San Diego Home Mortgage Blog

Start the day by floating, but keep focused on our alerts. Mortgage rates are bumping against their best since last Spring; both the mortgage driver 10 yr note and mortgages themselves are overbought in the near term; susceptible to selling. The longer outlook remains constructive, the short view slightly bearish.

The bond and mortgage markets opened a little soft in early trade this morning; the 10 yr at 8:00 -4/32, mtgs -2/32, the DJIA futures index +70. At 8:30; mtgs -1/32, 10 yr -4/32 and DJIA +65. At 9:00; mtgs -1/32, 10 yr -4/32 and DJIA +61. At 9:30 the DJIA opened +73, 10 yr note -3/32 and mortgage prices at 9:30 -2/32.

No economic data to think about today; rate markets will focus on this afternoon's (1:00) $39B 3 yr note auction starting three days of Treasury borrowing. The equity markets had a strong day yesterday with the DJIA +112 and S&P +15, starting stronger again today.

Yesterday we reported that Obama is considering another stimulus plan to try and lower the unemployment rate. This morning we hear Obama is considering extending the first time homebuyers' tax credit and increasing spending in the transportation sector. Won't be labeled as another stimulus plan of which only 40% of the $787B has been used; taxpayers and consequently the Congress are not in the mood for more government spending that has gotten completely out of hand. So the slight of hand is tax cuts and increased spending; in any other language but government it is more stimulus with only the name changed to protect the guilty. Administration officials have told allies in Congress that a broader transportation bill, and extensions of a homebuyer tax credit and unemployment benefits are all on the table.

A few days ago, at the end of Sept the government fiscal year ended for 2009. Next we will get the 2009 fiscal deficit, the CBO is saying $1.6T with 2010 deficit at $1.4T. It wasn't more than three years ago the deficit was just $300+B. Much of the exploded deficit was used to save the financial system; it had to be done but probably not to the massive extent the panic required. Congress led by the likes of Barney Frank have little desire to cut any spending programs, actually increasing them where it isn't necessary other than to be re-elected. Yesterday Frank said he wants to use $2B of TARP loans that have been re-paid for more spending. The price America will pay in the future for the spending now will be high interest rates, likely approaching 8.0% for mortgages by 2011. Don't worry, be happy; let the next Congress gag on it----how Congress and administrations think.

Hardly a week goes by without talk of the demise of the dollar as the world's reserve currency. Today reports of Mid-East oil producers looking to other currencies as payments for oil exports. Oil has always been settled in US dollars. The exploding deficits, the conviction the US does not have the stomach to cut spending, the Fed keeping interest rates low, and foreign investors drowning in dollars are issues that will not easily be ignored much longer. For now however, it is mostly chatter but the rumors are increasing. Every rumor so far has been vehemently denied from the sources.

Australia raised its interest rates by 25 basis points this morning; suggesting their economy is rebounding faster than the US. IN fact most of the world is coming out of their recessions more rapidly than what we are doing here.

The rest of the day will center on this afternoon's $39B 3 yr note auction and the equity markets that have no intention of rolling over.

PRICES @ 10:00 AM

10 yr note: 103.03 -8/32 3.25% +3 BP

5 yr note: 100.18 -5/32 2.25% +3 BP

2 Yr note: 100.05 -2/32 0.91% +3 BP

30 yr bond: 107.20 -20/32 4.06% +4 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: @ 9:30 101.11 -1/32 (-5/32 (.15 bp) frm 10:00 yesterday)

15 yr FNMA 4.0 Nov: @ 9:30 101.25 -2/32 (-3/32 (.09 bp) frm 10:00 yesterday)

30 yr GNMA 4.5 Nov: @ 9:30 101.17 +1/32 (-5/32 (.15 bp) frm 10:00 yesterday)

15 yr GNMA 4.0 Nov: @ 9:30 102.15 -1/32 (-2/32 (.06 bp) frm 10:00 yesterday)

Dollar/Yen: 88.70 -0.86 yen

Dollar/Euro: $1.4722 +$0.0075 (dollar continues to decline)

Gold Dec: $1.036.80 +$19.00 (new all time high)

Crude Oil Nov: $71.42 +$1.01

Goldman-Sachs

Commodity Index: 464.26 +6.94

DJIA: 9715.60 +114.79

NASDAQ: 2097.88 +29.70

S&P 500: 1054.66 +14.20