Morning Report: 75% of the US Treasury market is underwater 7/9/18

Vital Statistics:

Last Change
S&P futures 2773.25 10.1
Eurostoxx index 383.72 1.4
Oil (WTI) 74.01 0.21
10 Year Government Bond Yield 2.86%
30 Year fixed rate mortgage 4.50%

Stocks are higher this morning as trade war fears recede. Bonds and MBS are down.

Earnings season begins this week, with a bunch of the big banks reporting on Friday.

The biggest econ data will be the PPI and CPI on Wednesday and Thursday. For the most part it should be a quiet week.

Leandra English has resigned from the CFPB. She was the Deputy Director for Richard Cordray, and believed she should have been given the job instead of Mick Mulvaney. She sued in Court and lost. Now that Kathy Kraninger has been nominated, she is gone.

Donald Trump will announce his SCOTUS pick at 9:00 pm tonight. The favorites are Brett Kavanaugh and Thomas Hardiman.

Interesting stat: 75% of the US Treasury market trades under par. This is the highest percent ever recorded (we started measuring this in the 80s). In the past, it generally peaked around 50%, which happened at the end of Fed tightening cycles and was usually a buying opportunity. I would note that these were in the context of a secular bull market in bonds. In secular bull markets, you buy the dip. We are now in a secular bear market in bonds and that changes the dynamic.

The REO-to-Rental Trade was a big winner over the past several years. Hedge funds and pension funds bought foreclosed properties for pennies on the dollar, fixed them up and rented them out, earning high single digit returns. As home prices rise, you would think these people will start ringing the register. Turns out they are doubling down. Professional investors are buying up homes in urban areas with good schools. This is making things even tougher for the first time homebuyer who is struggling to find a starter homes. That said, it isn’t a ridiculous number – last year major investors bought 29,000 homes, which is a drop in the bucket compared to total existing home sales of 5.45 million.

20 Responses

  1. They’ve gone from 11 to 12 on the Trump derangement scale.


  2. So who does everyone want for SCOTUS? Not a lawyer, so I have no opinion…

    Liked by 1 person

    • Move on to the next thing! Memory-hole this pronto!


    • social media is simply destroying journalism. It has some serious issues before, but this “headline to generate clicks, trends” is a shot below the waterline. I don’t see how the industry can regain any semblance of trust.


      • To me it’s a great revealer, we know the bias now. Really, it takes us back to pre-radio and TV and returns us to a highly fractured and diverse market, a big chunk of which is dedicated to fact-checking (really attempting to embarass) the rest of the media. I’d argue we’re in the golden age of media here.


  3. Got this email from Bernie Sander’s bot-collusion system:

    Donald Trump just announced that he will nominate Brett Kavanaugh to the Supreme Court. Let me be absolutely clear: this nomination is a 100 percent political decision, and one that will have a profoundly negative effect on the lives of working people of this country for decades to come if Brett Kavanaugh is confirmed.

    Brett Kavanaugh’s record has made it clear he will use his position on the court to protect corporations at the expense of workers, to allow corporations and the wealthy to buy elections and to undermine voting rights. Further, given the fact that Donald Trump stated repeatedly during the campaign that any nominee of his would vote to overturn Roe v. Wade, I have no doubt that is exactly what Brett Kavanaugh will do.

    Simply put, nothing is more important now than doing everything in our power to stop this nomination

    What nomination wouldn’t be a 100% political decision? Also, Trump has two more years in office and I’m not sure he would want to compromise to get a justice approved by democrats even if they win in November, and would likely be happy to keep throwing people they voted down or prevented votes on. I guess they think it will be like Bork and Trump will nominate someone squishier after the first one fails but I don’t know how likely that is.

    I just don’t see how they can hope, really, to improve the outcome from their point of view. Either this guy gets it or next time it’s Thapar or Barrett (if it had been me, if would have been one of them out of the gate, as the long-term effect of having Democrats go on the attack against women and minorities, no matter their rational and the sympathies of their fellow travelers, erodes their status as the diversity party/ideology for swing voters and fence-sitters). And at some point someone who voted against this guy will be hesitant to vote against a minority or a woman for some reason . . . will be interesting to watch, I suppose.


  4. I thought this was good and pretty much sums up Vox

    Liked by 1 person

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