Market Insight
Have you MetChad...lately
Rates down...then up later in
the day. Session ended early and the market is closed tomorrow...for Good
Friday.
the day. Session ended early and the market is closed tomorrow...for Good
Friday.
FNMA 4.0% is down by 31 bps today...which is below the 25 day "moving" average to close at $99.69. Contrast this to $100.50 where we were a few weeks ago. Remember: when pricing goes down on these...rates go up. We want them to continue to be a desired investment or "in demand". There seems to always be a certain amount of "sell-off"
before a 3 day weekend so I know that there was some of that... Naturally, there were likely other investors "preserving profit" by selling out as well after a couple of really good days in a row in the bond market. Also, added Supply: $18 BILLION in 10 year T-notes hit the market today and the auction brought a 23.7% level of foreign
investment.
before a 3 day weekend so I know that there was some of that... Naturally, there were likely other investors "preserving profit" by selling out as well after a couple of really good days in a row in the bond market. Also, added Supply: $18 BILLION in 10 year T-notes hit the market today and the auction brought a 23.7% level of foreign
investment.
The "spending report" put out by the feds to show how they are purchasing mortgage backed securities suggested that they purchased $30 billion worth of coupons this last week...and are buying bonds in the 4-6% range. I am a little nervous to see them stop purchasing these securities...and I am sure we will notice some trends in this purchase report as they start to ease up. I would really have no idea what kind of "exit strategy" they have for this program...but hopefully it is not the "cold turkey" technique. If the feds stopped buying immediately: rates would BUMP up VERY readily and could climb from the 4.75-ish rates now to 6.75-ish in a matter of days.
Trend example today: Purchasing 6% mortgage bonds...generally those bonds back 6.5% mortgages. Most people who CAN are refinancing their 6.5% mortgages right now and those coupons will be paid out relatively quickly. SO: they are "Buying into" mortgage backed securities with the anticipation that the instruments they are holding will be paid out soon. This gives the impression that they are investing (30 billion this week!) but then are able to use some of the funds received when the coupons cash out to keep the program going.
A story in the NY Times today suggested that banks may be stronger than people think...and a few hours later Wells Fargo reported some very strong earnings for the first quarter. This sparked some real interest in all financials and the "normal" flow of money from bonds...to stocks was seen. This is a good sign and in the face of the "stress tests" on banks that have recently been done we will hopefully see some continued confidence. Even if the mortgage rates go up some...this is a good thing.
The DOW was up 246 points today on the tail of the Wells Fargo news among other things.
Initial Jobless claims came in at 654,000...yikes. This is 20,000 less than last week. I don't really see the markets reacting to this anymore as it is just kind of an accepted thing that we will see that kind of unemployment for a
while.
Have a great eve~
