Foundation Mortgage  Market Report 
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 www.foundationmtg.com 
  Wednesday, 9/8/10

 

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