Morning Report - More Mel

Vital Statistics:

	Last	Change	Percent
S&P Futures	1582.8	5.5	0.35%
Eurostoxx Index	2729.8	18.1	0.67%
Oil (WTI)	91.37	0.3	0.37%
LIBOR	0.273	0.000	0.00%
US Dollar Index (DXY)	81.75	0.263	0.32%
10 Year Govt Bond Yield	1.64%	0.01%
Current Coupon Ginnie Mae TBA	106.4	-0.1
Current Coupon Fannie Mae TBA	104.6	-0.1
RPX Composite Real Estate Index	192.8	0.3
BankRate 30 Year Fixed Rate Mortgage	3.4

Markets are stronger this morning after the ECB cut rates and initial jobless claims came in lower than expected. Productivity increased as well. Bonds and MBS are flat.

Yesterday's FOMC statement turned out to be a "steady as she goes" statement. They mention that they are ready to increase or decrease asset purchases in response to changing economic conditions. ZIRP (meaning rock bottom interest rates) will continue as long as unemployment is above 6.5% and inflation remains at 2.5% or lower.

People are still trying to understand the implications of Mel Watt as Chairman of the FHFA. The biggest one is that Mel Watt was not nominated to preside over the dissolution of the government's role in housing finance. Fannie and Fred will survive in some fashion. The elephant in the room is principal mods for people with underwater conforming mortgages. That will undoubtedly come up in the confirmation hearings. In his announcement, obama continued to press the left-wing narrative that "reckless lending" caused the financial crisis while studiously ignoring the fact that we had a housing bubble. I do think it is ironic that he talks about reckless lending when the government bears 50% of the credit risk of the entire US mortgage market. While people have hoped that the government will extricate itself from the mortgage market, this appointment suggests otherwise.

Challenger and Gray job cuts fell to 28,121 in April, a drop of 6% year-over-year. This is the lowest level since December 2012. Despite the sturm and drang over the sequester, the massive expected layoffs have yet to appear. Aerospace and defense did announce 1,928 job cuts that were related to the sequester. This is a far cry from the 900,000 jobs that were forecast by some studies.