Morning Report - Quits lead raises

Vital Statistics:

	Last	Change	Percent
S&P Futures	2061.2	1.3	0.06%
Eurostoxx Index	3113.1	-40.7	-1.29%
Oil (WTI)	55.46	1.4	2.49%
LIBOR	0.245	0.003	1.13%
US Dollar Index (DXY)	89.2	-0.040	-0.04%
10 Year Govt Bond Yield	2.19%	-0.01%
Current Coupon Ginnie Mae TBA	104.7	-0.1
Current Coupon Fannie Mae TBA	104.2	0.1
BankRate 30 Year Fixed Rate Mortgage	4.12

Markets are flattish this morning after a torrid 2 day run courtesy of Santa Yellen. Bonds and MBS are up small.

Fannie Mae is forecasting that wage growth is just around the corner and focuses on an interesting indicator out of the JOLTS job report - the quit rate. The quit rate is a leading indicator for job growth, and it has has been moving up for quite some time while wages have been flat. Another reason to be somewhat optimistic about 2015.

Are the high premiums for FHA loans creating an adverse-selection problem? The MBA thinks so. Creditworthy borrowers are going for the cheaper Fannie and Freddie loans, leaving only the borrowers with poor credit in the FHA risk pool. The new 3.5% down Fannie Mae loans will undoubtedly exacerbate this trend. 

The drop in oil prices is causing pain in economies that rely on oil revenues, particularly Russia and Venezuela. It looks like Russian banks are going to need some sort of bailout. This could have impacts on the US real estate market, particularly at the high end. On one hand, Russian billionaires will want to move assets out of Russia ahead of the capital controls that are probably coming, On the other hand, in a crisis, you sell what you can, not necessarily what you want to. Not sure how this will shake out, but it bears watching. It will probably be a preview of what happens when China's real estate bubble bursts as well. The Asian Crisis of the late 90s did have some reverberations in US credit markets, so we may feel a bit of credit tightening as banks back away from each other.