San Diego Home Mortgage Blog

We suggest floating overnight given the late selling that developed in the stock market. Mtg prices are slightly better now than when morning prices were set. Still bearish on the bond and mortgage markets, a cautious float is recommended.

The Fed Beige Book out this afternoon didn't have much new in it; markets were generally expecting what the Book reported. "Reports from the 12 Federal Reserve Districts indicated either stabilization or modest improvements in many sectors since the last report, albeit often from depressed levels. Leading the more positive sector reports among Districts were residential real estate and manufacturing, both of which continued a pattern of improvement that emerged over the summer. Reports on consumer spending and nonfinancial services were mixed. Commercial real estate was reported to be one of the weakest sectors, although reports of weakness or moderate decline were frequently noted in other sectors.".....

"The weakest sector was commercial real estate, with conditions described as either weak or deteriorating across all Districts. Banking also faltered in several Districts, with Kansas City and San Francisco noting continued erosion in credit quality (often with more expected in the future). One bright spot in the banking sector was lending to new homebuyers, in response to the first-time homebuyer tax credit. Finally, labor markets were typically characterized as weak or mixed, but with occasional pockets of improvement.".....

"Most Districts reported that housing market conditions improved in recent weeks, primarily from a pickup in sales of low- to middle-priced houses. Contacts reported that sales were boosted by the government's tax credit for first-time homebuyers." For the complete Book go to www.federalreserve.gov

The government is going to step heavily on business salaries and bonuses for companies that took TARP money. Top 25 in each firm; 90% pay cuts and bonuses cut by 50%. Well, they got bailout money and the government is a partner in those companies; so some input may be appropriate from the government. The problem is, there are is a growing number of the socialist elites in Washington that see this as a crack in the door to regulate a wider variety of salaries and bonuses. The US Congress and this current administration is on a path that may not lead to the rainbow that many now believe. The faster we get government the hell out of private businesses the better; what we want is a pledge from Barney Frank and Nancy Pelosi (and the President) that as soon as US taxpayers get our money repaid the government will go away. Yes, we know there are new regulations coming for the financial industry; given the scam, poor judgment, and greed exhibited it is hard to build a case for letting sleeping dogs alone.

Crude on a rampage today, up over $2.00 at one point today and now with an $80.00 handle. Crude is likely to climb back to $100.00 or more with the dollar crumbling under our feet. There is little concern about the dollar decline these days; the Wall Street crowd likes it because it is jacking up stock prices, the administration likes it because it jacks up stock prices, the media likes it because it jacks up stock prices, the Chinese like it because it jacks up US stock prices and makes bond buying cheap. Who doesn't like it? Those of us that see the downside implications it will have on inflation as the economy rebounds. A weak dollar is inflationary; spin it whatever way you want but a weak dollar isn't good for the US in the long run. It is similar to the global warming debate; those that believe in it don't want to hear any science that takes exception, no real debate; with the dollar no one wants to look past their 401Ks or consider the future repercussions.

Tomorrow weekly jobless claims are expected to be down 5K to 519K new unemployment filings; continuing claims are also expected to decline a little. At 10:00 Sept leading economic indicators are expected to be +0.9%. At 11:00 tomorrow Treasury will announce the amounts for next weeks auctions, we expect a total of around the $115B area for 2s, 5s and 7 yr notes next Tuesday, Wednesday and Thursday. On Monday treasury will sell a small amount of 5 yr inflation indexed notes, not a real market mover however.

It took until 3:30 for the stock market to go negative; it traded at its best early on but through the day no buying and a gradual decline in the indexes. As it rolled over the rate markets found the Pavlov's traction and mortgage rates climbed from their 14/32 decline seen at 10:30 to 12:00 today.

PRICES @ 4:00 PM

10 yr note: 102.01 -10/32 3.38% +4 BP

5 yr note: 100.06 -6/32 2.33% +4 BP

2 Yr note: 100.03 -1/32 0.95% +3 BP

30 yr bond: 105.00 -18/32 4.20% +3 BP

Libor Rates: 1 mo 0.243%; 3 mo 0.283%; 6 mo 0.585%; 1 yr 1.227%

30 yr FNMA 4.5 Nov: 100.30 +1/32 (+9/32 (.28 bp) frm 9:30)

15 yr FNMA 4.0 Nov: 101.18 +3/32 (.09 bp) (+9/32 (.28 bp) frm 9:30)

30 yr GNMA 4.5 Nov: 101.01 -2/32 (+7/32 (.21 bp) frm 9:30)

15 yr GNMA 4.0 Nov: 102.07 +2/32 (.06 bp) (+9/32 (.28 bp) frm 9:30)

Dollar/Yen: 90.95 +0.26 yen

Dollar/Euro: $1.4998 +$0.0070 (dollar weaker)

Gold Dec: $1058.10 -$0.50

Crude Oil Dec: $80.87 +$1.75

Goldman-Sachs 525.06 +12.83

Commodity Index:

DJIA: 9949.36 -92.12

NASDAQ: 2150.73 -12.74

S&P 500: 1081.39 -9.67