Morning Report: On-again / off-again stimulus

Vital Statistics:

 

  Last Change
S&P futures 3379 26.6
Oil (WTI) 39.75 -0.99
10 year government bond yield   0.78%
30 year fixed rate mortgage   2.88%

Stocks are higher this morning after Trump softened his stance on further stimulus measures. Bonds and MBS are flat.

 

We have a lot of Fed-speak today, along with the FOMC minutes at 2:00 pm. This might affect the governement bond market, but so far it looks like mortgages and govvies have decoupled a little.

 

Trump pulled the plug on stimulus talks yesterday, “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill,” Mr. Trump wrote Tuesday on Twitter. He then said he was willing to accept something that gave relief to airlines and direct stimulus payments to individuals: “If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now,” Mr. Trump tweeted.

 

Meanwhile, Fed Chairman Jerome Powell urged the government to enact further stimulus, saying there is little risk to the economy of the government “overdoing it.” “By contrast, the risks of overdoing it seem, for now, to be smaller,” Powell added in remarks to the National Association for Business Economics. “Even if policy actions ultimately prove to be greater than needed, they will not go to waste. The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”

 

Office, retail and residential vacancy rates increased in the third quarter. The average mall vacancy rate hit 10%, the highest in 20 years. Apartments are feeling the squeeze too as they are buying occupancy via reducing rents.

The third quarter statistics clearly show that property owners started to feel the impact of the pandemic. Ironically, occupancy growth in the apartment market was net positive, yet rents fell dramatically, especially in some high-priced markets as tenants had the upper hand and property owners recognized this and lowered rents to maintain occupancy.

 

Mortgage applications rose 4.6% last week as purchases fell 2% and refis rose 8%.

“Mortgage rates declined across the board last week – with most falling to record lows – and borrowers responded,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The refinance index jumped 8 percent and hit its highest level since mid-August. Continuing the trend seen in recent months, the purchase market is growing at a strong clip, with activity last week up 21 percent from a year ago. The average loan size increased again to a new record at $371,500, as activity in the higher loan size categories continues to lead growth.”

 

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