Coffee With Greta: Bank of England Steps In

DJIA Futures: +175 (+0.6%) 

SPX Futures: +17 (+0.5%)

NASDAQ Futures: +10 (+0.1%)

Good morning friends!

Futures are once again attempting to rebound after failing to rally on Tuesday.

Let’s get right to it!

Bank of England Steps In to Stabilize Bond Market

The Bank of England announced today it will buy long-dated government bonds to stabilize the financial market following the collapse of the pound. 

The bank said it will buy as many as needed between now and October 14. 

The B of E is also delaying the start of its program to sell down the bonds it already holds, which was set to begin next week.

Following a sharp increase in U.K. bond yields on Tuesday, the bank said, “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

Yields on the U.K. 30-year and 10-year gilts dropped by more than 30 basis points after the announcement. 

U.S. Treasury Yields Cool

The stabilization of the U.K. bond market is also cooling U.S. Treasury yields today. 

The 10-year yield is down 8 basis points to 3.87%, after topping 4% for the first time since 2008 overnight. 

The 2-year yield is down 18 basis points to 4.11%. 

The volatility in the U.K. bond market was weighing on an already volatile U.S. bond market as investors prepare for more large rate hikes from the Fed.

Mortgage Demand Slides Further

Mortgage demand tumbled again last week as rates rose following the Fed’s latest fed funds rate hike.

The Mortgage Bankers Association says overall application volume was down 3.7% last week.

That was led by an 11% drop in refinance applications, which were down 84% year over year. 

Purchase applications fell 0.4% weekly and 29% annually. 

The drop came as the average 30-year fixed contract rate rose to 6.52% from 6.25%, the highest since mid-2008.

According to Mortgage News Daily, average rates have since crossed 7%.

Oil Prices Stable Amid Production Outages

Oil prices are higher again today as production remains shutdown in the Gulf of Mexico as Hurricane Ian bears down on Florida. 

West Texas Intermediate crude futures are up 1.9% to $80 bbl while Brent crude futures are up 1.4% to $87.50 bbl. 

About 190,000 barrels per day of production is currently shutdown in the Gulf, about 11% of the region’s total daily production. 

The American Petroleum Institute reported crude inventories rose by 4.2 million barrels last week while gasoline stockpiles fell by 1 million barrels. 

The Energy Information Administration reports official supply levels later today. 

Coming Up: August Pending Home Sales

The National Association of Realtors reports pending home sales for August at 10:00 a.m. ET.

That’s expected to show pending sales declined 1.4% last month after a 1% drop in July. 

Pending sales represent contracts signed during the month with those sales expected to close in 30 to 60 days.

In Case You Missed It

• U.S. home price growth cooled at the fastest pace in the history of the S&P Case-Shiller Index in July. The national index rose 15.8% year over year, down 2.3% from June. The 20-city index rose 16.1% annually, down 2.6% from June. And the 10-city index rose 14.9% annually, down 2.5% from June. 
• Consumer confidence rose to a 5-month high this month as gas prices fall. The Conference Board’s consumer confidence index jumped to 108 from 103.6. That was higher than expectations for 104.5. The six-month expectations index rose to 80.3 from 75.8, the highest level in seven months.