San Diego Home Mortgage Blog

We held rate locks into this morning to confirm that the 10 yr had held its technical resistance, but warned not to hold locked loans taken yesterday on the re-price improvements. We will float again to start the session but will likely lock at the end of the session if not before. The 10 yr and mortgages are likely to edge lower in price today and into the employment report---technical selling in a well defined range. Keep alert for our alerts.

Treasuries and mortgages started weaker this morning, as we noted in the 4:30 comments yesterday, the 10 yr note hit its solid resistance at 3.28% and once again (so far) has failed to crack it. Mortgages and the 10 yr still are technically positive but the 10 remains in its 3.50% to 3.28% range. At 8:30 the 10 yr -7/32 at 3.30% and mortgages -5/32; the DJIA futures -6. At 9:00 the 10 yr -13/32 to 3.33% +5 BP, and mortgage prices -7/32; the DJIA up 10 points. At 9:30 the DJIA opened +4, 10 yr -13/32 and mortgage prices -6/32. (see below for 10:10 levels)

Yesterday the stock market got a little too excited about the acquisition by Xerox of Affiliated Computer Services; the excitement based on the view that M&A and acquisitions are signs businesses are about to invest more, leading to the thought that the economic outlook is improving. Many traders and market participants were off yesterday for Yom Kippur increasing market volatility. This morning though, in early activity the stock market in pre-market trading, while slightly weaker is holding most of the gains of yesterday. The remainder of the week will focus on the unfolding economic releases and Friday's Sept employment figures.

At 9:00, the first of two reports today; Case/Shiller home prices for July, expected to be a little better than June at -14.2% frm -15.44%, prices were down just 13.3% the smallest decline in prices in 17 months; 17 of the 20 areas covered showed an increase, led by a 3.1% jump in Minneapolis and a 2.9% increase in San Francisco. Las Vegas suffered the biggest one-month decrease at 1.9%. The reaction sent treasury and mortgage prices lower. Increasing home prices, while likely an anomaly as July generally has increases, combined with the 10 yr failing again at is resistance (3.28%) flipped short term sentiment; likely the note will track back to 3.41% now, its fist level of support.

At 10:00, a few minutes ago, Sept consumer confidence from the Conference Board, expected at 57.0 frm 54.1 in August, was a little weaker at 53.1 and gave a nice boost to the bond and mortgage markets, the 10 yr prior to the 10:00 release was off 16/32, mortgages off 8/32. After the lesser confidence the 10 and mortgages climbed to -8/32 and -2/32 respectively. The stock market traded better until the report then rolled over a little.

Weekly Johnson Redbook retail sales were down 2.2% at a year-on-year pace that extends an improving trend, but still declining. The report said low temperatures helped move seasonal items and that Halloween sales are off to a good start. Vehicle unit sales, to be posted Thursday, will be the next key piece of information for the September retail sales report.

Short term the run is likely over; the 10 yr went where we expected and failed where it has on three previous occasions at 3.28%, a rock of resistance. Still the 10 and mortgages hold slight bullish bias but not in the near term. Since late July the bellwether 10 yr has traded in a 23 basis point range, mortgages about the same. Last week's FOMC meeting statement said the Fed would keep short tem rates low for quite awhile as the economic recovery is fragile. Since then however various Fed officials have been speaking more hawkishly, saying repeatedly that the Fed will act aggressively and with surprise when it has to tighten. Likely a plus for the long end of the curve in that investors can find solace that the Fed will not let inflation get a toe hold.

PRICES @ 10:10 AM

10 yr note: 102.18 -10/32 3.32% +4 BP

5 yr note: 99.31 -7/32 2.38% +5 BP

2 Yr note: 99.30 -3/32 1.02% +4 BP

30 yr bond: 107.19 -16/32 4.06% +3 BP

Libor Rates: 1 mo 0.246%; 3 mo 0.289%; 6 mo 0.631%; 1 yr 1.253%

30 yr FNMA 4.5 Nov: 100.28 -4/32 (.12 bp) (+4/32 (.12 bp) frm 10:00 yesterday)

15 yr FNMA 4.0 Nov: 101.12 -4/32 (.12 bp) (+3/32 (.09 bp) frm 10:00 yesterday)

30 yr GNMA 4.5 Nov: 101.03 -4/32 (.12 bp) (+3/32 (.09 bp) frm 10:00 yesterday)

15 yr GNMA 4.0 Nov: 102.03 -4/32 (.12 bp) (+2/32 (.06 bp) frm 10:00 yesterday)

Dollar/Yen: 90.06 +0.41 yen

Dollar/Euro: $1.4563 -$0.0050 (dollar better)

Gold Dec: $991.90 -$2.20

Crude Oil Nov: $66.69 -$0.15

Goldman-Sachs

Commodity Index: 444.33 -0.32

DJIA: 9784.15 -5.12

NASDAQ: 2129.00 -1.76

S&P 500: 1063.99 +1.01