Morning Report: Fed makes no changes to policy 7/27/17

Vital Statistics:

Last Change
S&P Futures 2478.0 5.0
Eurostoxx Index 382.8 0.0
Oil (WTI) 48.4 -0.3
US dollar index 86.3 0.1
10 Year Govt Bond Yield 2.30%
Current Coupon Fannie Mae TBA 102.93
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 3.95

Stocks are higher after the Fed maintained existing policy yesterday. Bonds and MBS are flat.

As expected, the Fed kept the Fed Funds rate the same. The statement was almost identical to the June statement. The September Fed Funds futures went to a 100% probability of no hike, and the December futures went to a 51% chance of no hike. The Fed said balance sheet reduction will begin “relatively soon.” The consensus seems to be that “relatively soon” means September. The Fed Funds futures are hinting that as well, by going to a 0% probability of a rate hike, which means they are betting September will the meeting where tapering is announced. One complicating factor will be the debt ceiling hike, which will be happening around that time. If we get a stand-off, we might see the Fed punt until the December meeting.

June Durable Goods orders were up big on aircraft. The headline number was an increase of 6.5% MOM and 16% YOY. Ex-transportation, they were up 0.2% MOM and 6.8% YOY. Core capital goods orders (a proxy for business capital expenditures) fell 0.1% and are up 5.6% YOY.

Initial Jobless Claims ticked up to 244k, while the Chicago Fed National Activity Index rebounded to .13.

The UK banking regulator has decided to kill LIBOR by phasing it out by 2021.

Freddie Mac changed its guidelines on Home Possible Loans. No gift money until 3% down.

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