We start off the day with the Mortgage Bankers Association's Weekly Application Survey. Not because it's of vast important, mind you (except possibly to people who follow the financial sector), but because it is a bellwether of things to come. And, for the week ending 2/4, things aren't particularly coming. The market composite index declined a seasonally-adjusted 5.5% from the prior week, with the Refinance Index down 7.7% and the Purchase Index down 1.4%. The refinance share of mortgage activity fell to 66.6%, and the average interest rate for a 30-year fixed-rate mortgage rose 32 bps to 5.13%.
In other market driving news, Federal Reserve Chairman Ben Bernanke is going to be testifying before the House Budget committee today, starting at 10 AM. The Street will be watching his remarks closely, hoping for hints about future Fed policy.
In the "how did I miss that category", the Dodd-Frank financial reform law requires government agencies to go through their regulations and remove all references to credit ratings, working on the theory that part of the financial crisis was caused by over-reliance on those ratings. In response to this, the SEC has proposed to strip rating references from the Form S-3[1], replacing the former ratings requirement with alternative requirements. This particular plan is largely considered noncontroversial (although the large rating firms don't like it). What is more likely to be controversial is what impact this requirement to eliminate credit ratings from regulations will have on money market mutual funds. Currently, those funds are required to invest in high-grade securities, and removal of the credit ratings references has been opposed by the industry in the past. Now that Federal law requires it, nobody is quite sure what the SEC will do[2].
Looking to the Middle East, Credit Agricole bank is estimating that the current Egyptian crisis is costing the nation $310 million per day. The Egyptian government has not confirmed that specific number, but has acknowledged that it is causing their economy to suffer.
Anyone remember North Korea Crazy[3]? That little nutjob of a nation that got everyone's attention back in November by shelling Yeongpeong Island? Yeah, they're back in the news. Two days of talks ended in failure today when the North and South failed to set an agenda for the talks. Yes, that's right, it took them two days to work out that they couldn't even work out what they were going to talk about. The final collapse happened when the North Korean delegates all stood up and walked out of the conference.
Also, North Korea is accusing Japan of gearing up to reinvade Korea. This is probably just celebrating the fact that Kim Jong-un is now wearing his big-boy Furry Hat of Dictatorial Authority[4].
[1] "The Form what now?" The Form S-3 is a SEC form that (quoting from the SEC's website) "allows a company with less than $75 million in public float to register primary offerings of its securities". The company has to meet certain specific eligibility requirements, but if it qualifies it can go through a simplified registration process for an IPO.
[2] There is also some legitimate concern that this action will harm investor confidence in money market funds. Most investors like knowing that there is an objective standard for "high quality".
[3] "People See Me Shellin', They Hatin'" was a disappointment on the charts, easily pushed out of the top ten by Tunisia's "Takin' Bank", Yemen's "Steppin' Down (2013 Brutal Dictatorship Remix)" and Mubarak's "Don't Cry For Me, Egypt (You Know I'll Never Leave You)".
[4] Not a joke. Really. Follow the link.
