| Last | Change | Percent | |
| S&P Futures | 1368.0 | 8.2 | 0.60% |
| Eurostoxx Index | 2461.2 | 33.8 | 1.39% |
| Oil (WTI) | 88 | 1.1 | 1.24% |
| LIBOR | 0.312 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 81.06 | -0.193 | -0.24% |
| 10 Year Govt Bond Yield | 1.61% | 0.03% | |
| RPX Composite Real Estate Index | 191.4 | -0.4 |
Stocks are higher this morning on optimism the fiscal cliff can be averted. The new buzzword in Washington is "constructive" The pattern lately has been a strong opening, and then a late-day sell-off. This is a holiday-shortened week, so you can expect lower volumes and not much activity. We have a sparse economic calendar as well. Bonds and MBS are down.
Even if we reach a deal with the fiscal cliff, taxes are going up next year. Hurricane Sandy has been expected to lop a point or so off of 4Q GDP. Between the two, we are probably looking at a flat-to slight GDP growth in Q113. To add insult to injury, businesses are halting capital expenditures. While "constructive" is the operative word for Washington, "Uncertainty' is the buzzword for business. While it is certainly possible that a deal in Washington will remove the uncertainty, it feels like the business will simply find something else to fret about. The stock market is telling you that as well. FWIW, Elmer Fudd is sanguine about the whole thing, saying a recession is a small price to pay to get our fiscal house in order.
HUD has announced some changes to help FHA get through its rough patch - the punch line is that FHA loans are about to get more expensive. Fun fact: FHA loans were about 2% of the market pre-boom. Now they are 40%. The biggest changes involving borrowers will be an increase in the insurance premium, and removing the insurance cancellation program.
Redwood sold another $300 million of high quality jumbos last week, their sixth this year. Two Harbors apparently is close to a securitization as well. In the past two years, Redwood has securitized $900 million of jumbo mortgages. To put that in perspective, in 2005 and 2006, private label issuance was $1.2 trillion. That said, the private label securitization market is coming back, slowly but surely.
Leave it to Paul Krugman to link Twinkies and marginal tax rates.
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