Loan Biz Blog

Sorry for the “sticker shock” this morning in your pricing. Friday’s employment report did the damage. The payroll data came in on the plus side, up 162K new jobs with 48K attributed to government consensus workers (temporary positions) yet the unemployment report remained high at 9.7%. Although the market was looking for a good number, the reality put bond and fixed income sellers in motion for the shortened Friday session. Mortgage backs finished the day on Friday off 17/32’s as the yield on the 10 year note heads for our projected target of 4.0%. Now the debate starts as to whether or not the economic recovery is a glass half full or half empty. It looks sustainable but certainly at a sub-par level. Oil on the move, over $85.00 a barrel and heading for $90.00, along with the entire commodity sector (copper, gold, etc.) rallying into the assumption of good growth to come are also in play. The number that was the most profound was last week’s ISM Manufacturing Report. Up 5 points, it points to not only an inventory rebuilt but the reality of inventory coming off the shelves. Today’s ISM non-Manufacturing Report was up over two points as well. We acknowledge the economic improvement but feel that going “cold turkey” on the quantitative easing along with a bottom fishing housing industry will produce a choppy, slow recovery. Overall, the market is entering a value arena on the 10 year note between 3.92% and 4.02%. Currently, the note is down 9/32’s to yield 3.99%. Mortgage backs continue to follow suit, off 7 to 5/32’s depending on the coupon. Price change is nearby. With stock feeling giddy and supply coming this week (71 billion of 3’s, 10’s, and 30’s), along with 8 billion in 10 year TIPS (Treasury Inflation Protection Securities), the tactical bias is to keep your defense on the field. I know they are getting tired. Rumors out there about the Fed raising the Discount rate another .25% aren’t helping either. The good news is that Pending Home Sales (new contracts not closed) jumped 8.2%. We should have more purchase business. They’ll just have to pay a little higher rate to get it. Other good news can be found in our technical work which points to a market that is becoming very oversold. With 60 minute and daily chart oscillators buried and the near term target at hand (4.0% to 4.02%), some sort of reflex rally should occur, probably as we near the end of this week’s auction cycle (Thursday). We would expect investors to find value at current levels, wanting to buy and go long the paper as the debate over economic recovery continues. The last piece of good news is that mortgage rates are still low even with the bashing we’ve taken lately. Conventional fixed around 5.25% and Government fixed around 5.0% to 5.25% are historically low. And for the kicker, the new purchase today at these rates should have an opportunity to refi down the road. Call it a twofer!

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