Morning Report: Markets prepare for Janet Yellen

Vital Statistics:

	Last	Change
S&P Futures	2447.5	6.8
Eurostoxx Index	375.7	1.2
Oil (WTI)	47.7	0.3
US dollar index	86.1	-0.1
10 Year Govt Bond Yield	2.20%
Current Coupon Fannie Mae TBA	103.09
Current Coupon Ginnie Mae TBA	103.97
30 Year Fixed Rate Mortgage	3.89

Stocks are up this morning as we await Janet Yellen and Mario Draghi speeches in Jackson Hole. Bonds and MBS are flat. 

Janet Yellen will be speaking at 10:00 am EST at Jackson Hole. The markets aren't expecting much in the way of new policy guidance, however given the general illiquidity of the markets, and the fact that it is a Friday during summer, anything that spooks the herd could have outsized effects. 

Durable goods orders slipped 6.8% in July largely due to a drop in aircraft orders. Ex-transportation they were up 0.5% MOM and 5.6% YOY. Capital Goods orders rose 0.4% and are up 3.5% YOY. Capital Goods orders are a good proxy for business capital expenditures, and indicates manufacturing confidence in the future. 

Credit scoring is something we take for granted, however there is competition to the standard Fair Issac model (FICO). VantageScore (created by Fair Issac competitors Transunion, Equifax and Experian) is attempting to become an alternate scoring methodology for Fannie / Fred and FHFA loans. FHFA is worried that allowing new credit scoring methods would create a race to the bottom, where the agencies end up using the one that shines the most favorable light on borrowers. Some feel the FICO methodology, which doesn't distinguish between types of debt, is outdated. Vantagescore uses things like utility and rent payment history, which is useful for people who don't borrow much in the first place and don't have a FICO score. 

The post-election sell-off in bonds is unwinding, and mortgage rates have hit the lows of 2017, matching levels seen just after the election, according to Freddie Mac. The 30 year fixed rate mortgage averaged 3.86% for the week ending August 24, which is the lowest level since November 10, 2016. 

The homeownership rate may have bottomed, and perhaps we are seeing a turnaround for the younger buyers. Below is a chart of the homeownership rate by age cohort, going back to 1994. The youngest age brackets definitely have the most volatility, and they are the most affected by the dearth of starter homes for sale.