Morning Report: Fed Day

Vital Statistics:

Last Change
S&P futures 2805 -11
Eurostoxx index 367.48 1.08
Oil (WTI) 61.92 0.45
10 year government bond yield 3.22%
30 year fixed rate mortgage 4.96%

Stocks are lower this morning on no real news. Bonds and MBS are flat.

The FOMC announcement will come out at 2:00 pm EST today. No changes in rates are expected, and it should be a nonevent. Don’t expect to see any discussion of the recent sell-off in the stock market. About the only thing that could be interesting would be any discussion of how to quickly to shrink the Fed’s balance sheet, which is sitting at $4.1 trillion in assets, down from a peak of $4.5 trillion. That is still much lower than pre-crisis levels of below $1 trillion.

Fed assets

Donald Trump indicated that he would entertain an increase in the corporate tax rate if it was used for middle class tax relief. Democrats have complained that the middle class didn’t get a big enough tax cut, and the wealthy / corporations got too big of one. Don’t expect Democrats to bite, however. They want more healthcare entitlement spending and to raise taxes. Republicans aren’t going to vote to raise taxes, period.

UBS said it will fight an expected Justice Department civil suit over mortgage backed securities from 2007. They say they weren’t a “significant originator” of these mortgages.

The Fannie Mae Home Purchase Sentiment Index dipped in October. Affordability concerns are having an effect, as are higher mortgage rates. Despite the recent strong jobs numbers, more people are beginning to have job security worries. This is even more surprising when you consider that the number of respondents who said the economy is on the right track is at a record high.

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