Loan Biz Blog

What can you say about a trading day like today? How about we’re glad it’s over or blame it on Barney. Earlier we reported on the purple dinosaur’s confusion during story time. Seems as though he forgot about the commitment made by the Treasury on Christmas Eve that the government would will be explicit about GSE backing. About an hour ago, Mr. Barney back tracked on his previous comments. Probably after someone from the Treasury popped him upside the head. He now supports the Treasury’s intention to stand fully behind the December 24th statement on Fannie and Freddie. Given the shenanigans, mortgage backed paper and mortgage pricing traded like a roller coaster, only to end the day down 8/32’s. It could have been much worse. The 10 year note and 30 year bond did not fare as well, down 21/32’s and 46/32’s respectfully. Even with the steeper yield curve, mortgage backs narrowed (good for us) as the huge short squeeze in MBS paper persists. Going into next week, we like the way the session ended, trading off the lows of the preceding 5 day range. Gives us a good chance for a slight recovery into Monday morning before the market sets up for 74 billion in 3’s, 10’s, and 30 year treasury auctions. Reminds me of why the market is just like a saying of Roseanna Danna’s, “if it’s not one thing, it’s another”. Take advantage of any improvement into early next week as we have yet to find a bottom. It’s not too far away, but not nailed down just the same. Some days this business we have made a career in just doesn’t go our way. It’s easy to get discouraged, think about throwing in the towel and looking for a place where the grass is just a little greener. Many times when I find myself inviting people to my pity party, I think of the overwhelming odds that faced Colonel Travis and his men at the Alamo. He has been called America’s patriot. On the eve of his last day on earth some 174 years ago, I’d like to share his letter with you. Have a great weekend!

The Travis Letter

William Barret Travis, a young lawyer, in his 20's, from South Carolina, was ill-prepared for the monumental task he had at hand. With only limited military experience, his rank of "Colonel" was more honorary than anything else. Seemed everyone was a colonel in the fledgling Texas Army. Yet, he faced the overwhelming odds he found himself staring at with a grim - and bold - determination. It is not often in life that someone, with all on the line, gets to practice what they preach. In his plea for assistance, Travis sets down the rules for exactly that ... and then, he lived it! In this most powerful letter, one of the truly moving documents of our storied past, Travis gets to say what everyone would love to be able to have the opportunity to say. They are not mere words - stirring though they are - for they foretold his destiny. It would not be long before "victory or death" would be at hand. Read this letter slowly ... savor every word ... it is the stuff of legend!

Commandancy of the Alamo

Bexar, Feby. 24th 1836

To the People of Texas & all Americans in the world --Fellow citizens & compatriots -- I am besieged by a thousand or more of the Mexicans under Santa Anna -- I have sustained a continual Bombardment & cannonade for 24 hours & have not lost a man -- The enemy has demanded a surrender at discretion, otherwise, the garrison are to be put to the sword, if the fort is taken -- I have answered the demand with a cannon shot, & our flag still waves proudly from the walls -- I shall never surrender or retreat. Then, I call on you in the name of Liberty, of patriotism & everything dear to the American character, to come to our aid, with all dispatch --The enemy is receiving reinforcements daily & will no doubt increase to three or four thousand in four or five days. If this call is neglected, I am determined to sustain myself as long as possible & die like a soldier who never forgets what is due to his own honor & that of his country –

Victory or Death.
William Barret Travis
Lt. Col. Comdt.

P.S. The Lord is on our side

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Funny thing about snow. Americans from our states that deal with it every winter always seem to get done what they have to get done. Given the Employment data this morning, the weather being a factor just didn’t materialize. For the record, the economy lost 36K jobs while the unemployment rate remained steady at 9.7%. December and January job losses were also revised, improving December by 49K and January by 6K. Job creation in February was mixed with Construction jobs taking the worst of it, down 64K. Temporary hiring improved 48K and generally is seen as a precursor to permanent hiring. Health care and the government added a few thousand jobs yet information systems and financial servicing were a negative. The average workweek fell .1, probably reflecting correctly the affects of Winter’s wrath. Post data, treasuries took a tumble but mortgage backs hung in there, down only 5 to 7/32’s. We expected the short squeeze in MBS to help and for a while, our assumption looked good. Then came the selling as originators and mortgage servicers unloaded on the market. At one time, FNMA and GNMA 4.50% coupons were off 15/32’s. Just when it looked like a “Katie bar the door” day, the Treasury Department came to the rescue, telling Reuters that “there should be no uncertainty about Treasuries commitments to Fannie and Freddie”. Treasury added that Fannie and Freddie continue to play a vital role in the housing market during the current crisis. At the same time, Barney boy confused the markets by telling investors that investors should not bet on a government guarantee for their GSE investments. In this case, mortgage pricing looked like a game of crack the whip, eventually settling down as traders interpreted that Treasury trumps Barney. Currently, we’re off 9/32’s on current coupon mortgages and down 22/32’s on the 10 year note (yield 3.69%). Stocks are having a nice day, up 85 points on the big board. The weakness today has taken prices back into the range that has been forming since January. The center of that range lies at 3.73%, a target we would expect the bears to go for. The failure to continue our recent rally is more reflective of overbought conditions than a new bear trend. Let’s call the market neutral with a slight edge to sellers (bearish trading). With the MBS short trade still in play, our bias is for continued worsening of mortgage pricing but by only .25 tops before we attempt another rally. Keep your pipeline close to the vest until the skies clear. We’ll wrap it all up later today.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Soooooo, let’s see what we have to deal with today; Sovereign debt problems in Greece continue to hold Euro zone hostage, massive short in our mortgage backed securities paper has traders scrambling, economic news such as Productivity, Factory Orders, Unemployment Claims, and Pending Home Sales, Treasury auction supply coming next week, and tomorrow’s weather skewed Employment Report due out at 7:30 am cst. Just another day at the salt mine. Weekly Unemployment Claims fell 27K to 469K as seasonal factors and the weather related snafu has everyone guessing is this real or Memorex. The big picture points to the percentage of eligible people receiving unemployment benefits being 3.5%, well above the reading that creates jobs. Seems to us that unemployment is stabilizing albeit at higher levels. Not the makings of a vibrant economy. Pending Home Sales looked like a Rottweiler as well, falling 7.6% in January. Economists were looking for a plus 1.0% print. Once again, the NAR Chief Lawrence Yun blames the weather for affecting home shopping. Maybe we’ll get a clear read in July. For the record, all regions were in the red with the West falling 13.2%. Did it snow in California? Factory Orders were up 1.7% with the ex-transportation up .1%. A 15% gain in transportation orders did this trick for this number. Maybe new accelerator parts for Toyota. Productivity gains were off the chart, rising 6.9%. The flip side was a drop in labor costs of 5.9%. We are putting computers to work, not Joe the Plumber. All of the above has flattened the yield curve with the 10 year note up 4/32’s and the bond plus 13/32’s. Mortgage backs are plus 2/32’s but since we rolled pool months from April to May, pricing stayed the same even though we had late gains yesterday and gains this morning. With the spread between April and May being 12/32’s, blame the timing of the month for taking away your pricing. One positive here is that until we work through this massive off sides market position in MBS, mortgage pricing will be supported, helping to keep pricing stable. Since I will be out this afternoon, I’m going to give you our best guess on tomorrow’s jobs data.

Expectations for the February Employment Report are as follows;

1) Non-Farm Payrolls – Minus 50K

2) Unemployment – Rate 9.8%

3) Hourly Earning – Plus .2 month on month

4) Average Work Week – Minus .2

As we have been talking about, the weather is going to make a mess of the numbers as well as the number of census workers hired by the government. We expect continued job losses in manufacturing, construction, and private services payrolls. Construction should be hit the hardest, probably losing another 50K. Consensus workers are a wild card as the government is expected to ramp up hiring, adding 1.2 million short term workers over time. Using one standard deviation and a dart board, our bias is for 100k in job losses and a 9.9% unemployment rate. JPMorgan has the call at minus 90K and 9.9%, Barclays at Minus 75K and 9.8%, Wells Fargo at minus 80k and 9.7%, and Credit Suisse the outlier at minus 125K and 9.9%. If there is a miss, it will be towards more job losses than less. You may recall that I wrote about John Ryding call that job losses would be minus 250K. Don’t know if he is right but I do know he’s a pretty sharp dude. What will the market do? Most likely blow the numbers off due to distortions in the weather but trade nonetheless in a volatile fashion. Once the dust settles, we would expect that pricing will be close to today’s levels “unless” the number is below expectations. Let’s say we see a -25K or unchanged print. We feel the market would interpret that to be much better than expected once you factor in the weather distortion. Really, this one is a crap shoot. With pricing at some of the best levels we’ve seen, it’s always a good idea to square up your pipelines in front of such a high profile piece of data. Technically, we’re not getting much help as the 10 year note chart has formed a triangle pattern on the daily time frame. We would need to close below 3.45% to turn this into a raging bull (currently 3.61%) so not much help there. Triangle patterns typically wind themselves up, tighter and tighter before a break out occurs. Given the distance in basis points for a bullish outcome, we would side with a break out to higher yields/ worsening mortgage pricing to coincide with the ending of the short squeeze in the MBS market. To put this in English and cut to the chase, be careful out in the days ahead with customers wanting to “float”.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

The bond market seems to be defying gravity despite all kinds of reasons to trade towards higher yields. One reason the Treasury market seems to have found support is that the SIFMA (Securities Industry and Financial Markets Association) is reporting 700 billion in fails to receive/deliver mortgage backed paper. Throw in 70 billion that FNMA and FHLMC bought back in February (delinquent buyback program) and you have a number of investors scrambling to hedge up positions in fixed income portfolios. On a go forward basis, FNMA and FHLMC are expected to buy back another 150 billion. Accelerating prepayment speeds has also given the fast money types a reason to back MBS and flip to another asset class (treasuries) with a more predictable prepayment speed. All of the above will make the set up into Friday’s payroll numbers a dicey affair. Best to take advantage of any price improvement by Thursday afternoon. Technically, the buying looks suspect because it is not endorsed by any daily study turning bullish. All are neutral, telling us that all we’re doing is rattling around in the range. One more thought; as a big fan of western history, today marks an important day for the state of Texas. On March 2nd, 1836, Texas declared independence from Mexico. 59 signers gathered on this day so many years ago in a blacksmith shop at Washington-on-the –Brazos and formally split from Mexico to form the Republic of Texas. The signing came less than one year after the Texas Freedom Fighters fought their first battle in Gonzales, October 1835. Texas won independence when the revolutionary army whipped Mexico at the Battle of San Jacinto on April 21st, 1836. Texas later joined the Union in 1845. So for all ya’ll Texas out there, pull a cork and celebrate the day!

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Lot’s going on, lot’s to do, and no time to do it all. Results of the 7 year note auction just hit the tape to yield 3.078% with 40.3% going to Indirect Bidders. Direct Bidders stayed away, taking only 17.2%. Bid to cover was a respectable 2.98 to 1 with only a .5bps tail. Given it a B and close the book on this week’s financing. As you can read in Gail’s piece, concerns about a Moody’s downgrade for Greece, Unemployment Claims jumping 22K, and Durable Goods (ex-transportation) falling .6% are not the makings of an economic recovery. Stocks feel the pinch, down 156 points on the big board while the flight to quality trade is on in treasuries (10 year note up 14/32’s). Mortgage backs have followed suit, up 5 to 6/32’s depending on the coupon. Technically, the chart gapped higher leaving what we call an “island reversal” behind. Bullish formation that typically leads to a full retracement (revisit the best levels set 2/8). That area is only ½ point away in 10 year note trading and if achieved, could boost mortgage pricing by another .125% to .25%. What I’m getting at here is that the market trades well but your risk reward is starting to dwindle.

Given the stiff resistance overhead, best to use the improved mortgage levels and take a little off the table. Too many cross currents leading to too much volatility doesn’t allow any of us to put our feet up on the desk. Take advantage.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Case-Shiller 20 city home price index was the first to hit the tape, down 3.1% year on year and off 2.5% Q4. The numbers were close to expectations with a few bright spots like Dallas, Washington DC, San Francisco, and San Diego showing year on year price appreciation. David Blitzer, Chairman of the index committee at Standard and Poor’s, said the housing market is in better shape than it was a year ago and showing signs of stability. Our next hurdle will be the removal of MBS purchases by the Fed and the elimination of the 8K tax credit. Time will tell. Consumer Confidence was up next, falling sharply by nearly 10 points to 46.0. The present situation hit 27 year lows while future expectations fell to levels not seen since July 2009. The weather could have been a factor but overall, the numbers are disappointing as consumers do not see their problems as temporary. What we need here is some supply side economics, ala Ronald Reagan. All of the above, combined with a drop in Germany’s consumer confidence has given our market a nice little pop. Stocks are on the slide, down 65 on the big board but the 10 year note is plus 17/32’s on the day. Mortgage backs are up 12/32’s on the 4.50% security. We priced up 11/32’s, giving you the benefit of the market right out of the shoot. The buying today has pushed the chart back through resistance but has not eliminated the bearish trend readings. We like the price action which has put the market in a neutral bias, stopping the bearish bias of the past few days. One thing to keep in mind is that auction supply started today and concludes on Thursday. Given the souring economic data, we’d expect willing buyers of all three issues. Good time to take advantage of better pricing, using the float down just in case things go from bad to ugly (economic data).

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

The first trading day of the week is off to a slow but positive start for us mortgage types. Although the 10 year note is down 2/32’s (yield 3.79%), mortgage backed security spreads have tighten, posting gains of 5/32’s on the day. Stocks have been of little help, waffling on either side of unchanged all day. No news this morning but the calendar will heat up as we move towards the end of the week (see attached). Of particular importance will be the Housing data on Wednesday and Thursday, followed by 4th Qt. preliminary GDP on Friday. The treasury auction calendar is in full swing with 126 billion up for grabs, starting tomorrow with 44 billion of 2 year notes. The good news here is that all the paper is shorter in duration (2 year through 7 year) which should have better appeal to the investor community then the debacle 2 weeks ago. Another key to market direction this week will be Sir Ben’s testimony before the Humphrey-Hawkins group on Wednesday and Thursday. We expect him to manage his speech and question/answer period back to “core” Fed values, emphasizing low rates for and extended period and no assets sales until some sort of economic recovery is well underway. The technical view of all this mumbo jumbo is to stay defensive, selling rallies into auction supply and Sir Ben. Intraday charts have improved but the lack of strong gains and bearish readings on daily charts suggest that the market is corrective in nature. If our work (and that of others) is correct, we would expect a larger bearish move (more selling/worsening mortgage pricing) in the days ahead. To avoid another leg down, we need to close below 3.74% on the 10 year note (end of day close). Best to keep both hands on the wheel.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

New day, same story. Mortgage backed securities are getting a dose of the “new normal”. The point here is that the Fed has been buying MBS for the past 14 months, starting at an average of 100 billion a month and then tapering off to 50 billion a month. Within this process, they (Fed) has bought the majority of the new issue MBS (loans we have been producing) and now owns 20% of outstanding MBS paper. That part of this Quantitative Easing process will end soon (end of March). That said, the street is being overwhelmed with mortgage paper by originators, servicers, and portfolio types that make this their business. The spike in mortgage rates and worsening prices will be worked into the system until we find a new buyer/buyers to replace Uncle Sam. The other part of this market “two step” happened yesterday after the stock market closed. That’s when the Fed raised the Discount Rate. For the record, the Discount Rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from the Federal Reserve Bank lending facility, the discount window. Usually, these loans are extended to commercial banks, etc. for a short period of time. The move was technical in nature but does start the ground work for monetary policy changes to remove Quantitative Easing measures put in place over a year ago. Earlier today, CPI, inflation at the consumer level, hit the tape plus .2% with the core index (ex-food and energy) down .1%. The print was better than expected and points to inflation well under control. Market action was positive for the 10 year note and MBS post CPI with mortgage backs unchanged to up a tick or two. That mini rally quickly faded as mortgage players entered the market, selling on the reality of my opening few lines. Currently, the 10 year note is off 1/32nd to yield 3.81%, mortgage backs are off 7/32’s, and stocks are plus 36 points on the big board. The next 30 days are going to be tricky as volatility and the changing dynamics will be difficult to handicap. Given what we know, you should error on the conservative side, locking loans as they come across your desk. Once this period of adjustment is priced in the system, we expect mortgage pricing to rebound (get better) as MBS product will look attractive on a yield basis and the overall economic picture will still be a concern. We’ll try wrap this up as happy hour approaches.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Adding insult to injury, the Fed just raised the Discount Rate from 50 bps to 75 bps. The FOMC minutes eluded to the possibility (yesterday) but the market did not expect it would happen this soon. They (Fed) are saying that no change in policy has been signaled. Market reaction has been negative as sellers once again are pounding the street with paper. MBS now off 19/32’s. Lucky for us the devil will close in 5 minutes. We’re looking for a little stability and maybe a small rally to relieve oversold conditions in the morning. That happening “if” CPI comes in as expected or better. Careful out there.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

The selling of treasuries and mortgage backs has been relentless, continuing the slide as we head toward today’s close. Heavy selling by leveraged funds and mortgage hedgers has taken its toll on current coupon mortgages, currently down 17/32’s. 10 year note trading is no better, down 19/32’s to yield 3.81%. On the chart, trend intensity is has turned bearish and daily oscillators and firmly on the sell side. The low today touched the 40 day moving average and needs to hold into the close or further selling will be likely. Expecting a rally here of any magnitude is a lotto ticket so stay very defensive with your pipeline. Best we can hope for is a tame CPI (inflation) number in the morning to boot strap this thing back into the range. Hang in there.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Bond prices were mixed yesterday as yields on the short end of the curve fell a touch while longer maturities saw their yields rise. We held our ground into the afternoon hours and kept the range trade alive.  Overall, the bond market's performance was not bad given the stronger performance in stocks, EU pledge to clean up the Greece situation, stronger-than-expected initial jobless claims data, and the weak long-bond auction.  

Overnight, China announced an increase in its bank reserve requirements in an effort to drain liquidity, loan growth, and property appreciation. The move is having its most direct impact on commodity prices but has also pressured stocks a touch lower. In other world news, German Chancellor Merkel slowed the Greece rescue plan, leaving the path forward there uncertain. This morning, bond prices are higher and have had little reaction to this morning's retail sales report. For January, retail sales were a touch better-than-expected with overall sales rising 0.5% while ex-auto and ex-auto & gas sales both rose 0.6%. December's retail sales were revised slightly higher.  The rally today has taken prices to the 50% retracement of the preceding drop at 118-07.  Hourly studies are endorsing the strength but trend studies still remain neutral.  We have pushed through resistance at that 117-31 level and additional strength should drift up to 118-125 if the market has its legs. However, daily charts still lean bearish, making a major rally unlikely.  We currently are trading 3.68 on the 10 yr  (118-06).  These are good levels so it’s probably not a bad idea to take advantage of the current pricing.  Without a major breakout developing, best to keep hand on trigger!

You will want to stay tuned for this one!

Just a quick note as we are way behind the curve this morning. For the most part, the jobs report was bond bullish, improving or holding steady mortgage pricing as Nonfarm Payrolls fell 20K. Since the print, both stocks and mortgage backs held close to unchanged. Within the last 10 minutes, stocks have slipped, now down 88 points on the big board. This has helped to goose MBS higher and allow us to improve pricing by .125% (out shortly). With S & P futures (stocks) right on good support, we would expect a bounce in stocks early next week (at least a short term trade). So with the price improvement, it’s not a bad time to take a little off the table, expecting stocks to recover and our mortgage pricing to get pinched (consolidate) as the week begins. It fits with the technical picture as well since we are now becoming over bought in the near term. Overall, both global and stateside concerns will keep the market on edge and support lower mortgage rates. Interesting stuff from Gail this morning, especially the first piece on extending MBS purchases. Pray that the Apple Dumpling Gang gets it right. Wonderful to see all you PrimeMericans the past few days. Safe travels.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

The ongoing wave of debt concerns in the Euro Zone. Lithuania joined the debt woes of Spain, Greece, and Portugal, forcing the ECB to have Plan B ready. That being a stimulus package if all of the above cannot raise capital and pay their bills. The concerns hit equity markets across the pond like a brick, spilling over to stateside trading right from our opening bell. Currently, stocks are off 200 on the big board as the macro concerns keep on comin’. Bond and mortgage back traders have a tactical bias to sell strength into tomorrow’s payroll numbers but seem to be caught between a rock and a hard place as the above mentioned has caused a flight to quality in U.S. fixed income products. Currently, the 10 year note is up 18/32’s (yield 3.63%) with mortgage backs up a smooth 8/32’s. With mortgage pricing better by .25% and the always volatile Employment Report for January out tomorrow at 7:30 am cst, squaring up your pipelines is always a good bet. More on our “employment guess” this afternoon. Earlier today, Weekly Jobless claims rose 8K, much more than the expected drop of 10K. With seasonal factors in the rear view mirror, the numbers seem to be leveling off at the high end of the range. Disappointing indeed. Preliminary Q4 Productivity jumped 6.2%, in line with most economist expectations. The number is all about growth in output versus hours worked. Good for corporate profitability, bad for jobs. We’ll complete the economic hat trick with Factory Orders crossing the tape plus 1%. Most of the gain can be attributed to inventory rebuilding yet a positive sign came by way of Durable Goods, up for the first time in three months. Technically, yesterday’s selling in 10 year notes took the contract to support but held within the current range. That weakness did not accelerate any sell signals but does tell us that sellers are gaining the advantage. As I mentioned above, they are frustrated with macro events just the same. Looking a little deeper, we see slow stochastics bullish but stalling and Elliot Wave counts pointing to a top and correction since printing a yield of 3.59%. From a pure chart play, we would advise locking in your loans. Trouble with that is stocks and all the global heartburn can put the chart on its head. Tough one to handicap. Given the high profile jobs number tomorrow, it’s best to be a live dog than a dead lion when it comes to pipeline management.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Pending Home Sales hit the tape up 1.0% to 96.6, stabilizing after last month’s record 16% decline. Contract signings rose in every region of the country except for the West which declined 3.8%. The Midwest did the best, up 5.2% after getting punished last month for a loss of 25.7%. The leveling off in this index points to the continuation of the 8K tax credit for first time buyers as move up buyers are still on the sidelines. The Street also took note of the rise in the U.S Home Vacancy rate which rose 2.7%. While we see the data as “less worse”, the pressure continue on our housing market. For the most part, most market are relatively calm. Stocks are up 60 something on the Dow, 10 year notes are up 2/32’s (yield 3.65%), and mortgage backs are plus 2/32’s as well. Overall, both stocks and bonds seem to be worried about Regulatory Policies and the removal of stimulus as we move into the new year. The political rush for bank and financial reform is at best in chaos, being thrown from one side of Capitol Hill to the other, right along with the Federal Reserve Chairman. As we mentioned earlier, the removal of stimulus is the political hot potato. Without it, we need more Americans employed to keep the housing industry moving. Without the consumer back in the game, a double dip recession, led by housing is a real possibility. Politicians and the populous movement are angry about continuing anything associated with growing the government and adding to the deficit. We believe in a phase out, not going cold turkey with respect to the 8K credit. In the short run, it’s tough to find a political or regulatory rabbit to pull out of the hat. As Mortgage Bankers, we has been through tough times in the past and always come out on top. This period of craziness will be no different. Cream always rises to the top! Going into Friday’s Employment data, our bias is for a neutral/defensive fixed income trade. Most time frames on the chart has gone neutral with little sponsorship from either bulls or bears. We do like the fact that some oscillators suggest that further upside (rally) is plausible but needs a catalyst. That probably comes Friday morning. Trouble is, what will the data be? Until that cat is out of the bag, locking in your pipeline is the best sleeping pill we can prescribe.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

The lack of month end buying and rebounding stocks has pinched treasury and mortgage pricing this morning. 10 year notes are off 12/32’s (yield 3.65%), mortgage backs off 6/32’s, and stocks are up 85 on the big board. The week ahead will be loaded with first tier data including everything from Construction Spending, Housing numbers, and the Employment Report for January. Earlier today, Personal Income/Spending hit the tape plus .4% and plus .2%, slightly better than economists has predicted yet not anything to write home about. Construction Spending was another story, falling 1.2% versus the minus .5% many were looking for. Cold weather and competition from a heavy inventory of distressed/foreclosure sales has done the trick once again. The ISM Index (Manufacturing) surprised to the upside, putting it its best number since August 2004 (plus 3.5 points to 58.4). Digging deeper into the numbers, most of the gains came from new orders as inventories need to be rebuilt. The question now becomes, will buyers step up to take the newly produced goods off the shelf? Time will tell. President Obama’s projected budget sets a new record deficit (1.516 trillion in 2010) as the new budget looks to be 3.8 trillion. Bailout costs for FNMA and FHLMC alone will be 153 billion. Wow. Technically, note, bond, and MBS structure are in neutral as follow through to the upside (rally) is not in the cards. Bulls need the 8 day moving average (currently we’re sitting on it) at 3.65% to hold. We expect that area to hang in there into tomorrow. Traders will then make a move, one way or the other, on Wednesday and Thursday to hedge positions up for Friday’s Employment Report. Tough one to handicap as predictions on Nonfarm Payrolls and the Unemployment Rate are all over the map. Cautiously optimistic is the best we can come up with.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Although the early morning economic data was much better than expected, especially GDP plus 5.7%, stocks are just above unchanged and bonds, notes, and mortgage backs are grinding higher (rally). Most of the improvement in treasury and mortgage pricing can be attributed to month end hedge fund extensions. Barclays index, which most money funds must follow, call for a .06 duration extension in fixed income funds. This is healthy and has forced firms that must comply to the index to step up and buy all the instruments we just talked about. Concerns over stock price valuations continues to support our market as well. China slowing its economy, Greece going broke, and political policy uneasiness in Washington DC are all giving the stock market a continuing headache. With the price change for the better that Big Joe just threw your way, it’s a good time to lock in a few at the best levels of the week. Monday will be a new month and the hedge fund buying will be history so take advantage if the need is there. More this afternoon as we wrap it up for the week.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

I’m sorry about playing “crack the whip” with your pricing today. It’s been a volatile session. With 15 minutes to go in cash Treasury/MBS trading, the market is going out on the lows (highest yields/worst mortgage pricing) of the day. Fed Governor Hoenig’s dissent looks to us like an interest rate protest or maybe it’s the first vote/trial balloon. Traders were expecting the same old, same old and got sideswiped by the hawkish detail I just mentioned. This one is a tough call, trying to figure out if it’s the beginning of a tightening cycle or the Fed’s way of testing the market towards removal of accommodation (stopping the Treasury/MBS purchase program, etc.) With so many cross currents it’s tough to remember who’s on first. I can tell you from a technical stand point that the market put in an outside day down, including a test of the best levels we’ve seen since November and then failing. The rejection from the top and outside day down are strong indicators of a market top in the making. This does not mean that the consolidation we expect will be huge, just that it has a very high probability. Given the fact that the 8 day moving average held, sellers will need to trade the market above 3.65% for a sustained period of time to do any real damage. For now, the brackets to watch are 3.65% to 3.57% (we are set to close right at 3.65%). Anything outside these parameters to the high side is bearish for interest rates and below 3.57% is bullish. Given the uncertainties on so many fronts, you should expect the unexpected right along with volatile trading and mortgage pricing. Hopefully, the State of the Union Speech will give us a little help. Hang in there and keep both hands on the wheel.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Just a heads up as the market is drifting lower (MBS now down 5/32’s) as Fed Governor Hoenig, who believes that economic and financial conditions have changed sufficiently and that expectations of low interest rates for an extended period of time are no longer warranted. Comments were made about Treasury/MBS purchase program that are set to expire March 31st or June 30th are still in vogue. Markets are slipping as we speak, warranting a worsening re-price for .25. Hang in there.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Treasury Secretary Geithner is medium rare as the House Oversight Committee is grilling him on AIG. Undisclosed documents, backroom deals, maybe a cover up coordinated with Sir Bernanke, and the counter parties all paid off at par (by the taxpayers) are the hot topics. As we speak, their search for a smoking gun continues. The FOMC is finishing up their two day meeting with any change in short term rates and policy statement due out at 1:15 pm cst. The consensus thinking is that they will continue their low interest rate policy for an “extended period of time”. We also expect the FOMC to note that the economy still has “challenges” with some improvement seen within the economy. Given today’s power packed agenda, the FOMC should not move the market. Earlier this morning, New Home Sales dipped by 7.6% to 342K units. Sales gains in the Northwest and West were over shadowed by losses in the Midwest and South. Housing, along with employment, needs to be top priority for our country. Let’s see what the CEO of the U.S. has to say tonight. We also have 42 billion of 5 year notes on the auction block. Results are due at high noon cst. Given the anxiety in stocks and overseas markets, we expect the issue to go well. Trouble with this call is that it is happening on a FOMC day and historically, only one out of the last five have come in on the screws. The others had been sloppy. Technically, the market is making higher highs and higher lows, holding the bullish regression line. Once again we challenged the 3.56% yield level and have backed away. Given all of the cross currents, we advise a defense pipeline strategy until the dust settles. Currently, the 10 year note is up 6/32’s (yield 3.61%), mortgage backs up 3/32’s, and stocks off 30 something on the big board. Buckle up!

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Results of the first leg of this week’s auctions (2 year note) just hit the tape. Yield came in at .88%, Indirect Bidders took only 11%, and the bid to cover was 3.13 to 1. The issue also had a 1 bps tail. This was not an aggressive auction so we’ll give it a C. Post results, the market pulled back and briefly when negative on mortgage backed securities. Currently, the 10 year note is up 2/32’s (yield 3.62%), mortgage backs up 1/32nd, and stocks plus 73 on the big board. Trading is a little spooky right now as Wall Street dealers fear there might not be the sponsorship for Wednesday and Thursday’s longer duration auction paper ( 5’s and 7 year notes). We also have the FOMC statement tomorrow and the State of the Union speech so buckle up, this thing could get slippery. Earlier today, Consumer Confidence was out with a print of 55.9 (improvement) and the Case Shiller Home Price Index was down 5.3% (as expected). Earlier than that, the wheels were churning across the pond as Italy, Greece, Spain, Portugal, and now Japan are struggling with their sovereign debt. S&P just put Japan on the negative credit watch. With China putting the brakes on bank lending, the mood outside the U.S. is tentative at best. On the bright side, Barclay’s has issued their indices for month end extensions, a measure that fixed income funds must conform to per their filings. The extensions are larger than expected so in English, this will be supportive of mortgage pricing until at least Thursday afternoon. Technically, the high today approached the 62% retracement level of the November/December selloff (188 11 in futures/ 3.56% yield on the 10 year note). We failed to take that level out and have now backed away. Not to rain on your parade but this failure could be the start of a new corrective phase. Your key will be if yields on the 10 year note print 3.65% or higher. On the bright side, daily oscillators are still posting positive readings and holding above midrange levels. All good things for those that want lower mortgages/better pricing. Just want you to know that this baby is like herding cats so keep both hands on the leash! P.S. we’re rich to the market (investor pricing) so a price change for the worse (.125) should come as no surprise.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Bond prices rose yesterday as stocks suffered another beating. The Dow and bond yields both closed at their lowest levels in a month. Stocks were reacting, in part, to President Obama's renewed focus on reigning in big banks. The administration is seeking to curb proprietary trading and reign in too-big-to-fail institutions. Despite widespread support on Capitol Hill for constraining the large banks, it is unclear how soon and in what form the President's proposals will materialize. The moves would require Congressional approval and House Financial Services Chairman Barney Frank indicated that the changes would not be in effect for a number of years. Meanwhile, the confirmation of Sir Bernanke, which was thought to begin as soon as today, does not appear to be making any progress. Senate Majority Leader Reid, who must schedule the vote and does not appear to have sufficient Senate support to do so, seems to be waffling based on a quote where he said "As the Senate prepares to take up Chairman Bernanke's nomination, I look forward to hearing more from him about how he intends to address these issues." This morning, bond prices are slightly lower and stocks have once again opened lower. Corporate earnings and, in some cases, even revenues are coming in better-than-expected but investors seem focused more on concern for the future than joy over the fourth quarter. The economic calendar is dormant today. The economic data releases on tap next week are not terribly significant but it will be a momentous and potentially volatile week with the State of the Union address, the FOMC meeting, and the last week of Bernanke's current term as Chairman. Currently we are trading off a tick or two in mtg backs with the 10yr unchanged at a 3.61yld. Buying yesterday forced prices to close above the 50% retracement of the Nov/Dec sell-off at 117-28. The market is trading that level as we speak. The next target would be the 62% retracement of that previous sell-off at 118-11. We would expect to see a push to that level with some light consolidation on the way up. Have a great weekend!

With Permission & Courtesy of Joe Webb
Senior Trader

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen
Your Mortgage Professional
PrimeLending | a PlainsCapital Company
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888)675-6262 Toll Free Fax: (866)908-2611

Weekly Unemployment Claims jumped unexpectedly by 36K to 482K. Continuing Claims came in at 4.599 million, nearly unchanged over the past two weeks. Dow Jones reported that the spike in Weekly Claims was due in part to a backlog of Christmas and New Year’s filings. They are calling it an “administrative thing, not an economic thing”. I’m not so sure about that when you look at Emergency Claims jumping 652K. They continue to soar due to recent extension changes (new claimants) while those already on emergency benefits are not coming off the roles. Leading Economic Indicators were also released, up 1.1% versus the expected plus .9%. 8 of the 10 components indicated growth via month on month comparisons. The trouble with this data is that it is rear view mirror stuff, information that we already know and is priced into the market. When its release, the market blinks and moves on. What is catching trader’s eyes this morning is China and their latest release of GDP. The plus 10.7% has the Dragon breathing fire and Wall Street worried about overheating. Given the data, China will need to curb growth sooner than later which will certainly have an effect on our economy. Stocks are taking a beating, down over 200 points. Metals, oil, commodities, and financials are all to the downside. Financials are really spooked as the Prez just held a news conference about limited bank risk taking. The good news is that for every stock market whipping, money always runs for cover in the bond market. Even though the 10 year note looks a little tired, given the rally over the past few days and upcoming auction supply next week, the 10 year has powered through resistance and now trades a 3.61% yield. Mortgage backs have had a good day as well, up 5/32’s on the current coupon. Bullish signals are still active on daily charts but open interest has been falling. This means that as we advance (rally), volume is declining, usually a sign that a top or at least a stall is near. Makes sense into next week’s auction supply. The other component that has kept mortgage pricing from any radical improvement is that spreads between our paper and the 10 year note are widening. Underlying reason here is the backlog of foreclosed homes that is overshadowing a recovery in housing. Servicers are holding inventory or renting it, reluctant to push it on the market for fear of further depressing values. We’re going to deal with this throughout 2010. For now, get a few locked at some of the best levels we’ve seen in some time.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

For the most part, markets are quiet, trading just above unchanged. Oil and gold up, the dollar down, and stocks up a baker’s dozen on the big board. Bonds, notes, and MBS are a mixed bag with the 10 year note off 3/32’s (yield 3.82%) and MBS current coupon up 1/32nd. The week ahead will feature little news until Thursday’s dose of Retail Sales, Weekly Unemployment Claims, Import Prices, and Business Inventories. Friday’s finale will feature a heavy slate as well. CPI, inflation at the consumer level, will be the highlight (complete week attached). Tuesday, Wednesday, and Thursday’s trade will have to content with 84 billion in auction paper. 3’s, 10’s, and 30’s will all cross the auction block. Given the paper, a defensive strategy should be taken as we look for a 3.78% to 3.88% range on the 10 year note. The curve is at record steep levels but should unwind a touch (flatten) as we get through the bond auction on Thursday. Interesting article in the Hartford Courant on Saturday which featured Fed Governor Rosengren talking about the direction of mortgage rates “if” the Fed ends its MBS purchase program. “If” the program ends, he is looking for a bump in mortgage rates of .75% from today’s levels. He also went on to say that the Fed could extend the program if the economy deteriorated dramatically. In our opinion, this program and the 8K stimulus MUST be extended until the housing industry gets back on solid footing. Let’s hope they get it right. Technically, the market has not been able to form a strong bias over the past few sessions despite very oversold conditions. From our work, the chart is trapped right in the middle of good support (3.88%) and good resistance (3.76%). Given that the spread between 2’s/10’s and 2’s/30’s are at historic wides, odds favor a little improvement in pricing once the auctions are out of the way. Until we see who shows up to buy all this paper, keep your defense on the field, selling strength if the opportunity presents itself. One more thing; Congrat’s to all you Cardinal, Raven, and NY Jet fans. And oh ya, how bout’ them Cowboys!

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

For the most part, today has been all about squaring positions before tomorrow’s all important Employment Report. The tight range, back and forth price action, has been with us all day. Mortgage backs started in the hole, down 3/32’s early this morning but now are down 8/32’s. Wishy washy trade with a bearish bias. A worsening price change for .125% is a layup. Most of the bearish bias has come from “whisper numbers” on tomorrow’s data printing on the positive side. My number happens to follow suit, looking for a plus 20k jobs growth. Stocks have traded much in the same fashion, printing on both sides of unchanged as we enter the last hour of trading. Tomorrow’s jobs report is big from at least two perspectives. One is that it is the first high profile piece of data in the new year. Two, it is given an overweight as to the direction of the economy. No jobs, no growth while the flip side projects just the opposite. No matter what your bias, getting your pipelines squared up is high priority as this number creates high anxiety and volatility. For the record, here’s what the market is expecting for tomorrow;

1) Nonfarm payroll – Minus 8K jobs

2) Unemployment Rate - 10.1%

3) Hourly Earning – Plus .2% month on month change

4) Average Work Week – 33.2 hours

While the ADP report (yesterday) predicted job losses of 84K, most traders are looking for a number on either side of unchanged. Our bias is based upon the weekly unemployment reports that are used in the reporting cycle (for the monthly number). Average drop has been 20%. The next factor has been a steady improvement in private sector service jobs. Last month’s gain in this sector was 51K, the first improvement since November 2007. We believe it will surprise on the upside again. Manufacturing and Construction will continue to be the dogs, shedding another 80K jobs combined. We expect the Government to add about 10K and see the 2% gain in temporary workers shifting into full time, permanent employment. Add it all up and our call is plus 20K. We agree that the unemployment rate bumps up just a bit to 10.1%. What others are saying;

1) UBS – Minus 35K at 10.2%

2) Credit Suisse – Plus 10K at 10.2%

3) RBS – Plus 25K at 10.1%

4) JP Morgan – Plus 40K at 10.0%

What will the effect on mortgage rates be? Given that the market has build in a positive jobs bias, anything that is 0 to 50K in jobs growth will not create a strong selloff. The bias will be for worsening pricing but not substantially so. This is because the market has already sold off in anticipation. The surprise trade would be for a number closer to ADP’s, say minus 50K or higher. This would give us a nice little snap back rally, probably good for ½ point in mortgage pricing. Given that we are near good support technically (3.88% versus 3.83% current) and the set up (risk reward) favors MBS being down slightly worst case, savvy borrowers may want to not lock going into this number. On the other hand, this one is tough to handicap and by using the float down, everyone wins. Keep both hands on the wheel.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Wanted to get you out a quick heads up as fast market conditions as pressing the market (selling). Currently, the 10 year note is off 14/32’s to yield 3.81% while current coupon MBS are off 8/32’s. Since we priced near unchanged, chances of a worsening price are not if but when. Despite a firm close above the 8 day moving average, selling is threatening revive the bear trend. Very tricky market so stay defensive.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Sorry for my tardiness today but wanted to confirm that this was the light at the end of the tunnel instead of another train about to run us over (2:00 pm CST 10 year note futures close). Two fundamental factors, Pending Home Sales falling 16% and the Fed being open to extending the MBS purchase program to help underpin the housing industry gave us the boost (see details below). The chart work I was waiting to see was if we could close above the 8 day moving average, something we haven’t done for over 2 weeks. Given that fact that we closed above the 8 day, many bearish signals (ADX, Trend Intensity, etc.) have been neutralized, crippling the bears and reducing the probability of continued bearish trending. In other words, the light we were seeing “is” the end of the tunnel which should produce better mortgage pricing into Friday’s Employment release (7:30 am cst). Given the severity of the selling over the past 3 weeks, we could easily see another 1 point gain in the 10 year and another ½ point improvement in MBS. This will need to occur within a short time frame (2 days) as all bets are off come Friday. Use the improvement to square up your pipelines before Friday’s Employment data.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

Hello 2010! The first trading day of the New Year has been all about stocks and commodities, with both sectors flying off the page. Stocks have gotten their legs from a continuation of last year’s Santa Clause rally and Chinese manufacturing expanding. Most European exchanges were higher by ½% to 1.0%. Commodities have been the beneficiary of not only the recovery theme but once again a falling dollar. Gold up over $20.00 and oil up nearly $2.00 have been just a couple of today’s power plays. The economic calendar kicked off the New Year with ISM’s Purchasing Manager’s report and Construction Spending. ISM printed its highest level since November 2006 while Construction Spending fell to its lowest level since July 2003. The entire calendar for the week is attached. Notice that Friday’s Employment data for December will be released Friday at 7:30 am CST, setting the tone for the month ahead. Given the divergence in data, the days ahead will be a challenge predicting mortgage interest rates. The GDP growth and recovery theme seems to be more about replacing inventory taken off the shelves than any real growth. What needs to happen to solidify a recovery is an expansion or long term investment, consumer spending, and lowering the unemployment rate. If not, we could see another economic dip. If the Fed steps in too quickly to raise rates, given my last statement, we could see a repeat of what happened in 1937 when the Roosevelt administration prematurely bumps rates. Housing will also be a big factor. While existing home sales have some wheels due to depressed values and the 8K stimulus. New construction has and will continue to suffer as the builders must compete with existing home sales. Tough to make any money when you sell for below your cost to construct. As you have all noticed, mortgage rates have been on the move. Their level will be critical as we judge demand. Technically, we’re near good support at 3.88% to 3.91% (currently 3.84%). Trouble is, we see very little demand from buyers showing up why the likes of Pimco’s Bill Gross are opening talking about reducing their exposure to Treasuries and UK Sovereigns. We’ll need to stay quick on our feet until the sky clears. Currently, let’s enjoy a little green on the screen as the 10 year note is unchanged, mortgage backs are plus 6/32’s, and stocks up a buck sixty

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611

For the first time in nearly two weeks, bond prices rose across the curve on Tuesday and climbed slightly higher this morning. The economic data came in very close to estimates yesterday and the five-year note auction fared a touch better-than-expected. The S&P / Case Shiller home price index fell in October after five straight monthly increases. While the decline was barely measurable, it serves as a reminder that the bounce back in real estate prices is not likely to occur as quickly as the three-year decline. The consensus among analysts seems to be for another 10% decline in home prices in 2010, making a new bottom. The Conference Board's consumer confidence measure rose a touch to 52.9 and has been confined to a narrow range since April. Confidence remains well above its lows but is still below previous recession's lows and well below the "normal" levels. The five-year note auction was solid, finding better-than-expected demand, especially following the soft two-year note sale the previous day. Today, the Treasury will auction $32 billion seven-year notes at high noon. I have forwarded more news below including this morning’s release of Chicago PMI which came in at its highest level since Jan 06’. The last bit of news for the week will be released tomorrow with weekly claims. Trend signals in the last couple of weeks of the year can have trouble maintaining their direction in January. Current bearish readings on Trend Intensity remain valid, but are getting tested by a very minimal corrective action. Trend signals need prices to continue to hold below the 8-day moving average that currently sits at 116-045…..that measure is often critical resistance during a bearish trend. However, a close above that level would neutralize any bearish readings. The 10yr is currently sitting at 115-22 on futures, a yld of 3.807. We priced mtg backs up this morning about 7-8 ticks and we are now only up a couple. I don’t want to scare anyone, but price changes for the worse would be in play if we hold these current levels. Please note that tomorrow is an early market close and the lock desk will shut down promptly at 11:00am CST. Please get all locks in before this cutoff. The lock desk will re-open on Monday, January 4th at normal hours.

With Permission & Courtesy of Joe Webb
Senior Trader

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen
Your Mortgage Professional
PrimeLending | a PlainsCapital Company
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888)675-6262 Toll Free Fax: (866)908-2611

Not even Tiny Tim can catch a break today. Our mini rally from this morning has started to fade as current MBS are now down 3/32’s. With pricing struck plus 2/32’s early today, chances of a worsening price change are close to 100%. Blame it on the light volume as the bias is bearish and most traders have one foot out the door.

With Permission & Courtesy of Scott S. Eggen
Senior Vice President – Capital Markets

For other rate lock advisory commentary please visit:
http://www.mrloanbiz.com/DailyRateAdvisory

Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
Email: 888@MrLoanBiz.Com Web: www.MrLoanBiz.Com
Toll Free: (888)MR-LOAN-BIZ (888) 675-6262 Toll Free Fax: 866-908-2611