Projected Range of 10yr Notes, What Manufacturing & Inflation Stats Tell Us
What Do Manufacturing & Inflation Stats Mean?
Economic stats often point to different economic trends, depending on one’s viewpoint. What difference do numbers like Industrial Production, Capacity Utilization, Producer Price Index, etc., mean for anyone in the mortgage business? Aside from moving rates around, last week we saw strength in manufacturing production (pushing commodity prices higher), weakness in final demand, and negligible inflation. The Consumer and Producer Price Indices have fallen for two months in a row. CPI is now up just 2% over the past year, but the PPI is up 5.3% over the past year. This leads us to believe that companies cannot pass along their higher costs to their end consumers, which in turns suggests that profit margins in coming quarters will be impacted. The same applies to mortgage banks – many would prefer to increase their profit margins, but don’t want to risk any market share so are forced to keep things slim.
Another Failed Bank & Summer Solstice
Nevada Security Bank wasn’t so secure, and on Friday Umpqua Bank, through the FDIC, assumed all its deposits. The bank didn’t make it to see the summer solstice, which occurred this morning at 7:28AM EST. (From here on, the days will become shorter here in the Northern Hemisphere.)
National Flood Insurance Still Not Approved By Congress
Fannie Mae issued guidance on its stance on the lapse in issuance of flood insurance policies. The Agency issued a Lender Letter describing purchase conditions for delivery to Fannie Mae of loans closed during the NFIP lapse. Originators are advised to read the actual letter, since investors will probably follow it if they haven’t already, but “Until evidence of active flood insurance is obtained, a lender may deliver a mortgage loan to Fannie Mae on the condition that the borrower can provide acceptable evidence of a completed application for flood insurance and a copy of a check or the final HUD-1 Settlement Statement reflecting payment of the initial premium, or the assignment of an existing flood insurance policy from the property seller to the purchaser. Lenders must have a process in place to identify mortgaged properties securing loans sold to Fannie Mae that do not have proper evidence of active flood insurance, take all steps (insofar as permitted by applicable law) necessary to facilitate the issuance of coverage once the NFIP insurance authority is renewed, and retain documentation to support acceptable evidence of flood insurance.”
Update On Loan Modifications
Freddie Mac sent out a bulletin addressing “an extended set of requirements for the temporary Freddie Mac HAMP Backup Modification and the Cap-to-Reinstate modification for Home Affordable Modification program (HAMP)-ineligible borrowers.” Freddie expanded the eligibility requirements for these solutions in order to assist a larger population of distressed borrowers avoid foreclosure, and also extended the eligibility timeline to now include borrowers with stated income Trial Period Plan effective dates on or before May 1 instead of April 1.
Projected Range of 10yr Notes
What seems to be pushing rates around right now? There is some feeling out there that bonds are once again paying attention to growth and inflation rather than the latest crisis. And, of course, there is little or no inflation, which leaves the growth aspects of the US economy front & center. Paul Jacob from Bank of Manhattan, for example, believes that the new 10-yr yield range is 3.15% to 3.40-3.50%. The “real” 10-year Treasury yield measured against the 1-year change in core CPI is 2.25%, almost precisely equal to its average level since 2000.
Economic Preview For Week
In terms of economic news, there is nothing today. Tomorrow we have some “10AM EST numbers”, long thought to be not as important as the “8:30AM EST numbers”, with Existing Home Sales, FHFA Home Purchase Index, and the Richmond Fed Index. Wednesday is New Home Sales, but later on we’ll have the end of the Federal Reserve’s FOMC meeting. (No matter how much the press wants to talk about the meeting, there will be no change to overnight rates, and little, if any, change to the actual announcement.) Thursday we have Initial Jobless Claims and Durable Goods. Friday is GDP, and the University of Michigan Consumer Sentiment Survey. And in order to finance activities of the US government, the Treasury will auction $40B in 2-, $38B 5- and $30B 7-year notes beginning tomorrow. The 10-yr is back up to 3.30% and current coupon 30-yr MBS prices are down about .250.
Daily Humor
“Husband Down”
A husband and wife are shopping in their local Wal-Mart. The husband picks up a case of Budweiser and puts it in their cart.
“What do you think you’re doing?” asks the wife.
“They’re on sale, only $10 for 24 cans”, he replies.
“Put them back, we can’t afford them,” demands the wife, and so they carry on shopping.
A few aisles further on along the woman picks up a $20 jar of face cream and puts it in the basket.
“What do you think you’re doing?” asks the husband.
“It’s my face cream. It makes me look beautiful,’ replies the wife.
Her husband retorts, “So does 24 cans of Budweiser and it’s half the price.”
On the PA system: “Cleanup on Aisle 25, we have a husband down.”