Morning Report: Markets still ignoring DC show 3/6/17

Vital Statistics:

Last Change
S&P Futures 2373.8 -7.5
Eurostoxx Index 373.6 -1.6
Oil (WTI) 53.2 -0.1
US dollar index 91.5  
10 Year Govt Bond Yield 2.48%
Current Coupon Fannie Mae TBA 101.86
Current Coupon Ginnie Mae TBA 103.19
30 Year Fixed Rate Mortgage 4.19

Stocks are lower this morning on overseas weakness. Bonds and MBS are flat.

Fed Funds futures are now fully pricing in a 25 basis point hike at next week’s FOMC meeting. Now that we are in the quiet period, the only market-moving data should be late this week when we get productivity and the jobs report.

Consumer spending has almost fully recovered from the Great Recession, with the February number coming in at $101, the strongest February since 2008.

Factory orders increased 1.2% in January. Consensus was for a 1.1% increase.

Over the weekend, the war between Democrats and Trump intensified, with Democrats calling for Attorney General Jeff Sessions to resign and Trump accusing the Obama administration of tapping the phones of Trump Tower. So far, markets are basically ignoring all of this as a sideshow. IMO, markets are sanguine about this simply because the deepening partisanship makes gridlock even more likely, and therefore a lot of the uncertainty is taken off the table. When and if that ever changes, the canary in the coal mine should be the dollar.

Prepay speeds dropped by 30% in January, according to the Black Knight Financial Services Mortgage Monitor. Delinquencies declined by 4% versus December and are down 17% YOY. That said, foreclosure starts increased largely due to seasonal effects. Note the decline in prepayments was not uniform across the credit spectrum: 720+ FICO prepays declined by 32%, while sub 620 FICO prepays fell by 10%. Even with rates up here, it still makes sense for some borrowers to do cash-out refis in order to consolidate higher interest rate debt like credit cards.

What should you do if you are upside down on your home? Zillow has you covered.

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