Morning Report: Strong economic data 3/17/17

Vital Statistics:

Last Change
S&P Futures 2379.3 0.3
Eurostoxx Index 378.1 0.4
Oil (WTI) 49.0 0.2
US dollar index 90.6  
10 Year Govt Bond Yield 2.52%
Current Coupon Fannie Mae TBA 101.53
Current Coupon Ginnie Mae TBA 102.87
30 Year Fixed Rate Mortgage 4.27

Markets are flat this morning on no real news. Bonds and MBS are flat as well.

Industrial production was flat in February, while manufacturing production increased 0.5%. Capacity Utilization fell to 75.4%. The low industrial production number was largely driven by weather and lower-than-expected utility expenditures. The manufacturing production number was actually strong and the Jan-Feb numbers were the strongest back-to-back reading in 3 years. Capacity Utilization is still relatively low compared to historical numbers, and is one reason why inflation remains under control.

Consumer sentiment increased to 97.6 from 97.2 in February, while the Index of Leading Economic Indicators ticked up to 0.6%.

Trump’s new budget involves cuts to HUD. Here is a list of the specific cuts. Initially it appears that rental support and mortgage origination are untouched, and other areas like community development block grants will take the hit. Community Development Block Grants are known primarily for Meals on Wheels, but that is not really what they do. CDBGs are mainly Federal grants to local governments to build parks or other nice-to-haves. Unsurprisingly, the biggest beneficiaries are the counties surrounding DC.

Refinances dropped to 43% of all originations in February, according to Ellie Mae. Refis have been falling due to the change in VA IRRL securitization treatment and rising rates. The refis that still make sense however, are refinancing old ARMs into 30 year fixed rate mortgages, as LIBOR (which is what the interest rates is pegged to) is definitely going up, while longer term rates may or may not increase. The other trade is refinancing out of FHA loans from a few years ago, where the borrower has enough equity to qualify for a conforming loan with no MI. Time to close dropped to 46 days, which was down 5 days from January, but flat YOY.

UBS is out with a call saying the bond market sell-off is almost over. They are making the argument that the yield curve typically flattens in a tightening cycle, and the the long end adjusts first then stagnates. I made a similar argument here.

19 Responses

  1. If Trump and Carson were smart, they would make an announcement saying that they are increasing funding for Meals on Wheels while cutting the other stuff in the Community Development Block Grant Program.

    Make the left defend giving money to Tony Soprano’s no-show gig developing the Esplanade..


  2. this is fascinating. it’s virtue signaling vs. legal analysis

    Click to access 17-35105%20en%20banc.pdf


    • PL was discussing what virtue signalling was yesterday. They thought it was a snide characterization for people doing good things..


    • nova:

      this is fascinating. it’s virtue signaling vs. legal analysis

      Yes, it is. Reinhardt doesn’t deserve the title “Judge”. He’s a partisan political hack through and through.

      But frankly almost as distressing to me is the dissent, which ends with this:

      Even as I dissent from our decision not to vacate the panel’s flawed opinion, I have the greatest respect for my colleagues. The personal attacks on the distinguished district judge and our colleagues were out of all bounds of civic and persuasive discourse—particularly when they came from the parties. It does no credit to the arguments of the parties to impugn the motives or the competence of the members of this court; ad hominem attacks are not a substitute for effective advocacy. Such personal attacks treat the court as though it were merely a political forum in which bargaining, compromise, and even intimidation are acceptable principles. The Courts of law must be more than that, or we are not governed by law at all.

      Sorry Judge Bybee, but your failure to acknowledge what is right in front of you doesn’t compel everyone else to be equally blind. The Court is treated as though it were merely a “political forum” precisely because that is what the colleagues who you claim to so respect have turned it into, and the unfortunate fact of the matter is that thanks to your colleagues, we are not governed by law.g

      It does you no credit to pretend the motives of your colleagues are pure when it is so obvious, as even your own dissent suggests, that one must willfully ignore mounds of legal precedent and opinion in order to reach the decision they have come to. The real question is why you would profess to have the “greatest respect” for colleagues who are either so dishonest or so incompetent that they fail to correct errors that you yourself describe as “manifest”, “many” and “obvious”; who fail to apply what you describe as “uncontroversial principles”; who you yourself proclaim have turned precedent “on its head” and apply principles that “cannot withstand the gentlest of inquiry”; who by your own words were “oblivious” to the “important history” of case law contrary to their ruling; who have done things that you say are “precisely what the Court have told us we should not do”; who you strongly imply, both in your introduction and your conclusion, have made a decision not based on the law, but rather based on what they “as individuals, may feel about the President or the Executive Order”, and who have let “personal inclinations get ahead of important, overarching principles about who gets to make decisions in our democracy.”

      If the continued reputation and legitimacy of the Court as non-political is your concern, then you should have the courage to call out the very people who are destroying it, rather than professing a “respect” for them that is inexplicable in the context of your own critique of their opinion from which you are dissenting. The problem here is not the fact those who are subject to your court’s ruling act as though the court is politically partisan. The problem is the fact that the Court, thanks to your “respected” colleagues, has become politically partisan.


  3. Brent….huge win for the Badgers. Great defense on the last 2 possessions.


    • Absolutely. ‘Nova has been a 1-2 seed the last 4 years and been eliminated in game two 3 times but won the whole taco once. This is Wiscy’s 4th straight Sweet 16, as a lower seed, IIRC. Interesting contrast.


    • unfortunately had to miss it, but hope to see a replay..


  4. cause nothing says white power like green beer and a LED bowtie


  5. Like

  6. Edit: this a parody site and I got fooled. Fucking Russians!

    I bet.

    In all seriousness, why would he comment on this?


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