Morning Report: Fannie Mae surges on housing reform

Vital Statistics:

 

Last Change
S&P futures 2973.5 -5.25
Oil (WTI) 58.46 0.44
10 year government bond yield 1.64
30 year fixed rate mortgage 3.77%

 

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

 

Steve Mnuchin is scheduled to testify before the Senate Banking Committee this morning regarding housing reform and the role of Fannie and Freddie. Mark Calabria, who runs the FHFA and Ben Carson who runs HUD will also join him. Note that Fannie and Freddie surged 35% yesterday on a Compass Point piece that expressed optimism for a shareholder suit and Mnuchin said that they were closer to retaining their earnings. You might want to keep an eye on the screen this morning if you hold these stocks.

 

Fannie mae stock

 

Small Business Optimism fell in August as respondents tempered their optimism about the future. Much of this was due to the about-face at the Fed, and fears that they might know something everyone else does not. Despite the drop in expectations, the small business labor market improved, with firms hiring .19 workers on average, and many finding it difficult to hire qualified workers. Small business also increased capital spending, which indicates optimism about the future. So, despite the dip in optimism, firms are still spending like the expansion will continue. One other data point: credit availability remains a non-problem. Only 4% of small businesses reported that their borrowing needs were not met, which is more or less a historical record. So, don’t expect much additional juice from rate cuts, as there is already more than enough credit.

 

The Chinese government removed the foreign cap on investments, although this is largely a symbolic move, as the current limit presents no constraint. That said, it is hard to avoid the thought that the Chinese government is looking for some greater fools out there for their banking system to sell assets to. Despite the talk about the yuan becoming a reserve currency, the Chinese government probably won’t want to give up the amount of control required.

 

Delinquency rates continue to fall, according to CoreLogic. The 30 day delinquency rate fell 30 basis points to 4% in June. The foreclosure rate fell 10 bps to 0.4%. We did see an uptick in a few states that wasn’t natural disaster related: VT, NH, MN, and ND.

 

Corelogic delinquencies.

 

 

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