Morning Report: Bonds rise on Middle East tensions

Vital Statistics:


Last Change
S&P futures 3227 -30.25
Oil (WTI) 63.07 2.04
10 year government bond yield 1.83%
30 year fixed rate mortgage 3.95%


Stocks are lower this morning on tensions in the Middle East. Bonds and MBS are up.


The US killed an Iranian military commander in Iraq last night, which has sent oil prices up a few bucks, and the 10 year bond yield down to 1.83. The risk-off trade is in  full swing with equity markets falling and S&P futures down a percent. It is too early to tell if the market is overreacting (hint – it usually is) but you might get a window here to pull in some loans.  Might be a good time to review any refis that missed the boat last month.


We will get the minutes from the December FOMC meeting around 2:00 pm. Probably wouldn’t be market-moving on a normal day, but with the volatility from the Middle East situation all bets are off. Be careful locking around that time.


Foreclosure starts hit a 14 year low, according to Black Knight Financial. In November, 33,500 foreclosures were started, which was a 26% decline on a YOY basis. IIRC, there were weather-related issues that boosted the number last year, so that may be partially driving the drop. We did see a tick up in delinquencies, but they are still down 5% YOY. Prepays are more than double last year, which means the refi boom may still have some legs.


The Spring Selling season has historically kicked off right about Super Bowl Sunday. This year, it seems to be accelerating. In fact, some of the homebuilders are noting that traffic remains strong (Toll Brothers noted an acceleration through November and early December). “As shoppers modify their strategies for navigating a housing market that has become more competitive due to rising prices and low inventory, the search for a home is beginning earlier and earlier,” said George Ratiu, senior economist at “With housing inventory across the U.S. expected to reach record lows in 2020, we expect to see this trend continue into the new year.”



48 Responses

  1. i notice on social media the same people who were mad about pulling out of Syria are mad about the Iranian attack..

    pick a lane people

    Liked by 1 person

    • And vice versa.

      Liked by 1 person

      • There’s a large contingent of folks–especially in the Twitter-verse–who are shamelessly “my side right, you’re side wrong”. So it’s never about the thing, it’s always about which side did the thing, that determines how that thing is praised or criticized.

        But they rarely have anything substantial to say about it, so I’m not sure it matters. 🙂


  2. Good piece on the Soleimani drone strike:

    Love this:

    “Former Vice President Joe Biden’s statement on Soleimani’s death warned of what might come next. “Trump just tossed a stick of dynamite into a tinderbox,” Biden said (apparently unaware that tinderboxes are smaller than sticks of dynamite, or that dynamite obliterates dry and soggy firewood with equal ease).”

    Liked by 1 person

  3. Another interesting take:

    “Qassem Soleimani Haunted the Arab World

    In much of the Middle East, and even in Iran, the military commander was feared, and his death has been greeted with elation.

    Kim Ghattas
    10:03 AM ET”


    “The Soleimani Assassination Is America’s Most Consequential Strike This Century

    The U.S. attack against the top Iranian general will have far greater repercussions than the killings of al-Qaeda and ISIS leaders.
    Kathy Gilsinan Mike Giglio”

    I’m still not sure this was a good idea, but I will give Trump credit for actually taking consequential action once he decided to do something and not just bombing low level militia out in the desert for the optics.

    Liked by 1 person

  4. Hindsight will prove 20/20 on killing the QUDS general but it seemed like one of the realistic options available, and was likely both urged and approved by Central Command. That general was probably behind a lot of tactical planning to cause trouble in Iraq and elsewhere.

    Biden’s criticism was politically expedient, but I think the dynamite/tinderbox analogy was meant to convey a sense of overkill or overreaction. IOW, I don’t agree with his kneejerk reaction but I am not making fun of the mountain-molehill metaphor.

    I would like to get out of the ME too, but we have dug ourselves a long way in. It would be worth trying to think of all possibilities, good, bad, and indifferent, if we simply withdrew from the region, or if we selectively withdrew from it. That is beyond my pay grade, but when George writes that he does not care if Iran or China [or I assume Turkey or Russia] fills the vacuum I don’t know if that makes the world safer for us.

    I am still someone who reacts negatively to the Sanders/Warren view of unilateral disengagement but who also reacts negatively to USA go-it-alone hegemony. I still think if we could build or rebuild a western consensus it would be safer for us [which, as you know, is why I liked Bush 41 and James Baker].


    • I don’t know if that makes the world safer for us.

      Obviously, we would have to eliminate the perpetrators of any attack on the US via nukes or whatever else, on devastating attack like that would keep us safe.

      Whatever sucker, er entity that fills the vacuum will actually have better success then we will because they probably would have zero moral or political constraints in stopping any dissent.

      Liked by 1 person

      • The basic problem is that after Bush 41 no one had an exit strategy for military engagement in the ME. Trump is no different from his immediate three predecessors in this failing. That is a bigger issue than going after one bad guy, which is justifiable on its own merits, but the criticism for that strike is conflated with the bigger issue of no off ramp.

        One of my Muslim [from Pakistan] former clients once told me that western funding of public secular schools in the ME would probably pay off for the west much more than the same amount spent on combat. But he was speculating based on his own education in England and then the USA. That was in the aftermath of 9/11/01.

        He was an amusing smart guy, fwiw.


  5. PopeHat’s ideas for new Star Wars movies are funny:


  6. FYI Brent:

    “Ben Carson’s latest plan to weaken fair housing enforcement”


    • Adding affordable units isn’t enough. If they are in an area separate from the 1-acre single family zoning neighborhoods, the left is upset, even if the kids from the affordable housing project attend the same schools. If a neigborhood is “too white” then you must allow multi-family housing in it.

      obama and his band of SJWs took it too far, and it was even too much for deep-blue Westchester County.


    • Objective reporting! If the Obama admin did the same thing: “Obama’s Out-of-the-Box Solution to Improve Housing Availability”


  7. Happy New Year, gentlemen! May 2020 be a good year for all of you.


  8. Koskidz struggling with competing conspiracy theories.

    Just kidding, they’ve threaded the needle.

    Liked by 1 person

  9. Awesome! Killing that muzzie freak is the gift that keeps on giving!

    Liked by 1 person

  10. Worth a read:

    “Inside the plot by Iran’s Soleimani to attack U.S. forces in Iraq
    Reuters staff
    World News
    January 3, 2020 / 7:56 PM /”

    “Petraeus Says Trump May Have Helped ‘Reestablish Deterrence’ by Killing Suleimani
    The former U.S. commander and CIA director says Iran’s “very fragile” situation may limit its response.

    By Lara Seligman | January 3, 2020, 1:37 PM”


    • Despite the obvious facts that this guy was a true target of opportunity and a terrorist leader, my liberal pen pals are unable to see this as anything but a stupid Trump miscalculation. Libya is easily justified for them, although illegal, because BHO, while this was by the book and [probably] not an act of war.

      That it might backfire is always a real possibility because of the big problem that we have had no exit ramp since at least 2006, while two presidents campaigned for an exit ramp since 2008. That No Exit problem is the one that pisses Brent and George off and probably the rest of us here as well.

      I think it pisses off liberals, as well, btw. They just now see it [wrongly] as TRUMP.


      • If the Iraqi’s demand we leave it hands Trump another campaign promise fulfilled, no?

        Liked by 1 person

      • my liberal pen pals are unable to see this as anything but a stupid Trump miscalculation

        It always concerns me that people–presumably familiar with history–think they can possibly know whether this is actually a miscalculation or not, or whether anything we do in this category is going to have unforeseen positive or negative consequences. While someone often predict some of the things that happen, I don’t think you know.

        My tendency–if I were the guy saying, “yeah, do that” would be because it’s so hard to believe things like this, or Libya, or Iraq, or Afghanistan–is going to turn out well. Meaning: is our intervention going to be a net positive or a net negative? I’m going to tend to assume a net negative, but you really can’t know.

        Maybe this guy was about to bring out Middle East peace or set off a nuke in New York. I mean, you’d probably have a good idea if either of those things was about to happen but still. We can’t ever do a comparison of what the world is like if we kill this guy and also what it’s like if we don’t kill him. So I’m not going to take a position that this was a good idea or bad idea or will have good or bad consequences. Because I just don’t feel I can know, and I don’t feel like any of these folks are so smart that they can really know.

        So we’re left with: was this guy Mother Theresa? Was he about to cure cancer? Eh, probably not. Is he responsible for acts of terror and death and murder? Seems like. So, I’m not gonna give Trump shit for having signed the kill order.


      • Tom Friedman of all people I think gets to the heart of it:

        “On Nov. 27, Iraqi Shiites — yes, Iraqi Shiites — burned down the Iranian consulate in Najaf, Iraq, removing the Iranian flag from the building and putting an Iraqi flag in its place. That was after Iraqi Shiites, in September 2018, set the Iranian consulate in Basra ablaze, shouting condemnations of Iran’s interference in Iraqi politics.

        The whole “protest” against the United States Embassy compound in Baghdad last week was almost certainly a Suleimani-staged operation to make it look as if Iraqis wanted America out when in fact it was the other way around. The protesters were paid pro-Iranian militiamen. No one in Baghdad was fooled by this.

        In a way, it’s what got Suleimani killed. He so wanted to cover his failures in Iraq he decided to start provoking the Americans there by shelling their forces, hoping they would overreact, kill Iraqis and turn them against the United States. Trump, rather than taking the bait, killed Suleimani instead.”

        I find the whole “disproportionate” critique absurd and mildly offensive. if the US is attacked (especially by a as of yet non-nuclear power), I want the response to be disproportionate.

        This comment on Popehat also seemed appropriate:

        “But to be fair cogent well-thought out plans have failed miserably so far so maybe it’s time to try a venal corrupt bumbling imbecile’s plans.”

        Liked by 2 people

        • What evidence is there though that it’s an abrupt, spur of the moment plan?


        • “But to be fair cogent well-thought out plans have failed miserably so far so maybe it’s time to try a venal corrupt bumbling imbecile’s plans.”

          I find it hard to disagree with that statement.

          What evidence is there though that it’s an abrupt, spur of the moment plan?

          Not sure there’s evidence, but there is an apparently pattern of behavior. I don’t think it’s unreasonable to suspect that this wasn’t planned in great detail.

          But I still think the point is valid: elaborate sociopolitical-based planning hasn’t seemed to work out that well. I don’t think this could be much worse.


        • I think Trump cultivates the Rogue Elephant perception of himself but I’m not sure the greasing of that muzzie could have been accomplished in an impulsive manner. He’d have had to have been tracked for months for the hit to work.

          Liked by 1 person

        • Years, according to Mullen.

          Liked by 1 person

        • What evidence is there though that it’s an abrupt, spur of the moment plan? This took planning, and the evidence supports that.

          For example, Mike Mullen said that they always kept tabs on the Quds general but he generally stayed hidden. So I assume that the MF just got careless and arrogant by appearing as a target in the open outside of his home nation. Obviously military intel knew in advance that he would likely be at that airstrip at that time.

          Liked by 1 person

        • He’d have had to have been tracked for months for the hit to work.

          That makes a lot of sense. So definitely a long-term plan to take this guy out. Sort of like there was with Obama with Clinton was in the Whitehouse, only Trump actually signed off on it.


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