Father’s Day WEEKEND Open Thread

That’s right, we celebrate the whole weekend at our house.  But then we celebrate our birthdays for at least a week (sometimes longer) and Christmas for at least two.  And since this place is heavily populated by men I would be remiss if I didn’t wish all of you Dad’s a Happy Father’s Day.

I lost my dad when I was 56 and I miss him every day.  I think I’ve mentioned before that we had a pretty rocky relationship while I was in my 20’s but we found our way back to each other  and a big part of the reason we were able to do so is because he was my best friend when I was a child.  He worked really hard and very long hours but nearly every free moment he had was spent with his girls and we loved it.  He always knew I was a little sponge and so he filled me up with values and lessons that are still a huge part of me to this day.

And luckily for me I’m also blessed with a terrific husband who could easily win a “Best Father of the Year” award.  So I appreciate fatherhood and hope y’all have a great weekend with your kids if they’re around or at least that you are acknowledged gratefully by them if you’re separated by some miles.

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And a few links for those of you who check in……………….feel free to add your own.

Income inequality in the United States—already well above that experienced in other advanced economies—has surpassed Gilded Age levels, and the Great Recession and ongoing jobs crisis will exacerbate this trend until full employment is restored. While market forces are the primary driver of rising inequality, recent economic research suggests that tax policy has contributed as well, both by exacerbating after-tax income inequality since the late 1970s and by spurring a shift of pretax income toward high-income households.

Facebook became the first to release aggregate numbers of requests, saying in a blog post that it received between 9,000 and 10,000 requests for user data in the second half of 2012, covering 18,000 to 19,000 of its users’ accounts.

Warning:  don’t read this if you’re eating, prone to sudden bouts of queasiness or unable to even think about Un Chien Andalou without simultaneously bursting into tears and dry-heaving. Believe me, I’m speaking from experience here.

And last but not least:

Comic

Morning Report – MBS spreads 6/14/13

Vital Statistics:

  Last Change Percent
S&P Futures  1632.7 1.8 0.11%
Eurostoxx Index 2654.8 -11.8 -0.44%
Oil (WTI) 95.66 -0.2 -0.23%
LIBOR 0.273 0.000 0.00%
US Dollar Index (DXY) 80.92 -0.031 -0.04%
10 Year Govt Bond Yield 2.21% -0.02%  
Current Coupon Ginnie Mae TBA 101.5 0.3  
Current Coupon Fannie Mae TBA 99.8 0.7  
RPX Composite Real Estate Index 203.4 0.5  
BankRate 30 Year Fixed Rate Mortgage 4.05    

 

Markets are higher this morning after a slew of economic data that was generally negative. Bonds and MBS are up.
 
In economic data this morning, the producer price index showed inflation remains in check at the wholesale level. Industrial Production and Capacity Utilization were lower than expected. Finally, the University of Michigan Consumer Confidence number fell. Yesterday, the Bloomberg Consumer Comfort Index fell, and the driver was people’s perception of their own financial situation. Perhaps the increase in interest rates is beginning to be felt.
 
Next week will be the FOMC meeting. Market participants will undoubtedly be focusing on the debate over tapering QE. Are they comfortable with the recent spike in long-term rates? 
 
Mortgage investors are starting to rotate to non-agency paper as rates rise. It is basically a bet that the housing market continues to improve. At the margin, it should put pressure on agency paper, which will increase borrowing rates.
 
We have already seen some of the effects of mortgage REIT deleveraging in the MBS space. The spread between Ginnie I and Ginnie II securities has narrowed, as well as the spread between Fannie Mae and Freddie Mac TBAs. Fannie Mae and Ginnie I TBAs generally trade at a premium to Freddie Mac TBAs and Ginnie II TBAs respectively. Why is this happening? Mortgage REIT deleveraging. The Ginnie Is and Fannie Mae TBAs are more liquid than the IIs and Freddie Macs. And when you are deleveraging, you sell what you can, not necessarily what you want to. Punch line?  Ginnie loans and Fannie loans are getting more expensive relative to Freddie loans. 
 
The MR will be spotty next week as I will be on the Left Coast.

Morning Report – Negative Equity Falls 6/13/13

Vital Statistics:

  Last Change Percent
S&P Futures  1612.3 2.4 0.15%
Eurostoxx Index 2654.8 -11.8 -0.44%
Oil (WTI) 95.66 -0.2 -0.23%
LIBOR 0.273 0.000 0.00%
US Dollar Index (DXY) 80.92 -0.031 -0.04%
10 Year Govt Bond Yield 2.21% -0.02%  
Current Coupon Ginnie Mae TBA 101.5 -0.2  
Current Coupon Fannie Mae TBA 99.8 0.0  
RPX Composite Real Estate Index 203.4 0.5  
BankRate 30 Year Fixed Rate Mortgage 4.05    

 

Markets are up on the back of a good retail sales number, in spite of an absolute shellacking (down 6.4%) in the Nikkei 225 index overnight. Initial Jobless Claims came in at 334k, a little better than expectations. The Import Price Index fell, which is bond bullish. Bonds and MBS are up small.
 
Advance Retail Sales were up .6% in the month of May, which was better than expected. Less autos and gasoline, they were up .3%, in line with expectations. April was revised downward from .5% to .2%.  Building materials are increasing at a 10% clip, which bodes well for new construction. 
 
It is probably too early for the back up in rates that started in May to start showing up in economic data, but is presence (or absence) will almost influence the Fed’s decision making on ending QE. Don’t forget The Bernank is done at the end of the year. The odds-on favorite is Janet Yellen to replace him and she is to the dovish side of Bernake. While I think it is a long shot, beware of a snap-back rally in bonds. That is when the margin clerk finishes his business.
 
CoreLogic reported that home equity increased 9% in the first quarter to reach $4.2 trillion. Negative equity fell 8% to $580 billion and the number of negative equity properties fell to 9.7 million from 10.5 million. CoreLogic estimates that if home prices increase another 5%, 1.6 million homes would regain positive equity.   This should really help drive purchase business as homeowners who have been stuck finally are able to move. Combined with a recovering job market to lure in the first time homebuyer and still generally good affordability, maybe the purchase business will make up for some of the lost refi business. Caveat: If the increase in home price appreciation continues to be driven by all-cash bidding wars in Las Vegas, then the effect will be more muted. We need to see home price appreciation in places like the Northeast and Midwest for this to really start turning things around. 
 
JP Morgan Chase is cutting 1,800 jobs in its mortgage unit, with the hits primarily coming from servicing (as delinquencies fall) and its Albion NY call center (as the refi market dries up).

Morning Report – The margin clerk approacheth… 6/12/13

Vital Statistics:

  Last Change Percent
S&P Futures  1637.7 10.6 0.65%
Eurostoxx Index 2697.5 14.3 0.53%
Oil (WTI) 96.07 0.7 0.72%
LIBOR 0.273 0.001 0.37%
US Dollar Index (DXY) 81.15 0.037 0.05%
10 Year Govt Bond Yield 2.23% 0.04%  
Current Coupon Ginnie Mae TBA 101.6 -0.3  
Current Coupon Fannie Mae TBA 99.92 -0.2  
RPX Composite Real Estate Index 202.8 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.04    

 

Markets are higher this morning after yesterday’s decline. This week is relatively data-light until Friday. Bonds ad MBS are down small.
 
Mortgage Applications rose 5% last week as the Bankrate 30 year fixed rate average fell from 4.1% to 4.03%. Refis were up 5%.
 
The sell-off in bonds and MBS has not only hit mortgage REITs like Annaly and American Capital, who are down 25% + in the last month, it has also hit some hedge funds as well. $1.5 billion Metacapital is down 6.5% this year. The REITs are levered something like 6:1 and the hedge funds are undoubtedly levered as well. Margin calls could start soon, and when they happen, look out below. MBS are one of those investments that pretty much everyone is long, and there are few buyers when they get hit. The point of this: watch your locks. It is a dangerous environment to float in.
 
Corelogic has put out its latest equity report. Just under 20% of all homes are underwater and negative equity fell by 8.7% in the first quarter.

What Kind of Whistleblower Would You Be?

I’m not sure what to think about this Snowden guy.  I tend to think the government certainly has an obligation to hold secrets when it comes to national security and yet obviously the American people deserve to know, and I think participate in, the process by which we give up so many of our legal rights in order to acquire that sense of security.

Diane Feinstein thinks he should be tried for treason and John Boehner calls him a traitor.

Political opinion in the US was split with some members of Congress calling for the immediate extradition from Hong Kong of the whistleblower, Edward Snowden. But other senior politicians in both main parties questioned whether US surveillance practices had gone too far.

Dianne Feinstein, chairman of the national intelligence committee, has ordered the NSA to review how it limits the exposure of Americans to government surveillance. But she made clear her disapproval of Snowden. “What he did was an act of treason,” she said.

House Speaker John Boehner defended the NSA programs and their congressional oversight, saying he had been briefed on the programs and that Americans were not “snooped on” unless they communicated with a terrorist in another country.

“He’s a traitor,” Boehner said of Snowden in an interview with ABC News. “The disclosure of this information puts Americans at risk, it shows our adversaries what our capabilities are, and it’s a giant violation of the law.”

Daniel Ellsberg believes Snowden’s leak is the most important example of whistleblowing in history.

In my estimation, there has not been in American history a more important leak than  Edward Snowden’s release of NSA material – and that definitely includes  the Pentagon Papers 40 years ago. Snowden’s whistleblowing gives us the possibility to roll back a key part of what has amounted to an “executive coup” against the US constitution.

For the president then to say that there is judicial oversight is nonsense – as is the alleged oversight function of the intelligence committees in Congress. Not for the first time – as with issues of torture, kidnapping, detention, assassination by drones and death squads –they have shown themselves to be thoroughly co-opted by the agencies they supposedly monitor. They are also black holes for information that the public needs to know.

Ellsberg seems to think this event will give Americans both the incentive and proof  we need to rise up against this “surveillance state”.   Ha, based on the polling I’ve seen this week and comments from both government officials and public forums I’ve been reading, most people don’t really care that much or simply accept it’s the trade off  for being safe.

And it seems to me we have two different kinds of justice being handed out for whistleblowers.  Thanks to Dodd/Frank (don’t get me wrong, I know it’s a crappy bill) the SEC has newly enacted protections for financial whistleblowers and the government has reaped the benefits to the tune of   millions of dollars.

In just its first year, the whistle­blower program already has proven to be a valuable tool in helping us ferret out financial fraud,” then-SEC Chairman Mary L. Schapiro said in November 2012. “When insiders provide us with high-quality road maps of fraudulent wrongdoing, it reduces the length of time we spend investigating and saves the agency substantial resources.”

The SEC’s Investor Protection Fund awarded the Commission’s first Whistleblower Award Program recipient in 2012, but the case and individual haven’t been made public. The Fund represents monetary sanctions received from settlements of SEC cases, including penalties, disgorgement, and interest. The balance at the end of fiscal 2012 was $453 million.

And on the opposite end of the spectrum Obama appears to undermine his own support of protections for whistleblowers, at least in the area of National Security.

The federal appeals court granted another hearing on May 24, and the Obama administration rushed out a memo asking the Director of National Intelligence and the Office of Personnel Management to quickly come up with a litmus test for deciding which federal positions can be classified as being “sensitive,” citing a 2010 OPM proposal that aimed to dramatically expand the number of national security employees.

Whistleblower advocates say the court ruling and the president’s memo spell a major rewiring of the Whistleblower Protection Enhancement Act. “It’s not that OPM and DOJ are arguing that whistleblowers in sensitive positions shouldn’t have access to protections. It’s an unintended consequence that they have not tried to prevent,” says Angela Canterbury, public policy director at the Project on Government Oversight, where I used to work. “The Obama administration is undermining the same protections they [formerly] supported.

There are at least five whistleblowers who’ve come up against the heavy hand of the Obama Administration via the DOJ recently.

The Obama administration has waged a war on government whistleblowers. So here are 5 whistleblowers who have been under attack by a president who once said that official whistleblowers were “often the best source of information about waste, fraud, and abuse in government.

Check out the Thomas Drake case:

4. Thomas Drake

A former executive at the National Security Agency, Thomas Drake exposed details about the agency’s Trailblazer Project. For this, he was charged under the Espionage Act, though the government’s case against him spectacularly failed.

Drake became concerned about the Trailblazer Project’s cost–at $1 billion, it was way more than the NSA should have been paying for a program they could have instituted in-house. He was also concerned it would violate the privacy of Americans. But Trailblazer, which was supposed to analyze intercepted communications, was chosen to be the NSA’s vehicle for surveillance anyway. Drake disclosed details about the NSA’s wastefulness to a Baltimore Sun reporter.

The government initially threw the book at him, but their case collapsed. As Marcy Wheeler explained in The Nation: “The Department of Justice had been pursuing Drake for alleged violations of the Espionage Act that might have sent him to prison for up to 35 years. But the government withdrew the evidence supporting several of the central charges after a judge ruled Drake would not be able to defend himself unless the government revealed details about one of the National Security Agency’s telecommunications collection programs.” Drake was eventually convicted on the misdemeanor charge of exceeding authorized use of a computer.

I’m really curious what all of you think of the whistleblower issue in particular, but of course I’m also wondering if anyone thinks there’s a reverse of the surveillance state possible.  Is surveillance state too strong of a descriptive?  Do you think Obama is really to blame or is it just the result of an overzealous government at all levels since 9/11?

Morning Report – NFIB Small Business “confidence” 6/11/13

Vital Statistics:

 

Last

Change

Percent

S&P Futures 

1625.6

-16.5

-1.00%

Eurostoxx Index

2661.6

-57.8

-2.13%

Oil (WTI)

94.47

-1.3

-1.36%

LIBOR

0.272

-0.002

-0.69%

US Dollar Index (DXY)

81.46

-0.186

-0.23%

10 Year Govt Bond Yield

2.26%

0.05%

 

Current Coupon Ginnie Mae TBA

101.2

-0.2

 

Current Coupon Fannie Mae TBA

99.55

-0.5

 

RPX Composite Real Estate Index

203

0.6

 

BankRate 30 Year Fixed Rate Mortgage

4.06

   

 

Thought I had posted this earlier, but it looks like it didn’t take

Markets are lower after the Bank of Japan left policy unchanged. Bonds and MBS are heavy again, with the 10 year yielding 2.26%

Part of the issue with the weakness in the bond and MBS market is convexity-related hedging. Convexity hedging is coming out of the mortgage REITs primarily, but also anyone who holds mortgages as an investment and hedges the interest rate risk. The “inside baseball” explanation of what is going on: Mortgage REITs are finding that as rates increase, the duration of their mortgage backed securities increases. This means they have to either sell MBS or Treasuries to rebalance their hedge.” The punch line: selling begets more selling. And that is partly why the 10 year and MBS cannot get out of their own way.

The NFIB Small Business Optimism report ticked up to 94.4 in June, the highest level in a year, and the second highest reading since the recession started in 2007. That is the good news. The bad news? The number is still very weak, and only slightly higher than the post-recession average.  The biggest headaches for small business?  Taxes, Government regulations / red tape, and poor sales. In that order. The elephant in the room is obamacare. The report highlights one of the big disconnects happening right now, with the S&P 500 near record levels. The big multinationals are doing fine, but small business is barely growing with population. Since small business is half of the economy, it explains why we can have record levels in the S&P 500 and “meh” economic growth.If multinational profits correspond to 4% GDP growth, and the small business sector profits correspond to 0% GDP growth, you get 2% growth as an average number. 

Traders are well aware of the “fat finger” phenomenon. This happens when you are entering an order and accidentally hit two keys at once, turning an order to buy 100,000 shares into an order to buy 1,200,000 shares. Well, we have a fat head error. And no, I am not talking about the one where a guy ordered a Tom Brady Fathead poster for his office and got Tebow instead. 

Remember eminent domain? It’s baaaack. Or at least advocates have some new ammunition – a paper by Cornell law professor Robert Hockett. He argues that municipalities should, in partnership with investors, “condemn” underwater mortgage notes, pay mortgagees “fair value” and systematically write down principal. Of course any municipality that pursues this will effectively be cutting their citizens off from Fannie Mae / Freddie Mac / Ginnie Mae loans.

Morning Report – a consensus forming on QE? 6/10/13

Vital Statistics:

 

  Last Change Percent
S&P Futures  1644.8 6.2 0.38%
Eurostoxx Index 2716.5 -7.6 -0.28%
Oil (WTI) 95.33 -0.7 -0.73%
LIBOR 0.274 -0.001 -0.36%
US Dollar Index (DXY) 81.82 0.146 0.18%
10 Year Govt Bond Yield 2.18% 0.01%  
Current Coupon Ginnie Mae TBA 101.5 0.1  
Current Coupon Fannie Mae TBA 100.1 -0.2  
RPX Composite Real Estate Index 202.4 0.2  
BankRate 30 Year Fixed Rate Mortgage 4.03    

 

Markets are higher this morning on no real news.  There is no economic data this morning. Bonds are weaker, with the 10 year yield at a 16 month high of 2.18%. MBS are down small.
 
Pretty light week, data wise. We will get NFIB Small business Optimism on Tuesday, retail sales on Thursday, and industrial production / capacity utilization on Friday. None of these should be market moving. 
 
Compass Research is out saying the death of NJ Senator Frank Lautenberg pretty much makes Mel Watt an unlikely confirmation. It drops his “yes” votes from 56 to 55. Separately, KBW is out saying that Fannie Mae common stock is worthless. Of course is still sports a $11.4 billion market cap
 
Home equity increased by $816 billion in Q1, according to the housing scorecard, put out by HUD. Delinquencies are down 7% in the month of May. In spite of the back up in mortgage rates, housing still remains highly affordable.
 
US bond fund redemptions are the highest since 1992. Bill Gross, who’s fund lost 1.9% in May predicted that April of 2013 will go down as the end of the three decade bull market in bonds that began in the early 1980s. A poll by Bloomberg predicts that the Fed will cut its quantitative easing program from $85 billion a month to $65 billion a month at the October 29-30 FOMC meeting.

Immigration Reform-ATiM Style

I’ve been thinking about this post all week and trying to come up with a clever angle to get a discussion going.  After a few brief exchanges with some of you I realized that most of us probably support some variety of reform that leads to citizenship, so what’s there to discuss right?  One thing I’d like to understand more clearly is why some of you support open borders or how you think that would actually work in reality.   I’m also curious about what everyone thinks the chances are of the Senate bill passing first the Senate and eventually the House.  I’m not really expecting it to pass the House at this point but think it might squeak past in the Senate.  And also, at 844 pages with 300 amendments already offered isn’t it just another boondoggle anyway?

The first thing I had trouble finding was a good summary of the bill, I love you guys but I’m not willing to read that many pages of gobbledegook to come up with the gist of the bill.  I’m reading a book I’m really enthralled with right now and am not giving that up for ATiM.  The best summary I could find was Marco Rubio’s…………..funny huh?

Here are a few highlights:

This legislation contains the toughest border immigration enforcement measures in U.S. history. It is based on six required security triggers that must be achieved before the newly legalized are allowed to apply for green cards. These six triggers include:

1. Border Security Plan: DHS must create, fund and initiate a border security plan (within 6 months of bill’s enactment).

2. Border Fence Plan: DHS must create, fund & initiate a border fence plan (within 6 months of bill’s enactment).

3. Border Security Metrics: DHS must achieve 100 percent border awareness and at least 90 percent apprehension rates in high-risk sectors of the U.S.-Mexico border (within 5 years of bill’s enactment).

4. Border Commission: If DHS fails to achieve #3, a Border Commission of border state officials and stakeholders is required to create & implement a plan to achieve 100 percent border awareness and at least 90 percent apprehension rates in high-risk sectors of the U.S.-Mexico border (within 10 years of bill’s enactment).

5. Employment Verification: Universal E-verify must be implemented (within 10 years of bill’s enactment).

6. Exit System To Stop Visa Overstays: Visa exit system must be implemented at all international airports & seaports (within 10 years of bill’s enactment).
Modernizing

Conservative Economists Say Modernizing Our System Will Grow Our Economy And Create Jobs: The modernization of our legal immigration system will be a net benefit for America as we make historic reforms towards a more merit-based immigration system that will help us attract entrepreneurs, innovators, investors, skilled workers and people driven by the desire to build a better life for themselves and, in turn, create jobs for American workers.

Protecting American Workers: This bill protects American workers from unwarranted immigration for jobs that Americans are willing and able to do. For example, the proposal would not allow any work visas to be issued if the unemployment rate in a certain area is above 8.5 percent, which is the norm in many cities.

Highly Skilled Workers: After educating the world’s brightest and most innovative minds, we will no longer send them home to benefit competing economies like China and India; we will instead staple green cards to their diplomas. We will also expand the highly skilled H1-B visa program from 65,000 to 110,000 to fill jobs Americans can’t do. To accomplish the move to a more merit-based immigration system, we eliminate certain categories of family preferences that have allowed for chain migration and completely eliminate the diversity visa lottery, among other reforms.

Guest Worker Program: The bill establishes a guest worker program for lower-skilled workers that ensures our future flow of workers is manageable, traceable, fair to American workers, and in line with our economy’s needs. The modernization of our visa programs will ensure people who want to come legally – and who our economy needs to come legally – can do so.

Agricultural Worker Program: A new agricultural guest worker visa program would be established to ensure an adequate agricultural workforce to safeguard our food supply. This program will also allow current undocumented farm workers who have made a substantial prior commitment to agricultural work in the United States to obtain legal status.

And then it goes on to detail how the bill deals with the illegal immigrants here now.  It explains why it’s not amnesty, how they’re going to deny Federal benefits until certain criteria are met, what to do about children (dreamers) brought here unwittingly by their parents and how the path for  immigrants who came her illegally will be longer and more difficult than it is for those who chose the legal path.  There’s a lot in there, and you can tell where the compromises are.

Here are a few comments from various people here that I would love to hear more about and am also wondering what everyone thinks of the bill the gang of eight crafted.

Mark:  I am for need based immigration. I think we should permit immigrants with talent and skill to come here and apply for citizenship after five years. I think we should allow many more immigrants in toto than we do now. But I want them to actually learn American history and become acculturated and be fluent in English before they take their oath of citizenship. I want their knowing and proud allegiance to our country. And I don’t want extended family reunification – I want it limited to spouse and minor children.

I agree with George that immigrants are our lifeblood. But without selectivity, I believe we can get blood poisoning.

Brent:  On immigration, I am to the left of both parties. Our economy’s biggest growth came during periods of greatest immigration. While there is a correlation / causation issue there (were immigrants flocking to the US because the economy was great or were immigrants making the economy great?) I think we need an influx of young people to balance out the aging baby boom generation. Since we can’t go back and change fertility rates, well that leaves immigration.

McWing:  I’d give citizenship on day one, also, I wouldn’t have any language requirement though I would not publish anything official in anything other than English. A common language is important, IMO. And since I think the welfare state will collapse anyway, sure, let them have at it, though I dont think that is why the overwhelming number of immigrants come here, for welfare. I, perhaps naively, think they come here to live and work in a society who’s governent interferes in their lives less than where they came from. Also, they’ll be paying taxes, so the schools will be funded adequately. I hope the parents demand English only/immersion for their kids, to give them a fighting chance once they hit the working world. I don’t think the border states will be swamped, people move to where there are jobs, immigrants are no different.

Scott:  I am instinctively in favor of open borders and easy immigration. But that cannot coexist with the kind of welfare state that we now have. I suppose if you assume the welfare state as it exists must eventually collapse anyway, then accelerating it and getting on with the recovery process sooner rather than later makes sense. In which case open borders and immigration is even more attractive.

Perhaps more of you have weighed in and I missed it so I’m curious what the rest of you think and is there any chance that the Senate bill is a launching pad for the kind of reform each of you wants?  As a Californian with a keen interest in Mexico and it’s people I probably wouldn’t go as far as McWing, although I might be persuaded, but the bill looks a little constipated with stumbling blocks to me.

There’s been all sorts of coverage lately and I’ve read a lot of it but one of the most interesting to me was this email exchange Greg Sargent had a couple of days ago on Cornyn’s suggested compromise and perhaps thwarting Presidential aspirations:

This has put Marco Rubio in a box, and it needs to be acknowledged that Cornyn’s move really does threaten the prospects for reform. Frank Sharry, of the pro-immigration America’s Voice, explains why in an email to me:

“Cornyn is trying to box Rubio in, and if he does, we’ve got a problem.  Cornyn is taking dead aim at hardening the triggers – threatens the path to citizenship in a big way – in hopes of dragging Rubio to the right. The problem is that Rubio going right loses many Dems. Dicey moment. Cornyn stepped out in front with a proposal for more border security in way that undermines the path to citizenship. Rubio either goes with Cornyn — to look more conservative — and threatens the bipartisan core support for reform, or says no to Cornyn and looks weak, damaging the chance to get 15 Republicans to come in board.”

In other words, Cornyn has undercut Rubio by staking out a position much further to the right of the Gang of Eight compromise that Rubio had been taking.

I’ve read, in a variety of opinions, that the only way immigration reform will pass is if Republican leadership and the big donors want it to pass and they’ll have to pressure Boehner to put it up for a vote and hope the Democrats will get it across the finish line.  I can’t help but wonder if that would finally be the end of Boehner’s Speakership though.

Morning Report – Jobs report in line with expectations 6/7/13

Vital Statistics:

  Last Change Percent
S&P Futures  1631.1 8.4 0.52%
Eurostoxx Index 2695.6 19.4 0.72%
Oil (WTI) 94.28 -0.5 -0.51%
LIBOR 0.275 0.001 0.33%
US Dollar Index (DXY) 81.47 -0.067 -0.08%
10 Year Govt Bond Yield 2.11% 0.03%  
Current Coupon Ginnie Mae TBA 102.2 0.1  
Current Coupon Fannie Mae TBA 100.6 -0.1  
RPX Composite Real Estate Index 202.2 0.3  
BankRate 30 Year Fixed Rate Mortgage 3.98    

 

Markets are higher after the jobs report came in pretty much in line. Bonds and MBS are flat / down small.
 
The jobs report showed that nonfarm payrolls increased by 175,000 in the month of May, slightly higher than Street estimates (which were lowered after the ADP report). April was revised downward from 165k to 149k. The unemployment rate ticked up from 7.5% to 7.6% as the labor force participation rate ticked up from 63.3% to 63.4%. Earnings and workweek were flat. Since the report was pretty much in line with expectations,we aren’t seeing any big reaction in the markets.
 
Remember my question about mortgage rates on Wednesday? Basically how did the Bankrate average 30 year mortgage rate jump from 3.9% to 4.1% when the bond market was flat and we had a weak day in Fannie TBAs? Well, whatever it was, it has been reversed, as the Bankrate average 30 year mortgage rate fell 18 bps back to 3.98%. Strange.

 

Morning Report – Modest, Moderate, and Measured 6/6/13

Vital Statistics:

  Last Change Percent
S&P Futures  1611.6 3.6 0.22%
Eurostoxx Index 2725.5 16.2 0.60%
Oil (WTI) 94.24 0.5 0.53%
LIBOR 0.274 0.000 -0.07%
US Dollar Index (DXY) 82.35 -0.248 -0.30%
10 Year Govt Bond Yield 2.11% 0.03%  
Current Coupon Ginnie Mae TBA 101.8 -0.2  
Current Coupon Fannie Mae TBA 100.2 -0.2  
RPX Composite Real Estate Index 201.9 0.1  
BankRate 30 Year Fixed Rate Mortgage 4.16    
Markets are flattish after initial jobless claims came in as expected. Challenger and Gray reported that announced layoffs are 41% below last year’s pace.  Bonds and MBS are flat.
 
Moderate. Modest. Measured. That is the summary of the Fed’s Beige Book Survey of economic growth. The bright spot of the report was residential real estate construction. The Dallas District noted the strongest growth, while growth elsewhere was modest to moderate. Since this report is basically as amalgam of the various Federal Reserve District reports which have been previously released, it isn’t a market-mover. 
 
The Senate plan to wind down the GSE’s (Corker / Warner) would liquidate Fannie and Fred, transfer all of their liabilities to Treasury. The liquidation preference would be to the US Government first, then the junior prefs, and then the common shares. Note that Fannie Mae and Freddie Mac’s recent record profits have not gone to paying down their debt to the government – those funds have been simply revenues to the government. A new entity – The Federal Mortgage Insurance Commission would have a re-insurance role and backstop private insurance. Ginnie Mae would not be affected.