The Fed continues to fret over inflation that’s too low
In March 2013, the Fed was forecasting that 2015 inflation would be ~1.5%–2%. By the December 2014 meeting, it decreased that number to 1%–1.6%.
The recovery hasn’t been satisfying. Due to consumption and consumer deleveraging, the necessary spending isn’t generated to pull the economy out of its slow growth pattern.
The FOMC (Federal Open Market Committee) statement characterized the labor market. In 2015, the Fed is forecasting that unemployment will fall to 5.2%–5.3%.
Yesterday, the Federal Reserve ended its September FOMC meeting. It changed its language regarding interest rate normalization going forward.
Historically, incomes and house prices have correlated very closely. That changed during the housing bubble.
The Fannie Mae 3.5% TBA started the week at 105 1/32 and picked up 7 ticks to close at 105 7/32. Bonds rallied 4 basis points.
The ten-year bond rallied 4 basis points, with yields decreasing from 1.84% to 1.80%. Ginnie Mae TBAs picked up 9 ticks.
The ten-year bond fell 4 basis points and mortgage rates rose 3 basis points to 3.84%. The MBA Mortgage Bankers Index jumped substantially twice in a row.
Bonds have been influenced heavily by European rates since last summer, when markets speculated about further QE from the European Central Bank.
Interest rates were very volatile as the European Central Bank made a big announcement regarding its own version of quantitative easing.
This week has some critical earnings reports in the homebuilder and REIT sectors, and the FOMC meets.
Fannie Mae puts out a monthly National Housing Survey that measures consumer attitudes about housing and the economy.
While most indices showed the housing market bottoming out around February 2012, the FHFA House Price Index showed it bottoming out around May 2011.
Just under half of all states are judicial. However, in terms of delinquencies, the majority of the leaders are judicial states.
Better economic times are helping lower mortgage delinquencies, but we still have some work to do clearing the foreclosure pipeline.
Capacity utilization was 79.7% in December—a decrease from the downward-revised reading of 80% in November. It bottomed out at 66.9% in 2009.
The Fannie Mae 3.5% TBA started the week at 104 30/32 and picked up 3 ticks to close at 105 1/32. Bonds rallied 10 basis points.
The ten-year bond rallied 10 basis points, with yields decreasing from 1.94% to 1.84%. Ginnie Mae TBAs were more or less unchanged.
Last week, the Swiss National Bank unexpectedly removed the cap on the Swiss Franc, which jolted markets and blew up some hedge funds.
Commercial retail REITs such as Simon Property Group (SPG) and General Growth Properties (GGP) focused most on disappointing retail sales data on Tuesday.