San Diego Home Mortgage Blog

Rate markets opened lower in price this morning, but holding at 9:00 at support levels. The 10 yr note at 8:00 was off 8/32, by 9:00 the note -2/32 and mortgage prices -2/32. The stock market trade in early futures trading pointing to a better open at 9:30. At 9:30 the DJIA opened +15, the 10 yr note -3/32 and mortgage prices at 9:30 -3/32.

No economic releases on the schedule today. The market will likely float in a low end range awaiting news, while chatter will continue over the possibility the Fed is preparing to pull the trigger on higher rates. The fact that they are seen looking at reigning in accommodation while keeping rates low and talking to dealers in reverse repurchase operations among other issues. Can't shake the concern the bond market is building that the Fed is closer to some form of extraction from its accommodative policy. No rate hikes, focus now is based on the Fed draining reserves using reverse purchases, possibly paying interest to banks that park money. This week there are a lot of Fedsters on the speaking trail however none, including Bernanke today at 11:00 is likely to rock the boat with tightening talk.

Treasury released the 2009 fiscal data on Friday; the annual deficit is less than what had been expected; a lot less than what we were looking for six months ago. The deficit for the year $1.417T, estimates a few months ago were in the range of $1.8T. Treasury said the lower deficit is due to unused TARP funds that were expected to be much higher. Good news anytime the deficit is less than expectations, but very worrisome with the deficit four times higher in 2009 than 2006 and likely to be over a trillion in 2010. Treasury also reported foreign buyers increased their U.S. debt holdings for a fourth consecutive month in August to $3.45T. No let up in demand for treasuries based on concerns the economic recovery will falter, the dollar weaker attracting foreign demand and thoughts the fed will not tighten until at least mid-2010. Mostly guesses on the economic outlook and the timing of any Fed squeeze. Fixed income funds have attracted 18 times more money than the equity market so far this year.

This week's economic calendar:

Tuesday;

8:30 Sept PPI (+0.1%, the core +0.1%)

Sept housing starts and permits (starts +2.0%, permits +1.8%)

Wednesday;

7:00 weekly MBA mortgage applications

2:00 Fed Beige Book; its report on the economy

Thursday;

8:30 weekly jobless claims (+3K, continuing claims 5.99 mil frm 5.992 mil)

10:00 Sept leading economic indicators (+0.9%)

FHFA housing price index (N/A)

Friday;

10:00 Sept existing home sales (+4.7%)

Bernanke is speaking at 11:00 at the San Francisco Fed Economic Policy Conference Asia and the Global Financial Crisis in Santa Barbara, California. Traders will listen for anything having to do with his comments on US and global economies and Fed thoughts on reducing stimulus.

The dollar is slightly weaker again this morning; no one cares however. The government is sitting back and letting it decline; helps US exports and continues to attract foreign investors to US bond market. Short-sighted, the US eventually will pay a price for our crumbling currency. So far it works but the time will come when dollar denominated investments will be a hard sell.

Q3 earnings reports continue to flood in; most are better on cutting costs and employees. No end to the job losses, even though 500K a week hitting unemployment is seen as good news; like repeatedly hitting your thumb with a hammer, it feels so good when you stop, but your thumb is flat. Don't fight the tape they say; good advice although the equity markets look a little tired; it has looked tired many times in the last few months only to rest up and shoot higher.

Mortgage markets are a little lower at 10:00 but still slightly better than where prices traded at 9:30 Friday morning. Technically mortgage charts are bearish with the 9 day relative strength index at oversold levels. Looking for a bounce but it will require the 10 yr note to lead the way. The 10 yr has nice support at 3.50% and solid resistance now at 3.25%. The remainder of the day will be stock watching for bond traders.

PRICES @ 10:00 AM

10 yr note: 101.22 -1/32 3.42% unch

5 yr note: 100.00 -2/32 2.37% +3 BP

2 Yr note: 100.01 -1/32 0.98% +1 BP

30 yr bond: 104.15 +8/32 4.24% +1.5 BP

Libor Rates: 1 mo 0.245%; 3 mo 0.283%; 6 mo 0.592%; 1 yr 1.250%

30 yr FNMA 4.5 Nov: @9:30 100.22 -2/32 (+3/32 (.09 bp) frm 9:30 Friday)

15 yr FNMA 4.0 Nov: @9:30 101.09 -1/32 (+2/32 (.06 bp) frm 9:30 Friday)

30 yr GNMA 4.5 Nov: @9:30 100.28 -2/32 (+3/32 (.09 bp) frm 9:30 Friday)

15 yr GNMA 4.0 Nov: @9:30 101.30 -3/32 (-1/32 frm 9:30 Friday)

Dollar/Yen: 90.84 -0.04 yen

Dollar/Euro: $1.4899 unch

Gold Dec: $1049.70 -$1.80

Crude Oil Nov: $78.39 -$0.14

Goldman-Sachs

Commodity Index: 508.92 +0.72

DJIA: 1001.58 +5.67

NASDAQ: 2150.75.-6.14

S&P 500: 1087.50 -0.18