| Last | Change | Percent | |
| S&P Futures | 1433.3 | 1.8 | 0.13% |
| Eurostoxx Index | 2629.5 | 5.4 | 0.21% |
| Oil (WTI) | 86.35 | 0.6 | 0.65% |
| LIBOR | 0.31 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 79.95 | -0.116 | -0.14% |
| 10 Year Govt Bond Yield | 1.66% | 0.00% | |
| RPX Composite Real Estate Index | 191.1 | 0.4 |
Markets are up slightly this morning ahead of the FOMC statement this afternoon. Mortgage Applications were up 6.2% last week. Right to Work was passed in Michigan. Bonds and MBS are flat.
The FOMC statement is due out at 12:30, and at 2:15, the Bernank begins his press conference. Things to look for: New Treasury purchase plan to replace Operation Twist, 2013 GDP forecast, any comments on its outlook for housing. The WaPo speculates that the Fed will shift more buying to Treasuries than mortgages, and it looks like Bill Gross concurs, as he is lightening up his MBS position.
Looks like FHFA Acting Director will be out of a job soon. This will undoubtedly pave the way for a mass principal forgiveness / underwater refis on Fannie and Freddie loans. Mortgage-Backed securities will be vulnerable to news of more interventionist policies out of FHFA, so beware as you could have Treasury pricing and MBS pricing diverge.
While individual tax rates are going up as part of the fiscal cliff, corporate tax rates may be going down. Obama earlier this year proposed lowering the corporate tax rate to 28% from its current 35%. The lower rates would be offset by eliminating some deductions and the net revenue would be the same. I would argue that we are at the point on the Laffer Curve where lowering rates would actually raise revenues as it would eliminate some of the transfer-pricing games companies play to declare as much income as possible overseas. The poster child of these transfer pricing games is GE, which paid no US income taxes in 2010. Or Google, which shifted $9.8 billion in revenues to a Bermuda shell company, which allowed it to avoid paying roughly $2 billion in taxes.
Dodd-Frank implementation could stall for a while after Mary Schapiro steps down as Chairman of the SEC, leaving the commission deadlocked with 2 democrats and 2 republicans. Politically divisive issues like prop trading and restrictions on executive pay will have to wait until a fifth commissioner is nominated and confirmed. Fun fact: The SEC has finalized just 32 of the 95 rules that the 2010 law required.
The Fed has been quietly telling the big banks: No more mergers. Banks that hold 10% of US deposits are already capped in size, but now it looks like the biggest banks just below that threshold are now prohibited from growing by acquisition. Fed Governor Dan Tarullo gave a speech which discusses the TBTF problem and examines various alternatives (re-instate Glass Steagall, capping non-deposit liabilities, etc.)
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