Morning Report: Initial Jobless Claims stuck around 800k

Vital Statistics:

S&P futures342926.6
Oil (WTI)40.75-0.99
10 year government bond yield 0.77%
30 year fixed rate mortgage 2.88%

Stocks are up this morning on no real news. Bonds and MBS are flat.

We will have a lot of Fed-speak today, mainly in the afteroon.

Initial Jobless Claims came in at 840,000 last week. It seems that we are stuck at a new level of around 800k a week.

The MBA’s Mortgage Credit Availability Index fell again last month to hit a 6 year low. The MBA believes it is probably due to a curtailment of ARM loans ahead of the transition from LIBOR to SOFR.

“Mortgage credit supply decreased in September to its lowest level since February 2014, driven in part by a 9.5 percent decline in the conforming loan segment,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “This reduction was the result of lenders discontinuing conforming adjustable-rate mortgage loan offerings in advance of the September 30, 2020, application deadline for GSE-eligible LIBOR-indexed ARM loans.

About a quarter of all borrowers in forbearance are still making their mortgage payments. Of the 3.4 million borrowers in forbearance, 840k are current on their mortgages. Given that servicers were required by the CARES Act to record mortgages in forbearance as current, many borrowers chose to enter forbearance as a precaution.

The Northeast and Mid-Atlantic states are most at risk to the economic effects of the pandemic, according to a study by ATTOM Data.

“The U.S. housing market continues to show remarkable resilience during a time of widespread economic trouble and high unemployment stemming from the virus pandemic. But amid continued price gains, pockets around the country face greater risk of a fall, especially in and around the Northeast,” said Todd Teta, chief product officer with ATTOM Data Solutions. “There is much uncertainty ahead, especially if another virus wave hits. We will continue to closely monitor home prices and sale patterns to see if, how and where the pandemic starts rattling local markets.”

As the economic woes drag on, a crisis in rental housing is building as tenants cannot pay their rent and small landlords who depend on that rent cannot make mortgage or property tax payments. Affordable housing advocates are urging more action from the government to do something. “The longer the federal government waits to act, the steeper the financial cliff that renters will be pushed off when the eviction moratorium expires this winter,” Yentel said. If the 800k weekly initial jobless claims is the new normal, we will have a crisis of epic proportions.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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