It’s Bill Rapp, the Mortgage Viking here, let me tell you about what the Good Ole Boys on Wall Street are talking about today…
Banco Santander rattled the European Contingent Convertible, or CoCo, by skipping the first call date on €1.5bn of the 6.25% fixed coupons that float at the 5Y swap rate. The company said it had an “obligation to assess the economics and balance the interests of all investors”
Which translated into human speak essentially says the floating rate would be lower than what they could refinance at in the new issue market. So is this a risk for the US market? It doesn’t appear so.
Fed Chair Jay said yesterday that he thinks we’re near full employment, so all eyes will be on the inflation backdrop if the Fed is to get back on the rate hike path.
While core inflation held steady at 2.1% which should hold near the Fed’s 2% target. I think at this stage the Fed would likely tolerate inflation above 2% for a period of time.
The NFIB Small Business Optimism Survey collapsed to 101.2, and now sits below the 2016 election spike which was the highest level on this index since 2004. Obviously, the government shutdown was likely to blame for much of the decline, but the index has been moving lower every month since August.
Interestingly enough, this index declined somewhat sharply following the 2013 government shutdown, and went on to recover strongly over the next 12 months.
I will keep an eye on this data point in the months ahead, especially if we can avoid another shutdown this week.
That is all for today, please do not forget to subscribe and share this post if you found it useful!
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