Morning Report: Bond Yields rise on hawkish central bankers 6/29/17

Posted on June 29, 2017 by Brent Nyitray

Vital Statistics:

Last Change
S&P Futures 2443.8 5.0
Eurostoxx Index 384.9 -0.9
Oil (WTI) 45.3 -5.4
US dollar index 87.9 -0.1
10 Year Govt Bond Yield 2.27%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 3.91

Stocks are higher this morning after the big banks announced increases in dividends and buybacks in response to passing their stress tests. Bonds and MBS are down after hawkish comments from central bankers globally.

In the past few days, the Bank of England, the Bank of Canada, and the ECB have warned that short term rates are heading higher. This has sent the 10 year bond yield up over 10 basis points, and has really clobbered the German Bund, which now yields 44 basis points. The Fed Funds futures have tweaked their assessments of the September and December meetings, with the markets now handicapping a 18% chance of a Sep hike (up from 12%) and a 57% chance of a hike in December (up from 50%).

The third and final revision to first quarter GDP came in at 1.4%, an upward revision of 0.2%, as personal consumption was revised upward from 0.6% to 1.1%. The inflation indicator fell from 2.2% to 1.9%. Know what bumped up the consumption numbers? RVs. If it weren’t for Winnebagos, GDP would have grown less than 1%.

Initial Jobless Claims ticked up slightly to 244k, while corporate profits were up 12% YOY.

The head of the NYSE thinks short sellers are “icky” You want icky? Here’s icky.

Good info: 15 money-saving tips for first time homebuyers. Also questions any homebuyer should ask the seller before taking the plunge.

Hottest real estate markets in June 2017. Mainly the usual suspects, but there are signs of life in the Rust Belt: Columbus OH is #5 and Detroit is #6.

Filed under: Economy, Morning Report |

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26 Responses

  2. Brent Nyitray, on June 29, 2017 at 12:59 pm said:

    If you want a good laugh, head to #HeterosexualPrideDay on Twitter…

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    • Kevin S. Willis, on June 29, 2017 at 1:54 pm said:

      ““But the cost of those tax credits would quickly skyrocket, because healthy people would flock to non-complaint plans, which could cherry pick them with inexpensive premiums.””

      Is this true, really? How would that work with large employers, who often the young and healthy who will live forever, and older folks who know they will get sick (and have children, and spouses)? If I were single, and had to purchase my own health insurance directly, I would pick the leanest, catastrophe-only plan I could find and probably never go to the doctor.

      But I work for an organization about approximately 8000 employees at any given time. We all get the same few insurance plan options via Cigna. While I could arguably go to another plan, without subsidy I doubt I would save much money, and saving $20 a month but seeing my deductible for the year go up $1000 or more . . . wouldn’t be worth it, really.

      Unless companies decided to move to systems that force people to buy their own health insurance, aren’t we left with independent contractors and part-time workers and so on deciding to move to cheaper insurance?

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  4. Kevin S. Willis, on June 29, 2017 at 1:46 pm said:

    OT: Anybody have any good arguments for the remain side in the Brexit? I’ve been doing some casual reading, and the benefits of the EU membership don’t seem worth the cost, and most of the remain arguments strike me as weak, lame, or sucky. Also, generally self-serving.

    I’m not seeing how the EU benefits any but perhaps the poorest member states, and even them: not so much. I certainly don’t see when a powerhouse like the UK should be sending $13 billion to Brussels, or why any of the countries (and especially Britain) should be willing to submit to an organization as fundamentally undemocratic as the EU?

    The arguments for Brexit seem really solid and rational for the most part. But I wonder, as polling on leaving the EU has swung so radically since 1977 up and down and up and down . . . is there something I’m missing? Is there now or has there been numerous good reasons in the past for Britain to be in the EU?

    Also, I read it suggested that future British EU membership might end up with Britain being required to move to the Euro (on of the Brexit arguments). That seems fantastical, to me. Brussels might demand it, but how it would it enforce it without their being a de facto Brexit, anyway?

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    • ScottC, on June 29, 2017 at 2:22 pm said:

      KW;

      Anybody have any good arguments for the remain side in the Brexit?

      The best arguments in favor are trade/business related. For example, the banking industry is much more easily navigated when everyone is subject to a single regulatory regime. With the UK out of Europe, banks with their main international business centered in London (which is most of them) will face all kinds of new regulatory hassles when trying to deal with the continent. Lots of them may relocate to a new center in Europe, resulting in big job losses in London. Most of the UK’s trade is with other countries in Europe. They will now have to renegotiate trade agreements which will almost certainly be less advantageous than the relatively free trade within Europe that they had before.

      To me the economic benefits of being inside of Europe have always been obvious. (Free trade is always beneficial.) The problem from my view (as a one-time resident who has a soft spot in my heart for the UK) has always been the creeping political union that the EU-niks have been pushing and striving for since day one. And I have always argued that the economic benefits were not worth the political cost of the inevitable loss of British sovereignty. Better to control your own fate, and make the best deals from the outside that you can. (It’s not as though the US suffers greatly by having to negotiate trade deals from the outside rather than the inside of the EU.) But the economic downside of being outside of the union will be that much more obvious and painful for having had, and now lost, the economic benefits of being inside.

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      • jnc4p, on June 29, 2017 at 2:33 pm said:

        I think it would have worked better as a free trade zone without the Euro and the non-trade rules.

        Exchange rates were a useful balancing mechanism that should have been maintained. It’s easier for a currency to fall in value than it is to actually cut spending or raise taxes.

        Liked by 1 person

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        • ScottC, on June 29, 2017 at 2:44 pm said:

          jnc:

          I think it would have worked better as a free trade zone without the Euro and the non-trade rules.

          Very much agree. In fact it was the creation of the Euro that really made it clear to me that the ultimate goal was not so much a trade union but rather a political union with the destruction of national sovereignty. The one thing the UK did right – and has actually made Brexit possible – was to avoid adopting the EUR.

          Liked by 1 person

        • markinaustin, on June 29, 2017 at 5:53 pm said:

          Exchange rates were a useful balancing mechanism that should have been maintained. It’s easier for a currency to fall in value than it is to actually cut spending or raise taxes.

          Makes good sense.

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      • Brent Nyitray, on June 29, 2017 at 2:42 pm said:

        I remember when the EU was trying to force the Brits to not serve beer in pints. That sort of trivial stuff is what pisses everyone off.

        Not to mention the Brits hate the French.

        Liked by 1 person

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      • Kevin S. Willis, on June 29, 2017 at 4:28 pm said:

        @scottc1:

        Thanks! That was informative. I thought you might have had an interesting perspective, having once lived there.

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    • jnc4p, on June 29, 2017 at 2:32 pm said:

      “I’m not seeing how the EU benefits any but perhaps the poorest member states, and even them: not so much.”

      Germany does well, because in practice it got to write the rules in exchange for making the Deutschmark the Euro.

      In effect, it has economic colonies in southern Europe that allow it to run perpetual trade surpluses.

      Liked by 1 person

      Reply
  5. Kevin S. Willis, on June 29, 2017 at 2:05 pm said:

    From Paul Waldman at Plumline:

    People suffering from Alzheimer’s often experience something called “sundowning,” when in the early evening they become particularly disoriented and erratic in their behavior. The president of the United States experiences something we might call “mornraging,” when at the beginning of the day he tunes in to morning television shows, hears something that makes him mad and fires off tweets that highlight the darkest recesses of his id.

    I can’t decide who I want to dislike more. Trump, or the folks on the left who want to compete with him. I get the strategy of evoking Alzheimer’s with Trump (the sort of thing Waldman would never do if it was a crazy Democrat being crazy in office) but still . . . I dunno, I’m subjective. My dad’s got dementia. I’ve seen the sundowning. My only response is: not cool. Not exactly mocking a disabled reporter . . . but not exactly that different, either. I dunno.

    As I get older, the more I hate everybody. 😉

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    • jnc4p, on June 29, 2017 at 2:35 pm said:

      They have become what they wish to destroy.

      Trump’s biggest victory vs the media has been to drag all of them down to his level. They will lose a mud wrestling match with him.

      Good piece by Taibbi on the media and Trump

      http://www.rollingstone.com/politics/features/taibbi-with-cnn-flap-medias-trump-era-identity-crisis-continues-w490226

      Liked by 1 person

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      • Kevin S. Willis, on June 29, 2017 at 4:31 pm said:

        “The news media is now in its second year of a profound identity crisis.”

        I would disagree that this is the 2nd year. I’m not sure I’d pinpoint when it started, but I’d wager about the time CNN became the first 24 hour news network, and around the time the afternoon papers started all shuttering their doors.

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      • Kevin S. Willis, on June 29, 2017 at 4:36 pm said:

        That pressure is exacerbated by rebranding campaigns. The Washington Post’s “Democracy Dies in Darkness” motto, for instance, is bold and high-risk marketing, but it creates audience expectations that they’ll be reading the rescue of democracy with their morning coffee. These La Resistance expectations are hard to meet, and can lead to reporting misses.

        When I first saw WaPos self-congratulatory new motto, all I did was roll my eyes. And think: morons. Which was rude of me.

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  6. Brent Nyitray, on June 29, 2017 at 5:16 pm said:

    How much you wanna bet that CNN is trying to goad Trump into siccing the FCC on them? The second he does that it will be the end of his presidency…

    Liked by 1 person

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    • Kevin S. Willis, on June 29, 2017 at 5:27 pm said:

      I’m guessing that he won’t. He seems to like these battles to be public length/width/girth measuring contests. CNN is just going to goad him into more angry tweets at worst, I think.

      CNN would no doubt love it? To be attacked by the Nixonian president? To be responsible for his downfall? Stick it up your arse, Washington Post! CNN rules!

      But I’m thinking it will not happen.

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    • Let the mutherfuker burn!, on June 29, 2017 at 6:21 pm said:

      I don’t think the FCC has jurisdiction here, it’s 100% cable. Now, siccing the FEC on them would be a very Democratic thing to do.

      Liked by 1 person

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  8. Let the mutherfuker burn!, on July 3, 2017 at 8:42 pm said:

    I laughed.

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