Morning Report - Taper Day

Vital Statistics:

	Last	Change	Percent
S&P Futures	1698.8	0.5	0.03%
Eurostoxx Index	2907.4	16.4	0.57%
Oil (WTI)	105.8	0.4	0.39%
LIBOR	0.252	0.001	0.20%
US Dollar Index (DXY)	81.14	0.001	0.00%
10 Year Govt Bond Yield	2.86%	0.01%
Current Coupon Ginnie Mae TBA	103.7	0.0
Current Coupon Fannie Mae TBA	102.8	-0.1
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.48

Markets are flattish ahead of the FOMC meeting this afternoon. The announcement is expected around 2:00pm, so don't try and lock anything around that time period. Bonds and MBS are down small.

Mortgage applications rose 11.2% last week, which was a big increase after a depressed short Labor Day week. The refi index jumped 18% as rates ticked down a little. The purchase index was up 2.5%.

Housing starts and building permits came in lower than expected, with housing starts at an annualized 891k and permits at an annualized 918k. SFR continued to increase while multi-fam dipped. Sub - 1 million levels in housing starts is still a highly depressed level. After touching 1 million units in March, activity has been slowing. You can see from the chart we have been underbuilding for a long time. I guess you won't see a major increase in starts until the first time homebuyer returns to the market and that is going to be jobs-driven. In related news, the National Association of Homebuilder Confidence Index was flat last month, but still at post-crisis highs. The builders are also noting that momentum seems to have stalled for the moment. 

Certainly the Fed is noticing the drop-off in housing sector activity as rates have risen. This will probably make them want to maintain current purchases of MBS and cause them to lower Treasury purchases only. The consensus seems to be the "tiny taper" scenario, where the Fed cuts Treasury purchases by $10 billion a month starting in October.

The SEC is going to force companies to disclose the ratio of CEO pay to the median pay of employees at the firm. Glad to see the SEC is on class warfare beat - much more important than, say, doing something about high frequency trading  /sarc.