Morning Report: Global bond yields fall

Vital Statistics:

S&P futures4,3394.8
Oil (WTI)73.810.45
10 year government bond yield 1.31%
30 year fixed rate mortgage 3.11%

Stocks are higher this morning as we await the FOMC minutes at 2:00 pm this afternoon. Bonds and MBS are up.

It looks like the big decrease in yields is an across-the-board phenomenon in global sovereign debt markets which started on Monday when US markets were closed. The German Bund has dropped 10 basis points in yield to -30 bp, and Gilts / JGBs are up as well. The drop in yields doesn’t appear to be driven by, say the jobs report.

One possibility is that investors are thinking that the post-COVID recovery has peaked, and that inventory re-stocking is wrapping up which means that any commodity-driven inflation has peaked. Commodity-driven inflation is almost always transitory (the exception being the oil shocks of the 1970s), and a durable increase in inflation requires higher wages combined with low productivity.

MBS are lagging the move in Treasuries as usual.

The number of mortgages in forbearance fell to 2 million, which is the lowest since March 2020 at the onset of COVID. The percentage fell to 3.87%. “For the first time since last March, the share of Fannie Mae and Freddie Mac loans in forbearance dropped below 2 percent. The share in every investor type and almost every loan category dropped as well, bringing the number of homeowners in forbearance below 2 million,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The rate of forbearance exits and new forbearance requests remained at low levels, but we expect the pace of exits to increase with reporting next week for the beginning of July.”

Mortgage applications fell 1.8% last week as purchases fell 1% and refis fell 2%. “Even as mortgage rates declined, with the 30-year fixed rate dropping 5 basis points to 3.15 percent, both purchase and refinance applications decreased,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Treasury yields have been volatile despite mostly positive economic news, including last week’s June jobs report, which showed ongoing improvements in the labor market. However, rates continued to move lower – especially late in the week. The 30-year fixed rate was 11 basis points lower than the same week a year ago, but many borrowers previously refinanced at even lower rates. Refinance applications have trended lower than 2020 levels for the past four months.”

The Fannie Mae Home Purchase Sentiment Index was largely unchanged last month, however the some of the components are beginning to reflect the current housing market. The percentage of people who think it is a bad time to buy increased by 8 ppts to 64%, while the number of people who think it is a good time to sell increased by 10 ppts to 77%.

There were 9.2 million job openings at the end of May, according to the JOLTS jobs report. Interestingly, the quits rate fell from 2.8% in April to 2.5% in May. Since the quits rate tends to lead wage inflation, the drop in that statistic could be considered bond-bullish. The labor market continues to be a mess of conflicting signals.

15 Responses

  1. This is making the rounds in right wing media,

    I’m curious as to what type of law enforcement capabilities Capital police would have off of the Capital grounds? I honestly don’t know.


    • I am guessing this is just for show. The left has gotta milk the 1/6 thing for all its worth. It is the only thing they can talk about.


      • True, but if you’re a citizen living in Ohio and a Capital police shows up at your door demanding things/stuff, do they have any legal authority? Do they have to be obeyed like you would other police when it involves certain orders. For example, is it a crime to elude the Capital police off Capital grounds? That kind of thing.


    • I don’t see why the FBI can’t investigate threats against members of Congress.

      Capitol police should maybe focus on securing the physical grounds of the Capitol itself first.


      • I completely agree. I’m just curious what kind of authority the claim to have outside the Capital grounds or Congressional field offices.


        • Good wrap-up by Ace over NSA spying of Tucker Carlson.


        • Oh the humanity!


        • Lot of small business owners and builders of affordable housing in Minneapolis and Portland whose hearts bleed for them—for whom the destruction took everything they had worked for their lives. How sad to see the poor entitled twats of DC who have their own private police force see some damage to the place they work that was immediately repaired and restored on the taxpayers dime with zero effort on their part!

          Not advocating for Capitol riots but my sympathy is low. They really do seem to view themselves a royalty and the people as rabble—to be condemned or indulged based on the fashion of the day.

          Also clearly still trying heavily to pimp January 6th as their 9/11. Will work on blue Checkmark Twitter I’m sure.


        • Oh the humanity!

          That horse is going to be glue by the time primaries roll around.


        • Glenn Greenwald called it on the NSA. It went from “of course they wouldn’t spy on Carlson” to “well, he shouldn’t have been talking to foreigners” immediately:


        • I’m not sure what the goal is with “leaking” (although it becomes less like “leaking” when everybody knows who is doing it and is pretty sure why). Tucker wanted an interview with Putin? Shocking. Something else coming?

          This is 100% the standard liberal mindset and it’s what makes that faction so authoritarian. I have zero doubt that if it’s proven that someone in the intelligence community obtained these communications & criminally leaked them, liberals will justify it:

          He’s exactly right–although I don’t like calling these new progressives “liberals”. I don’t think they deserve the word. At all. They are some of the most markedly illiberal human beings on the planet.

          Somehow GG is shocked that a noxious TV personality dabbling in foreign contacts ran afoul of legitimate surveillance?

          Totally fine with legit surveillance of legitimately awful people who run around with other legitimately awful people.

          I am not fine with “legit” surveillance of people we personally don’t like because they offend us in some way, but particularly politically.

          I find it disappointing (though perhaps inevitable) that this is now an acceptable position amongst “liberals”.


        • I agree that it is time people stop calling authoritarian leftists “liberals.”

          They are nothing of the sort.


  2. Great piece from Greenwald on the Capitol Police expansion:


    • I just read this. It’s the creation of a new intelligence organization–apparently one expected to have FBI-style (or more) domestic surveillance powers–under the direct command of congress? Senate get some input on who they go after, as well? Executive branch?

      Anyway, it’s always good news when the central government creates its own not-so-secret police to investigate and prosecute critics and political opponents.

      Do most people feel like the country they grew up in has gone insane about the time they hit their fifties? I feel like that’s common, so perhaps my present age would explain how nuts the world seems to me now.


    • Also, any speculation on if the Republicans will reign this in should they grab power again? Which seems possible in 2022. I feel like they might because it’s so explicitly partisan . . . but they might not. I would bet on them keeping it if it was just about class, but it’s really only about people on the right and Trump supporters and Republicans so they might not be that excited about keeping them in place.

      And nobody ever talks about the incentives. What are the incentives these offices will have to entrap people for “domestic terrorism” in order to justify the next 2 billion dollars?


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