Morning Report: Forbearances decline

Vital Statistics:

 LastChange
S&P futures3534-10.6
Oil (WTI)40.070.51
10 year government bond yield 0.96%
30 year fixed rate mortgage 2.89%

Stocks are lower this morning after yesterday’s furious rally. Bonds and MBS are down.

Yesterday was a “hip to be square” day in the market, for those of us old enough to remember the early 1980s. Basically, every stock that has been hated for months had its day in the sun. Investors snapped up mall stocks, apartment REITs, retailers, lodging companies, cruise lines and sold off the big COVID momentum names. Mortgage originators got thrown overboard on fears that rates are going to rise and squash the refi boom.

Mortgage Backed securities are lagging the move in Treasuries, which means mortgage rates aren’t moving up as fast as the 10-year. This is typical, however remember the Fed is the 800 pound gorilla in the MBS market, so it can support rates wherever it wants.

JP Morgan is “going on the offensive” in the home lending business, reducing credit constraints.

Small business optimism was steady in October, at a historically high reading. “Leading up to the presidential election, small businesses continued to focus on stabilizing their businesses but were uncertain about the future economic conditions due to COVID-19 government regulations on all levels,” said NFIB Chief Economist Bill Dunkelberg. “We see solid momentum going into the 4th quarter, and another good quarter could get the GDP back to its 2019 closing levels.”

Loans in forbearance decreased 16 basis points to 5.67% last week, according to the MBA. “With declines in the share of loans in forbearance across the board, the data this week align well with the positive news from October’s jobs report, which showed a gain of more than 900,000 private sector jobs and a 1 percentage point decrease in the unemployment rate,” said MBA Senior Vice President and Chief Economist Mike Fratantoni. “A recovering job market, coupled with a strong housing market, is providing the support needed for many homeowners to get back on their feet.”

Author: Brent Nyitray

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

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