Morning Report - Case-Shiller up, 13 out of 20 MSAs down

Vital Statistics:

	Last	Change	Percent
S&P Futures	1870.3	4.3	0.23%
Eurostoxx Index	3197.9	32.1	1.01%
Oil (WTI)	101.2	0.4	0.40%
LIBOR	0.225	0.001	0.22%
US Dollar Index (DXY)	79.79	0.103	0.13%
10 Year Govt Bond Yield	2.72%	0.02%
Current Coupon Ginnie Mae TBA	105.4	-0.2
Current Coupon Fannie Mae TBA	104.3	-0.1
BankRate 30 Year Fixed Rate Mortgage	4.26

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

Home prices rose.76% month-over-month and 12.9% year over year, according to the Case-Shiller real estate index. The strength in home prices is largely due to reduced inventory and does not necessarily represent a robust housing market. In fact, 13 out of the 20 cities in the index declined in February on a month-over-month basis. The strength was in the West Coast, Dallas, and DC. Everyone else was down.

Why does a company with $123 billion in net cash on the balance sheet need to tap the bond market? In a move guaranteed to infuriate many, Apple is looking to do a $17 billion bond issue to repurchase stock. Why not use the their cash to do it? Because it is overseas and subject to repatriation taxes. 

The markup of the Crapo-Johnson bill begins mark-up in the Senate. The two big expected changes are 1) Guarantors of MBS cannot also be originators, and 2) The bill will not supersede the bailout agreement, which means all of Fan and Fred's profits have to go straight to the government. My personal opinion is that not much is going to be done on housing reform this year. With Republican control of the Senate a distinct possibility, they are going to want to wait and see if they can drive a better deal when control changes. 

There was nothing earth-shattering in American Capital Agency's first quarter earnings release. AGNC is the second-biggest mortgage REIT in the US and is a big buyer of mortgage backed securities. They continue to shrink their balance sheet and buy back stock. They have shortened the maturity of their portfolio and now half of it is in 15 year fixed rate MBS. The dwarfs are interesting - you do get a meaningful drop in rate on the conforming side, but not on the government side. In fact, there is no rate advantage in going from 30 to 15 in govvies at all. Why? Govvie dwarfs are highly illiquid.