All Things in Moderation

Vital Statistics:

	Last	Change
S&P futures	4,158	-21.5
Oil (WTI)	79.27	-1.59
10 year government bond yield		3.63%
30 year fixed rate mortgage		6.48%

Stocks are lower this morning on disappointing earnings. Bonds and MBS are up.

Mortgage applications fell 8.8% last week as purchases fell 8% and refis fell 10%. “Last week’s increase in mortgage rates prompted a pullback in application activity. With more first-time homebuyers in the market, we continue to see increased sensitivity to rate changes. The 30-year fixed rate increased 13 basis points to 6.43 percent, which led to purchase applications declining 10 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Affordability challenges persist and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act. The 10-percent drop in FHA purchase applications, and the increase in the average purchase loan size to its highest level in a month, are other indications that first-time buyers have pulled back. The spread between the jumbo and conforming 30-year fixed rates widened slightly last week to 15 basis points, but this was a much tighter spread compared to the past year. As banks reduce their willingness to hold jumbo loans, we expect this narrowing trend to continue.”

Western Alliance reported first quarter earnings after the close and the stock rallied 16% on the open. Earnings per share came in at $1.28 which was below the Street estimate of $2.04 however adjusted earnings per share came in at $2.30.

The bank saw deposit outflows in the aftermath of the Silicon Valley Bank situation, and ended the quarter with $47.6 billion. In April, the Western Alliance picked up another $2 billion in deposits, which are 73% insured. Immediately available liquidity is 158% of uninsured deposits.

Western Alliance did make some security sales and wrote down some investments. Provisions for credit losses increased, primarily due to a corporate debt security issued by a financial company and increased economic uncertainty. Book value per share increased.

Atlanta Fed President Ralph Bostic said that the FOMC will probably hike another 25 basis points and then pause. “One more move should be enough for us to then take a step back and see how our policy is flowing through the economy, to understand the extent to which inflation is returning back to our target…If the data come in as I expect, we will be able to hold there for quite some time,” he said. “Once we get to that point, I don’t have us really doing anything but monitoring the economy for the rest of this year and into 2024.”

Filed under: Economy |