San Diego Home Mortgage Blog

Given that pricing this morning is lower, and the possibility of the stock market softening we suggest continuing to float rate locks. However, it is critical today to keep alert for price changes; normally lenders will move prices on 8/32 (.25 bp) price moves on mortgages. Being quadruple witching there is an increased potential of volatility. At the end of the day if mortgage markets are still soft we will likely want to lock ahead of next week's supply and better economic outlooks.

Treasuries and mortgages opened weaker this morning,

no follow-through from the strong rally yesterday. Pushing prices lower, the stock indexes started better pointing to a firm opening at 9:30. At 9:00 the 10 yr note -8/32, mortgages prices -5/32. At 9:30 the DJIA opened +52, the 10 yr -11/32 and mortgages -8/32 frm yesterday's close. (see below for 10:00 levels)

There are no economic reports to deal with today; it is however a day that may see increased volatility with all financial options expiring as well as futures contracts, quadruple witching.

Yesterday's better headline economic reports are getting the credit this morning for the better open in the equity market, but as we noted in yesterday's afternoon report the interior data on the Philly Fed business index, weekly jobless claims, and housing starts were not so strong. Nevertheless, with Bernanke, Warren Buffet and about every analyst now convinced the recession is over, investors are continuing to buy equities. As long as the economic outlook remains positive lower interest rates will be difficult to achieve. Not much concern in the markets yet that the recovery will likely be at a snails pace compared to other recessions in the past 50 yrs.

Given the lack of follow-though frm yesterday so far this morning the rate markets may be vulnerable to more selling next week ahead of Treasury's $112B of supply (2 yr, 5 yr, and 7 yr note auctions). Technically the 10 yr note and MBSs are still holding key moving averages and chart support levels, (3.50% for the 10 yr note and 100.03 on the Nov FNMA coupon now at 100.07). Still will hold to our slightly bullish outlook for rates but time and price equation is working against us; unless the 10 yr note and mortgages gain traction in the next few sessions both may turn technically bearish. The 10 can't sit at this level for much longer before traders will turn more bearish. Mtg rates hovering at 5.00% levels have to break below it or that market also will give up the fight.

PRICES @ 10:00 AM

10 yr note: 101.15 -15/32 3.44% +6 BP

5 yr note: 99.25 -8/32 2.42% +4 BP

2 Yr note: 100.01 -2/32 0.98% +3 BP

30 yr bond: 104.29 -23/32 4.21% +4 BP

Libor Rates: 1 mo 0.246%; 3 mo 0.289%; 6 mo 0.675%; 1 yr 1.271%

30 yr FNMA 4.5 Nov: 100.07 -10/32 (+3/32 frm 10:00 yesterday)

15 yr FNMA 4.0 Nov: 100.24 -7/32 (+4/32 frm 10:00 yesterday)

30 yr GNMA 4.5 Nov: 100.16 -9/32 (+9/32 frm 10:00 yesterday)

15 yr GNMA 4.0 Nov: 101.14 -6/32 (+5/32 frm 10:00 yesterday)

Dollar/Yen: 91.34 +0.33 yen

Dollar/Euro: $1.4710 -$0.0032 (dollar better)

Gold Dec: $1,016.30 +$2.80

Crude Oil Oct: $72.25 -$0.22

Goldman-Sachs

Commodity Index: 47148 -0.98

DJIA: 9810.37 +26.45

NASDAQ: 2127.41 +0.66

S&P 500: 1067.24 +1.75