San Diego Home Mortgage Blog

This morning start by floating; we will hang in until or unless the 10 yr note yield climbs above the significant 3.50% (now 3.48%). Have to pay attention today if floating because breaking 3.50% means we will be seeing rates over 5% again.

Not a good start this morning; the 10 yr note at 8:30 -16/32 at 3.48% and at key support levels (3.50%). Mortgage prices at 8:30 -8/32 (-.25 bp); the DJIA futures +19. As we have repeatedly noted in the last couple of weeks, the rate markets are soft and slightly bearish frm a technical perspective, trading below key averages (on price) and above key averages on the yield charts. Not a seriously bearish environment yet but if 3.50% cracks the tone of the rate markets will become more serious and likely drive mortgage rates. So far however, every attempt by traders to breach 3.50% has failed; that level now has increased importance as a technical support. At 9:00 the 10 -14/32 3.47% +5 BP, mtgs -7/32 (-.21 bp) and the DJIA +28. At 9:30 the DJIA opened +15, 10 yr note -16/32 and mortgage prices -7/32 (.21 bp).

Ben Bernanke spoke this morning on financial reform; said the Fed is thinking about increased taxes on large unwieldy banks or an increase of capital reserves. Some increasing talk floating around that the government wants to shrink the large banks to eliminate the "too big to fail" issue that allowed the big ones to carry on with massive leverage and little concern about the what ifs; it was no secret that behind any fails those biggies would be propped up to keep the financial system from crashing. In the past two years we have experienced the fallacy of too big to fail; tax payers are, and will pay a price that most yet have no idea the amount and what implications it will have for the US over the next few years.

Atta Boy Ben; the Fed chairman called for a “credible process” for imposing losses on the shareholders and creditors, saying “any resolution costs incurred by the government should be paid through an assessment on the financial industry and not borne by the taxpayers.” Putting the burden on shareholders will get bank executives attention like nothing else. Problem is however, Congress and the administration will give the banks a pass on this one before setting new rules for the future.

The long term significance of the financial crisis caused by big banks, Wall Street firms, and rating agencies has yet to be fully appreciated. The US government is rapidly usurping power and control; big brother isn't just a phrase anymore. Health care, bank regulations, consumer protection, gun control---all new government involvements in our personal lives; the financial system mess has led to a huge increase in government. Congress and the administration are convinced US citizens need the government to take complete care of them from womb to the tomb. Can't fully experience it yet but it won't be long before we do, big brother is getting bigger by the day as a result of banks ineptness and Wall Street greed. All you need to think about is what Congress is attempting to do to the mortgage broker.

At 10:00, the only data today; Sept existing home sales expected to be up 4.7%, jumped 9.4%. August sales were revised slightly lower to -2.9% frm -2.7%. The median sales price $174,900.00, -8.5% yr/yr. 7.8 months supply, inventory levels fell 7.5% the lowest inventories since March of 2007.

Late yesterday afternoon there was more selling in the bond and mortgage markets, pushing prices lower and yields higher from where we reported them at 4:00. Took away some of the cushion we had for floating overnight.

PRICES @ 10:10 AM

10 yr note: 101.10 -11/32 3.46% +4 BP

5 yr note: 99.25 -8/32 2.42% +6 BP

2 Yr note: 100.00 -3/32 1.00% +6 BP

30 yr bond: 103.28 -12/32 4.27% +3 BP

Libor Rates: 1 mo 0.243%; 3 mo 0.281%; 6 mo 0.580%; 1 yr 1.235%

30 yr FNMA 4.5 Nov: 100.19 -7/32 (.21 bp) (-1/32 frm 9:30 yesterday)

15 yr FNMA 4.0 Nov: 101.09 -5/32 (.15 bp) (-1/32 frm 9:30 yesterday)

30 yr GNMA 4.5 Nov: 100.25 -7/32 (.21 bp) (unch frm 9:30 yesterday)

15 yr GNMA 4.0 Nov: 102.01 -4/32 (.12 bp) (+1/32 frm 9:30 yesterday)

Dollar/Yen: 91.84 +0.56 yen

Dollar/Euro: $1.5018 -$0.0004

Gold Dec: $1064.40 +$5.80

Crude Oil Dec: $80.57 -$0.62

Goldman-Sachs

Commodity Index: 523.36 +0.03

DJIA: 10047.60 -33.71

NASDAQ: 2176.34.+10.98

S&P 500: 1089.48 -3.43