Friday – October 18, 2024
UMBS opened Up 12 bps on the morning. S&P Futures are up 12.25 points.
Thursday’s data delivered on the high risk front with a big move in the bond market, but not as much on the reward front. Specifically, rate sheets didn’t move nearly as much as the market suggested. That makes for a very compelling lock opportunity–especially for the risk averse crowd who didn’t happen to lock yesterday. It continues to be the case that the biggest moves are a risk after the biggest econ data and that the first two weeks of November could be extraordinarily volatile.
Housing starts came in at 1.354 million units, which is more or less flat on a month-over-month and year-over-year basis. This was below the 1.4 million Street expectation. Building Permits came in at 1.428 million, which was down on a MOM and YOY basis. Again, this number came in below expectations.
Multi-family construction seems to be falling the most, while single-family is flat-to-rising. Multi-fam starts are down 15.7% YOY, while single family starts rose 5.5%.
Homebuilder confidence rose in September, according to the NAHB Housing Market Index. While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions
Industrial Production fell 0.3% MOM, while manufacturing production fell 0.4% MOM, according to the Federal Reserve. Capacity Utilization fell from 77.8% to 77.5%. The hurricanes and the Boeing strike accounted for most of the decline.
Western Alliance reported earnings yesterday. Mortgage origination rose 21% on a quarter-over-quarter basis and 10% on a year-over-year basis. Gain on sale margins fell to 20 basis points compared to 26 basis points last quarter and 38 basis points a year ago.
From the Bowtie Economist: While inflation is barely 2.5% Y-o-Y, unemployment is just 4.1%, and incomes are rising, voters are sour on the economy. Here, I think, is why. Median income in 2023 rose to $80,610, but it’s still below the 2019 $81,210 inflation-adjusted peak. And, sure, overall inflation is low, but Y-o-Y food and energy (things we buy all the time) inflation peaked at 40% in 2022, its worst showing since 1979!
Bonds were technically a hair weaker in the overnight session, but even if they never improved from those levels, yields still would have been inside the prevailing range (4.0 to 4.12 in terms of the 10yr). As it stands, they did improve a bit, ultimately hitting 4.063 at the lows and holding near there through the close. MBS picked up a microscopic gain as well. All of the above is perfectly reasonable considering the lack of motivation in economic data. Today’s only report (residential construction) hasn’t moved markets in over a decade. With that, we’re back to waiting for relevant data with the next notable installment not arriving until Thursday.
UMBS closed the day up 3 bps at 99.48
