Economic Commentary
- Thread starter BondTrader_IHB
- Start date
NEW -> Contingent Buyer Assistance Program
Whatever the Fed is going to do, it aint gonna work, see attached the bloomberg screen shot of the spreads (the bottom portion) between 10yr US Govt Treasury vs Fannie Mae's 30yr Fixed Rate Mortgage Bonds.
Yields on Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds climbs above 4%, the highest since March 10 and up from 3.94% on May 20. So all that govt talk of cheap refinancings is now officially off the table.
Attached files
Well, it's possible QE round 2 will happen, big Ben looks at his balance sheet of 3.2 trillion and saying fxxk it, I will keep printing till we reach 5 trillion, so I have enough money to save the banks in Q2 2009 when all the CMBS exploded. Buy gold, sliver and foreign stocks, get out of the dollar.
If I were Bren, I'd be moving the big Woodbury East grand opening up by a month to early June. Or maybe delaying it again until 2015 or something.
In the interest of my education and others, could you please verify that this purchase of the long bonds by your employer would not seem fortuitous. I was a bit surprised when you wrote they were buying the long bond because in my mind they appeared to be as expensive as they could get. Am I missing something?
No inflation!
usctrojanman29_IHB
New member
Thanks for the info...it is much appreciated! Btw, I've heard on CNBC that the FED has almost but given up by trying to keep 10-year rates low by buying them and has turned their focus on buying the Fannie/Freddie MBS bonds to keep mortgage rates low (spread between the 10-year and 30-year fixed rate was north of 2% back about 8-12 weeks away and is down to about 1% now). What are you seeing on your end?BondTrader said:
BondTrader_IHB
New member
usctrojanman29 said:
Whatever the Fed is going to do, it aint gonna work, see attached the bloomberg screen shot of the spreads (the bottom portion) between 10yr US Govt Treasury vs Fannie Mae's 30yr Fixed Rate Mortgage Bonds.
Yields on Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds climbs above 4%, the highest since March 10 and up from 3.94% on May 20. So all that govt talk of cheap refinancings is now officially off the table.
Attached files
freedomCM_IHB
New member
yes, the 10yr hit 3.7% today.
30 yr mtg is going to hit 5.5%-6% by July, I bet.
30 yr mtg is going to hit 5.5%-6% by July, I bet.
usctrojanman29_IHB
New member
So much for that housing recovery. haha I hope all the current responsible home owners out there were able to lock in those ultra low rates while they lasted. Looks like that mortgage origination fee income that the banks generated in Q1 and Q2 will dry up more and more the higher rates go.freedomCM said:
BondTrader_IHB
New member
usctrojanman29 said:
Well, it's possible QE round 2 will happen, big Ben looks at his balance sheet of 3.2 trillion and saying fxxk it, I will keep printing till we reach 5 trillion, so I have enough money to save the banks in Q2 2009 when all the CMBS exploded. Buy gold, sliver and foreign stocks, get out of the dollar.
kcmkane_IHB
New member
freedomCM said:
If I were Bren, I'd be moving the big Woodbury East grand opening up by a month to early June. Or maybe delaying it again until 2015 or something.
awgee_IHB
New member
BondTrader said:
In the interest of my education and others, could you please verify that this purchase of the long bonds by your employer would not seem fortuitous. I was a bit surprised when you wrote they were buying the long bond because in my mind they appeared to be as expensive as they could get. Am I missing something?
usctrojanman29_IHB
New member
Speaking of CMBS....errrr...the next shoe to drop....how are the AAA tranches of the CMBS bonds trading in general?BondTrader said:
usctrojanman29_IHB
New member
Ok, I'm trying to think how they would account for that extra printed money on their balance sheet....they would credit cash when it comes in, but what's the corresponding debit to? Note Payable? Loan Payable? Due to Taxpayers Payable?awgee said:
BondTrader_IHB
New member
Pending sales up strongly in April
Pending home sales rose 6.7% M/M in April, for the third consecutive monthly
gain. This was higher than consensus estimates for a 0.5% gain, with sales in
the Northeast (+32.6% M/M) and Midwest (9.8% M/M) leading the way. Sales in
the two largest markets were less impressive, with the South -0.2% M/M and the
West 1.8% M/M. Recall that ending home sales reflect signed contracts for
existing single-family homes, condos and co-ops, and tend to lead existing sales
by 1-2 months (with the strongest relationship in Y/Y terms). First-time
homebuyers, lured by record affordability, deeply discounted foreclosure
properties and an $8K tax credit, were behind the monthly gain, according to the
NAR. In short, these figures suggest that existing home sales could increase in
May after a 2.9% rise in April.
We are cautious about jumping to such a conclusion, as the NAR notes "the
relationship between contracts on pending home sales and closings on existinghome
sales is taking longer than in the past...mortgage processing time has
increased and it is taking many months to close on homes requiring short sales
with lender approval...and some sales are falling through at the last moment."
More recently, pending sales have indeed given mixed signals about actual sales
transactions and, with mortgage applications for purchase down 2.4% M/M so far
this month, any upside in May resales appears quite limited, in our view.
Consumers slowly dip back into autos
Light vehicle sales surprised to the upside in May with a 9.9M unit outturn
(annualized) versus 9.3M in April and consensus estimates of 9.4M. While this
was the highest rate of sales since last December, activity is still the weakest
since 1982 and hovering near record lows in per capita terms. Domestically-made
auto sales came in better than expected at 7.3M units, with Ford and the foreign
transplants gaining market share at the expense of the two bankruptcy-laden
manufacturers. Even so, both Chrysler and GM reported better traffic and
reported relatively better than expected sales after slashing prices on many
models in order to clear inventories ahead of dealership closings. Imported name
plate sales also rose, with the strongest gain among in trucks (+9.4% M/M).
Stronger fleet sales were likely a factor in May, which may have been boosted by
government purchases of fuel-efficient vehicles from the big-3 producers as the
Obama Administration completed orders of 17,600 units by June 1st. Such sales
were placed within the past two months and at most, could have boosted sales by
0.2M units in May. Ongoing incentives, the Memorial Day holiday and improved
consumer confidence were also tailwinds over the month. Looking ahead, more
cautious lenders, a more frugal consumer and rising unemployment likely will all
weigh heavily on auto sales, making for a very slow-moving recovery.
Pending home sales rose 6.7% M/M in April, for the third consecutive monthly
gain. This was higher than consensus estimates for a 0.5% gain, with sales in
the Northeast (+32.6% M/M) and Midwest (9.8% M/M) leading the way. Sales in
the two largest markets were less impressive, with the South -0.2% M/M and the
West 1.8% M/M. Recall that ending home sales reflect signed contracts for
existing single-family homes, condos and co-ops, and tend to lead existing sales
by 1-2 months (with the strongest relationship in Y/Y terms). First-time
homebuyers, lured by record affordability, deeply discounted foreclosure
properties and an $8K tax credit, were behind the monthly gain, according to the
NAR. In short, these figures suggest that existing home sales could increase in
May after a 2.9% rise in April.
We are cautious about jumping to such a conclusion, as the NAR notes "the
relationship between contracts on pending home sales and closings on existinghome
sales is taking longer than in the past...mortgage processing time has
increased and it is taking many months to close on homes requiring short sales
with lender approval...and some sales are falling through at the last moment."
More recently, pending sales have indeed given mixed signals about actual sales
transactions and, with mortgage applications for purchase down 2.4% M/M so far
this month, any upside in May resales appears quite limited, in our view.
Consumers slowly dip back into autos
Light vehicle sales surprised to the upside in May with a 9.9M unit outturn
(annualized) versus 9.3M in April and consensus estimates of 9.4M. While this
was the highest rate of sales since last December, activity is still the weakest
since 1982 and hovering near record lows in per capita terms. Domestically-made
auto sales came in better than expected at 7.3M units, with Ford and the foreign
transplants gaining market share at the expense of the two bankruptcy-laden
manufacturers. Even so, both Chrysler and GM reported better traffic and
reported relatively better than expected sales after slashing prices on many
models in order to clear inventories ahead of dealership closings. Imported name
plate sales also rose, with the strongest gain among in trucks (+9.4% M/M).
Stronger fleet sales were likely a factor in May, which may have been boosted by
government purchases of fuel-efficient vehicles from the big-3 producers as the
Obama Administration completed orders of 17,600 units by June 1st. Such sales
were placed within the past two months and at most, could have boosted sales by
0.2M units in May. Ongoing incentives, the Memorial Day holiday and improved
consumer confidence were also tailwinds over the month. Looking ahead, more
cautious lenders, a more frugal consumer and rising unemployment likely will all
weigh heavily on auto sales, making for a very slow-moving recovery.
BondTrader_IHB
New member
Impact from stimulus package very muted
According to an article from Bloomberg News, the $787 billion package passed in
February is having less of an impact than most economists expected. About $111
billion in planned infrastructure spending is arriving so slowly that recovery in the
final six months of the year may be weak.
More on the intensifying restraint at local government
Not only is the stimulus from the federal government going slowly out the door, it
appears much of it is going to be offset by the intensifying penny-pinching at the
state and local levels of government. State tax collections have become more
sensitive to the business cycle in recent years, which means the drop in revenues
is likely to be deeper and last longer this time around. So, this is a theme that is
simply not going away. Turn to page A2 of today’s Wall Street Journal, “States’
Budget Woes Are Poised to Get Even Worse”.
We also see that New York City Mayor Bloomberg just announced a plan to raise
$887 million by increasing the city sales tax rate and repealing an exemption for
clothing purchases of less than $110. However, the plan did include tax relief for
small businesses with incomes less than $100,000.
According to an article from Bloomberg News, the $787 billion package passed in
February is having less of an impact than most economists expected. About $111
billion in planned infrastructure spending is arriving so slowly that recovery in the
final six months of the year may be weak.
More on the intensifying restraint at local government
Not only is the stimulus from the federal government going slowly out the door, it
appears much of it is going to be offset by the intensifying penny-pinching at the
state and local levels of government. State tax collections have become more
sensitive to the business cycle in recent years, which means the drop in revenues
is likely to be deeper and last longer this time around. So, this is a theme that is
simply not going away. Turn to page A2 of today’s Wall Street Journal, “States’
Budget Woes Are Poised to Get Even Worse”.
We also see that New York City Mayor Bloomberg just announced a plan to raise
$887 million by increasing the city sales tax rate and repealing an exemption for
clothing purchases of less than $110. However, the plan did include tax relief for
small businesses with incomes less than $100,000.
BondTrader_IHB
New member
*According to a response filed by the Solicitor General Elena Kagan on behalf of the United States of America, no court, not even the Supreme Court, has an authority to rule on the applicability of the TARP funds, previously designated exclusively for financial company bail outs, for the Chrysler case.
The Obama Administration argued Monday that no court, including the Supreme Court, has the authority to hear a challenge by Indiana benefit plans to the role the U.S. Treasury played in the Chrysler rescue, including the use of “bailout” (TARP) funds. The Indiana debt holders, U.S. Solicitor General Elena Kagan wrote, simply have no right to raise that issue, thus putting it out of the reach of the courts.
Although arguing that the courts may not rule on the validity of Treasury’s decision to shore up a new Chrysler company with funds from the Troubled Assets Relief Program, the Solicitor General did argue that those funds may go to a troubled auto company, and not just to banks or other regular financial institutions.
Convenient - so if not the highest judicial institution in the US can decide on what the proper venue for TARP utilization is, does that mean that Geithner and Obama are now completely above the law in terms of how they burn taxpayer cash.
*Several ex-TARP banks are allowed to pay back TARP money, but interestingly Wells, BOA, Citi (supposively big and heathly by now) are not on the list.
*A light week in terms of economic releases, the focus will be on treasury auctions, Chinese has moved down the term curve to focus on more buying on the 2-3 year T-bonds (in defense of a potential rate hike and US lost its AAA rating), so God knows how 10yr T-bond yield can drop over, which has been the key of recent surge in 30yr mortgage rates, refinance activities were down 60%+ in the last 2 weeks.
*GM is above a dollar.
The Obama Administration argued Monday that no court, including the Supreme Court, has the authority to hear a challenge by Indiana benefit plans to the role the U.S. Treasury played in the Chrysler rescue, including the use of “bailout” (TARP) funds. The Indiana debt holders, U.S. Solicitor General Elena Kagan wrote, simply have no right to raise that issue, thus putting it out of the reach of the courts.
Although arguing that the courts may not rule on the validity of Treasury’s decision to shore up a new Chrysler company with funds from the Troubled Assets Relief Program, the Solicitor General did argue that those funds may go to a troubled auto company, and not just to banks or other regular financial institutions.
Convenient - so if not the highest judicial institution in the US can decide on what the proper venue for TARP utilization is, does that mean that Geithner and Obama are now completely above the law in terms of how they burn taxpayer cash.
*Several ex-TARP banks are allowed to pay back TARP money, but interestingly Wells, BOA, Citi (supposively big and heathly by now) are not on the list.
*A light week in terms of economic releases, the focus will be on treasury auctions, Chinese has moved down the term curve to focus on more buying on the 2-3 year T-bonds (in defense of a potential rate hike and US lost its AAA rating), so God knows how 10yr T-bond yield can drop over, which has been the key of recent surge in 30yr mortgage rates, refinance activities were down 60%+ in the last 2 weeks.
*GM is above a dollar.
BondTrader_IHB
New member
Offsetting The Stimulus Package
U.S. retail gasoline prices are now up a full buck from the lows, to $2.62 a gallon (up 41 days in a row) — the equivalent of a $130 billion drag on discretionary spending at an annual rate. Tack on the 60bps bounce in mortgage rates too, which has triggered a near-60% collapse in mortgage refinancings. Then tack onto that the 0.2% decline in average weekly earnings in May — down now in two of the last three months — and a consumer relapse could well be in the offing and end up snuffing out this ballyhooed inventory-led recovery that has underpinned equities and undermined Treasuries over the last 3-4 months.
.
U.S. retail gasoline prices are now up a full buck from the lows, to $2.62 a gallon (up 41 days in a row) — the equivalent of a $130 billion drag on discretionary spending at an annual rate. Tack on the 60bps bounce in mortgage rates too, which has triggered a near-60% collapse in mortgage refinancings. Then tack onto that the 0.2% decline in average weekly earnings in May — down now in two of the last three months — and a consumer relapse could well be in the offing and end up snuffing out this ballyhooed inventory-led recovery that has underpinned equities and undermined Treasuries over the last 3-4 months.
.
BondTrader_IHB
New member
The next two weeks are the "window dressing" week for most equity mutual funds managers. I urge you move money out of those "road kills".
SOME POSITIVE SIGNS IN CHINA
While exports seemed to have suffered a bit of a setback in May (-36.4% YoY
versus -22.6% in April), it does look as though the government stimulus is
percolating through the Chinese economy much more quickly than it is the case
in the industrialized world. Retail sales are up more than 15.0% YoY; turnover in
the commercial and residential real estate market has expanded 45.3% and
investment spending has accelerated at a 33% YoY pace. No wonder
commodity prices are booming again. (GAS is at $3/gallon again and it's not even summer yet)
GAS PAINS FOR THE U.S. CONSUMER
Gasoline receipts surged at a 52.0% annual rate in May and the ‘siphon off’
effect is going to get worse because the IEA is forecasting $2.70 on retail
gasoline across the U.S.A. by next month. That would imply a $150 billion drag
at an annual rate so far this year on discretionary spending or the equivalent of
a near 2% pay cut for the average worker (where is my Obama stimulus?).
THESE ARE GREEN SHOOTS?
These YoY numbers, as of last week, hardly paint the picture of an imminent
recovery:
• Raw steel production (-47.3%)
• Lumber production (-32.6%)
• Railway traffic (-20.1%)
• Electrical output (-12.9%)
SOME POSITIVE SIGNS IN CHINA
While exports seemed to have suffered a bit of a setback in May (-36.4% YoY
versus -22.6% in April), it does look as though the government stimulus is
percolating through the Chinese economy much more quickly than it is the case
in the industrialized world. Retail sales are up more than 15.0% YoY; turnover in
the commercial and residential real estate market has expanded 45.3% and
investment spending has accelerated at a 33% YoY pace. No wonder
commodity prices are booming again. (GAS is at $3/gallon again and it's not even summer yet)
GAS PAINS FOR THE U.S. CONSUMER
Gasoline receipts surged at a 52.0% annual rate in May and the ‘siphon off’
effect is going to get worse because the IEA is forecasting $2.70 on retail
gasoline across the U.S.A. by next month. That would imply a $150 billion drag
at an annual rate so far this year on discretionary spending or the equivalent of
a near 2% pay cut for the average worker (where is my Obama stimulus?).
THESE ARE GREEN SHOOTS?
These YoY numbers, as of last week, hardly paint the picture of an imminent
recovery:
• Raw steel production (-47.3%)
• Lumber production (-32.6%)
• Railway traffic (-20.1%)
• Electrical output (-12.9%)
no_vaseline_IHB
New member
BondTrader said:
No inflation!
awgee_IHB
New member
Tuesday, June 16, 2009
GE Capital Is Back In The Game To Win It
Posted by Tyler Durden at 1:01 PM
After providing several hundred billion in second liens and other subordinated tranches to some of the worst companies in existence over the past 5 years, a result of a complete lack of investing discipline which nearly brought parent General Electic down, GE Capital Corp. is back in the game, and this time it plans to win it. Bankrupt commodity product rollup extraordinaire Spectrum Brands (provider of such deflation worthless products as Remington shavers and Rayovac batteries) announced it has secured a $242 million exit financing as part of its emrgence into a "normal" company, with none other than perma-glutton for punishment, GE Capital.
The company went bankrupt after several Goldman led refies in 2007 straddled it with over $4 billion in debt. One can bet that Goldman syndicated any exposure faster than you can say Lllloyd: Zero Hedge would not be surprised if it was GE Capital itself that ended up being on the receiving end of the soon to be worthless paper.
But you gotta put capital to use: and those GECC principals are just so familiar with the whole zinc forward curve, and lawn manure comps that it would be a waste not to capitalize on that extensive experience. We give GE about a year before it manages to again somehow be underwater this particular investment.
GE Capital Is Back In The Game To Win It
Posted by Tyler Durden at 1:01 PM
After providing several hundred billion in second liens and other subordinated tranches to some of the worst companies in existence over the past 5 years, a result of a complete lack of investing discipline which nearly brought parent General Electic down, GE Capital Corp. is back in the game, and this time it plans to win it. Bankrupt commodity product rollup extraordinaire Spectrum Brands (provider of such deflation worthless products as Remington shavers and Rayovac batteries) announced it has secured a $242 million exit financing as part of its emrgence into a "normal" company, with none other than perma-glutton for punishment, GE Capital.
The company went bankrupt after several Goldman led refies in 2007 straddled it with over $4 billion in debt. One can bet that Goldman syndicated any exposure faster than you can say Lllloyd: Zero Hedge would not be surprised if it was GE Capital itself that ended up being on the receiving end of the soon to be worthless paper.
But you gotta put capital to use: and those GECC principals are just so familiar with the whole zinc forward curve, and lawn manure comps that it would be a waste not to capitalize on that extensive experience. We give GE about a year before it manages to again somehow be underwater this particular investment.