Morning Report - REIT TBA selling could be over

Vital Statistics:

	Last	Change	Percent
S&P Futures	1686.8	4.3	0.26%
Eurostoxx Index	2760.1	18.3	0.67%
Oil (WTI)	103.9	-0.6	-0.60%
LIBOR	0.265	-0.001	-0.38%
US Dollar Index (DXY)	81.66	0.000	0.00%
10 Year Govt Bond Yield	2.58%	-0.02%
Current Coupon Ginnie Mae TBA	104.3	-0.1
Current Coupon Fannie Mae TBA	103.9	0.1
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.36

Markets are higher this morning on no real news. Bonds and MBS are up

The S&P / Case-Shiller home price index rose 1.05% month over month and 12.2% year over year in May. The usual suspects (Phoenix, Lost Wages, and San Francisco) showed 20%+ gains while the Midwest and East Coast showed low / mid single digit increases. New York brought up the rear with a 3.3% increase. This has been borne out by the homebuilders, where the ones with a heavy West Coast focus have outperformed the ones that are East Coast / diversified. 

Mortgage REIT American Capital Agency (AGNC) reported second quarter earnings last night. Book value got hit by 12%, but the interesting data point is the state of their TBA portfolio. The To-Be-Announced (or TBA) market is what sets mortgage rates. Over the second quarter, their TBA portfolio fell from 27.5 billion to 14.5 billion. That is a lot of paper they just dumped. They consider themselves to be positioned where they want to be at this point from a duration hedging standpoint. The key takeaway - we'll have to see what Annaly (NLY) has to say, but so far, it appears that a substantial chunk of the selling in the TBA market is done. That is good news for mortgage rates, and I wouldn't fall out of my chair with shock to see lower mortgage rates in the context of a stable 10-year.

Completed foreclosures were 55,000 in June, down 20% year over year and up 2.5% from May, according to CoreLogic. Approximately 1 million homes in the U.S. were in some stage of the foreclosure process, compared to 1.4 million a year ago. This represents 2.5% of all homes with a mortgage. The states with the most work left to do are Florida (8.6%), New Jersey (6%), New York (4.8%), Connecticut (4.2%) and Maine (4.1%).