Monday – February 27, 2023

MBS up 13 bps early on the day.

Durable goods orders fell 4.5% in January, according to the Census Bureau. Excluding transportation, durable goods orders rose 0.7%. Core Capital Goods orders (a proxy for corporate capital expenditures) rose 0.8%.

Inflation took the conch last week and set the tone for fixed income markets as the Federal Reserve’s favored inflation index — the PCE — came in looking ugly on both an annual and monthly basis. This followed the CPI release that was also not anything for the central bank to brag about and bottom line is hopes for a monetary policy pivot anytime soon are fading quickly. The US Treasury 10-yer yield is within spitting distance of 4%, the Optimal Blue 30-year lending rate is at 6.63% and has its eye on 7%, and volatility remains elevated (it has closed higher for three weeks in a row now and is highest since early January.)

Pending Home Sales rose 8.1% MOM, but are still down 24% compared to a year ago. That said, NAR doesn’t really see much of a pickup in home sales until 2024.

It’s tough to trust any gains these days. Last week bonds started to level off, as did rates, after seeing both get worse for most of February. We are starting to see signs that rates could be capping out for the moment, but not sure yet if we can trust them. Risks still support locking for protection, and the outlook is still that rates will remain at these levels or worse and not likely to see much improvement.

TransUnion’s 2023 Consumer Credit Forecast projects delinquency rates for credit card and personal loans to rise to levels not seen since 2010. At the same time, demand for most lending products will remain high relative to pre-pandemic levels with the number of consumers securing auto and home equity loans increasing on an annual basis.

Despite a challenging macroeconomic environment, TransUnion’s new Consumer Pulse study found that more than half (52 percent) of Americans are optimistic about their financial future during the next 12 months. The forecast found that there is room for optimism with auto loan and home equity originations expected to rise next year. While credit card originations are expected to drop from 87.5 million in 2022 to 80.9 million in 2023, the number of new cards opened will remain much higher than at any time in the last decade.

LoanDepot sued CCM last July_ in a New York federal court for purportedly poaching at least 32 of its employees beginning last February. The Cleveland-based lender has denied allegations of wrongdoing and, along with its current employees who are named defendants, included the commission claims in responses filed in late December and earlier this week. "LoanDepot routinely - and falsely - designated bona fide self-generated loans as company- generated loans in order to pay a lower commission to the originating individual defendant," wrote counsel for CrossCountry in a lengthy response this week. "That constituted a material contract breach, as loanDepot's loan officers were entitled to a higher commission for self- gener?ted for 10?ns"


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