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.

26 Responses

  1. Podesta’s click on the free russian mail order bride link is starting to have some consequences…


  2. The Supremes send back to the 4th for reconsideration a case that we talked about here last year.

    Click to access 030617zor_6j37.pdf

    They sent it back “in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017” rather than simply overturning it on the more sensible grounds that the original ruling was, quite literally, incoherent. But I guess we should take what we can get.


  3. This explains a lot:

    “Here’s a funny article by David Wong of Cracked that talks about the dopamine high we sometimes get from outrage. The gist of it is that the brain gets some sort of chemical payoff from outrage, and we seek it when we’re otherwise bored with life. Politics serves up lots of outrage opportunities. That’s why we are drawn to it – for the high.

    We rationalize that we are fighting the good fight and making the world better. But mostly it just feels good to get worked up about issues and share the experience with like-minded dopamine addicts.”


  4. One more reason why it’s easy to hate the left:


  5. Interesting read:

    “I had an opportunity a few weeks ago to visit with a friend during her layover at O’Hare. The atmosphere around the airport was tense. Protests over Trump’s fumbled Muslim ban were just coming to an end. An unusually robust police presence was augmented by heavily-armed federal agents roaming the terminal.

    As a black Republican woman who had been active in politics, she had seen her share of bigotry and discrimination in and out of politics. Given the circumstances, her mood was strangely serene. While I vented my worries, she nodded politely, an odd smile on her face. Finally she interrupted me, “I need to tell you something you’re not going to like and may not understand.”

    After voting twice for Obama she had voted for Donald Trump. She didn’t do it because she liked him. She didn’t do it because she thought he would be a great President. Donald Trump offered the only available means to break the complacency that was strangling our politics on both sides.

    She explained, “I am truly sorry that all you can see is fear for you and your family but too many people are too comfortable in a system that is destroying a lot of lives. This was our only chance to create a real opportunity for change.””

    This sentiment is shared by a large chunk of Trump’s white voters as well:

    “For at least a few black voters, a uniquely terrible candidate offered an opportunity to vote for the wrecking ball.”


  6. More from Andrew McCarthy, who has had some good analysis of the whole Trump/Russian/Wiretapping issue.

    But still, the media and Democrats have always had a serious vulnerability here — one they’ve never acknowledged because they’ve been too swept away by the political success of the fantasy narrative. It is this: At a certain point, if compelling evidence of collusion between the Trump campaign and Russia to steal the election did not materialize, the much more interesting question becomes: How did the government obtain all this information that has been leaked to the media to prop up the story? The most plausible answer to that question: The Obama administration, through the Justice Department and the FBI, was investigating the associates of the opposition party’s presidential nominee, and perhaps even the nominee himself, during the campaign. Otherwise, what explanation can there be for all of the investigative information — much of it classified, and thus illegal to disclose — that has been funneled to the press?


  7. Why is the left so bent out of shape over this travel ban?

    Is this just a huge virtue-signalling exercise?


    • I think so.


    • They believe their own BS too. Namely that the people affected by the ban are the real victims, that it’s all based on racism with no actual merit, and that the real goal is to make it permanent to keep out “brown people”.


      • The “not-left” critics of the travel ban point to 1] these are not the countries that brought us 9-11 and other events; 2] this is a source for anti-American “see, we told you they hate us” propaganda for Islamic terror groups, and 3] this adds no security as individuals must still be vetted on an individual basis. As McCain and Graham suggested last week, more attention to vetting should be welcome as a matter of security, while picking countries to ban does nothing, in and of itself.

        This new ban cleans up the serious due process issue nicely and cuts the legs from under the [much weaker] Establishment argument, as well. So I think the only remaining criticisms will not be addressed by the courts, but in the media and eventually in the Congress.


        • Mark:

          these are not the countries that brought us 9-11 and other events

          One of the primary problems in dealing with 9/11 and other such events is that they aren’t brought to us by any country. Islamic terrorism is an ideological problem that is not confined to any particular national borders or sovereign governments. So while this criticism might be a reasonable argument that the travel ban should encompass more countries, it doesn’t strike me as a reasonable one for saying that it encompasses too many.

          this is a source for anti-American “see, we told you they hate us” propaganda for Islamic terror groups

          Given that the very values we wish to defend are a source of anti-American propaganda for Islamic terror groups, I don’t find this particular criticism very compelling. If the ability of the enemy to use our own policies as anti-American propaganda should prevent us from imposing the policy, we might as well simply adopt Sharia law right now and call it a day.

          this adds no security as individuals must still be vetted on an individual basis.

          I don’t understand this criticism. While it obviously doesn’t make security foolproof, to say that it adds no security seems to me to be false on its face. Even if terrorists were randomly distributed across the entire immigrant population, any system that vets 100 people individually will be more likely to miss a terrorist than a system that refuses to even look at 50 of those people and only needs to vet the other 50 of them individually.


        • mark:

          BTW, with regard to number 2, I’d also say that anyone who’s understanding of and preference for American values is so tenuous that it can be turned into a desire to kill Americans simply because of a restrictive immigration policy is probably someone we ought not be accepting into the country in any event.


  8. Thought exercise…Suppose the attacks on Jewish cemeteries are done by Islamists.

    Who does the left side with?


    • Isalamists. They don’t have any agency.


      • Islamists. They are doing this solely because of Islamophobia and Israeli policy.

        They currently rank considerably higher on the hierarchy of victimhood, even to the point of trumping the Charlie Hebdo writers.


  9. Shot:



  10. Nova, just curious… Do a lot of the healthcare forecasts include any assumptions about AI replacing workers and cutting costs?

    I have to imagine that AI is going to do to law and medicine what technology did to the financial sector. Could that move the needle with bending the cost curve?


  11. I’m wondering if anyone here knows the answer to this:

    Is a FISA warrant legally required in order to place surveillance on foreign embassy communications? In other words, does the FBI need a FISA warrant to listen in on the Russian ambassador’s phone calls?


    • No warrant of any kind is necessary to tap communications that cross our national boundaries.

      Think of the Border Patrol’s ability to stop and search without a warrant.

      But I do wonder if the legal fiction of embassies being foreign soil makes all communications fair game…


      • Is a warrant required if there is no intent to use it for prosecutorial purposes?


      • Mark:

        No warrant of any kind is necessary to tap communications that cross our national boundaries.

        So the FBI can bug the Russian embassy itself at will, but would need a FISA warrant to bug the ambassador’s Georgetown residence? Is that right?

        edit: Whoops…I should have read your last sentence!


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