Morning Report: FOMC minutes show Fed preparing to back off tightening

Vital Statistics:

	Last	Change	Percent
S&P Futures	1928.5	5.8	0.30%
Eurostoxx Index	2922.3	24.6	0.85%
Oil (WTI)	31.37	0.7	2.32%
LIBOR	0.618	0.000	0.00%
US Dollar Index (DXY)	96.93	0.144	0.15%
10 Year Govt Bond Yield	1.82%	0.00%
Current Coupon Ginnie Mae TBA	105.4
Current Coupon Fannie Mae TBA	104.6
BankRate 30 Year Fixed Rate Mortgage	3.67

Stocks are higher this morning after oil continues its rally. Bonds and MBS are flat

Initial Jobless Claims fell from 269k to 262k., while the Philly Fed improved to -2.8.

The Bloomberg Consumer Comfort Index fell slightly to 44.3 from 44.5 the prior week. The Economic Expectations index fell markedly from 47 to 42.5.

The Index of Leading Economic Indicators improved slightly in January from -0.3% to -0.2%. 

Mortgage Delinquencies fell from 4.99% to 4.77% and foreclosures fell from 1.88% to 1.77% in the fourth quarter, according to the MBA. 

The FOMC minutes were released yesterday, and for the most part they were a non-event as far as the markets were concerned. The Fed did spend some time talking about the slowdown in China, and the reverberations in the markets. A number of officials are beginning to think the inflation forecasts are too high. In addition, the stresses in the financial system act as a tightening even if rates go nowhere. The Fed seems to be setting the stage for a cut in the GDP and inflation forecasts at the March meeting, as well as a pause in tightening. Separately, the OECD took down its forecast for global growth to 3.0% from 3.3%. 

Mortgage REIT MFA Financial reported earnings this morning. They continue to position their portfolio of MBS more towards credit risk and less towards interest rate risk. When the private label securitization market comes back, REITs like MFA will be the big buyers of non-QM paper. Their appetite for non-agency MBS will be the key driver bringing back the widespread use of products that don't fit in the agency box. 

FHFA Chairman Mel Watt says that the GSE's lack of capital is the most serious risk to the mortgage market right now. He says that guarantee fees have increased 25 basis points since 2009 and they are now "appropriate." He also said that the current state of conservatorship is "not a desirable end state" and said that the GSE's protection from market forces "presents itself in multiple decisions, including pricing."