August 14, 2019 Headlines

Yesterday’s sell-off in Treasuries proved brief, with prices surging higher across the curve again today. The 30-year Treasury bond set a record low yield of 2.01% earlier this morning (currently 2.04%), and the 10-year yield is down 10 bps on the day. The catalyst for today’s move was weak economic data out of China, including industrial production falling to a 17-year low. Retail sales were also softer than expected, adding to the general market narrative that global growth and inflation is heading lower (and will drag the U.S. down as well). S&P 500 futures are down 1.4%, and European indices are down nearly 2% on the day. Yesterday’s announcement by President Trump that some of the new 10% tariffs will be delayed through the holiday shopping season (phones and toys from China) did boost risk markets for the day, but there are clearly concerns that the damage may already be done with regards to the economic consequences of the trade war.

The MBA mortgage applications index rose 21% for the week ending August 9, with refinance applications surging 37%. The refi applications index is now at a 3-year high, but compared to late 2012/early 2013 (last major refi wave), the current index reading is only 45-50% of where it was at that time. Mortgage rates have fallen amid the big rally in Treasuries over the last few months, but as one would expect, the primary-secondary mortgage spread has been gradually widening over that timeframe, which is affected by origination capacity. Origination capacity is always an important metric to observe during periods of high refi application activity. In the early post-crisis years, there was a great deal of application activity, but many were never approved, in part, because origination capacity was relatively low at that time (fewer originators in the wake of the housing bust).

Jason Haley
Managing Director, Investment Management Group

Date Event Survey Actual Prior Revised
8/14/2019 MBA Mortgage Applications 21.70% 5.30%
8/14/2019 Import Price Index MoM -0.10% 0.20% -0.90% -1.10%
8/14/2019 Import Price Index ex Petroleum MoM -0.10% 0.00% -0.40%
8/14/2019 Import Price Index YoY -2.00% -1.80% -2.00%
8/14/2019 Export Price Index MoM -0.10% 0.20% -0.70% -0.60%
8/14/2019 Export Price Index YoY -0.90% -1.60%
8/15/2019 Empire Manufacturing 1.7 4.3
8/15/2019 Nonfarm Productivity 1.40% 3.40%
8/15/2019 Unit Labor Costs 1.90% -1.60%
8/15/2019 Philadelphia Fed Business Outlook 9 21.8
8/15/2019 Retail Sales Advance MoM 0.30% 0.40%
8/15/2019 Retail Sales Ex Auto and Gas 0.50% 0.70%
8/15/2019 Retail Sales Ex Auto MoM 0.40% 0.40%
8/15/2019 Initial Jobless Claims 212k 209k
8/15/2019 Retail Sales Control Group 0.40% 0.70%
8/15/2019 Continuing Claims 1685k 1684k
8/15/2019 Industrial Production MoM 0.10% 0.00%
8/15/2019 Manufacturing (SIC) Production -0.30% 0.40%
8/15/2019 Capacity Utilization 77.80% 77.90%
8/15/2019 Bloomberg Consumer Comfort 62.9
8/15/2019 NAHB Housing Market Index 65 65
8/15/2019 Business Inventories 0.10% 0.30%
8/15/2019 Net Long-term TIC Flows $3.5b
8/15/2019 Total Net TIC Flows $32.9b
8/16/2019 Housing Starts 1257k 1253k
8/16/2019 Housing Starts MoM 0.30% -0.90%
8/16/2019 Building Permits 1270k 1220k 1232k
8/16/2019 Building Permits MoM 3.10% -6.10% -5.20%
8/16/2019 U. of Mich. Sentiment 97 98.4
8/16/2019 U. of Mich. Current Conditions 110.7
8/16/2019 U. of Mich. Expectations 90.5
8/16/2019 U. of Mich. 1 Yr Inflation 2.60%
8/16/2019 U. of Mich. 5-10 Yr Inflation 2.50%









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