Morning Report - 73:1 leverage

Vital Statistics:

S&P Futures	1830.6	-0.1	-0.01%
Eurostoxx Index	3107.9	-3.1	-0.10%
Oil (WTI)	93.86	0.2	0.20%
LIBOR	0.24	-0.002	-0.70%
US Dollar Index (DXY)	81.04	0.203	0.25%
10 Year Govt Bond Yield	2.99%	0.05%
Current Coupon Ginnie Mae TBA	104.4	-0.2
Current Coupon Fannie Mae TBA	103.3	-0.2
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.5

Stocks are flattish after the ADP Employment change came in better than expected at 238k jobs. The Street was at 200k and the estimate for Friday's number is 195k. Bonds clearly didn't like the number, with the 10 year yield around 2.99%. 

Mortgage applications rose 2.6%  last week, although the holiday makes any sort of week-over-week comparison difficult. Later on today we will get consumer credit and the minutes of the FOMC meeting. 

When I discussed Janet Yellen's new role at the Fed and also showed a chart of the Fed's balance sheet, I forgot to mention the other important side of things - the equity. Turns out the Fed announces these things weekly. And right now, we have a $4.02 trillion balance sheet supported by $55 billion in equity. For those keeping score at home, that works out to be 73:1 leverage, or about 2.6 times the leverage that blew up Long Term Capital Management. The Fed is long duration and levered 73:1 in a rising interest rate environment. And they are still building up the balance sheet, just at a slower pace than before. Everyone hopes Janet can stick the landing, but this is no sure bet.

56 out of 350 metro areas returned to or exceeded their last normal levels of economic and housing activity, according the the NAHB. More than 35% of all the markets are withing 90% of previous norms. Where does your MSA stack up? Find out here.

State of the unemployment extension: Yesterday, the Senate had a test vote that passed a 3 month extended unemployment benefits extension, however several of the Republicans who said "yea" would vote "nay" if there weren't paid for. Of course we have the House which would probably extend benefits if they are paid for with spending cuts.