Morning Report: Job openings hit a record high

Vital Statistics:

	Last	Change
S&P Futures	2428.3	-6.3
Eurostoxx Index	389.5	-2.6
Oil (WTI)	47.4	-0.1
US dollar index	88.1
10 Year Govt Bond Yield	2.15%
Current Coupon Fannie Mae TBA	102.6
Current Coupon Ginnie Mae TBA	103.81
30 Year Fixed Rate Mortgage	3.9

Definitely a risk-off feel this morning as we head into the UK elections, James Comey's testimony, and the ECB meeting later in the week. Bonds and MBS are up as we begin the Fed blackout period with the the 10 year bond yielding around 2.15%.

Job openings hit a record of 6 million, according to the JOLTs job openings survey. The quits rate was flat at 2.1%. The quits rate is the most important number in this report (every FOMC statement will reference it) as it is a harbinger for future wage growth. Overall, it shows that there is strong demand for employees, however there is still a mismatch between what employers want and what is available. The reservoir of the long-term unemployed will probably continue to keep a lid on wage growth, however we are seeing wage inflation in certain disciplines that are in low supply (mainly skilled labor).

The Trump reflation trade looks dead and the 10 year bond yield looks to be heading back to pre-election levels. If you look at a Fibonacci chart of the 10 year yield, pretty much all the support levels have been broken. 

The death of the Trump Reflation Trade is affecting economic confidence as well, at least according to the Gallup US Economic Confidence Index. It is still well above pre-election levels and historical norms but it has given back a lot of the post-election froth. Trump is ready to pivot to infrastructure spending, and the Democrats have historically wanted to spend on infrastructure as well, however they philosophically don't like the fact that much of this uses the private capital and prefer to use direct government spending on their priorities like mass transit. Given that mass transit is almost entirely a blue-state phenomenon, that is going to get very little interest from Red state Republicans. Maybe there is some common ground, but it is going to hard to find. 

Case in point: Many want to see high speed rail in the US. Fine, but when airlines are offering $50 fares, it is going to be impossible to compete. Note that Donald Trump proposed to privatize air traffic control, in order to get private capital to spend the money to update the system. 

Home prices rose 6.9% last month according to the CoreLogic Home Price Index. Rents increased 3%. Scarcity remains the biggest issue driving home price appreciation, as lower mortgage rates have fed a buying frenzy. The West continues to lead the charge. 

Despite the Fed rate hikes, financial conditions are the loosest in 3 years. Definitely a disconnect is going on between Fed intentions and actual market behavior. 

Regulatory reform is probably going to be smaller for the financial sector than imagined. After spending billions to come into compliance with Dodd Frank, banks are loath to see a new regulatory regime.