Morning Report: Morgan Stanley calls for rates to rise 100 basis points.

Posted on November 3, 2020 by Brent Nyitray

Vital Statistics:

  Last Change
S&P futures 3338 37.6
Oil (WTI) 38.15 1.29
10 year government bond yield   0.88%
30 year fixed rate mortgage   2.87%

Stocks are higher as we head into election day. Bonds and MBS are down small.

The share of loans in forbearance fell by 7 basis points last week to 5.83%, according to the MBA. “With more borrowers exiting forbearance in the prior week, the share of loans in forbearance declined across all loan types,” said MBA Senior Vice President and Chief Economist Mike Fratantoni. “Almost half of forbearance exits to date have been from borrowers who remained current while in forbearance, or who were reinstated by paying back past-due amounts.”

Apparently Morgan Stanley was out with a call yesterday calling for markedly higher bond yields, with the 10 year yield rising 100 basis points. Apparently the analyst is using 2016 as a template, where an unexpected Trump victory translated to a big “risk on” trade where investors sold Treasuries and bought stocks. Regardless, traders are betting on volatility stemming from the election. As MBS investors know, volatility is kryptonite for the asset class. And sort of dislocation in the bond market will translate into lower MBS pricing, which in turn means higher mortgage rates at the margin. FWIW, with global sovereign debt at or close to record lows, COVID, a Federal Reserve who wants low rates, and a lot of uncertainty regarding the disease and the recovery, I am not seeing the case for higher rates, but I guess anything is possible these days.

Construction spending rose 0.3% MOM and 1.5% YOY in September, according to the Census Bureau. Residential construction was up 2.7% MOM and over 10% YOY. That said, office and lodging spending was down.

Home prices rose 1.1% MOM and 6.7% YOY, according to CoreLogic. They are predicting flat prices going forward however.

Filed under: Economy, Morning Report |

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15 Responses

  1. jnc4p, on November 3, 2020 at 12:08 pm said:

    Observation from my state – the only third party candidate to make the ballot was the Libertarian one. No Greens this year.

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  2. jnc4p, on November 3, 2020 at 2:01 pm said:

    I mentioned this before, but here’s the Twitter thread that had Glenn Greenwald vs Dan Froomkin arguing about whether it was acceptable for the media to intentionally downplay and suppress the Biden corruption stories because they might help Trump.

    The back and forth was interesting:

    Edit: There’s something in the Twitter embed that’s screwing up the thread.

    Try this:

    https://tinyurl.com/yxg8g2zc

    Froomkin wrote an article where he acknowledged this and stated that after Biden was elected they would have to go back and actually demand accountability from Biden:

    “It was not Biden that the Washington press corps needed to hold accountable. Biden simply was not the story.

    But all that changes if and when he becomes the president-elect.

    The second he is declared victor – or, given how long that could take, perhaps even once all the votes are cast – political journalists should be holding him to the highest possible standards of transparency, logic, and clarity.

    They should be demanding detailed statements about policy and personnel so we can hold him accountable going forward.

    And yes, with Trump no longer a distraction, it would also be worth relitigating the past to get a better sense of where Biden’s weaknesses are – to determine where he needs to be held to account most aggressively.”

    https://presswatchers.org/2020/10/if-biden-wins-political-journalists-have-a-lot-of-catching-up-to-do/

    I don’t see that happening, and I agree with Greenwald and Taibbi that by not doing so during the camping the press has destroyed what little was left of it’s credibility in favor of becoming a partisan actor.

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    • Brent Nyitray, on November 3, 2020 at 2:53 pm said:

      I think the press will lay into Biden as a way of pretending to show nonpartisanship, but it will really be all about forcing him to resign so kamala can take over

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  3. novahockey, on November 3, 2020 at 2:14 pm said:

    Nate Silver
    @NateSilver538
    Replying to
    @NateSilver538
    The one thing I’ll say is that there’s just not really that much you can tell without knowing who people voted for. Whether the electorate ends up at say R+3 or R+1 by party registration isn’t as important as whether Biden wins indies by 20 points or loses them by 2.

    ___________
    that’s maddenesque

    or, if you prefer:

    I’m glad you’re here to tell us these things. Chewie! Take the Professor in back and plug him into the hyperdrive!

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  4. jnc4p, on November 3, 2020 at 2:49 pm said:

    Best thing I’ve seen on PL in months:

    https://www.nbcnews.com/id/wbna43744222

    And before anyone blames Trump or the Russians, note the date of the article.

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  5. Brent Nyitray, on November 3, 2020 at 9:02 pm said:

    sporting index us presidential markets went out trump 68-71, biden 35-38. markets were reversed this am.

    big change in sentiment. US bond yields falling.

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