Morning Report: Awaiting the Fed

Vital Statistics:

 LastChange
S&P futures4,41765.2
Oil (WTI)86.871.23
10 year government bond yield 1.78%
30 year fixed rate mortgage 3.73%

Stocks are rebounding as we await the Fed’s decision. Bonds and MBS are flat. Oil is rallying on Ukraine tensions.

The Fed’s decision is set for 2:00 PM EST. While no changes in the Fed Funds rate are expected, the focus will be on the balance sheet and the reduction of the central bank’s holdings of mortgage backed securities and Treasuries. This could have an effect on MBS prices which would affect rates. Be careful locking around that time. Jerome Powell will hold a press conference at 2:30.

Mortgage applications fell 7.1% last week, according to the MBA. The purchase index fell 2% while refis fell 13%. “All mortgage rates in MBA’s survey continued to climb, with the 30-year fixed rate rising for the fifth consecutive week to its highest level since March 2020,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. He noted the 30-year fixed rate is now 77 basis points higher than a year ago. “Unsurprisingly, borrower demand for refinances subsided, with applications falling for the fourth straight week. After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance. Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them.”

The IMF has downgraded its outlook for global growth from 4.9% to 4.4%. Supply chain issues are expected to last through mid-year and then abate.

Flagstar reported earnings that came in slightly below expectations. Mortgage originations fell to $10.7 billion, which is down 15% from the third quarter and 19% from a year ago. Gain on sale margins fell to 1.02%, which was a big decline from 1.5% in the third quarter and 1.93% a year ago. The MSR portfolio multiple increased from 1.08% to 1.12%.

20 Responses

  1. Breyer is retiring from SCOTUS. Who will Manchin support?

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    • Breyer retiring is actually pretty insignificant, I think. Progressive judges are pretty much just cogs. We all know exactly how they are going to vote in any politically contentious case that anyone cares about. So whether it is him or some other left-wing legislator pretending to be a judge, which is what Biden will appoint, the results will be the same.

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  2. This also made me laugh.

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  3. This strikes me as accurate:

    “These are people who voted for both Barack Obama and Donald Trump. And I know that a lot of your listeners can’t imagine that there’s anyone like that who exists in America. And the good news, is that they’re not as angry at each other. The bad news is that they are very, very hostile to the way things are in America today.

    We all have something that makes us agitated and angry, and I was hoping that because they were independents, because they voted for both sides of the political equation, they would be much more hopeful, because they would see advantages on both sides.

    What I realized, and the most important finding of this group, is that in fact, independents are simple rejectors. They reject both the left and the right. They reject the past president and the current president, and in some ways, they’re actually even more negative, because they don’t see a way out. They don’t see either side as being the answer to the challenges facing the country. And that means that they’re pretty down on the future.”

    And the horror:

    “…the more that I hear, the more that I understand, the more frightened I get. I will tell you that we are on a razor’s edge right now. That it’s not that it’s a powder keg. It’s not that we’re about to erupt with violence on the streets. But we are reaching the point where we simply turn off the T.V., stop reading the newspaper, stop collecting any information, and shut it all off. And once we do that, the future of our democracy will truly be in peril.”

    God forbid people turn off the news.

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