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A weekly look at where mortgage interest rates are headed.

Market Commentary

1984 Cult Classic Repo Man is unquestionably Emilio Estevez’s greatest film. However, although aliens and punk-rock share universal appeal, who could have guessed that Fed Chairman Jerome Powell is such a fan of the movie that he would produce a sequel some 35 years later by way of monetary policy? One week after repo rates spiked amidst a liquidity crunch heading into the end of the quarter, the Fed continues to inject up to $75bn daily into repo markets to keep overnight borrowing flowing freely. Analysts are quick to point out that the technical fix bears little resemblance to a previous crunch in 2007-08, when pledged collateral consisted of sub-prime MBS rather than ultra-safe treasury bonds, but the seize-up indicates banks and primary dealers remain wary of having too little cash on their balance sheets ahead of annual stress tests, and a rise in federal deficit spending has led to a deluge of treasuries in the money markets.

 The bankruptcy of Thomas Cook, the world’s oldest travel agency, forced the United Kingdom to enact its largest aerial operation since the Berlin Airlift in 1949. Over 150,000 travelers were left stranded from Tunis to Tbilisi as the moribund company folded after years of declining sales and encroaching debt.  Ironically, the packaged vacation industry has seen a resurgence in recent years, but a series of poor strategic decisions and an inability to cater to a shift in generational tastes led to the firm’s demise.

 The UN General Assembly kicked off in New York today amidst a litany of geopolitical disputes the world over. Climate Change appears to be the signature issue at this year’s conference, though tensions in the Persian Gulf, Brexit, and the ongoing disruption of global trade arising from profligate trade barriers will share the spotlight.

Market Strikes as of 9/20/2019

10 Year Treasury:             1.7215

S&P 500:                         2,992.07

FN 3.0:                              101.297

FNCL 102:                             3.249                    

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