San Diego Home Mortgage Blog

Mortgage prices are lower now than when morning prices were set. We suggest locking loans and not floating overnight. The wider perspective continues technically bullish for the long end of the curve including mortgages, but markets can keep that positive technical outlook even with yields backing up 20 basis points from present levels---so best to lock.

Treasuries and mortgages opened better this morning but as the day worked on slid back to unchanged on the day. The equity markets continue to defy gravity and plow forward, still seems to be ignoring that consumers are not, nor will they increase spending to pre-recession levels. Can't fight the tape however, the markets are always correct for any moment in time. Interest rate markets betting on continued strong demand for US treasuries; appears not to matter the low rates across the yield curve. Today's $7B 10 yr inflation indexed notes went off well; at 1.51% with a cover of 3.12 and indirect bidders biting off 44% of the auction.

Tomorrow we get to the meat of this week's auctions; $39B of 3 yr notes are up. Based on the demand over the last three months dealers and traders are not concerned that demand will lessen. Wednesday $20B of 10 yr notes and Thursday re-open of the current n-the-run 30 yr for $12B.

There are no scheduled economic reports tomorrow.

Irrational exuberance; Nobel Prize winner in economics Joseph Stiglitz is saying about the equity markets. He is not alone, Bill Gross at PIMCO also is questioning the rise in stock prices, as we are and hundreds of others hiding in the bushes. We mentioned previously, even the most outrageous market bulls are questioning the way the stock market has advanced in the face of unemployment likely to continue increasing through the first half of 2010, and then any hiring isn't likely to push unemployment down much. This is a new normal, seems the only ones not on board with that are investors being dragged into the markets by the same group that imploded the economy with their greed and malfeasance, Wall Street and large banks (not mortgage brokers as Barney Frank espouses). Stiglitz points to commercial real estate, consumers unable to pay off credit cards and the decline in "safe" net worth, homes. He cites elements of the jobs report such as the number of people who can’t find a full-time job and the pace at which Americans are dropping out of the labor force. The counter argument against the pessimistic outlook comes from the Street, the improvement of emerging markets in Asia since the recession began; not a bad argument as long as it is balanced with the impact on America and our purchasing power that has kept the world afloat for generations.

Barney Frank is out there today talking about taking the TARP loans that have been re-paid (about $2B) and using them to help those that have lost their jobs stay in their homes. A very nice thing from a humanitarian perspective but it points to why the country is drowning in debt, whenever there is money floating around Congress will make every conceivable effort to spend it. In the long run US taxpayers are not likely to see much of the $700B used for TARP ever get back in the bank. “I was disappointed,” Frank said of the employment report. “I expected a downward trend.” This is the man that has a handle on things? A second economic stimulus package is something “people are going to be looking at,” Frank said. Congress is going to spend until the bankrupt the US; won't be long before the US is considered an over the hill economic power with no control over spending and with polices that are conceived for the moment with no care of what years later will look like.

PRICES @ 4:00 PM

10 yr note: 103.13 +1/32 2.22% unch

5 yr note: 100.25 unch 2.21% unch

2 Yr note: 100.08 unch 0.87% unch

30 yr bond: 108.14 -9/32 4.01% +1 BP

Libor Rates: 1 mo; 0.244%; 3 mo; 0.284%; 6 mo; 0.601%; 1 yr 1.206%

30 yr FNMA 4.5 Nov: 101.12 +1/32 (-4/32 (.12 bp) frm 10:00)

15 yr FNMA 4.0 Nov: 101.26 +3/32 (.09 bp) (-1/32 frm 10:00)

30 yr GNMA 4.5 Nov: 101.17 +1/32 (-4/32 (.12 bp) frm 10:00)

15 yr GNMA 4.0 Nov: 102.15 unch (-2/32 (.06 bp) frm 10:00)

Dollar/Yen: 89.51 +0.12 yen

Dollar/Euro: $1.4651 +$0.0063 (dollar weaker)

Gold Dec: $1,016.50 +$12.20

Crude Oil Nov: $70.44 +$0.49

Goldman-Sachs

Commodity Index: 457.38 +3.10

DJIA: 9599.75 +112.08

NASDAQ: 2068.15 +20.04

S&P 500: 1040.42 +15.23