Morning Report: Fed Day

Vital Statistics:

 

Last Change
S&P futures 2925 -0.25
Oil (WTI) 53.85 -0.35
10 year government bond yield 2.09%
30 year fixed rate mortgage 4.15%

 

Stocks are flat as we head into the FOMC decision, which is set for 2:00 pm. Bonds and MBS are down.

 

The disconnect between the current market forecast and the last Fed dot plot are so stark that we are probably set up for some volatility in bonds after the announcement. Be careful locking around then.

 

Donald Trump looked at ways to possibly remove Fed Head Jerome Powell. While the law protects the independence of the Central Bank, Fed Chairmen have been removed before. Jimmy Carter removed G. William Miller in the late 70s after something like 11 months on the job, and kicked him upstairs to Treasury. Note the President was unhappy with the ECB and their signals of new stimulus – it strengthened the dollar against the euro and that is a negative for US exporters.

 

Mortgage Applications fell 4% last week as purchases and refis fell by 4%. Rates rose by 2 basis points to 4.14%. “After seeing a six-week streak, mortgage rates for 30-year loans increased slightly, which led to a pullback in overall refinance activity,” said MBA Associate Vice President of Economic and Industry Forecasting Joel Kan. “Borrowers were sensitive to rising rates, but the refinance share of applications was still at its highest level since January 2018, and refinance activity was at its second-highest level this year. Government refinances actually increased last week, led by a 17 percent in VA refinance applications, while conventional refinance applications decreased 7 percent.” The refi index has rebounded to the highest level in almost 3 years:

 

MBA refinance index

 

New Jersey has tightened the requirements for nonbank servicers.

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