Morning Report: Stimulus Bill Passes

Vital Statistics:

 

  Last Change
S&P futures 3721 25.3
Oil (WTI) 48.21 0.24
10 year government bond yield   0.96%
30 year fixed rate mortgage   2.78%

Stocks are higher this morning after Trump signed the COVID-19 relief bill. Bonds and MBS are down.

 

The stimulus bill includes $600 checks for most Americans, and also includes a continuing resolution to keep the government open.

 

This should be a quiet week between Christmas and New Years. Markets will be closed on Friday, and the bond market closes early on Thursday. There doesn’t appear to be any market-moving data either, although we will get Case Shiller and Pending Home Sales.

 

While Treasury yields have been inching up, mortgage rates continue to hit new lows. This has been driven primarily by Fed MBS purchases and increased competitive behavior from originators. While existing homeowners are benefiting from lower rates, the first time homebuyer is struggling to find anything affordable as inventory is stuck at record lows.

 

Unintended consequence of Fed policy: stock market margin debt is at an all-time high. Today’s WSJ has a story of a guy who sold his house and spent some of the proceeds to buy Tesla call options. IMO the Fed has painted itself into a corner here, and I suspect returning to any sense of pre-COVID normalcy will be a rough road indeed. Meanwhile, Bitcoin continues to soar, and home prices are rising at a double digit rate.

 

 

4 Responses

  1. Good that DJT signed. I would guess that we all thought he would, either yesterday or today, while the press and cable news were playing “What if he doesn’t?”

    I still mainly see DJT as our own Berlusconi, more savvy as a marketer but less as a businessman or pol. Neither the short nor long cons would have been winners for DJT if he vetoed or pocket vetoed the bill. But his action in appearing to be the champion of the poor for a week and reluctantly signing in the last 24 hours before shutdown is positive for both his short and long cons, and given that his decisions drove stock prices during the week and upon news of his signing it may have helped his short con in more ways than one [this latter suggestion is completely my own and has no basis in evidence or proof, so I do not believe it, I merely suggest it in the free spirit of internet conspiracy theory disclosure].

    Like

    • I suspect Trump will start a media venture when he leaves to cater to conservatives who suspect Fox has joined the liberal media. He should buy up Parler and maybe some other outlet.

      He would make a fortune.

      Like

    • Apparently Sanders is going to try and hold up the veto override vote for the Defense bill unless there’s a vote in the Senate on increasing the COVID checks to $2000.

      Like

      • I saw that. Grandstanding. Thanks for nothing.

        You might read the interview he gave as a candidate to Military Times. Told them how he would slash the mil budget with an axe, not a scalpel. Consistency is the hobgoblin of small minds, or some such.

        Like

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