CT Mortgage Blog

Week of December 1st, 2008

December 4th, 2008 12:49 PM

Sure enough that one great comment from Paulson last Tues improved rates quick a bit. The injection of money into mortgage backs created an 80 bps rally before we've slowly trickled away since then. The big fear in mortgage backed securities is jobless claims. Today ADP came out with is a survey indicator that predicts the monthly unemployment numbers that will be released this Friday. We're down 250,000 jobs in the private sector which is worse than the 205,000 expectation from analysts. We're fighting that barrier now where investors question the security in mortgage backs. Unemployment normally sucks money out of equities, and it goes into mortgage backs and bonds. The levels have gotten so bad that the fear of people losing jobs is now outweighing the security of a real estate backed asset. We are improving slowly today after a 35 bp hit this morning. There may be room for another drop, but it depends on what Fridays final unemployment numbers do. Holiday sales were pretty bleak, and we have this big looming issue of an auto bail out which could have various outcomes on rates.

I guess there's some room for a little gain, but don't expect much. These lower 5% rates are only around for a week or 2 at best so capitalize and create urgency. The YSP has been trading weak due to quality fears. Consumers pay 1 - 2 points for a loan are getting WAY better rates.

Some other great news is the recession has now been defined as starting in Dec 2007!!! That's awesome news when they predict a couple year recession and we're technically already through year #1.

Posted by Edward Woodhead on December 4th, 2008 12:49 PMPost a Comment (0)

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December 30th, 2008

December 30th, 2008 11:26 AM

We did see the week start off with a pullback which was expected and fortunately was not as much as could have been. As data began to flow, we saw mortgage backed securities began to climb back to end the week slightly down as inflation fell back into the Fed’s “comfort zone” and news about the economy remains negative. There were several Treasury auctions last week as the government continues to cover the bailouts, among other things. We saw another 4-week auction bid 0.00% yield and we saw relatively low foreign participation, which is not good news for mortgage bonds.

This week will be light on data as well, along with another shortened trading week, so volatility could show up, or we could see another tame week like this last one. The ISM Index will be the major player of the week and will be the first set of data of 2009. Here is the rest of the week’s data:

Monday: No data scheduled
Tuesday: Consumer Confidence (10:00)
Wednesday: Initial Jobless Claims (8:30), Chicago PMI (9:45), Crude Inventories (10:30)
Thursday: HAPPY NEW YEAR!!!
Friday: ISM Index (10:00)

Looking at the charts, we can see that mortgage backed securities remain along their 10-day moving average and in a narrow trading range, and may make an effort to reach new highs this week, though I suspect we will see them remain fairly flat again overall. Stochastic indications are giving some breathing room as the rest on the bottom of the “overbought” zone, so we may see some new life for mortgage bonds as the new year starts.

Posted by Edward Woodhead on December 30th, 2008 11:26 AMPost a Comment (0)

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