San Diego Home Mortgage Blog

Not much improvement in mortgage prices from morning pricing levels. Suggest floating over night, but be prudent in your decisions; do not let your floaters grow to numbers that a hit would cause financial pain. Likely the 10 yr note and mortgages will open weaker in the morning.

Not much happened today; the bond and mortgage markets were static and didn't have a range of more than 5/32 on the 10 yr and mortgages a 6/32 price range. No economic data and the roaring stock market kept bond traders calm with no reason to by or sell. All there was today was the $40B 3 yr note auction, and as has been the case the demand was excellent. Love the cheap dollar. As noted this morning the administration wants the dollar to fall, it is probably the single most event driving stocks higher and keeping interest rates from increasing. Obamanomics that down the line we will possibly pay a price of increased inflation unless the buck reverses. The wisdom is, once the Fed begins to tighten rates the dollar will begin to re-gain strength. Heard a regular on CNBC this morning conjecturing that even if the dollar turns the equity markets will continue to rally; good luck to him. The dollar decline is a good thing so far, it has revived the equity market and kept US interest rates low or the time being. Manipulating currency markets isn't confined to the dollar; other countries are in the game; and the game is increase exports. It has also driven crude oil higher, not so good.

The $40B 3 yr note auction went smoother than sliding off satin sheets; a lower yield, highest cover on record back to 1993 and the off-the-charts indirect bidder rate. In trading this morning in the WI market the rate was trading at 1.41% to 1.42%, at the actual auction it hit at 1.404%, the bid-to-cover ratio 3.33 to 1 and indirect bidders jumped on it to take 68.5% of the $40B. The previous, smaller, $39B went at 1.445% with a 2.76 bid-to-cover and an indirect bidder participation rate of 49.1% There was some positive reaction to the strong auction but with the 10 yr tomorrow and the 30 yr bond on Thursday supply is still somewhat of a drag.

No data again tomorrow; at 1:00 a more testy 10 yr auction of $25B. There is an increasing global supply of notes and bonds flooding this week. Corporates and sovereign offerings may take a little steam off the demand for the 10 yr tomorrow.

Back to Friday's employment report; it wasn't nearly as good as the headlines suggested and the optimism shown by financial markets. Yes it was better than in Sept but as all economists know, you can make the numbers look anyway you want by various accepted methods. The number of unemployed actually soared by 558,000, to 15.7 million, as measured by the household survey (the unemployment rate at 10.2%). The establishment survey polls larger businesses; the household survey actually calls individual households. If you don't seasonally adjust the number in the establishment survey (the stat represented by non-farm jobs), the actual change in unemployment for October was 641,000, or about 450,000 more than the seasonally adjusted number. And the Bureau of Labor Statistics added 86,000 jobs that they simply guess were created through the so-called birth-death ratio.

The Federal Reserve said nine of 10 bank holding companies deemed short of capital in May have raised their reserves enough to withstand the risk of higher unemployment and slower economic growth. “The one exception, GMAC, is expected to meet its remaining buffer need by accessing the TARP Automotive Industry Financing Program, and is in discussions with the U.S. Treasury on the structure of its investment,” the Fed Board said today in a press release. (Bloomberg News)

PRICES @ 4:00 PM

10 yr note: 101.07 +7/32 3.47% -2.5 BP

5 yr note: 100.12 +2/32 2.29% -1 BP

2 Yr note: 100.09 unch 0.85% unch

30 yr bond: 101.25 +7/32 4.39% -1 BP

Libor Rates: 1 mo 0.239%; 3 mo 0.272%; 6 mo 0.540%; 1 yr 1.131%

30 yr FNMA 4.5 Dec: 101.01 +5/32 (.15 bp) (+2/32 (.06 bp) frm 9:30)

15 yr FNMA 4.0 Dec: 101.21 +4/32 (.12 bp) (+2/32 (.06 bp) frm 9:30)

30 yr GNMA 4.5 Dec: 101.08 +6/32 (.18 bp) (+2/32 (.06 bp) frm 9:30)

15 yr GNMA 4.0 Dec: 102.11 +4/32 (.12 bp) (+2/32 (.06 bp) frm 9:30)

Dollar/Yen: 89.99 unch

Dollar/Euro: $1.4990 +$0.0106 (dollar weak)

Gold Dec: $1103.20 +$7.50

Crude Oil Dec: $79.28 +$1.86

Goldman-Sachs

Commodity Index: 510.29 +13.27

DJIA: 10226.94 +203.52

NASDAQ: 2154.06 +41.62