Morning Report: Trump labels China a currency manipulator

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Last Change
S&P futures 2853 24.5
Oil (WTI) 54.76 -.04
10 year government bond yield 1.75%
30 year fixed rate mortgage 3.92%


Stocks are higher after China stopped the devaluation of the yuan and fixed it at a higher than expected rate. Bonds and MBS are flat.


Treasury officially called China a “currency manipulator” yesterday for the first time since 1994. This is a specific term used when the country in question intervenes in the currency markets and has a large trade surpluses. That said, it is also largely symbolic in that it doesn’t have any real consequences. It brings the IMF into the loop and that is about it. In essence it is a political move.


The 10 year bond was up something like 24 ticks yesterday, but we did not see much movement in MBS, particularly up in the rate stack. If you were looking for big improvements in the 4%+ note rate range, you were disappointed. As a general rule, MBS will lag the moves in Treasuries, especially large ones. If the 10 year seems to find a level around these prices, then eventually mortgage rates will follow. But it generally seems like mortgage rates take a “wait and see” posture after big moves. If we get some sort of trade detente with China, it is likely we will give back a big chunk of this rally and mortgages seem to be wary of this.


Home prices rose 0.4% MOM and 3.4% YOY according to CoreLogic. This is despite lower rates from a year ago. Prices are rising at the lower price points and languishing at the higher price points. That said, incomes are rising and that should push prices higher, especially combined with lower rates.


Grandpa, tell me again about when people paid to lend money? We know all about negative yields in the sovereign debt markets, with investors paying over 50 basis points per year for the privilege of lending to the German government. We have seen some corporate bonds trade at negative yields, so why not mortgages, too? Jyske Bank in Denmark is offering 10 year mortgage bonds with a negative coupon. Nordea Bank may be following suit as well, by offering 30 year mortgage bonds with negative coupons. Denmark’s government bond yields -50 basis points already, and some banks in Denmark are offering 30 year mortgages with rates as low as 50 basis points. Home prices are up 24% over the past 2 years in Denmark.


You have to wonder what the Fed is thinking here – no matter what they do, it seems long term rates globally are being drawn into a vortex of negative rates. Mohammed-El Arian talked about this at the MBA secondary conference in May – the 10 year yield is going to be pulled down by global rates no matter what the Fed does. The US has to feel like the Rodney Dangerfield of government bonds: of the major players, only Greece, Russia, Mexico, Brazil, Indonesia, China, and India have higher yields.


The service economy cooled in July, according to the ISM non-manufacturing PMI. It fell from 55.1 to 53.7, which means the sector grew, just at a slower rate than June. That said, this is the lowest reading since August of 2016, which is a concern. The report usually has some anecdotes and I thought this was interesting: “Tariffs continue to push costs higher, and customers are looking for more discounts due to mortgage-rate fluctuations.” (Construction). We have a housing shortage and builders are experiencing softening prices?


Black Knight Financial Services said that July home affordability is at an 18 month high. Falling interest rates have translated into a 15% increase in buying power. The share of median income needed to make principal and interest payments on the average home fell from 23.3% to 21.3% in November 2018. In the early 80s, when mortgage rates were double digit, this percentage was closer to 40%.

16 Responses

    • I have never understood why car companies don’t do runs of their classic models that are slavishly loyal to the original, super-popular design, with accommodation for modern legal requirements. But they could make this car. And the 2020 Barracuda would sell.


    • Fascinating. So divorced from reality, but does show just how left-aligned the media has been for so long that so many Democrats are astounded that the press doesn’t act as a non-stop propaganda arm for their personal progressivism 24-7.

      But at least some on the media know that the sort of unadulterated ultra-progressive, pro-Democrat advocacy these folks want them to do will just hurt both them, and the electability of the politicians who think it would be a great thing if the media constantly called Trump a racist Nazi who causes mass shootings and caused 9/11.

      Beto is a dumbass. The idea he was the great Caucasian Male hope of the Dems …. well, that’s over with.

      And the best part is win Trump wins in 2020, they still aren’t going to have any idea why they lost.


    • George, it seems the politico link is busted.

      Kev, to me the worst part about the D campaigns seems to be the likelihood DJT will win.

      Brent, the list of donors was public information. I think the ultimate campaign finance reform within the bounds of Citizens United is total reveal. And reveal does mean everyone can publish lists. That may even be a feature, not a glitch. I haven’t decided.


      • Oh, I know it is public information. I just think it is unseemly for politicians to sic the mob on non-politicians that don’t see eye-to-eye with them politically.

        A government official trying to get someone fired for their political views is verging on totalitarianism


        • I can see the value of the distinction as you describe it for elected officials. I’m still thinking about it.


        • well, and the other thing is going after people in your own district?


        • It’s total war now and probably has been since at least 2008, where John McCain had been tortured by the NVA into insanity. In 2012, Mitt Romney was going to put blacks back into slavery and gave a woman cancer by sheer force of his anemic personality to 2016 with Trump who is literally Hitler and a Putin stooge. I think Trump figured it out though and I suspect the tide turned when he told Hillary Clinton, to her face, that if he’d have been president she would be in jail.

          In a lot to ways it’s like the campaigns of the early to mid 19th century, where anything goes.

          Liked by 1 person

      • Mark:

        I think the ultimate campaign finance reform within the bounds of Citizens United is total reveal.

        If monetary support must be public, shouldn’t votes be public as well?


        • Scott – No.Secret ballot encourages voter independence from influence and financial disclosure encourages candidate independence fron influence.

          George – Thanks.


        • Mark:

          Secret ballot encourages voter independence from influence and financial disclosure encourages candidate independence fron influence.

          A few points:

          1) I would dispute the latter. It isn’t disclosure that does so. It is limitations on support that does so. If I donate $50mm to HRC’s campaign (or the Clinton Foundation), I’ll have some influence regardless of whether or not the donation is publicly known. (Why do you suppose that donations to the Clinton Foundation – which were not anonymous – dropped significantly after her loss in 2016?)

          2) Candidates are not supposed to be independent of influence. Certainly they should be independent of corrupt influence, but supporting a candidate’s campaign – whether through donations, or votes, or volunteering, or dedicating glowing media coverage to them – because you expect them to advocate for certain policies is not corrupt.

          3) If we want voters to be independent of influence in the voting booth, why wouldn’t we also want then to be independent of influence when it comes to their support for a campaign? As Brent pointed out, the whole point of the doxxing of donors was to place pressure on them for supporting certain candidates. If that is acceptable (and I don’t think it is), then why wouldn’t it be acceptable to put pressure on people for voting for certain candidates?


      • I just think it’s amazing that the Democrats could easily win all the moderates and swing-voters and centrists, along with every NeverTrumper—they could take more of the middle-ground than Obama or Clinton did. And instead it’s like: screw those voters! I want my tweets to go viral!

        I can’t imagine they are using serious political consultants—or they are ignoring them, if they are. The opportunity to win far exceeds ‘92 and ‘08–and they are in a competition to see who can go down in flames most brightly. It’s amazing. The current crop make Hillary look like a savvy politician with broad appeal. They make the Republicans who ran against Trump look like shrewd political operatives running strong campaigns.

        I’m okay with another four years of Trump. Although I kind of like Tulsi Gabbard. If she got the nomination, I might have to vote for her.


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