Morning Report: Uptick in delinquencies 8/6/13

Posted on August 6, 2013 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1700.7 -1.8 -0.11%
Eurostoxx Index 2811.4 2.4 0.08%
Oil (WTI) 107 0.5 0.44%
LIBOR 0.266 0.001 0.38%
US Dollar Index (DXY) 81.74 -0.138 -0.17%
10 Year Govt Bond Yield 2.63% 0.00%  
Current Coupon Ginnie Mae TBA 104.6 0.0  
Current Coupon Fannie Mae TBA 103.9 0.0  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.37    

 

Markets are flattish on no real news. This week is relatively data-light. Bonds and MBS are flat.
 
Mortgage delinquencies rose 10% month over month in June, according to Lender Processing Services, breaking a downtrend that has lasted since late last year. 700,000 people who made their May payment missed their June payment. Is this a blip or the start of a new trend? Interesting fact regarding geography – Non-current inventory is still close to peak levels in New York State (only down 5%). By contrast, California is down 59%, Arizona is down 66% and Nevada is down 47%. This explains why Northeast real estate prices are still bumping along the bottom of the bathtub while the Southwest is not. 
 
Home prices increased 11.9% year-over-year, according to CoreLogic. According to chief economist Dr. Mark Fleming: “In the first six months of 2013, the U.S. housing market appreciated a remarkable 10%. This trend in home price gains is at the best pace since 1977.” They are forecasting prices to increase 12.5% in July. You can see what markets are hot and what markets are not below:
 

 
There were some interesting observations out of mortgage REIT Invesco Mortgage Captial (IVR). They noted that spreads have widened on agency paper and believe there is good value here. They are taking the view that the spread widening is temporary and was due to a perfect storm of REIT de-leveraging, mutual fund outflows and dealers clearing inventory for quarter’s end. What does this mean to us? That mortgage rates have room to fall, even if the 10 year bond doesn’t move.

 

Filed under: Morning Report | 11 Comments »

Morning Report – slow data week 8/5/13

Posted on August 5, 2013 by Brent Nyitray

Vital Statistics:

 

  Last Change Percent
S&P Futures  1701.8 -2.2 -0.13%
Eurostoxx Index 2807.7 -3.3 -0.12%
Oil (WTI) 105.9 -1.0 -0.95%
LIBOR 0.265 -0.001 -0.45%
US Dollar Index (DXY) 81.99 0.077 0.09%
10 Year Govt Bond Yield 2.62% 0.03%  
Current Coupon Ginnie Mae TBA 104.6 -0.1  
Current Coupon Fannie Mae TBA 103.8 -0.2  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.38    

 

Markets are flattish after a wild week with an unexpectedly strong GDP report, a dovish FOMC statement, and a disappointing jobs report. This week is very data-light, so I don’t expect a whole lot of movement. We do have some Treasury auctions this week, but I don’t see that as market moving. Bonds and MBS are down small.
 
The 10 year traded in a range of 2.57% to 2.74%. So far, it is looking like 2.74% is acting as resistance.
 
Another data point showing the first time homebuyer is being put off by higher rates – Beazer Homes announced a drop in orders as traffic has slowed due to higher interest rates. So far we have seen drops in orders from Pulte and Beazer – both geographically diverse builders with an emphasis on lower price points. 

Filed under: Morning Report | 47 Comments »

Open Thread Plus Bites & Pieces

Posted on August 4, 2013 by lmsinca

I’m still catching up from last week’s news and propaganda but I did read a couple of pieces that I thought were pretty interesting.

This was from the AP Friday.

MILWAUKEE (AP) — Abortion is still legal but getting one in many states will be difficult if laws passed this year are upheld by the courts. In a march through conservative legislatures, anti-abortion Republicans passed a wave of new restrictions that would sharply limit when a woman could terminate a pregnancy and where she could go to do so.

The push brought the anti-abortion movement closer to a key milestone, in which the procedure would become largely inaccessible in the three-fifths of the country controlled by Republicans even if still technically legal under Roe vs. Wade.

But rather than continuing to roll across the GOP heartland in synch with the pro-life movement’s plan, the effort may now be hitting a wall. The obstacle comes not from opposing Democrats but from GOP leaders who believe pressing further is a mistake for a party trying to soften its harder edges after election losses last year.

The resisting Republicans include governors and top legislators in more than a half-dozen states, including some of the largest and most politically competitive in the party’s 30-state coalition. They are digging in to stop the barrage of abortion proposals, hoping to better cultivate voters not enamored with the GOP’s social agenda.

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This one’s a little long but a fascinating read on our 40 year war against marijuana.  I don’t indulge but it’s pretty clear, I think, that it’s time to change our policies.  I loved this Nixon quote.

President Nixon had already made up his mind. In May 1971 he told H.R. Haldeman, “I want a goddamn strong statement about marijuana. Can I get that out of this sonofa-bitching, uh, domestic council? I mean one on marijuana that just tears the ass out of them.” And Nixon told Shafer directly, “You’re enough of a pro to know that for you to come out with something that would run counter to what the Congress feels and what the country feels, and what we’re planning to do, would make your commission just look bad as hell.”

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I’m pretty sure this isn’t going anywhere but it’s the thing I’ve been talking about since 2009…………..jeeze.  Medicare for all.  Here’s the money quote that makes it dead on arrival.

“Paradoxically, by expanding Medicare to everyone we’d end up saving billions of dollars annually,” he said. “We’d be safeguarding Medicare’s fiscal integrity while enhancing the nation’s health for the long term.”

Friedman said the plan would be funded by maintaining current federal revenues for health care and imposing new, modest tax increases on very high income earners. It would also be funded by a small increase in payroll taxes on employers, who would no longer pay health insurance premiums, and a new, very small tax on stock and bond transactions.

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And since we have peppers coming out of our ears (garden) here I thought I’d post my Baked Jalapeno Poppers recipe.

I use a combination of whatever peppers we have in the garden.  I can usually get about 15 to 18 poppers from this recipe.

Slice peppers in half lengthwise and remove seeds and membrane.  I like to leave part of the stem on.

Combine:

8 oz cream cheese

1 1/2 cup mozarella, jack or pepper jack cheese

1/2 tsp cumin

1/2 tsp or less cayenne

Stuff peppers with cheese mixture.

Bowl one:  1/2 cup seasoned flour

Bowl two:  2 eggs

Bowl three:  1 cup seasoned bread crumbs (I use plain bread crumbs and season them myself)

Seasoning:  salt, pepper, paprika, garlic powder, onion powder, cayenne pepper and Mexican oregano to taste.  I just wing it and add to both flour and bread crumbs.

Roll peppers in flour, then dip in egg and finally dredge with bread crumbs.  Refrigerate several hours and then bake in a 350 oven for about 1/2 hour……………..yummy

Filed under: cooking, healthcare, Medicare, recipes, Republican Party, War on Drugs | Tagged: , , | 12 Comments »

Morning report – meh jobs report 8/2/13

Posted on August 2, 2013 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1698.2 -2.0 -0.12%
Eurostoxx Index 2801.2 -7.4 -0.26%
Oil (WTI) 107.4 -0.5 -0.42%
LIBOR 0.267 0.001 0.38%
US Dollar Index (DXY) 82 -0.336 -0.41%
10 Year Govt Bond Yield 2.61% -0.09%  
Current Coupon Ginnie Mae TBA 104.3 0.6  
Current Coupon Fannie Mae TBA 103.8 0.6  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.46    
If you went to sleep just before Wednesday’s GDP report and just rolled out of bed, you would be forgiven for asking what all the hoopla is about. If not, you would be suggesting that Webster’s put the 3 day intraday chart of the 10-year bond yield as the illustration for the word “whipsaw.”
 
Bonds are rallying hard after a weak jobs report. Stocks are selling off as well. TBAs are up 3/4 of a point. 
 
The July jobs report sent yields down 14 basis points (yes) on disappointing numbers. 162,000 jobs were added in July, and June was revised downward. The unemployment rate fell from 7.6% to 7.4% as the labor force participation rate dropped from 63.5% to 63.4%. Hourly earnings ticked down month-over-month and weekly hours fell. Overall, a “meh” report, with the caveat that summertime jobs reports tend to be volatile and no matter how hard the Bureau tries to make seasonal adjustments for all the things going on (seasonal work, students, teachers, etc) it is a difficult task. 
 
Given that GDP growth has averaged about 1% over the past 3 quarters and the labor market is improving at a snail’s pace, it makes you wonder what the Fed is thinking about when they say they want to taper this fall.
 
The Fed seems to alternate between characterizing growth as “modest” and “moderate.”  Ever wonder what the line between the two is? The WSJ attempts to parse.

Filed under: Morning Report | 21 Comments »

Morning Report – Dovish FOMC 8/1/13

Posted on August 1, 2013 by Brent Nyitray

Vital Statistics:

 

  Last Change Percent
S&P Futures  1692.9 12.4 0.74%
Eurostoxx Index 2797.4 29.2 1.06%
Oil (WTI) 106.9 1.9 1.82%
LIBOR 0.266 0.000 0.00%
US Dollar Index (DXY) 82.06 0.605 0.74%
10 Year Govt Bond Yield 2.63% 0.06%  
Current Coupon Ginnie Mae TBA 104.3 -0.2  
Current Coupon Fannie Mae TBA 103.7 -0.3  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.39    

 

Stock markets are higher after a dovish FOMC statement yesterday and lower than expected initial jobless claims. Bond and MBS are down.
 
The FOMC statement was interpreted as dovish yesterday. There wasn’t any discussion of tapering, as the Fed seemed to go back to its older language that said QE could increase or decrease depending on the data. They are forecasting that the economy will improve through the second half of the year. The only other notable change was that they reaffirmed the risks of dis-inflation, which was enough to get previous dissenter James Bullard back in the fold. 
 
The 10 year had sold off hard on the ADP jobs number and the GDP number, but it rallied hard after the statement. The range was 2.57% to 2.7%. You can see just how big the swing was below:
 

 
The final shoe to drop will be the jobs report on Friday. 
 
The Case-Shiller first quarter report is out. Most of the info is old news, but some is not. CoreLogic is forecasting that prices increase 6.5% year over year over the next 12 months. Over the next 5 years, they expect prices to increase at a 4% per year rate. The usual suspected – Phoenix, Sacramento, etc are leading the charge. Bringing up the rear are Long Island, Hartford, Edison NJ, Kansas City, and Newark. 

Filed under: Morning Report | 27 Comments »

Hump Day Craziness

Posted on July 31, 2013 by lmsinca

I read this yesterday and it lead me to some interesting questions.  Well, they were interesting to me anyway.  I’ve been fascinated with the different factions of the Republican Party and the increased number of Libertarians who primarily seem to vote Republican when there is no Libertarian around to vote for.  This piece mentions the possible break between Evangelical Christian Republicans and conservative Catholics over the new Pope’s recent comments regarding gays and poverty.  It appears to me that Libertarians have also broken with the Christian wing of the Republican Party over many social issues.   I’ve learned from our discussions here that Libertarians seem to be for both open borders and abortion, in some cases “on demand”, even I don’t believe in either of those suggestions, so is that to the left of me?

I guess I’m wondering where all this will eventually lead.  How hard will it be for Libertarians to vote for a Republican of the evangelical sort?  Is it just a case of voting for the lesser of two evils in a Presidential election, or even a local election?  When do your votes and principles collide?  I swallowed my objections and voted for Obama because of health care, and a couple of other accomplishments I supported,  rather than third party, which is what I normally do.  A big fat wasted vote either way really.

My thoughts rambled from the original piece but I wanted you guys to see how it got me thinking.  I’m finding it somewhat interesting that I tend to vote social issues and for the preservation of things such as Social Security, Medicare and other safety net protections.  There doesn’t seem to be that much difference to me in the reality of economic policy between the parties or for that matter even foreign policy now that many conservatives seem to be more isolationist than they were in the past, but I’m guessing the Libertarians/Conservatives here don’t agree and vote their pocket book, or is it all big vs small government and the demolition of the safety net that motivates y’all.  I’m curious.  It seems to me that the differences between us are more along the lines of priorities.  I think we all value similar things but just place more weight on some than others.  Or maybe I’m delusional.

I think it is a safe bet that if Pope Francis I lives more than a few years that Catholics will soon be kicked out of the Republican Party and resume their previous status as the semi-black race. The reason is simple. Pope Francis I is on the opposite side of the political divide from Pope John Paul II. The Polish pope was a Cold Warrior who basically took the Reagan-Thatcher line on left-leaning political movements in the Third World, including in Latin America. The Argentinian Jesuit pope isn’t a communist, but he advocates for the poor without any apology.

For now, conservative American Catholics are trying to parse the distinction, but it isn’t going to work. They are not going to be able to embrace The Slum Pope who wants to “make a mess” of the established order within the Church by encouraging young people to shake up the dioceses and force them to embrace the convicts, drug addicts, and the truly impoverished.

Our country is uniquely unable to appreciate this change specifically because our right wing succeeded in categorizing the left in the Third World (and, to an extent, even in Europe) as communist in sympathy. The right assumes that the Vatican is an ally in all things, but that is no longer even close to being the case. On so-called family values, the papacy is still reliably conservative, even if it can’t be counted on anymore to demonize homosexuality. But on economic issues, the papacy is now a dedicated enemy of the Republican Party.

Before long, the right will have no choice but to break from the pope, and then their opposition will grow to a point that the alliance between Catholics and evangelicals will not hold.

There sure has been a lot of talk lately about women.  I’ve been troubled by some of it as it seems we’re going backwards in some respects.  There are too many stories to link but between all the states enacting TRAP laws, all the strange definitions of rape, the mayor of San Diego’s bizarre harassment and who has and has not shielded him from investigation, the treatment of rape victims in the military,  USC redefining rape as not rape if there is no ejaculation (my personal favorite), who is and isn’t hot enough to either run for office or other more nefarious activities, etc. etc. that I’ve been trying to figure out what’s going on.  Maybe nothing ever really changed.  I’m concerned that so much of it has become political football.  I thought this piece on the subtleties of how a woman can succeed in the financial industry was pretty troubling.

Our youngest is working in another male dominated industry and is constantly trying to determine how to proceed on her merits while most of the men are attracted to her looks.  She has a few male mentors who seem to take her seriously so she’s focusing on that and trying to stay away from the guys who want to date her and stay focused on her work.  She’s discovering it’s an interesting dynamic that has many challenges.  She faced numerous challenges as a grad student but that was nothing compared to what she’s dealing with now.

It doesn’t help when other women give this kind of advice.

New details have emerged from a bias lawsuit filed by three former employees of Merrill Lynch against the company, which alleges that during training they were instructed to read a book called “Seducing the Boys Club: Uncensored Tactics From a Woman at the Top” and emulate its advice.

The tips in the book, published by New York Magazine’s The Cut, are truly shocking. “I play on [men’s] masculine pride and natural instincts to protect the weaker sex,” says a section of the book advising women on how to get men to do their work. “Unless he is morbidly obese, there is no man on earth who won’t puff up at this sentence: Wow, you look great. Been working out?” suggests a portion on diffusing tense situations.

On a lighter note the Anthony Weiner story is in another realm altogether in my opinion.  I guess I’d like to know why his wife is standing by him but it’s none of my business really.  Otherwise it seems to be a case of “consenting adults” which doesn’t bode well for his marriage or his candidacy but otherwise is just more creepily entertaining than anything else.

I wish I could share all the “Carlos Danger” jokes my husband has come up with, they’re hysterical, and just pop out of his mouth at the most inconvenient times.  He’s a true comic and I’ve thanked my lucky stars more than once that he makes me laugh.  Anyway we’ve had a lot of fun at Anthony Weiner’s expense around here.  I saw this and couldn’t resist.

Anthony Weiner Forever

Weiner forever

Filed under: 2013 and beyond, big government, comics, conservatism, Elections, homosexuality, Libertarians | Tagged: , | 81 Comments »

Morning Report – 2Q GDP better than expected, but Q1 revised down 7/31/13

Posted on July 31, 2013 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1683.3 -1.4 -0.08%
Eurostoxx Index 2755.1 -4.1 -0.15%
Oil (WTI) 103.6 0.5 0.46%
LIBOR 0.266 0.001 0.23%
US Dollar Index (DXY) 82.12 0.290 0.35%
10 Year Govt Bond Yield 2.68% 0.07%  
Current Coupon Ginnie Mae TBA 103.8 -0.4  
Current Coupon Fannie Mae TBA 103.3 -0.4  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.36    

 

Markets are slightly better after some good economic data. At 2:00 pm we will get the FOMC decision. Mortgage Applications fell. Bonds and MBS are getting beaten up on the good data.
 
The ADP jobs report showed the private sector added 200k jobs in July, and June was revised upward to 198k. The ADP report is supposed to mimic the final jobs number, not the advance estimate we will get on Friday. 
 
The advance estimate of second quarter GDP growth came in at + 1.7% This was higher than the 1% estimate. First quarter GDP was revised down by a lot… from + 1.8% to + 1.1%. That said, it looks like the growth came from inventory build as consumer spending cooled. If spending doesn’t rebound, that will depress growth in the future. 
 
Count Richmond California as the next locality threatening to use eminent domain to seize mortgages. Unsurprisingly, SIFMA (the Securities Industry Financial Markets Association) which runs the TBA market condemned the idea. SIFMA told San Bernardino that if they proceeded down the eminent domain path, that mortgages originated in that jurisdiction would become ineligible for TBA trading. This would effectively cut off the locality from Ginnie Mae and Fannie / Freddie loans. Which is 90% of the mortgage market. FHFA nominee Mel Watt has taken a pass on the whole eminent domain issue, which is yet another reason why he faces an uphill battle for confirmation. 

Filed under: Morning Report | 27 Comments »

Morning Report – REIT TBA selling could be over 7/30/13

Posted on July 30, 2013 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1686.8 4.3 0.26%
Eurostoxx Index 2760.1 18.3 0.67%
Oil (WTI) 103.9 -0.6 -0.60%
LIBOR 0.265 -0.001 -0.38%
US Dollar Index (DXY) 81.66 0.000 0.00%
10 Year Govt Bond Yield 2.58% -0.02%  
Current Coupon Ginnie Mae TBA 104.3 -0.1  
Current Coupon Fannie Mae TBA 103.9 0.1  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.36    

 

Markets are higher this morning on no real news. Bonds and MBS are up
 
The S&P / Case-Shiller home price index rose 1.05% month over month and 12.2% year over year in May. The usual suspects (Phoenix, Lost Wages, and San Francisco) showed 20%+ gains while the Midwest and East Coast showed low / mid single digit increases. New York brought up the rear with a 3.3% increase. This has been borne out by the homebuilders, where the ones with a heavy West Coast focus have outperformed the ones that are East Coast / diversified. 
 
Mortgage REIT American Capital Agency (AGNC) reported second quarter earnings last night. Book value got hit by 12%, but the interesting data point is the state of their TBA portfolio. The To-Be-Announced (or TBA) market is what sets mortgage rates. Over the second quarter, their TBA portfolio fell from 27.5 billion to 14.5 billion. That is a lot of paper they just dumped. They consider themselves to be positioned where they want to be at this point from a duration hedging standpoint. The key takeaway – we’ll have to see what Annaly (NLY) has to say, but so far, it appears that a substantial chunk of the selling in the TBA market is done. That is good news for mortgage rates, and I wouldn’t fall out of my chair with shock to see lower mortgage rates in the context of a stable 10-year.
 
Completed foreclosures were 55,000 in June, down 20% year over year and up 2.5% from May, according to CoreLogic. Approximately 1 million homes in the U.S. were in some stage of the foreclosure process, compared to 1.4 million a year ago. This represents 2.5% of all homes with a mortgage. The states with the most work left to do are Florida (8.6%), New Jersey (6%), New York (4.8%), Connecticut (4.2%) and Maine (4.1%). 

Filed under: Morning Report | 48 Comments »

Morning Report – Busy week ahead 7/29/13

Posted on July 29, 2013 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1683.4 -3.2 -0.19%
Eurostoxx Index 2748.6 6.6 0.24%
Oil (WTI) 105.1 0.4 0.37%
LIBOR 0.266 0.001 0.38%
US Dollar Index (DXY) 81.71 0.050 0.06%
10 Year Govt Bond Yield 2.58% 0.02%  
Current Coupon Ginnie Mae TBA 104.4 0.1  
Current Coupon Fannie Mae TBA 103.8 -0.1  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.35    

 

Markets are down this morning as we head into a data-intensive week. Merger Mondays are back with a few big transactions. Bonds and MBS are down small.
 
We have 3 big events in bonds this week – first we have the FOMC meeting on Tues and Wed. The FOMC statement will undoubtedly be parsed very closely. We will also get the advance estimate of 2Q GDP on Wed. Finally, on Friday we get the jobs report. So lots of potential market-moving stuff towards the back end of the week. 
 
There is a lot of discussion over who will be the next Fed Chairman after Bernanke’s term is finished in January. Bernanke has said he doesn’t want the job anymore. The two names mentioned are Janet Yellen and Larry Summers. Given that Summers hasn’t even done a stint as a Fed governor, he would be a surprising pick. This looks like so much theater. The next Fed Head will be Yellen. Yellen is an even bigger dove than Bernanke, so keep that in the back of your mind when you think about taper timing.
 
This week we will have a lot of earnings reports from the mortgage REITs. While we expect to see declining book values, the more interesting data will involve how much the REITs have de-leveraged. Some have done nothing (Capstead). Others have sold paper and still have increased leverage ratios because the value of their portfolio has dropped. What we hear from the REITs will tell us a lot about how much selling remains to be done in the MBS market, and that will tell us which way we want to lean with rates.

Filed under: Morning Report | 39 Comments »

Morning Report – What homebuilders are saying about the market 7/26/13

Posted on July 26, 2013 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1675.5 -8.5 -0.50%
Eurostoxx Index 2744.8 4.5 0.16%
Oil (WTI) 104.4 -1.1 -1.03%
LIBOR 0.265 0.001 0.45%
US Dollar Index (DXY) 81.77 -0.203 -0.25%
10 Year Govt Bond Yield 2.55% -0.02%  
Current Coupon Ginnie Mae TBA 104.5 0.2  
Current Coupon Fannie Mae TBA 104 0.1  
RPX Composite Real Estate Index 200.7 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.38    

 

Markets are lower on no real news. Bonds and MBS are up small. 
 
There isn’t much in the way of economic data this morning. I would expect activity to dwindle as most of the Street will be on the L.I.E. by noon.
 
Yesterday was a big day for real estate-related earnings – we heard from three homebuilders – Meritage, D.R. Horton, and Pulte. As far as the question “Has higher mortgage rates affected traffic and purchase activity?” goes, the answer is yes, at least in some areas. Meritage (who is primarily in the West / Southwest) noted an increase in orders, as did Pulte. Pulte noted that buyers still have a “sense of urgency.” On the other hand, D.R. Horton, which is more geographically diversified reported a decrease in orders. That was huge. D.R. Horton said that buyers are “alarmed” at the rapid rise in rates and it has affected sales. I guess it makes sense when you think about it – on the West Coast, inventory is depleted and prices are rising at double digit rates. So it would make sense that buyers would feel a sense of  urgency – the fear is not being able to find a house. Elsewhere in the country, with prices flat / up small, that doesn’t exist. Horton is at the lower price points as well, so maybe you are starting to get into DTI issues with first time homebuyers. Anyway, the increase in rates is starting to bite as far as purchase activity goes.
 

Filed under: Morning Report | 39 Comments »

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