Stocks are higher this morning as earnings continue to come in. Bonds and MBS are up.
Treasury Secretary Scott Bessent said there may be an announcement of a deal in the Middle East to allow shipping in the Strait of Hormuz today or tomorrow. “We are in talks with the Iranians,” Bessent told CNBC’s “Squawk Box.” “There is a chance we may have a deal today or tomorrow to open the strait and move towards a more normalized position in this conflict.”
“It would be freedom of movement,” Bessent said. “Even though things are still a little dicey there over the past few days, we saw quite a few ships coming out even now.”
“There are hundreds if not 1,000 ships sitting in there and waiting to go out,” he said. “It’s not just energy. It’s fertilizer, it’s refined products, it is the various industrial gasses. We could see a big relief trade as those prices go down.”
The manufacturing economy is humming, with the ISM Manufacturing report rising 2.3 points in July to hit the highest point in 4 years. The production index shot up 6.3 points to the highest since 2021, while new order increased as well. Even employment, which had been in contraction territory for nearly 3 years, expanded. Prices rose as well, which is bad news for those who want the Fed to maintain current interest rates.
“In July, U.S. manufacturing activity remained in expansion territory, growing at its fastest rate in more than four years. Of the five subindexes that make up the PMI®, four grew faster compared to the previous month; the exception was the Inventories Index, which was down just 0.2 percentage point. Looking at the manufacturing economy, 20 percent of the sector’s gross domestic product (GDP) contracted in July, compared to 5 percent in June; however, no share of manufacturing GDP was in strong contraction (defined as a composite PMI® of 45 percent or lower), compared to 3 percent in June. The share of sector GDP with a PMI® at or below 45 percent is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Transportation Equipment; Machinery; Computer & Electronic Products; and Food, Beverage & Tobacco Products) expanded in July.”
Non-QM continues to grow as lenders are finding investor demand insatiable for non-QM paper . For evolving originators/lenders, are you ready to move from non-delegated to delegated / bulk delivery?
If you’re prepared to take the next step , hedge your production with Eris SOFR Swap futures (“Eris SOFR”). Eris SOFR is being used to hedge non-QM pipelines so that mortgage companies can accumulate loans
while reducing interest rate risk and selling bulk for greater pay-ups.
Eris SOFR is the most efficient, cost-effective, and liquid way to hedge non-QM loans. Trading volume in June topped $100bn for the month, averaging around
50,000 contracts ($5bn) per day. July 8th featured an Eris SOFR “Royal Flush,” with trades recorded in every actively-quoted tenor on the swap curve from 1-year to 30-years.
CME Group launched Eris Options – Options on Eris SOFR Swap futures – for CFO’s and Capital Markets teams that want to address volatile pull-through expectations.
Despite the massive boom in data centers, construction spending fell 0.1% MOM and 3.3% YOY in June. Residential construction was down 0.3% MOM and 4.7% YOY. As we saw from the homebuilder earnings reports, builders are concentrating on moving their inventory and buying back stock, not new construction.
JP Morgan announced a $750 billion commitment to affordable housing. This is through its American Dream Initiative, which was announced in March. This multi-year commitment hopes to build or preserve a million affordable housing units. They also intend to hire 850 new mortgage advisors and explore manufactured and modular homes as a new avenue.
“An affordable and resilient housing market is essential to driving economic growth and increasing opportunity,” said Michelle Herrick, Head of Commercial Real Estate for J.P. Morgan. “We’re focused on helping more people access quality housing they can afford—and we’re working across the real estate community, local governments, and nonprofits to scale housing solutions throughout the U.S.”
“Homeownership has always been at the heart of the American Dream. Owning a home can transform lives—providing stability, helping families build wealth, and creating a sense of community,” said Sean Grzebin, CEO of Chase Home Lending. “Our goal is to make the path to homeownership clearer and more accessible for more people, wherever they are in their financial journey.”
