Morning Report: Small Business Optimism falls 10/10/17

Vital Statistics:

Last Change
S&P Futures 2547.8 4.0
Eurostoxx Index 391.2 0.0
Oil (WTI) 50.2 0.6
US dollar index 86.6 -0.3
10 Year Govt Bond Yield 2.36%
Current Coupon Fannie Mae TBA 102.875
Current Coupon Ginnie Mae TBA 103.938
30 Year Fixed Rate Mortgage 3.9

Stocks are higher this morning after Walmart announced a $20 billion buyback. Bonds and MBS are flat.

Neel Kashkari speaks at 10:00 am.

Small Business Optimism fell in September as the hurricanes hurt retail spending in Texas and Florida. We did see a weakening in the labor market, not just in Florida and Texas, but in 2/3 of all Census regions. The hurricanes will probably boost the economy into Q4 and Q1 next year, but at the moment they are depressing things. 57% of firms are trying to hire, but the vast majority of those are finding few or no qualified applicants.

The US foreclosure and seriously delinquent rate remain very low, according to CoreLogic. The national Foreclosure rate was 0.7%, down from 0.9% last year. The Seriously Delinquent ratio was just under 2%. This is all July data, so pre-hurricane. We are starting to see the effects of the drop in oil prices in some of the energy intensive states like Alaska and Louisiana.

Home Prices continue to rise, jumping 0.9% MOM and 6.9% YOY in August, according to CoreLogic. Their models hold that half of the largest 50 MSAs are now overvalued, which has been driven by low inventory.

Fannie Mae is offering assistance to borrowers affected by the recent spate of hurricanes. Borrowers will be able to temporarily stop making monthly payments for 3 months (up to 12 months) without late fees, negative comments on their credit reports, or a requirement to get back current in one fell swoop.

The IMF took up their forecast for global growth to 3.6% this year and 3.7% next year. At the margin, this means reduced demand for safe haven assets like Treasuries, which would mean higher interest rates going forward. That said, we have several real estate bubbles overseas at the moment, and when they bust, it should be bond bullish (i.e. encourage lower rates).

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