Morning Report - Dodd-Frank 5 years on..

Vital Statistics:

	Last	Change	Percent
S&P Futures	2120.3	1.5	0.07%
Eurostoxx Index	3701.6	31.3	0.85%
Oil (WTI)	50.82	-0.1	-0.14%
LIBOR	0.292	0.005	1.66%
US Dollar Index (DXY)	97.9	0.042	0.04%
10 Year Govt Bond Yield	2.37%	0.02%
Current Coupon Ginnie Mae TBA	103.8	0.2
Current Coupon Fannie Mae TBA	103.1	0.2
BankRate 30 Year Fixed Rate Mortgage	4.17

Stocks are higher this morning after Greece made a payment to the ECB and re-opened its banks. Bonds and MBS are down small.

There is very little data this week - nothing today and tomorrow. We will get existing home sales on Wednesday and new home sales on Friday. Earnings season is in full swing and we will hear from heavyweights like Apple and IBM this week. Now that Greece and Chinese stocks seem to be stabilizing, I could see a gentle drift up in interest rates throughout the week. 

Good housing numbers out of Census on Friday, with housing starts hitting 1.17 million and building permits hitting 1.34 million. Building Permits have risen by 200 units or so over the past two months, which portends an end to the tight supply we have been seeing in many real estate markets, which is causing bidding wars in some areas. The big improvement is largely in the Northeast, where permits are finally surpassing the levels in the West. 

Chart: Building Permits: 1990 - Present

Interview with Chris Dodd and Barney Frank on Dodd-Frank 5 years later. Short summary: Dodd Frank is damn near perfect. A counter-take on it. Dodd-Frank did not end TBTF (too big to fail), however it does restrict credit, especially in mortgage banking (Barney Frank thinks D/F didn't go far enough). 

One of the unintended consequences of Dodd-Frank has been the pullback in liquidity in Treasury and corporate bond markets. Since Dodd-Frank prohibits proprietary trading, market-making has been pulled back as well, making Treasury markets more volatile, and according to studies has raised the interest rate the government pays on bonds by about 13 basis points or so. The side effect of this is that we will have more days like October 15, where Treasuries traded in a 36 basis point range as the market hit an air pocket during the day. What does this mean for LOs? Floating is going to be more dangerous.