Loan Biz Blog

2:57 PM (CST) - Just a note as we head into the final hour of trading. After strength took us through the major down trend line, the market failed and made new lows (highest yield of the day) into the CBOT 10 year note futures close (2:00 pm cst). For all you Barry lovers out there, let’s put the analytics into his terms. Open the chart (attached) and you will see today’s trade. The session formed a bearish candlestick that includes a long upper shadow and a bearish real body. The real body also shows some “Harami” traits (reversal). Conclusion without all of the Jack jumped over the candle stick BS is that upside momentum (rally) is not anticipated but neither is strong selling (bearish momentum). Trend intensity is now neutral which fits with our (not Barry’s) Goldie Locks scenario. As we speak, the 10 year is off 6/32’s (yield 3.89%) and MBS off 4/32’s. Expect a range trade to develop.

12:41 PM (CST) - 13 billion of these puppies crossed the block to yield 4.77% with 36.8% going to Indirect bidders. Direct bidders took 25.5% as well. The bid to cover was 2.73 to 1, respectably against the average of 2.50 to 1. The only drawback was that the issue produced a 1 basis point tail, something on the order of a bulldog or a pug. Not bad overall, give it a grade of B. Market reaction was a quick rally back to the day’s best levels, only to reverse in short order to where we repriced. Currently, the 10 year note is down 3/32’s (yield 3.88%), mortgage backs are unchanged, and stocks have gone positive on both the Dow and the Naz. Good news is that the selling of late is moderating. Not so good news is that we do not see a catalyst to rally the market. For the time being, I’d say we are in a “Goldie Locks” market, not to hot, not to cold, but just right. Best to keep both hands on the wheel.

10: 50 am (CST) - Just a quick update as early morning gains are starting to fade. At one time we had mortgage backs plus 5/32’s on the heels of a jump in Weekly Unemployment Claims (plus 18K to 460K). Stocks were also supportive as both the big board and the Naz opened in the red. Stocks have cut their losses in half and now the focus has turned to today’s 30 year bond auction. With the when issued pre-auction price trading right at 4.75%, valuation seems reasonable but worries about Indirect bidders is front and center. The average for this auction has been 40% taken by the Indirect types. Last month’s auction however was a disaster with only 23.9%. Technically, we’re right up against the down trend line. This is where the battle of bulls and bears will take place and the weapon of choice seems to be the 30 year bond auction outcome (12:00 cst). Since we priced plus 5/32’s and are now trading plus 1/32nd, Big Joe has taken the safety off and has his finger firmly on the price change trigger. Just a heads up as traders are getting a touch nervous.

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

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Sam Cowen, NMLS ID#: 176693
Branch Manager, Lending in 47 States
PrimeLending | a PlainsCapital Company
2007 N Collins Blvd Ste 403 Richardson, TX 75080
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