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

8/14/2019MBA Mortgage Applications21.70%5.30%
8/14/2019Import Price Index MoM-0.10%0.20%-0.90%-1.10%
8/14/2019Import Price Index ex Petroleum MoM-0.10%0.00%-0.40%
8/14/2019Import Price Index YoY-2.00%-1.80%-2.00%
8/14/2019Export Price Index MoM-0.10%0.20%-0.70%-0.60%
8/14/2019Export Price Index YoY-0.90%-1.60%
8/15/2019Empire Manufacturing1.74.3
8/15/2019Nonfarm Productivity1.40%3.40%
8/15/2019Unit Labor Costs1.90%-1.60%
8/15/2019Philadelphia Fed Business Outlook921.8
8/15/2019Retail Sales Advance MoM0.30%0.40%
8/15/2019Retail Sales Ex Auto and Gas0.50%0.70%
8/15/2019Retail Sales Ex Auto MoM0.40%0.40%
8/15/2019Initial Jobless Claims212k209k
8/15/2019Retail Sales Control Group0.40%0.70%
8/15/2019Continuing Claims1685k1684k
8/15/2019Industrial Production MoM0.10%0.00%
8/15/2019Manufacturing (SIC) Production-0.30%0.40%
8/15/2019Capacity Utilization77.80%77.90%
8/15/2019Bloomberg Consumer Comfort62.9
8/15/2019NAHB Housing Market Index6565
8/15/2019Business Inventories0.10%0.30%
8/15/2019Net Long-term TIC Flows$3.5b
8/15/2019Total Net TIC Flows$32.9b
8/16/2019Housing Starts1257k1253k
8/16/2019Housing Starts MoM0.30%-0.90%
8/16/2019Building Permits1270k1220k1232k
8/16/2019Building Permits MoM3.10%-6.10%-5.20%
8/16/2019U. of Mich. Sentiment9798.4
8/16/2019U. of Mich. Current Conditions110.7
8/16/2019U. of Mich. Expectations90.5
8/16/2019U. of Mich. 1 Yr Inflation2.60%
8/16/2019U. of Mich. 5-10 Yr Inflation2.50%









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