Morning Report: Mortgage spreads hit 37 year highs

Posted on June 6, 2023 by Brent Nyitray

Vital Statistics:

Stocks are flattish this morning on no real news. Bonds and MBS are down small.

The services economy expanded at a slower pace in May, according to the ISM Services Report. “There has been a pullback in the rate of growth for the services sector. This is due mostly to the decrease in employment and continued improvements in delivery times (resulting in a decrease in the Supplier Deliveries Index) and capacity, which are in many ways a product of sluggish demand. The majority of respondents indicate that business conditions are currently stable; however, there are concerns relative to the slowing economy.”

The prices index continues to decline, which is good news for the Fed. Over the past month, the percentage of companies raising prices has fallen from 35% to 25%. They aren’t cutting yet; the number of companies maintaining prices has risen from 60% to 69%. Employment entered contractionary territory, which should put additional downside pressure on inflation. Sentiment was summarized by: “We are trying to do more with the same staff because margins in the industry have compressed” and “Our company is currently on a hiring freeze until there’s a better understanding of where the economy is headed.”

Home prices rose 2% YOY in April, according to CoreLogic. Home prices were accelerating at 20% last year at this time, so this is a big slowdown. It looks like prices peaked in June of 2022, so we should start seeing YOY declines before long. The reasons for the slowdown are well know: mainly high mortgage rates are keeping potential buyers on the sidelines and potential sellers in their homes.

The top states in terms of percentage gains were Indiana and New Jersey. The losers were all concentrated on the West Coast and in the Mountain states.

The first-time homebuyer has been slammed by affordability issues, and will be negatively affected by the resumption of student loan payments in August. Unfortunately, mortgage rates continue to rise faster than the 10-year. The spread between the 30 year fixed rate mortgage and the 10 year bond yield has surpassed the highs of last year and the 2008 financial crisis and is back at levels last seen when the Smith’s The Queen Is Dead was released.

Filed under: Economy |

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18 Responses

  1. jnc4p's avatar
    jnc4p, on June 6, 2023 at 10:00 am said:

    I’m sure everyone is shocked to learn this:

    “U.S. had intelligence of detailed Ukrainian plan to attack Nord Stream pipeline

    THE DISCORD LEAKS | The CIA learned last June, via a European spy agency, that a six-person team of Ukrainian special operations forces intended to blow up the Russia-to-Germany natural gas project

    By Shane Harris and Souad Mekhennet
    June 6, 2023 at 10:52 a.m. EDT”

    https://www.washingtonpost.com/national-security/2023/06/06/nord-stream-pipeline-explosion-ukraine-russia/

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  2. ScottC's avatar
    ScottC, on June 6, 2023 at 3:13 pm said:

    Clinton appointee judge declares that going through puberty is harmful to adolescents.

    The plaintiffs’ adolescent children will suffer irreparable harm — the unwanted and irreversible onset and progression of puberty in their natal sex — if they do not promptly begin treatment with GnRH agonists.

    https://www.dailywire.com/news/federal-judge-temporarily-blocks-florida-ban-on-prescribing-puberty-blockers-cross-sex-hormones-to-minors

    The mind boggles.

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  3. jnc4p's avatar
    jnc4p, on June 6, 2023 at 3:55 pm said:

    Entertaining read:

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  4. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on June 6, 2023 at 6:32 pm said:

    Is the judge really this stupid? There has to be another reason for this reasoning.

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  5. lmsinca's avatar
    lmsinca, on June 6, 2023 at 7:15 pm said:

    Here’s a bit of a different take from the Daily Wire’s reporting.

    Florida ban on trans care for minors is likely unconstitutional, federal judge rules
    “The elephant in the room should be noted at the outset. Gender identity is real,” U.S. District Judge Robert Hinkle wrote, telling Florida to “put up or shut up.”

    Hinkle found that Florida’s bans on gender-affirming medical care for minors are subject to heightened scrutiny under the Equal Protection Clause because the bans discriminate on the bases of both sex and transgender status. While that would require the state to show that the bans advance an “important” government interest, Hinkle found that the state couldn’t even succeed in justifying the bans under the lowest level of scrutiny: rational basis review.

    “The State of Florida’s decision to ban the treatment is not rationally related to a legitimate state interest,” he ruled, a decision fatal to the bans.

    The trial evidence led Hinkle to address a conflict between some of the state’s arguments in court and the clear motivating factors expressed outside of court.

    “The elephant in the room should be noted at the outset,” Hinkle wrote. “Gender identity is real.”

    What followed in the next two pages of the court’s opinion was as aggressive a ruling as we’ve seen in challenging state actions to limit gender-affirming medical care — backed up, again, by a seven-day bench trial over these issues.

    “The medical defendants, speaking through their attorneys, have admitted [gender identity is real]. At least one defense expert also has admitted it,” Hinkle wrote. Some people, however, believe that “transgender individuals have inappropriately chosen a contrary gender identity, male or female, just as one might choose whether to read Shakespeare or Grisham.” Because of this, he continued, those people tend to “oppose medical care that supports a person’s transgender existence.”

    The members of the medical boards defending the lawsuit, at least in court, are not among those people. “In this litigation,” Hinkle wrote, “the medical defendants have explicitly acknowledged that this view is wrong and that pushing individuals away from their transgender identity is not a legitimate state interest.”

    Nonetheless, “an unspoken suggestion running just below the surface in some of the proceedings that led to adoption of the statute and rules at issue—and just below the surface in the testimony of some of the defense experts—is that transgender identity is not real, that it is made up.”

    This “purposeful discrimination” led him to conclude, “The plaintiffs are likely to succeed on their equal-protection claim,” as well as the parental-rights claim raised on behalf of the parents.

    Hinkle then addressed the state’s “laundry list of purported justifications” for the bans, concluding that they “are largely pretextual and, in any event, do not call for a different result.”

    In discussing Florida’s claims regarding the risks associated with gender-affirming medical care treatment, Hinkle acknowledges that “[i]need there are” risks — but, he goes on to describe the incomplete way such risks are addressed.

    “The challenged statute ignores the benefits that many patients realize from these treatments and the substantial risk posed by foregoing the treatments—the risk from failing to pursue what is, for many, the most effective available treatment of gender dysphoria,” he wrote.

    Hinkle also addressed the claims brought by many regarding international rules surrounding this care.

    https://www.lawdork.com/p/florida-ruling-trans-care-ban-minors?utm_source=post-email-title&publication_id=899862&post_id=126420415&isFreemail=true&utm_medium=email

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