Got this email update from eFannieMae last night....

Fannie Mae lanza nuevo HomePath.com en español, con el propósito de ayudar a más hispanos a adquirir su vivienda. Herramientas interactivas e información diseñada para guiar a los potenciales propietarios a través del proceso de adquisición de una vivienda y prevenir una ejecución hipotecaria

Fannie Mae Launches New HomePath.com in Spanish Aimed at Helping More Hispanics Buy Homes. Interactive Tools and Information Designed to Guide Potential Homeowners Through Homebuying Process and Prevent Foreclosure

I wonder how many homes went/will go into foreclosure because the borrower wasn't a citizen...Banco Popular anyone?

Recap of Yesterday

  • Jobless Claims: 505k vs. 505k expected. Unchanged from prior week. Continuing Claims fell to 5.611 million, lowest print since March . Decline in continuing claims a function of exhausted benefits
  • Oct Leading Indicators +0.3% vs. +prior 1.0% vs.  expected +0.5% . 6 of the 10 composites within the index  saw increases. The largest contributors: a widening of the interest rate spread to 3.27, a decline of 158,000 average weekly jobless claims, higher stocks, real money supply, and manufacturers' new orders for consumer goods.
  • Nov Philly Fed Business Conditions 16.7 vs. prior 11.5; New Orders 14.8 vs. prior 6.2; Prices Paid 14.9 vs. prior 21.3; Employment -0.5 vs. prior -6.8
  • Q3 Mortgage Delinquency Rate Sets New Record at 9.64% vs. prior 9.24% in Q2. Mortgages entering foreclosure process 1.42% vs. 1.36%; Foreclosure inventory rate for all loans 4.47% vs. 4.30%. MBA says will get worse before getting better. READ MORE
  • Fed MBS Purchase Program Update: $16 billion bought last week. Concentration in production MBS coupons. $228 billion left to spend. READ MORE
  • Treasury Secretary TIMMMMAY took a few shots to the chin yesterday from republican members of the Joint Economic Committee on Financial Regulatory Reform. One rep. (honorable) actually said that he didn't want to fire TIMMAY..he just wished he had never become Treasury Secretary in the first place. TG's response: It is Bush's Fault. HA. READ MORE
  • Bill Gross says its time to avoid risky assets as rising unemployment and sluggish growth will keep the Fed on HOLD into 2012. READ MORE
  • Short term TSY debt yields went negative yesterday. Blame year end, blame risk aversion. READ MORE

Treasury announced they will auction $118billion 2s/ 5s/ 7s next week. $44 bn 2s (unchanged in issue size), $42bn 5s (upsized by $1 bn),$32 bn 7s (up by $1 bln).  2s will be auctioned on Monday, 5s on Tuesday, and 7s go off on Wednesday. The three issues will raise $97 bln in new cash for Treasury.

The yield curve steepened yesterday as 2 year notes set a new record yield low, which I think was a function of the stock lever and a short squeeze with a slight nod to year end. Given the corrective momentum that took 2s from over 1.00% before the November FOMC meeting, to 0.68%, where 2s are currently priced, traders had many reasons to speculate on a bounce higher in 2yr note yields, it just never happened and short positions had to cover...call it forced buying + flight to safety. Just goes to show you...dont fight momentum in this marketplace.

At 5:40 when I updated my spread sheet, 2s were stopped at 0.708 and 10s at 3.34. The 2s/10s curve was 263bps, steeper on the day. The curve was steeper but it wasnt really a function of weakness in the long end of the yield curve. Yes, we are hitting huge technical resistance in 10yr futures, yes, today's option expiration kept price action from venturing past 120-00 (3.31), but 10yr TSY paper still traded well yesterday. 2s just traded better...hence the steeper curve.

I think a long term chart of 2yr yields is warranted.

The FN 4.0 ended the day +0-02 at 99-09 yielding 4.078% and the FN 4.5 traded -0-01 lower to 101-22 yielding 4.294%. The secondary market current coupon (CC) went out the door at 4.132%, barely moving on the day. The CC was +79/10yr TSY and +68/10yr swap. "Rate sheet influential" yield spreads were slightly wider thanks to continued choppy price action in benchmarks and MBS profit taking. MBS valuations = rich. Love me some short squeezing in MBS. EXPECT PROFIT TAKING TO CONTINUE INTO YEAR END!

In an unrelated story, I did my gf's homework last week and earned a 27/30 on the assignment. I am happy with that considering I had never written a children's book.  I miss college....

So Far This Morning...

The 10yr tested 3.31% overnight, but as previously explained, ran into a wall of position resistance which forced protective selling and pushed yields higher in the cash market. Chop Chop back and forth in the range continues...

In the MBS market, the FN 4.0 is currently -0-02 at 99-08 and the FN 4.5 is trading +0-01 at 101-23.

The range narrows...there isnt much room for further price appreciation in "rate sheet influential" MBS coupons. Mortgage rates will either go sideways or move higher. Lock.

Empty data calendar today. What should we talk about?