AnnieMac Commentary from our President....Treasury prices drifted slightly higher (yields lower) in the overnight session on a continuation of sentiment change from Ben Bernanke’s comments Wednesday and also from some news on China and Egypt. This morning we saw a mild reversal of that after the University of Michigan’s Consumer Sentiment index was released. As we’ve discussed before this index breaks consumer sentiment into two primary buckets of “How Do You Feel Right Now?” and “How Do You Feel About Things 6 Months From Now?”. The “Right Now” responses came in at a 6-year high as equity and home prices continue to rebound (to say nothing of the good vibes summer always gives people) and the “6-Months From Now” responses fell slightly as people still aren’t sure what to make of the future…they only know that as of right now they feel better than they have in a long time. What does this mean for economic activity? Not sure – ask yourself how you feel personally about spending the money you have and perhaps that’s how many others feel. Be that as it may the markets weren’t a huge fan of the number and bonds are selling off a bit. Wells Fargo released earnings last night and already seems to be feeling the effects of a slowing refinance and higher interest rate market. Total mortgage applications are down 30% from a year ago, refinance activity is down from about 70% last year to about 50% this year (and will certainly drop closer to 35% by next quarter’s earnings release), and income from mortgage-servicing rights were down 43%. All-in-all total mortgage banking income fell about 3% and you should expect this is just the beginning. What do well run behemoths like Wells do during periods like this? Given all of their massive infrastructure costs they have but two options – increase production through product expansion or cut staff and branches. This is where everything starts getting interesting. Please remember something else we’ve mentioned recently – liquidity absolutely stinks in this market and to make matters worse the only one covering the trading desks this afternoon are the same people who Monday through Thursday get coffee and donuts. So don’t read too much into any Friday activity and last Friday’s reaction to jobs should be proof enough that I am right about this. All in all the week was a good one for mortgage participants. Treasuries has their best week in 13 weeks from a price perspective even though things have still been bouncing around quite a bit.
Posted on: Fri, 12 Jul 2013 17:56:11 +0000
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