| Last | Change | Percent | |
| S&P Futures | 1973.5 | 2.1 | 0.11% |
| Eurostoxx Index | 3173.0 | -2.0 | -0.06% |
| Oil (WTI) | 101.2 | -0.9 | -0.88% |
| LIBOR | 0.234 | -0.001 | -0.43% |
| US Dollar Index (DXY) | 80.99 | -0.039 | -0.05% |
| 10 Year Govt Bond Yield | 2.48% | 0.02% | |
| Current Coupon Ginnie Mae TBA | 106.3 | 0.2 | |
| Current Coupon Fannie Mae TBA | 105.5 | 0.0 | |
| BankRate 30 Year Fixed Rate Mortgage | 4.32 |
Markets are higher this morning on overseas strength. Bonds and MBS are down.
Pending Home Sales fell 1.1% month over month in June, a sign that the real estate market continues to struggle to get up off the mat in many areas of the country. Limited credit and wage growth continue to be issues. That said, mortgage rates continue to increase even in the face of a flat bond market, which could signal credit is easing. Here is a chart of the Bankrate average 30 year fixed rate mortgage minus the 10 year bond yield:
In other economic data, the Markit Composite PMI came in at 60.9, a very strong number. The services PMI came in at 61. The Street forecast for the ISM PMI is 56 (for both services and manufacturing), so there is another possibility of an upside surprise there. The economy is getting better.
Big week coming up with economic data. On Wednesday, we will get the advance estimate for second quarter GDP and the results from the FOMC meeting. Friday is a big day - we will get the jobs report, ISM, and personal spending / personal income. This is a lot of data in one day, and markets will be thin as many desks will be half-staffed. This is a recipe for volatility. The lack of action in the bond market has bred complacency - don't get caught napping - I wouldn't be floating ahead of this Friday.
I don't expect any fireworks with the FOMC meeting - there will be no economic revisions until September, and the meaningful stuff (how to conduct policy after QE, how to prep the markets for rate hikes) won't make it into the FOMC statement. Separately, Dallas Fed Head Richard Fisher wrote an opinion piece in the Wall Street Journal pressing the Fed to not only end QE but to also start shrinking its balance sheet by not re-investing maturing bonds back into the market. Even that might not be enough. FWIW, he is skeptical of the Yellen framework for bubbles which is that "low interest rates don't cause speculative bubbles, and we can deal with bubbles through banking regulation." People have gotten used to the hawks being ignored. As the economy recovers, that will change.
It is official: Zillow is buying Trulia. It would be the marriage of the #1 and #2 online real estate listing sites, so it will attract antitrust scrutiny. Trulia will remain an independent brand and Zillow is following a similar strategy to Barry Diller's IAC/Interactive corp, where competing brands co-exist as some appeal to different market segments than the other.
Guess the marching orders went out over the weekend: The Administration want to end these inversion transactions, and everyone from Jack Lew to Dr. Cowbell are singing from the same sheet of music. The message: Take away this loophole now, and then let's focus on corporate tax reform later. It is clear what is going on: The Administration fears a Republican Senate will mean vastly different negotiations regarding corporate tax reform. Republicans are going to want to trade closing loopholes for lowering rates, so Obama wants to get a few "free" tax hikes in (which is what "closing loopholes" really means). Of course Republicans are in no mood to throw Obama a freebie and he knows it, so this is just a means to create some talking points ahead of the midterm elections.
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