Vital Statistics:
Last | Change | |
S&P Futures | 2672.8 | 11.0 |
Eurostoxx Index | 373.4 | 2.9 |
Oil (WTI) | 58.6 | -0.6 |
US dollar index | 83.6 | -0.1 |
10 Year Govt Bond Yield | 2.87% | |
Current Coupon Fannie Mae TBA | 103.591 | |
Current Coupon Ginnie Mae TBA | 103.688 | |
30 Year Fixed Rate Mortgage | 4.39 |
Stocks are up this morning on no real news. Bonds and MBS are down.
Consumer prices rose 0.5% MOM and are up 2.1% YOY, according to the Consumer Price Index. Apparel drove the increase. Ex-food and energy the index was up 0.3% and 1.8%. These numbers are a little higher than what the Street was looking for, and bonds sold off about 5 basis points on the report. Between the CPI and the higher-than-expected wage inflation in the jobs report, Treasury investors are getting nervous about inflation.
The Fed Funds futures are predicting a 78% chance of a 25 basis point hike next month. For the year, there is about a 1/3 chance of two hikes and a 1/3 chance of 3 hikes. with the final 1/3 split between 1 and 4.
Goldman’s inflation forecast is for a 1.8% increase in the core PCE. Despite upward creeping inflation, this is still below the Fed’s target rate.
Mortgage Applications fell 4% last week as purchases declined 6% and refis declined 2%. On the back of the jobs report, Treasury yields rose and mortgage rates hit the highest level in 4 years. The typical 30 year mortgage rate rose to 4.57% from 4.5%.
Retail Sales were down 0.3% in January and were flat YOY. Weak auto sales were behind the change. The control group was flat.
Fannie Mae reported earnings of $2.5 billion for 2017, after taking a $9.9 billion hit on deferred taxes based on the tax law. Adding back the $9.9 billion noncash charge gives the company net income of about $12.4 billion, about the same as 2016. The stock has a market cap of $10.7 billion, meaning it is trading at a P/E below 1. Arguably, the stock shouldn’t exist in the first place, and it only trades due to the vagaries of government accounting.
About 130 mortgage bankers sent an open letter to Congress stressing the need for GSE reform. The letter laid out their preference for a guarantor-based system over an issuer-based system. Essentially the difference would be that the guarantor-based system would be most similar to the current one, where someone like Fannie and Freddie do not originate mortgages, but guarantee than and issue securities. The issuer-based system would rely on a few large aggregators to secure the government guarantee and issue securities. The smaller bankers would probably be at some sort of competitive disadvantage under an issuer-based system and would be better off under a guarantor-based system.
Federal Reserve Chairman Jerome Powell’s prepared remarks at his swearing-in ceremony. “While the challenges we face are always evolving, the Fed’s approach will remain the same. Today, the global economy is recovering strongly for the first time in a decade. We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery and sustaining the pursuit of our objectives. We will also preserve the essential gains in financial regulation while seeking to ensure that our policies are as efficient as possible. We will remain alert to any developing risks to financial stability.”
Filed under: Economy, Morning Report |
It ain’t ok if it is done by the private sector:
https://www.salon.com/2018/02/12/why-sending-a-tesla-into-orbit-is-a-slap-in-the-face-to-science/
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“Just as Dwight Eisenhower once suggested we view military spending as a theft from the poor, I see random, self-promotional space junk as a theft from humanity.”
But viewing taxation as theft is “radical”.
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Well we spent a lot less on the military then, so what about now? Also, what about end-of-life healthcare spending?
Also running weight tests on the system is part of what they need to do. Getting media attention is something else they need to do. They did both. For petes sake.
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What was the motivation for aerospace spending in the first place? Defense!
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Salon is whiny SJW click bait. All it is.
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Even I don’t read Salon.
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I find this kind of behavior inexplicable. It’s got to be some sort of pathological entitlement. Based on his background, money cannot be an issue.
https://www.washingtonpost.com/politics/veterans-affairs-chief-shulkin-staff-misled-ethics-officials-about-european-trip-report-finds/2018/02/14/f7fbc020-0c3a-11e8-8b0d-891602206fb7_story.html?utm_term=.6a268e7dd0da
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It was a more innocent time.
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This should prove interesting:
“The $1.5 trillion tax cut that President Trump signed into law late last year, combined with a looming agreement to increase federal spending by hundreds of billions of dollars, would deliver a larger short-term fiscal boost than President Barack Obama and Democrats packed into their $835 billion stimulus package in the Great Recession.”
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