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Morning Report: Announced job cuts slow down


Vital Statistics:

Stocks are flattish on no real news. Bonds and MBS are up small.

US companies announced 47,457 job cuts in September, according to outplacement firm Challenger, Gray and Christmas. This is down 37% from August but is up 58% from last year. Tech companies have done the most cuts this year, followed by retail. Job cuts are back to pre-pandemic levels after two very low years in 2021 and 2022. The financial space is being hit hard, with Citi apparently looking to do a big restructuring in November.

Separately, initial jobless claims ticked up to 207,000 last week.

Lock volume fell 13.3% in September, according to MCT. High rates remain the biggest driver. “We are hopeful that we will get some better sentiment from the Fed in either its November or December meeting which would allow for some relief for rates,” said Andrew Rhodes, Senior Director, Head of Trading at MCT, “But without that, high-interest rates will continue to be the prevailing force weighing on the market.”

Good interview with the Bond King (Bill Gross) covering MBS (begins at 11:54). He goes on to mention merger arbitrage spreads are attractive, and have widened out. He talks about the attractiveness of some transactions, however the overarching analysis shows that we might be seeing some pain in the hedge fund space as merger spreads can be considered a bit of a canary in the coal mine.

More and more mortgage applications are being rejected for insufficient income, as mortgage payments rise faster than incomes. The CFPB reported that the average monthly mortgage payment at the end of 2022 was $2,045 compared to $1,400 a year before. This is a 46% increase in the payment, and incomes are rising in the mid-single digits. At the end of 2022, the 30 year fixed was below 6.5%, so things are only worse now.

Homebuilder LGI Homes reported a 13% increase in closings in the third quarter, a 13% increase compared to a year ago. New homes are one of the few places where the lock-in effect is not an issue, so we should continue to see more activity there.

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Weekly Initial Unemployment Claims Increase to 207,000

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