Here we go again.
Round and round we go.
The market is struggling to gain stability as market swings are the norm as of late. Mortgage bonds are now falling back off pushing rates higher.
Mortgage bond prices opened weaker this morning erasing the gains from yesterday afternoon but have recovered a bit near pricing to keep things in check.
Global equities brushed aside the Greek turmoil and posted gains overnight. US stock are higher with the DOW up over 40 points.
To repeat…. the roller coaster ride continues.
The data this morning was mixed. Factory orders up 0.3%, expected down 0.1%. Weekly jobless claims @ 397k, expected @ 400k, not rate friendly, Productivity up 3.1%, expected up 2.8%.
Yesterday the Fed made no rate changes and indicated:
-Growth strengthened somewhat in Q3
-Vote was 9-1, Evans wanted additional policy accomodation
-Household spending increased
-Signs point to continued weakness in labor market, elevated unemployment
-REPEATS significant downside risk to economic growth, notes strains from GLOBAL financial markets
-Inflation moderated
-Repeats the conditions likely warrant exceptionally low Fed Funds Rate at least through mid 2013
-Expects inflation to settle in coming quarters
-Will continue to reinvest principal payments of mortgage debt back into mortgage-backed securities
We still have the EMPLOYMENT REPORT FRIDAY.
YO-YO Market
Mortgage bond prices closed slightly below the levels where daily pricing was set applying upward pressure to mortgage rates. Trade was volatile all day tied to the movement in stocks. Equity and bond prices were yo-yoing with each snippet of news out of Europe. Tomorrow brings weekly jobless claims and Q3 advanced GDP before lenders set pricing. Prepare yourself and your borrowers for a wild ride. Regardless of what happens in Europe stocks and bonds will most likely be EXTREMELY volatile.
REFINANCE UPDATE if your home is under water
This morning, FHFA announced their enhancements to the HARP refinancing program. Operational details of the plan are to be released on November 15. Only loans that were purchased or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009 and have a current LTV over 80% are eligible. In addition, the loan must be current, no late payments in the last six months and no more than one late in the last 12 months. There are no restrictions on who may refinance these loans.
Program guidelines include:
- No limit on LTV, if new loan is a fixed rate loan (current LTV must be above 80%)
- Loans previously refinanced under HARP not allowed
- Certain agency fees will be waived if new loan is a shorter term loan
- Appraisals not required where Agency AVM is available
- Certain originator Reps and Warrants will be waived
Borrowers can determine if their loan is owned or guaranteed by Fannie or Freddie at http://www.fanniemae.com/loanlookup/ or http://www.freddiemac.com/corporate/
GADHAFI DEAD?
The head of the National Transitional Council military arm announced on Al Jazeera Arabic that Gadhafi is dead. The report hasn’t been confirmed.
Mortgage bonds are weaker at the open pushing rates higher as news out of Europe indicates the euro zone’s bailout facility will be able to buy EU bonds on the secondary market. The US debt market was weaker heading into the jobs data and didn’t move move following it.
Stock futures are higher adding addition pressure to mortgage bonds. The flight to quality buying of US debt instruments continues to fluxuate as hopes of a European debt solution increase. AS WE CONTINUE TO STATE….the trouble in Europe is far from over and we have been on this roller coaster for some time so expected more volatility to come!!!
Weekly jobless claims @ 403k, expected @ 400k, relatively in line with expectations
Buy the Ticket. Take the Ride.
Volatility dominated the capital markets today as Stock and Bonds flip flopped between negative and positive several times each with Stocks emerging as the winner when the trading day ended.
Fed Chairman Bernanke spoke on Capitol Hill today on the economy and said that the Fed would take necessary steps to grow the economy. The Dow was down 250 points at one point, then traded back to unchanged, then down 200 before closing up 150 points. Mortgage Bonds traded the opposite way of Stocks during the session but at one point Stocks and Bonds were both trading lower. But around 2:30 – 3:00pm ET, a report that EU finance ministers are looking at ways of coordinating to recapitalize European financial institutions pushed Stocks well into positive territory near the close.
Sell off.
Investors sold Bonds today and took some profits after the big surge in prices this week. Markets don’t go straight up or straight down so the move lower today wasn’t a big surprise and came without any gloom and doom headlines.
The 3.5% coupon fell 88bp to end at 102.78. Stock markets fluctuated between positive and negative several times during the session and ended with moderate gains but the Dow had its worst week since October 2008 down 6.4%…closing at 10,771.48 up 37.65. The S&P 500 fell 6.5% this week but managed to gain 6.87 to 1,136.43 while the Nasdaq was up 27.56 to 2,483.23 but down 5.3% for the week. The big news today was the record one day move for Gold as it had lost $100 to $1,641/oz before finishing at $1,653/oz down $88. Oil settled at $79.85/barrel down 66 cents falling 9.2% for the week. Next week economic data is plentiful and will give investors a broad look at the economy.
Let’s Twist Again, Like We Did Last Summer
How do you stimulate the economy without spending any money? You do the twist and shuffle. The Federal Reserve announced Wednesday that it would engage in a new policy known as “Operation Twist,” consisting of selling shorter-term Treasuries and using the proceeds to buy longer-term government bonds. The Mortgage Bond markets soared today after the surprise announcement from the Fed saying that it will be purchasing agency Mortgage Backed Securities from the principal payments from its holdings of agency debt and agency Mortgage Backed Securities in agency Mortgage Backed Securities. The move took players by surprise in a big way. The 3.5% coupon jumped 134bp to end at an all-time high of 103.00 The next few trading days will determine if we switch over to the 3% coupon, which finished at 99.81 up 134bp today.Stocks plunged after the Fed statement read that there are significant downside risks to the economy. The Dow lost 283.82, the Nasdaq fell 52.05 to 2,538.19 while the S&P 500 Index dropped 35.33. Oil in after hours trading was last seen at $84.83/barrel down $2.09. Weekly claims will be released tomorrow.
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