San Diego Home Mortgage Blog

Still want to keep locked and not float by initiating new long positions at these price levels in mortgages. Until the 10 yr breaks its strong resistance at 3.28% we will keep flat, especially with the Sept employment report hitting on Friday, a way too volatile series to bet on. Holding rate locks now is a bet that 3.28% yield on the 10 yr will be taken out. That said, so far the longer view continues to be technically positive for the moment.

The end of the quarter, end of the month and end of the US fiscal year today was marked with increased volatility in the financial markets. The equity market isn't used to getting negative economic news recently, today however it got two weaker data reads than were expected. The ADP employment estimate was expected to be a loss of 200K jobs, ADP announced a decline of 254K on their guesses released at 8:15 this morning. At 9:45 the Chicago purchasing managers' index was expected to continue its improvement at a read of 52 frm 50.0 in August, it fell to 46.1 on the overall index and the new orders sub-component fell to 46.3 frm 52.5 in August. Two shots across the bow that sent the stock market into a tail spin at 10;00; the DJIA fell 134 points. No real sustainable improvement in the rate markets however.

By this afternoon the stock market shook it off as it has on any negative news recently. The DJIA recovered the losses and at 1:30 traded +34 before backing off a little into the close.

The 10 yr note and mortgages are looking soft in the past couple of days. The 10 yr has tried and failed twice to break 3.28% resistance in the last 24 hrs and kept mortgage prices slightly weaker. The two month range of trading in the 10 yr is still alive; trading between 3.28% and 3.50% with hear term support now at 3.41%. Demand for treasuries continues to be strong as investors both domestic and foreign continue to suck up Treasury auctions. Tomorrow at 11:00 Treasury will officially announce next week's auction details (3s, 10s, and 30s) will be sold for a total of about $75B; Treasury is borrowing about $190B a month in 2s through 30s to fund the budget deficit.

Tomorrow; weekly jobless claims at 8:30 are presently expected to have increased 7K to 537K; also at 8:30 August personal income (+0.1%) and personal spending (+1.1%). At 10:00 the ISM national manufacturing index (53.5 frm 52.9), today's Chicago purchasing mgrs index plunged to 46.1, if the national report declines look for the equity markets to take a big hit and likely support the bond and mortgage markets. Also at 10:00 tomorrow, August construction spending (-0.2%). At 11:00 Treasury will announce the details of next week's Treasury auctions. At 2:00 Sept auto sales are thought to have declined by 2 mil from 10.1 mil, no more clunker deals.

Wells Fargo & Co. and Bank of America Corp. have an unprecedented share of the mortgage market and new clout in their business relationships. Correspondent lenders and mortgage brokers now must work with one or both of the Big Two to be in the business, industry executives and observers say. Combined, the two companies originated 44% of all the home loans written during the second quarter, up from 28.6% a year earlier, according to National Mortgage News. Looks good for them but we do not believe it will last long; slowly mid-tier mortgage companies are getting their feet under them and will cut into the Big Two as they are now called----always darkest before....

Although the 10 yr note and mortgage markets are finding it a slow go the past few days, and unable to break resistance levels, both are hanging tough. The 10 so far has not experienced any significant selling as it did previously when its yield fell to 3.28%. Even with supply next week the long end of the curve is holding tough and keeping mortgage rates from slipping. Not much chatter about it but I find it interesting that treasuries and interest rates are declining as equities are moving higher; kind of defies normal logic and may be telling us something about large investor thinking about the economic outlook and the outlook for the equity markets; something we will monitor closely.

Absolutely meaningless; CNBC has been drooling all day that 3rd Q ending today was the best quarter in 11 years.