Morning Report: Congressional Democrats take aim at BB&T / Suntrust merger

Vital statistics:

 

Last Change
S&P futures 2714 -8
Eurostoxx index 360.39 2.36
Oil (WTI) 52.28 -0.41
10 year government bond yield 2.64%
30 year fixed rate mortgage 4.43%

 

Stocks are down this morning on overseas weakness. Bonds and MBS are up small.

 

There is a possibility we could see another government shutdown at the end of the week. Talks over the weekend concerning border security funding went nowhere. For the financial industry, it will make funding loans for government employees more difficult, but everything else should be transparent.

 

Consumer staples companies are raising prices as commodity prices, transportation and labor costs increase. “The good news is that competitors are raising [prices] in those categories as we speak,” Church & Dwight Chief Executive Matthew Farrell said on a conference call last week when the company reported higher quarterly sales and lower profits. The Fed has been anxious to create more inflation, and it looks like they have finally succeeded. Does this mean we are headed for a repeat of 1970s inflation? Probably not – at least not in the near future. But it does mean the Fed Funds futures might be a touch too sanguine about monetary policy in 2019.

 

Speaking of inflation, we will get the consumer price index and the producer price index this week, which should be the only market-moving data.

 

Maxine Waters thinks the STI / BBT merger requires “serious scrutiny” “This proposed merger between SunTrust and BB&T is a direct consequence of the deregulatory agenda that Trump and Congressional Republicans have advanced,” Waters said in a statement to American Banker. “The proposed merger raises many questions and deserves serious scrutiny from banking regulators, Congress and the public to determine its impact and whether it would create a public benefit for consumers.” IIRC, all the “deregulaton” did was raise the ceiling for stress tests to $250 billion in assets. And that was due to the fact that many small banks were spending a lot on compliance and risk management for a portfolio of traditional bank loans. While it is entirely possible that someone at East Podunk Savings and Loan may blow himself up selling protection on a basket of CDO squareds, it is highly unlikely as well. And imposing all sorts of regulatory burdens on these banks under the guise of tackling systemic risk was on the wrong side of the cost / benefit ledger.