The Day Ahead: Construction Data, Housing Finance Conference, Inflation, Production

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Benchmark interest rates are higher and equity futures are rallying ahead of key housing, price level, and production data. In addition, the Treasury today hosts a conference on “the Future of Housing Finance.”

Ninety minutes before the opening bell, Dow futures are trading 51 points higher at 10,324 and S&P 500 futures are up 7.25 points to 1,084.50. Meanwhile the 2-year Treasury note is UNCH at 100-08 yielding 0.504% and the benchmark 10-year Treasury note is trading just above a 16 month low yield,  -0-08 at 100-07 yielding 2.600%.

The October delivery Fannie Mae 4.0 MBS coupon is -0-04 at 102-23 and the October Fannie Mae 4.5 is -0-01 at 104-17.

The Treasury said the following experts will be panelists at today’s "Future of Housing Finance" conference:

  • Barbara J. Desoer, President of Bank of America Home Loans
  • Ingrid Gould Ellen, Professor of Urban Planning and Public Policy at New York University's Wagner Graduate School of Public Service and Co-Director of the Furman Center for Real Estate and Urban Policy
  • Bill Gross, Co-founder and Co-chief Investment Officer of PIMCO
  • Mike Heid, Co-president of Wells Fargo Home Mortgage
  • S.A. Ibrahim, Chief Executive Officer of Radian Group Inc.
  • Marc H. Morial, President and Chief Executive Officer of the National Urban League
  • Alex Pollock, Resident Fellow at the American Enterprise Institute
  • Lewis Ranieri, Chairman of Ranieri and Company, Inc.
  • Ellen Seidman, Ellen Seidman, Executive Vice President for Mission and Strategy, at ShoreBank Corporation, and Chair of the Board of Directors at the Center for Financial Services Innovation
  • Michael A. Stegman, Director of Policy and Housing for the Program on Human and Community Development of the John D. and Catherine T. MacArthur Foundation
  • Susan Wachter, Richard B. Worley Professor of Financial Management, Professor of Real Estate, Finance and City and Regional Planning at the University of Pennsylvania's Wharton School
  • Mark Zandi, Chief Economist of Moody's Analytics

MND Search Results for "Housing Reform"

Key Events Today:

8:30 ― Housing Starts, or plans to construct new homes, are expected to come in at an annualized rate of 560,000 in July, up from 549,000 in June. The anticipated rise will break a three-month downward trend initiated when the tax-credit incentive expired. Building permits, which anticipate starts by a month or two, are expected to fall 3k to an annualized pace of 580,000.

“The payback period is probably behind us, but demand for housing remains very weak,” said economists at IHS Global Insight. “The housing starts outlook hinges on the labor market. We are expecting subpar growth in jobs the rest of the year. Housing starts, as a result, will remain depressed.

Noting that inventories of new homes are at low levels, economists at BBVA believe builders remain pessimistic “because the excess supply of existing homes is eroding what little housing demand there is.”

8:30 ― After falling 0.5% in June, costs in the Producer Price Index are anticipated to rise 0.2% in July. If correct, the annualized rate of change would be +4.2%. The more closely watched core index, which strips out food and energy costs, is anticipated to rise just 0.1% for the second month. The core annual rate would be +1.3%, well below the central bank’s preferred 2.0% pace, which gives a green light for continued easing of monetary policy.

“We expect no change in headline prices, with little movement either for energy or food,” said economists at IHS Global Insight. “Core inflation is expected to show a modest positive of 0.1% as demand is not robust enough to create a seller's market, but not weak enough to produce a buyer's market.”

9:15 ― Industrial Production is set to jump 0.5% in July after a small 0.1% gain in June. Neither this month nor last is reflective of underlying strength: the June numbers were boosted by utility output, while July figures are anticipated to rise from a jump in auto demand.

“Production will get a major shot in the arm from the vehicles sector, as several producers eliminated or curtailed normal downtime around Independence Day,” said economists at IHS Global Insight. “Modest numerical output changes are magnified when normal patterns are violated, and July unit-vehicle production should climb by double-digit percentages.  Although July's gain is exaggerated, the third quarter can safely average higher vehicle production than in the second, as the Big 3 producers have less than 60 days' worth of sales on dealers' lots.”

9:00 ― Treasury Secretary Tim Geithner provides opening remarks on the Future of Housing Finance conference. He is expected to say that Fannie Mae and Freddie Mac cannot be allowed to return to their pre-crisis configurations without risking another meltdown in the U.S. mortgage market.

9:15 ― HUD Secretary Shaun Donovan delivers remarks at the conference.

9:30 ― First panel: Housing Finance Reform and Broader Financial Markets. The panel is moderated by Tim Geithner.

10:30 ― Second panel: Housing Finance Reform and Broader Housing Policy Goals. The panel is moderated by HUD Secretary Shaun Donovan.

11:45 ― Working lunches hosted by senior White House, HUD, and Treasury Officials. 

Topics:

  1. Key Players in a Reformed System: Role of the Private Sector and of Government
  2. Delivering Access and Affordability
  3. Funding Housing and the Role of Securitization
  4. Aligning Private Market Incentives in the Housing Finance Chain
  5. Supporting Capital for Multifamily Finance
  6. Managing the Process of Transition

1:15 ― Closing remarks to the Future of Housing Finance conference.

12:30 ― Narayana Kocherlakota, president of the Minneapolis Fed, speaks at Northern Michigan University in Marquette, Michigan.

Treasury Auctions:

  • 11:30 ― 4-Week Bills