San Diego Home Mortgage Blog

We do not want to float overnight; keep everything locked. The 10 yr did however manage to test and hold its first near term support today when it tracked to 3.25%. We have support for the 10 yr between 3.25% and 3.28%. Mortgages track the 10 yr note, keep that firmly in mind.

Not much today; the rate markets opened slightly weaker then spent the day sitting quietly trading in a very tight range. The stock market started firm and continued to hold with not much volatility.

This afternoon's $39B 3 yr note auction followed suit with previous auctions over the last few months, strong bidding and its yield about where it traded earlier this morning in what is referred to as when-issued trading. The rate went at 1.445%, the cover 2.76% and indirect bidders took 49% of it. The previous 3 yr saw 1.487% with a 3.02 cover and a 54.2% indirect bidder take against an average through 2008 of 2.61 and 43.2% take.

The rate market has been pushing back but the upside will be a hard sell with the $20B reopened 10 yrs tomorrow and $12B reopened 30 yrs Thursday still sitting on tap. So far, so good on the auctions, but the longer dated offerings are going to be watched more closely. The Fed will be in buying treasuries in the 2020 to 2026 maturity range tomorrow as they head into the final leg of bond buying operations. In the bailout rescue frenzy the Fed agreed to buy $300B of treasuries last March, the program will come to an end at the end of this month. It was in hindsight, a plan that turned out to be unnecessary given the strong demand from the markets for treasuries.

Tomorrow one key report comes late in the afternoon (3:00 PM), August consumer credit. The estimate is for a decline in credit of $9.5B, in July credit plunged $21.6B against estimates of a small $5B decline. Consumers used to be considered the rock of the economy accounting for 70% of GDP growth; not these days though. The market realizes consumers are not going to go back to pre-recession spending so stock touters are pushing consumers under the rug in favor of an economic recovery built on business profits. I'll let you toss that around in your mind.

The reason the stock market rallied today? Because Australia increased their base lending rate by 25 basis points. Jumping to conclusions the US markets see it as strong evidence that the global economies are surely turning around, otherwise why increase rates. The crumbling dollar also helped, making US stocks cheap in the minds of investors with stronger currencies (which if the dollar continues to decline will be defined as everyone).

Here comes the next problem foisted on the mortgage industry; and likely it will be laid squarely on mortgage brokers because as we all know it was mortgage brokers that caused this Great Recession. Now a couple of Senators are eye balling reverse mortgages as the next problem of abuses; lead by a consumer watchdog agency the National Consumer Law Center. Some of the same lenders that helped drive the real estate boom with loans to home buyers who couldn’t afford the payments are now targeting seniors, the center said. I have had a gut full of these sanctimonious consumer agencies looking under every rock to find a "possible" problem even when none exists. What's more; making the giant leap to blame anything on mortgage brokers. Once again, while brokers don't have the best reputation in the sub-prime mess; it was Wall Street, big banks and rating agencies that combined to almost ruin this country. Jumping to conclusions on reverse mortgages being a domain of independent mortgage brokers is silly, ignorant and without merit. If on the other hand, any broker knows of another broker abusing the intent of any real estate lending that person needs to step up stop it; the industry is under major attack in an effort by the likes of Barney Frank to deflect where the real responsibility should be placed.

Tomorrow at 1:00; $20B of re-opened 10 yr notes for sale. At 3:00 August consumer credit is expected to decline $9.5B.

PRICES @ 4:00 PM

10 yr note: 103.01 -9/32 3.26% +4 BP

5 yr note: 107.10 -31/32 4.07% +5 BP

2 Yr note: 100.19 -4/32 2.24% +2 BP

30 yr bond: 100.06 -1/32 0.90% +2 BP

Libor Rates: 1 mo; 0.244%; 3 mo 0.284%; 6 mo 0.600%; 1 yr 1.212%

30 yr FNMA 4.5 Nov: 101.08 -4/32 (-3/32 frm 10:00)

15 yr FNMA 4.0 Nov: 101.23 -4/32 (-2/32 frm 10:00)

30 yr GNMA 4.5 Nov: 101.14 -3/32 (-4/32 frm 10:00)

15 yr GNMA 4.0 Nov: 102.12 -4/32 (-3/32 frm 10:00)

Dollar/Yen: 88.78 -0.73 yen

Dollar/Euro: $1.4715 +$0.0069 (dollar weaker)

Gold Dec: $1.043.00 +$25.20

Crude Oil Nov: $71.00 +$0.59

Goldman-Sachs

Commodity Index: 463.06 +5.68

DJIA: 9731.25 +131.50

NASDAQ: 2103.57 +35.42

S&P 500: 1054.72 +14.26