Morning Report: The changes to SLR will expire at the end of the month.

Vital Statistics:

S&P futures39082.4
Oil (WTI)59.22-0.72
10 year government bond yield 1.72%
30 year fixed rate mortgage 3.33%

Stocks are flattish this morning on no real news. Bonds and MBS are flat as well.

The Fed is allowing the temporary change to the Supplemental Liquidity Ratio to expire at the end of the month. Part of what has been driving rates higher has been banks getting ahead of this expected change. The punch line is that banks were holding a lot more Treasuries and mortgage backed securities than normal and now that will reverse. I am not sure where we are in this unwinding process, but it sounds like it has to end by the March 31.

So far we haven’t seen more guidance out of the GSEs regarding the investment property cap. Aggregators have been adding big hits to second and investment properties to discourage sellers. The most likely result of this will probably encourage the re-launch of the private label securitization market, particularly in non-guaranteed QM loans, which are loans that conform with QM, but are not guaranteed by the government. Re-launching this market will probably be an easier lift than the standard non-QM loans simply because there is a lot of data regarding prepays and defaults.

wrote about this issue a few years ago, and as far as I can tell, not much has changed since then. The big thing people don’t realize is that there are a lot of issues the buy-side needs resolved in order to bid this paper. It isn’t as simple as the mortgage industry thinks it is. A lot of stuff needs to be ironed out at the SIFMA level regarding the behavior of issuers and servicers. Given there is a need, we will probably see it happen, but this market isn’t about re-materialize overnight.

17 Responses

  1. Brent, you need to go to Substack:

    “Yglesias told me via Slack (he stopped working as a Vox writer last fall but still contributes to Vox’s Weeds podcast), the deal he took from Substack is actually costing him money, for now. Yglesias says he has around 9,800 paying subscribers, which might generate around $860,000 a year. Had he not taken the Substack payment, he would keep 90 percent of that, or $775,000, but under the current deal, where he’ll keep the $250,000 plus 15 percent of the gross subscription revenue, his take will be closer to $380,000.”


    • If you go to Substack Brent I will subscribe and pimp your stuff left and right!


    • “On the other hand, unless you’re running your own private newsletter business, it seems like anyone on any newsletter platform runs the risk of the same problem Doyle identified in their first blog post. If you’re on someone else’s platform, then other people will be there too — perhaps even making money — and you may hate them.”

      you can’t think this is a problem and value liberalism as an ideology.


      • Or have a capacity for rational thought. You will always also be the person on a platform that somebody hates and eventually they come for you.


      • Taibbi was talking about why the left despises Substack so much. What is the point of cancelling someone if they don’t stay canceled and can still earn a living?

        Defeats the whole purpose.

        Liked by 1 person

        • Surely the right sorts of people will eventually buy Substack and change their policy on wrongthink. And then deplatform everybody blue checkmark Twitter doesn’t like. If they aren’t actively resisting infiltration at every level they will eventually be taken over.


  2. And people think Trump is a lying conman.

    I wonder what is must be like to go through life in the complete absence of a sense of shame.

    I actually agree with this:

    President Joe Biden said earlier this week that he does not think that the filibuster must be done away with entirely. The Daily Wire reported that in an interview with ABC’s George Stephanopoulos, Biden said that the older version of the filibuster, deemed the “talking filibuster,” could be brought back instead of doing away with the process entirely.

    If people want to filibuster, make them actually do it. I’m on board with that.


    • I also agree on the reconstitution of the old school filibuster. Bring it back!


    • Agreed. The 1975[?] change was done because actually arguing about whether a bill with majority support should pass unaltered was just TOO DEMEANING for august Senators.


      • My problem with it exactly. That and you don’t have to be serious about it so there’s not prioritization. You have to be serious if you’re going to filibuster in person for days on end. Mr. Smith Goes to Washington!


  3. This will end well:


    • The government set out to prop up the economy. It may also be propping up the market.

      ya think?

      It never ceases to amaze me that the left has been absolutely unable to grasp this simple concept. Seriously. Ever since the dual mandate, we have seen nothing but asset bubble after asset bubble.

      And these simpletons think the growth in inequality has been due to Reagan. Or racism. Or something.


    • Christ on a cracker. Great Depression II here we come!


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