Treasuries and mortgages had a strong day Tuesday; the 10 yr note rate
fell 10 basis points and mortgage rates slipped 4 basis points in rate.
The improvement was driven by another down day in the stock
market; this morning markets are starting the other direction, stock
indexes at 9:00 pointing to a better open and the bond and mortgage
markets trading lower in price with the 10 yr note yield up 4 bp frm
yesterday's close and mortgage prices down 8/32 (.25 bp) after
increasing 17/32 (.53 bp) yesterday. It is the same old story; stocks
rally, the rate markets see selling, stocks weak and the rate markets do
better. It is difficult to draw much frm the recent trading with volumes
so low, yesterday's volume of trades in the stock market was one of the
slowest this year. Today begins Rosh Hashanah and likely will be less
trading than yesterday.
At 9:30
the DJIA opened +40, the 10 yr note -16/32 to 2.65% +6 bp and mortgage
prices -7/32 (.22 bp) frm yesterday's close.
This
afternoon Treasury will auction $21B of 10 yr notes; yesterday
$33B of 3 yr notes was taken down easily. The 10 yr should also be well
bid as global investors can't get enough of US debt in this global
economic decline. Tomorrow $13B of 30 yr bonds will be up for bid.
The Fed
will release its Beige Book at 2:00; the Fed's detailed report
on the economy from each of the 12 Fed districts. Generally there isn't
much new in the Book but more details that excite economists but doesn't
impress traders.
At 3:00
this afternoon we will see July consumer credit data;
expectations are for credit to have declined $3.25B, an improvement from
estimates at the beginning of the week at -$5.25B. Consumer credit is
one major key to measuring consumer attitudes toward spending. Consumers
are deleveraging as are banks and businesses; a process that will take
at least another two years to unwind from excesses in credit over the
last 15 years that lead to the economic breakdown.
The MBA
today released its Weekly Mortgage Applications Survey for the week
ending September 3, 2010. The Market Composite Index,
decreased 1.5% on a seasonally adjusted basis from one week earlier. The
Refinance Index decreased 3.1% from the previous week. The seasonally
adjusted Purchase Index increased 6.3% from one week earlier.
The four week moving average for the seasonally adjusted Market Index is
up 4.4%. The four week moving average is up 1.3% for the seasonally
adjusted Purchase Index, while this average is up 5.0% for the Refinance
Index. The refinance share of mortgage activity decreased to 81.9% of
total applications from 82.9% the previous week. The adjustable-rate
mortgage (ARM) share of activity remained unchanged at 6.1% of total
applications from the previous week. The average contract interest rate
for 30-year fixed-rate mortgages increased to 4.50% from 4.43%, with
points decreasing to 0.96 from 1.34 (including the origination fee) for
80% loans. The average contract interest rate for 15-year fixed-rate
mortgages increased to 4.00% from 3.88%, with points decreasing to 0.87
from 1.45 (including the origination fee) for 80% loans.
Not much
change in interest rates over the past week or so, just
swinging around with the equity markets. Pres Obama is out this week
talking about more stimulus, more money tossed at the problem that
stimulus won't fix. He wants to increase taxes on incomes over $250K,
increasing the tax won't help much and may actually be another drag,
keeping those "wealthy" people from spending. Congress is coming back,
the elections are coming like a fast train; both will add more
uncertainty.
If closing is in:
5-7 days: LOCK.
7-15 days: SUGGEST CAUTIOUS FLOATING.
15-30 days: SUGGEST FLOATING, MARKET IS VOLATILE HOWEVER.
30+ days: FLOAT.
PRICES @ 10:00
AM
10 yr note:
99.25 -16/32 2.65% +6 BP