|10 year government bond yield||0.66%|
|30 year fixed rate mortgage||3.37%|
Stocks are lower this morning on overseas weakness. Bonds and MBS are up.
It is April 15, and taxes are not due. People are starting to get their stimulus checks from the government. The Fed is beginning to advise on how to get the economy started again. On one hand, the economy cannot afford the roughly $25 billion a day in lost output the lockdown costs. On the other hand, if we re-open prematurely and have a second wave of infections, the economic costs could be worse. At the end of the day, people simply aren’t going to put up with this much longer. In places where there are few cases, people are simply going to ignore the edicts out of Washington and get back to work. The local governments are going to look the other way because they need the revenue as badly as people need their paychecks.
Mortgage Applications rose 7% as purchases fell 2% and refis increased 10%. Purchase activity will be muted as in-home showings and appraisal issues are a problem. Separately, the homebuilder sentiment index collapsed in April, from 60 to 30.
Retail sales fell 8.7% in March, as weakness in autos and gasoline was offset by an increase in TP and Purell.
Like the other big banks, Citi’s earnings took a hit as the company reserved $5 billion for expected defaults. Citi’s exposure is less in mortgages than, say Wells, but it is huge in credit cards and commercial real estate.
Industrial production fell 5.4% in March, while manufacturing production fell 6.3%. Capacity Utilization fell from 77% to 72.7%.
If you apply for forbearance, the initial negotiating position for most banks will be that the entire amount will be due immediately at the end of the forbearance period. For what its worth, I suspect this is to deal with the precautionary forbearance borrowers, those who are gaming the system by saying “I think I could get laid off, so I will suspend my mortgage payments for 90 days and keep them in the bank. At the end of the period, I will just send it all in at once.” At the end of the day, the government should have required some sort of proof of hardship. Given that the precautionary forbearance requests will compete with the people who actually need the help, servicers are overwhelmed with requests, and it seems forbearance will go to the borrowers who have the patience and free time to sit on hold for hours. The government really should have considered servicer capacity to handle requests (among other things) when it drafted the law.