Morning Report: Q1 GDP revised downward

Vital Statistics:

 LastChange
S&P futures3,8324.75
Oil (WTI)113.211.14
10 year government bond yield 3.17%
30 year fixed rate mortgage 5.93%

Stocks are flattish this morning after yesterday’s tech rout. Bonds and MBS are flat.

The final revision of first quarter GDP came in at -1.6%, a downward revision from the previous -1.5%. The PCE Price Index (basically inflation) was revised upward to 7.1%. Ex-food and energy it rose 5.2%. Consumption was revised downward to 1.8% from 3.1%.

The latest GDP Now estimate from the Atlanta Fed has growth increasing at 0.3% in the second quarter. If that is how it plays out, we will have managed to avoid a technical recession, however growth is anemic and the recent increases in the Fed Funds rate won’t begin to impact the economy until later this year.

Mortgage applications rose 0.7% last week as purchases rose 0.1% and refis increased 2%. The numbers were affected by the Juneteenth holiday.

“Mortgage rates continue to experience large swings,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. He noted the 30-year fixed rate declined 14 basis points last week to 5.84 percent after increasing 65 basis points during the past three weeks. Rates are still significantly higher than they were a year ago, when the 30-year fixed rate was at 3.2 percent.

“The decline in mortgage rates led to a slight increase in refinancing, driven by an uptick in conventional loans,” Kan said. “However, refinances are still 80 percent lower than a year ago and more than 60 percent below the historical average. Overall purchase activity has weakened in recent months due to the quick jump in mortgage rates, high home prices, and growing economic uncertainty.”

The abrupt shutdown of First Guaranty has left a lot of lenders with uncertain pipelines. The company laid off almost 80% of its staff on Friday, and basically left a skeleton crew to wind things down. “FGMC has experienced significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility,” Cassie Vacante, senior vice-president of Human Resources, wrote in a WARN notice.

I have heard rumors that liquidity is beginning to dry up in the non-QM space. I have to imagine the fallout from FGMC is related to it. Last week there were rumors that FGMC was hit by margin calls, which might be indicative of weakening buy-side demand for private label securities. While these are rumors only, it seems to fit.

Home Prices rose 21% in May, according to the Clear Capital Home Data Index. In the Southern region, prices rose 23%, led by a slew of Florida locations. The Northeast is beginning to experience home price appreciation at long last. Note this index is a month ahead of the FHFA and Case Shiller indices so it reflects more recent data. The rise in mortgage rates has yet to affect home price appreciation.

38 Responses

  1. No W.V. vs EPA today.

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    • What are they waiting for? I thought last week would be the last for opinions. They are really dragging it out.

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  2. Lol

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  3. Even Jacobin gets it:

    “Democrats Say They Want to Defend Democracy — but They’re Boosting Far-Right Republicans

    By Nick French

    The Democrats are boosting Trumpian candidates in GOP primaries with the hope that they’ll be easier to beat in the general election. It’s an incredibly dangerous and stupid political gambit.”

    https://jacobin.com/2022/06/democrats-boosting-far-right-republicans-defend-democracy-republican-gop-primaries

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    • It shows they simply aren’t serious about anything they say about “threats to democracy”—they wouldn’t work to make it easier for MAGA types if they really though Trumpers we’re a threat to democracy. They’d be doing everything to keep the MAGA folks away from any chance to win.

      So either they don’t think MAGA-ism poses any actual threat or they don’t care if it does.

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      • threats to democracy means threats to democrats.

        it is about their political ambitions tarted up in faux concern about the state.

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  4. Same.

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  5. Climate change hits tranny’s the hardest.

    It’s a known- known.

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    • Whenever I read something with an intersectional analysis, I always think of Nigel Tufnel describing his “intertwining lines” when he wrote Lick My Love Pump

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    • Every day it becomes more of a religious cult, and they lose another .01% of their fellow travelers because they sound insane to everybody else.

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  6. Stop making Trump look cooler!

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  7. I can’t help but wonder if any of you are actually watching the testimony from the witnesses or just regurgitating what you’re reading about it.Trump is a goner but maybe that’s what you wanted anyway but don\’t want to be the ones to say that?

    It’s confusing to those of us who live in reality why anyone would deny the evidence right in front of them and just how close we came to catastrophe.

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    • No one believed Anita Hill either and look where that got us!

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      • No one believed Tara Reid and we’re sunk because of it as well.

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        • It may be my horrible make sexism but sexual harassment claims and even assault claims like Reid’s have an expiry date. She should have gone public at the time. Christine Blakey Ford should have been provided profession mental health services but 30 years after the alleged incident should never have been testifying at a SCOTUS confirmation.

          Tara Reid didn’t crack the top 50 reasons to vote against Biden to my mind.

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        • McWing:

          No one believed Tara Reid…

          #believeallwomen(unlessithurtsaDemocrat)

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      • The press believed Anita Hill. And it got us Clarence Thomas on SCOTUS that he made it through an extremely hostile confirmation … and Clarence Thomas is by far my favorite justice, presently on the court or in my lifetime or in the 50 years preceding my lifetime. So I’m okay with it.

        I don’t find Anita Hill credible but honestly I don’t know. But I don’t get much of a sense that Thomas ever was the kind of serial harasser Anita Hill accused him of being. But again I don’t know and cannot know.

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      • lms:

        No one believed Anita Hill either and look where that got us!

        People who say “no one believed Anita Hill” probably shouldn’t go around talking about how they are the ones “living in reality”. But in any event, thank goodness 52 Senators ignored her, because it got us our greatest living SCOTUS justice, and perhaps the greatest justice since FDR threatened to pack the court.

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    • I’m the one on here that keeps writing that Biden’s DOJ will indict Trump and a DC jury will convict him sometime after the Republican convention and before the election. Your wish will be granted.

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    • What catastrophe? There was no catastrophe in the offing. Some morons rioted around the Capitol, most of them walked around and took selfies and acted like tools (and apparently someone stole Pelosi’s laptop?). At no point was America democracy imperiled. The Capitol Police could have done a better job, that National Guard might have been called out—so plenty of incompetence on displays. But those idiots were never going to take over the country or change the outcome of the election and fantasizing that it was an existential crisis is actually ignoring the evidence broadly available and clearly visible, IMO.

      That said I would prefer a political landscape where Trump is marginalized. While I don’t find him as evil as most on the left (and in fact voted for him in 2020 where I did not in 2016) he is far from the ideal candidate. Or president.

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    • Not interested in the left’s dog and pony show.

      I don’t believe a single thing democrats and the media say. Not after the Russian Collusion Hoax.

      So not going to waste my time. I don’t care what the left says – an unarmed mob led by a dude with buffalo horns was never a threat to the Republic.

      This is just drama queen bullshit to get the base to write checks. Nothing more.

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      • I can’t imagine a situation I’d be interested in this. I was much more liberal when Iran-Contra was going on and I listened to tiny portions of the hearings on the radio when I was driving from one place to another and it was going on. I probably caught a half-hour all told.

        This sounds as tedious as an infomercial to me. If this was the January 6th Hero’s Committee and was a bunch of Republicans talking about Hunter Biden or Joe Biden’s suspiciously high net worth after a lifetime of “public service” I wouldn’t be any more interested.

        I rarely watch news channels. I was at a hotel last Sunday and ate breakfast to a Fox News show. It was awful. Yelling and the acceptable subset of Republican talking points. Almost no reportage and certainly not the most basic insights available from any number of amateur and semi-pro podcasts. There are no news channels any more. And none of the people engaged in the January 6th committee are “investigating” or out to “discover the truth” than Fox News is about providing nuanced insights and careful factual analysis.

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    • lms:

      I can’t help but wonder if any of you are actually watching the testimony from the witnesses…

      I’m not.

      It’s confusing to those of us who live in reality…

      Doesn’t that “reality” include belief in the Russia Collusion hoax?

      Like

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