Recap of Yesterday

  • 3Q OVER: FINAL GDP CONTRACTED AT RATE OF 0.7%. LESS THAN EXPECTED 1.2%
  • ADP JOBS DATA says private employers cut 254,000 jobs in September. Market anticipated only 210,000
  • Chicago Manufacturing Index 46.1 vs. 50.0 in August. Stocks sell afterwards.
  • MBA says mortgage apps decline despite average rates being below 5.00%
  • OCC says prime and nonprime delinquencies are rising. Loan modifications also increasing
  • Freddie Mac says it will sell $1 billion in multifamily MBS next week...new issues coming quarterly. Freddie says this will provide "liquidity, stability and affordability" to the multifamily housing market.
  • IMF cuts global debt write down estimate to $3.4 trillion...warns that loan losses could rise in face of high unemployment related delinquencies
  • Fed's Lockhart says its too early to exit QE policy
  • CIT shares plummet 39% as concerns grow that the commercial lender would need to restructure debt and equity 
  • BoA's Ken Lewis steps down
  • STOCKS END QUARTER: S&P -0.33% to 1057. NASDAQ -0.08% to 2122. DOW -0.31% to 9712
  • Dollar weaker against basket of currencies. Euro improved vs. dollar to $1.4629. Dollar fell 0.43% to 89.73 Yen. Dollar index -4.2% in 3Q
  • Crude Oil prices rose 5.37% to $70.29/barrel after gasoline inventories dropped last week
  • Corporate debt spreads wider after weak Chicago PMI data
  • 10yr prices fell 4/32. Yields rise from 3.29 to 3.31
  • 2yr yield fell from 0.95% from 1.00%
  • 2s/10s steeper to 236bps
  • Reuters says MORTGAGE SECURITIZATION rose to over 90% in 3Q....anyone think there is private label market out there? HA...
  • In choppy session MBS prices close weaker. We saw a few reprices for the worse, not many though
  • Busy sessions...Originators offer over $3.5 billion, Fed soaks up. OAS wider.
  • MBS Current Coupon ends day near 4.216%
  • MBS yield spreads: Current Coupon +91/10YR TSY, Current Coupon +77/10yr SWAP

So Far this AM

  • SHANGHAI +0.90%, 28%, HANG SENG -0.28%,  TOPIX -1.51%, NIKKEI -1.53%, CAC -0.72%, DAX -0.55%, FTSE -0.66%
  • PRE-DATA: Equity futures and TSY futures flat overnight. At 6AM TSY futures move higher, equity futures move lower

830 AM DATA...

  • Personal Incomes and Outlays
    • spending up 1.3 versus 1.1 consensus
    • income up .2 versus consensus of .1
    • core PCE at 1.3 versus 1.4 last month (continuing deflation...)
    • rise in personal spending largest since oct 2001
  • Jobless Claims
    • rose to 551k from 534k prior week.  consensus was 530k
    • continuing claims down to 6.09 mln
    • 4 week avg lowest since january
  • American Bankers Association
    • consumer loan delinquency rises to record 3.35 %
    • home equity loan and line delinquencies also at record high - 4.01 % and 1.92% respectively
    • bank issued credit card debt rises to record cresting 5% for the first time

Post Data Reaction: TSY futures higher, Equity futures higher!

The FN 4.5 is +0-05 at 101-13 yielding 4.3275%. The FN 4.0 is +0-07 at 99-07 yielding 4.0889%. The secondary market current coupon is 4.1843%.

MBS Current Coupon Yield Spreads:

CC vs. 10yr TSY: +93bps

CC vs.5yr TSY: +192bps

CC vs.10yr Swap: +79bps

MBS trading as been thin this morning as rich prices and prepay fears keep investors parked on sidelines (based on what originators tell us, we dont think investors should be scared of prepays). Mortgages in general are lagging the yield curve, FN 5.0s are trading close to all time price highs seen in March.  Originators are expected to lock up more loans as MBS prices test all time highs.

Here is the FN 4.5 two day...

The 10yr TSY note yield has broken 3.27% resistance, leading "rate sheet influential" MBS prices higher.


Yield Curve
2s/5s: 2bps FLATTER at 135bps
2s/10s: 1bp FLATTER at 235bps
2s/30s: UNCHANGED at 310bps
5s/10s: 1bps STEEPER at 100bps
5s/30s: 2bps STEEPER at 175bps
10s/30s: 1bp STEEPER at 75bps

Looking ahead, it’s worth keeping in mind the wise words of Mark Twain:

“October. This is one of the peculiarly dangerous months to speculate in stocks,” he once wrote. “The other are July, January, September, April, November, May, March, June, December, August, and February.”

  • 9am - Bernanke Speaks
  • 9am - 30 yr bond announcement
  • 10am - both ISM and construction spending
  • 11am - remaining bond auctions
  • 430pm - oh so important fed balance sheet with first hint about the new world order of remaining MBS purchases

OCTOBER 1 CHANGES FOR NEW MORTGAGE APPLICATIONS

Revised eligibility: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-36ml.doc

loan mods: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-35ml.doc

HECM principal limit factors: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-34ml.doc

 

PS...edited at 950. I see a lender paying at 4.625%


MBS, TSY, LIBOR QUOTES