Morning Report: Bank earnings looking strong

Vital Statistics:

 

Last Change
S&P futures 2991 -6.25
Oil (WTI) 52.97 0.14
10 year government bond yield 1.74%
30 year fixed rate mortgage 3.97%

 

Stocks are lower this morning as bank earnings come in. Bonds and MBS are down.

 

Retail Sales disappointed, falling 0.3%, which was lower than expected. Ex autos and gas, they were flat, although August numbers were revised upward across the board. The control group was flat, and sales rose 4.1% YOY.

 

Mortgage Applications rose 0.5% last week as purchases fell 4% and refis rose 4%. “The ongoing interest rate volatility is impacting a borrowers’ ability to lock in the lowest rate possible. Despite a slight rise in mortgage rates last week, refinance applications increased 4 percent and were 199 percent higher than a year ago,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Purchase applications slowed for the second week in a row. While near term economic uncertainty is still a factor, other fundamental issues, such as a lack of housing inventory in many markets, is preventing purchase activity from meaningfully rising. However, purchase applications were still much higher than a year ago. This is a reminder that the purchase environment in 2019 continues to be stronger than in 2018.”

 

Bank earnings are generally looking good, and mortgage backed securities trading desks are doing well as rates have fallen and volumes have picked up. The other side of the coin is that the drop in rates have negatively affected the values of mortgage servicing rights. Wells is a good example: despite a $127 million increase in origination revenue, total mortgage banking revenue fell by $292 million as their servicing book took a $419 million mark-to-market loss.

Author: Brent Nyitray

Why do you need new bands? Everyone knows rock attained perfection in 1974. It's a scientific fact. - Homer Simpson

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