San Diego Home Mortgage Blog

With employment hitting tomorrow we suggest keeping flat (locking in all floating loans) over night. If buyers want to float, don't argue too much, a worse than expected job loss will likely tank stocks and run interest rates lower. Not much movement today ahead of the employment report tomorrow. Thin volume and no market shaking events today with markets completely focused on August non farm job losses; estimates remain at -200K to -225; our view -270K; the unemployment rate is widely expected to increase to 9.5$ up 0.1% frm July, we are expecting 9.6%. Yesterday the ADP job losses came at -298K but as we noted the ADP does not take into account government jobs. The stock market hung around unchanged until the final hour, then jumped to end + Yesterday the 10 yr note hit our six week target at 3.28% before closing at 3.31%; if job losses are greater than forecasts (over 300K) look for the stock market to get hacked badly and the 10 yr resistance cut like a hot knife through pudding. Mortgage interest rates have moved to 5.00% with a point up, but won't hold if treasury rates jump---and they will unless the equity markets begin to factor a slower economic recovery. Lots of vacillating now in the equity arena on what will come next. Most all market mavens are looking for and wanting a pull back; the talk from the bullish camp is a pull back will be a buying opportunity, while the economic realists want a pull back to say 'I told you so'. If you are following the bullish outlook you undoubtedly noticed how strong the bullish view is; take this to the bank, if the equities actually get bashed hard that bravado will vanish quickly. Easy to talk the talk but if we see a big decline it will not end until the bullish bias is yanked out. Treasury announced the official details on next week's auctions. An unchanged toil of $70B from last month; $38B of 3 yr notes, $20B of 10s and $12B of 30 yr bonds. not much of a surprise as Treasury now has a well defined borrowing plan every other week for a total of about $179B a month to fund the Obama budget deficit. So far demand for the huge borrowings has been strong leading traders to take them in stride. Always a question however; this time around if yields stay where they are now it may present little more difficulty. Supply and the August jobs data in the morning will likely set the tome for the next few days. If non-farm jobs are over 300K we can expect a strong positive reaction, then possibly giving it back into the supply next week. The wild card of course is that pesky stock market and the staunch bulls that can't see the light yet----that there are more speed bumps out there than markets have so far ignored: commercial mortgages, consumers not spending, the housing sector is still in depression regardless of the pundits you may hear, and the Obama spending spree with the health care issues and stimulus money. PRICES @ 4:00 PM 10 yr note: 102.12 -9/32 3.34% +3 BP 5 yr note: 100.11 -4/32 2.30% +3 BP 2 Yr note: 100.05 -1/32 0.92% +1 BP 30 yr bond: 105.27 -19/32 4.16% +3 BP Libor Rates: 1 mo 0.253%; 3 mo 0.321%; 6 mo 0.719%; 1 yr 1.290% 30 yr FNMA 4.5 Oct: 100.10 -6/32 (.18 bp) (-2/32 (.06 bp) frm 10:00) 15 yr FNMA 4.0 Oct: 100.27 -3/32 (.09 bp) (unch frm 10:00) 30 yr GNMA 4.5 Oct: 100.15 -8/32 (.25 bp) (+1/32 frm 10:00) 15 yr GNMA 4.0 Oct: 101.14 -2/32 (.06 bp) (-1/32 frm 10:00) Dollar/Yen: 92.76 +0.51 yen Dollar/Euro: $1.4259 -$0.0006 Gold Dec: $994.00 +$15.50 Crude Oil Oct: $68.17 +$0.12 Goldman-Sachs Commodity Index: 440.36 -2.08 DJIA: 9344.61 +63.94 NASDAQ: 1983.20 +16.13 S&P 500: 1003.23 +8.48