San Diego Home Mortgage Blog

Keep locked over the long weekend; do not float. Next week supply may push rates up a little and the stock market is still strong.
As we noted yesterday, the 10 yr note hit its resistance levels on Wednesday and would likely lose some steam after the strong rate declines in the past week.It continues to be all about how markets view the future of the economy and that is measured by how the stock market acts. The stock market rallied again today after the employment data this morning. Job losses were just 216K with 50K more losses added in the revision to the July job losses. The unemployment rate jumped to 9.7% frm 9.4% in July but was quickly ignored in favor of lesser job losses. Equity markets are choosing to see the cup half full as far as employment is concerned; when questioned, most will say employment is a lagging indicator based on Econ 101. True it is n normal recessions, question is, is this a normal recession?

This week markets were bolstered by generally better economic data; the manufacturing sector based on the August ISM report on Tuesday showed much more strength that was expected, July factory orders were up, July pending home sales were +3.2% frm June, and the minutes of the 8/12 FOMC meeting continued to see a small light at the end of what would be defined as a very long tunnel. After a strong move lower in rates early this week the 10 yr note met our technical objective at 3.28% that we have been noting recently. Thursday the rally ended with the equity markets closing better and today more selling as the stock market ran higher again. mortgage rates hit 5.00% for conforming loans under $417,000 on Wednesday but lost ground yesterday and today.

On the week; the 10 yr note yield is -1 BP at 3.44%. Mortgage prices on 30s +9/32, on 15s +10/32 and FHAs +9/32. The DJIA -103, NASDAQ -10, S&P -13. Gold +$8,00, crude oil +$3.00.

Next week is a short one with markets closed on Monday; not much on the economic calendar. Weekly jobless claims and consumer credit are the only headliners so equity markets will be scratching any kind of data to support the idea stocks are headed to the moon. Treasuries will face supply next week with $38B of 3 yr notes on Tuesday, $20B of 10 yr notes on Wednesday, and $12B of 30 yr bonds on Thursday. We will keep close attention to the 10 yr yield, it ended today at 3.44%; we have support at that level up to 3.50%. A run up over 3.50% on a close will do damage to the bullish technical outlook. These days it is very difficult to trade bonds and mortgages as they are joined at the hip with stock market movements. Wednesday night Pres Obama is taking an unusual step to speak at a joint session of Congress to press his health care program-----just can't stop spending; while we need health care reform, no program run or managed by the government has ever saved any money, only bigger deficits. Eventually we will pay more regardless of how the plan if finally defined. 1100 pages is evidence enough it will be a cluster.

PRICES @ 4:00 PM

10 yr note: 101.17 -26/32 3.44% +10 BP

5 yr note: 100.03 -7/32 2.35% +5 BP

2 Yr note: 100.04 -1/32 0.94% +2 BP

30 yr bond: 103.26 -59/32 4.27% +12 BP

Libor Rates: 1 mo 0.253%; 3 mo 0.314%; 6 mo 0.712%; 1 yr 1.288%

30 yr FNMA 4.5 Oct: 100.04 -8/32 (.25 bp) (-4/32 (,12 bp) frm 10:00)

15 yr FNMA 4.0 Oct: 100.21 -6/32 (.18 bp) (-3/32 (.09 bp) frm 10:00)

30 yr GNMA 4.5 Oct: 100.08 -9/32 (.28 bp) (unch frm 10:00)

15 yr GNMA 4.0 Oct: 101.09 -6/32 (.18 bp) (-5/32 (,15 bp) frm 10:00)

Dollar/Yen: 93.02 +.46 yen

Dollar/Euro: $1.4304 +$0.0050 (dollar weaker)

Gold Dec: $996.00 -$1.70

Crude Oil Oct: $67.78 -$0.18

Goldman-Sachs

Commodity Index: 439.01 -1.35

DJIA: 9441.27 +96.66

NASDAQ: 2018.78 +35.58

S&P 500: 1016.40 +13.16