Morning Report: Stimulus bill signed.

Vital Statistics:

 LastChange
S&P futures372125.3
Oil (WTI)48.210.24
10 year government bond yield 0.96%
30 year fixed rate mortgage 2.78%

Stocks are higher this morning after Trump signed the COVID-19 relief bill. Bonds and MBS are down.

The stimulus bill includes $600 checks for most Americans, and also includes a continuing resolution to keep the government open.

This should be a quiet week between Christmas and New Years. Markets will be closed on Friday, and the bond market closes early on Thursday. There doesn’t appear to be any market-moving data either, although we will get Case Shiller and Pending Home Sales.

While Treasury yields have been inching up, mortgage rates continue to hit new lows. This has been driven primarily by Fed MBS purchases and increased competitive behavior from originators. While existing homeowners are benefiting from lower rates, the first time homebuyer is struggling to find anything affordable as inventory is stuck at record lows.

Unintended consequence of Fed policy: stock market margin debt is at an all-time high. Today’s WSJ has a story of a guy who sold his house and spent some of the proceeds to buy Tesla call options. IMO the Fed has painted itself into a corner here, and I suspect returning to any sense of pre-COVID normalcy will be a rough road indeed. Meanwhile, Bitcoin continues to soar, and home prices are rising at a double digit rate.

Author: Brent Nyitray

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

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