Today - Thursday, December 12, 2013
2:44 AMHouse seen approving budget deal
- The House is today expected to pass a bipartisan but narrow two-year budget deal that Congressional leaders reached earlier this week despite opposition from right-wing groups, with even some of the more conservative Republicans lining up behind the agreement.
- However, the GOP-controlled Rules Committee didn't let Democrats include an amendment to extend federal unemployment benefits that are set to expire on December 28.
- Should the chamber approve the deal, the Senate is seen passing it next week.
Wednesday, December 11, 2013
3:25 PMBloomberg: Fischer has accepted Vice Chair role at Fed
- Former Bank of Israel Governor Stanley Fischer has been offered the #2 spot at the Federal Reserve by the White House, according to Bloomberg, which also reports a source as saying he's accepted.
- Prior to taking over at the Bank of Israel in 2005, Fischer had stints as a professor at MIT (where Bernanke and Draghi were students), the World Bank, the IMF, and as Vice Chairman at Citigroup. He was born in what is now Zambia and holds both U.S. and Israeli citizenship.
- From a panel discussion on Nov. 19: "Without the Fed, we’d have had a much deeper recession ... Without the extraordinary things that it’s done, the economy would be in much worse shape today and we need to remember that.”
- On QE: “Precisely how to get out of it, at what speed to get out of it, is a much harder thing to measure and to calculate."
2:59 PMIndustrials and homebuilders lead market decline
- The two worst-performing sectors on a down day are industrials (XLI -1.4%) and homebuilders (XHB -1.5%), (ITB -1.9%).
- Industrials are taking a hit after Joy Global (JOY -6.3%) missed earnings estimates and provided disappointing guidance. "With a limited number of projects that can book in time to help 2014, we continue to see both the need and opportunity to lower the cost base in our business," says the company. Caterpillar (CAT -1.2%).
- Homebuilders continue to digest Toll Brothers' (TOL -1.8%) "leveling in demand" comments from yesterday's earnings results - in the 19 weeks since August 1, business has been flat vs. last year, and in the first 5 weeks of FQ1 (beginning Nov. 1) business has also been flat from 2012 (though Hurricane Sandy makes a tricky comparison).
- CEO Doug Yearley on the earnings call (transcript): "There's just not a lot of action [this time of year]. We still feel like pent-up demand is building, demographics are on our side, affordability is in place, and we are cautiously optimistic about the spring season, which begins the end of January."
- Lennar (LEN -2.3%), D. R. Horton (DHI -3%), KB Home (KBH -3.1%), Hovnanian (HOV -3.3%)
1:04 PMBond outflows surpass all-time record
- Investors have pulled $70.7B from bond mutual funds YTD, according to TrimTabs - that's more than the $62.5B pulled amid the serial Fed rate hikes and bond market rout of 1994.
- Since June alone, investors have pulled $164.5M out of bond funds, and three of the four largest monthly outflows ever have occurred this year.
- Broad fixed-income ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, ISTB, GBF, GVI, MINC, FWDB, GIY
4:56 AMStates' income to edge up this fiscal year
- States' revenues are projected to increase 0.8% in FY 2014 - which began in October - sharply down from a 5.7% rise in FY 2013, the National Association of State Budget Officers says.
- Major reasons for the slowdown include tax cuts and a one-time surge in revenue last year following a change in federal laws.
- Spending is poised to rise 3.6% vs 4.3% a year earlier, with both increases below the historical average growth rate of 5.6%.
- The level of "rainy day funds" for emergency spending will decline to $56.7B in states that have passed their budgets from $67B. Hiring is not expected to increase. (PR)
- Muni ETFs: MUB, HYD, PZA, MUNI, TFI, ITM, MLN, HYMB, XMPT, SHM, SUB, PRB, SMB, PVI, SMMU, VRD, GMMB, RVNU
Tuesday, December 10, 2013
6:50 PMObama pollution rules weighed by sympathetic Supreme Court
- Supreme Court justices today expressed sympathy for the EPA’s approach to air pollution that crosses state lines.
- The rule that would curb emissions from coal-fired power plants in 28 states - struck down by the D.C. Circuit Court of Appeals and being tested by power companies, states and miners - has never taken effect, but it would force companies to either shutter old plants or invest billions of dollars in pollution-control technology.
- The court’s four Democrat appointees, at times joined by Chief Justice Roberts and Justice Kennedy, suggested the EPA had adhered to the language of the Clean Air Act; only Justice Scalia seemed convinced the rule could be unfair to some states.
- ETFs: KOL, XLU, IDU, VPU, RYU, PUI, UPW, FXU, SDP, PSCU, FUTY, UTLT.
- Coal names: PCXCQ, BTU, WLT, CNX, ACI, ANR, JRCC, YZC, ARLP, AHGP, NRP, PVR, PVG, PVA, OXF, CLD, WLB, RNO.
6:31 PMHouse, Senate negotiators agree to budget deal
- House and Senate negotiators announce a budget deal that sets spending levels for the next two years and replace some of the automatic budget cuts in the sequester; if agreed to by the full House and Senate, the deal would head off a government shutdown next month.
- Some conservative groups are trashing the deal and urging rejection.
5:33 PMGundlach reiterates bullish MBS call
- Rising interest rates have killed refinancing - eliminating prepayment risk - and home prices continue to move higher, a particularly bullish cocktail for non-agency MBS, says Gundlach (DBL, DSL), who finds those securities vastly more attractive than high-yield paper (HYG, JNK).
- Asked about Annaly (NLY) - an owner of agency MBS - Gundlach says he likes it and likes its management, but won't be buyer until after the dividend is cut to something more in line with what core earnings might be.
- "Something for Nothing" slides and webcast
- Non-agency MBS players include: MTGE, MFA, DX, TWO
- Related mREIT ETFs: REM, MORT, MORL
- High-yield ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, SJB, ANGL, XOVR, UJB, QLTC, SHYG
- Previous: "Freaking out" about interest rate risk
4:58 AMAmericans continue to recover wealth lost during recession
- The net worth of U.S. households and nonprofit organizations increased 2.6% in Q3 to $77.3T, although that's still around 1% below the pre-recession peak, when adjusted for inflation.
- Rising shares prices boosted the figure by $917B and increasing home values by $428B.
- Total mortgage debt rose 0.9% on quarter, while consumer debt climbed 6%.
- Debt as a proportion of income was 99%, down from a high of 125% before the recession. (PR)
Monday, December 9, 2013
1:12 PMBullard: Taper would "recognize" labor improvement
- The chances of the taper have increased thanks to the recent labor market data, says St. Louis Fed chief Jim Bullard, but below-target inflation remains an issue. "There is no widely accepted reason why inflation is running as low as it is in the face of extraordinarily accommodative policy from the Fed,” he says. “A small taper might recognize labor market improvement while still providing the Committee the opportunity to carefully monitor inflation during the first half of 2014 ... Should inflation not return toward target, the Committee could pause tapering at subsequent meetings."
- Like John Williams last week, Bullard suggests a change in forward guidance may be in order to convince markets the taper and a rate hike are two separate issues.
- Treasurys remain little-changed on the session, the 10-year yield off a basis point to 2.85%.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, TLH, ZROZ, SBND, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, UBT, TBX, TLO, VGSH, VGIT, LBND, GSY, DTYL, SCHR, SCHO, TYD, ITE, TYBS, TENZ, DTUL, TUZ, SST, DTUS, FIVZ, TBZ, DFVL, DLBL, DFVS, TYNS
10:20 AMJapan knows deflation, and it's buying Treasurys
- “There’s tremendous deflationary pressure in the U.S.,” says Mizuho Asset Management fund manager Yusuke Ito. “For bonds, the longer the maturity, the better." As U.S. investors exit duration in the domestic bond market, Japanese investors - to whom the U.S. 10-year yield of 2.84% looks positively towering - are snapping the paper up. The country's holdings of U.S. debt rose $98.2B in Q3, the 2nd largest increase since the data started becoming public 13 years ago.
- “The Japanese have experience with 15 years of disinflation,” says Hideo Shimomura, chief fund investor at Mitsubishi UFJ. “Now it is spreading to the U.S. It’s worthwhile to take long-end risk in portfolios.”
- Treasury ETFs: TBT, TLT, TMV, IEF, TBF, PST, EDV, TTT, TMF, TLH, ZROZ, SBND, IEI, DLBS, TYO, DTYS, VGLT, UST, UBT, TBX, TLO, VGIT, GSY, DTYL, LBND, SCHR, TYD, ITE, TYBS, TENZ, FIVZ, TBZ, DFVL, DLBL, DFVS, TYNS
9:38 AMBlackRock preps new bond ETFs
- BlackRock's (BLK) iShares looks to broadly expand its fixed-income offerings, filing to launch six new bond funds,. Two are target-date funds - the iSharesBond 2019 Corporate ex-Financials Term ETF and the iSharesBond 2019 Corporate Term ETF.
- The other four look to capitalize on the idea of rising interest rates. One is a floating-rate Treasury ETF, and the other three are hedged strategies - with two of those set to be actively-managed.
Sunday, December 8, 2013