Morning Report - G fee review - much ado about nothing

Vital Statistics:

	Last	Change	Percent
S&P Futures	2086.9	11.4	0.55%
Eurostoxx Index	3696.2	22.2	0.60%
Oil (WTI)	55.28	-0.5	-0.83%
LIBOR	0.276	0.001	0.24%
US Dollar Index (DXY)	97.88	0.363	0.37%
10 Year Govt Bond Yield	1.86%	-0.01%
Current Coupon Ginnie Mae TBA	103.7	0.3
Current Coupon Fannie Mae TBA	102.6	0.1
BankRate 30 Year Fixed Rate Mortgage	3.79

Markets are higher this morning on overseas strength. Bonds and MBS are flattish.

This week doesn't have any data which will move the bond market, but we do have some important numbers nonetheless. On Wednesday, we will get existing home sales and the FHFA House Price Index. On Thursday, we will get New Home Sales. Finally, we will get earnings from Pulte an D.R. Horton. Hopefully their comments will help reconcile the strong builder sentiment with the lousy housing starts numbers. 

Note that Pulte is saying that the housing market remains strong, despite the "volatile" numbers. They see high single digit growth in housing. M&A is hot: buy building product stocks. 

The Chicago Fed National Activity Index fell to -.42 in March, giving further ammo to the argument that the deceleration that started in January and February was not simply weather driven. The 3 month moving average, which is a more stable, indicates that the economy is operating below its historical trend. 

William Dudley is speaking at the Bloomberg Americas Monetary Summit this morning. His main points - the Fed will be data-dependent (boilerplate), and the Fed is cognizant of the risks or liftoff on emerging markets. Even if rates do go up, monetary policy will still be easy. That said, ECB and BOJ easing does make credit conditions more supportive. The stock market is blithely assuming that the economy will handle rate hikes as easily as it handled the end of QE and is therefore vulnerable, IMO. 

The Fannie Mae and Freddie Mac guarantee fee review is finished, and it looks like not much is going to change. The 25 basis point adverse delivery fee is gone, but there are new fees imposed, so it looks to be more or less a wash. Borrowers with lower credit are going to pay slightly less, while high bal, investment properties, and cash out refis will become slightly more expensive. 

Jon Corzine (of MF Global fame) is considering starting a hedge fund. Proving you can get away with anything in this country if you are politically connected. 

Morning Report: Corzine gets a Pass

Vital Statistics:

	Last	Change	Percent
S&P Futures	1352.6	-0.4	-0.03%
Eurostoxx Index	2456.5	-16.3	-0.66%
Oil (WTI)	86.54	0.2	0.25%
LIBOR	0.311	0.001	0.32%
US Dollar Index (DXY)	81.17	0.118	0.15%
10 Year Govt Bond Yield	1.61%	0.02%
RPX Composite Real Estate Index	192	-0.4

Markets are flat this morning after yesterday's bloodbath in the S&P and Wal Mart's miss, which is a negative sign for the economy. Inflation at the consumer level remained in the Fed's comfort range, while initial jobless claims jumped to 439k.  This is heavily influenced by Sandy, so don't read too much into it. The NY Fed's Empire Manufacturing Survey was negative, but better than expected and higher than the previous month.s  The Eurozone officially entered a recession.  Bonds are down small while MBS are flat.

The Bernank is speaking on Housing and Financial Markets at 1:20 est today.

Freddie Mac discusses housing starts in its November 2012 US Economic and Housing Market Outlook.

The FOMC minutes released yesterday showed the Fed is moving in the direction of providing explicit economic guideposts for monetary policy.  In other words, once unemployment drops to X%, we end QE. While they also expressed concern that the scheduled completion of Operation Twist may impact the economy, they did not announce a Treasury buying program.  The market does expect one, though.

A House report on MF Global basically characterizes Jon Corzine as the "de facto chief trader" and blames his trades for the firm's collapse.  The Democrats on the panel refused to endorse the report, basically proving (yet again) that the financial is political.

The Washington Post has a good backgrounder on the shale gas revolution.  This has the potential to be a real long-term elixir for the economy.