Risk-on!

MBA Mortgage Applications (week ended 2/7/2014)

– Purchase Index Week/Week -5.0%. Previous weeks were -4.0%, +2.0%, -4.0%, +12.0%, -1.0%, -4.0%, -6.0%, +1.0%, -4.0%, -0.2%, +6.0%, and -1.8%.

– Refinance Index Week/Week -0.2%. Previous weeks were +3.0%, -2.0%, +10.0%, +11.0%, +5.0%, -8.0%, +2.0%, -18.0%, -0.2%, +6.0%, and -4.0%.

– Composite Index Week/Week -2.0%. Previous weeks were +0.4%, -0.2%, +4.7%, +11.9%,+2.6%, -6.3%, -5.5%, +1.0%, -12.8%, -0.3%, and -2.3%.

The Purchase Index is down 13% year-on-year.  Purchase applications are a leading indicator of Home Sales which is a leading indicator of Housing Starts. Less home buying means less home building which hurts jobs and GDP.

Atlanta Federal Reserve Business Inflation Expectations

– Expectations +2.0%. Previous was +1.9%.

This is a survey index of business owners’ expectations as to what business will be 12 months into the future.

Yellen

Comments from the Fed Chair are as important as most fundamentals.  Yellen’s comments yesterday created a risk-on mentality to markets. Risk-on translates into higher Treasury yields and mortgage rates but this effect will likely last only a few days.