Loan Biz Blog

Stock market strength has pressured bonds, notes, and mortgage backs as we head towards the close. With the Dow up 96 points trading well over 11,000 and S & P’s over the 1200 level (which was good resistance and very psychological), the path of least resistance is for additional improvement. JPMorgan gave stocks the boost from the get go, beating earnings expectations by 10 cents and saying all the right things about credit quality improving etc. The 10 year note opened in the red but by only a few 32’s, holding onto the breakout level below 3.83% yield on the 10 year note. As you can see from the chart, that bullish momentum has been challenged as we are now trading at 3.86%. Technically savvy traders call the formation a “double top” that you can see by the horizontal line across the top. Confirmation is now being made as we have taken out the base from which the last leg of this rally started. In chart terms you can see this is the level below 116 10 (closed futures session at 116 09). Traders call this a “bear trap”, stranding the bulls on the expected breakout above 116 10. Further confirmation of the next move being to worsening mortgage pricing can be found in the fact that we failed to hold above both the 8 day and 21 day moving averages. They cross the right side of the chart at 116 12. SStochs have also made a bearish cross and I’d even bet that Barry’s candlestick malarkee shows a spinning top (reversal in process). In proper context, the selling today has been a function of overbought readings and the need for consolidation. We do not thing its anything huge but will most likely correct to 115 31 on the chart (yield equivalent of 3.92%). Mortgage backs are now down 11/32’s on the day and will probably give up at least another 8/32’s before we reach our target. Time to be careful out there.

RE: Where's the Beef (Loan)

Just got off the phone with the powers to be regarding USDA. The bill was introduce yesterday in the House by Representative Capito. Process time to clear the House should be 7 to 10 working days. Then on to the Senate where you know who is in charge of the Finance Committee (Barney Frank). By the way, he is in favor of the funding which will not be funding at all. The bill being presented will raise the MIP to 3.50 and then be adjusted on an annual basis to make the program self sufficient. Makes perfect sense and is budget neutral. Seems like a layup but then again, we talking about the Apple Dumpling Gang here. Passage in the Senate should take about 2 week (working days). Given the calendar and my math skills, we would project the program to be back in action by May 12th. Given the info I just received, the run dry day for USDA is May 10th or sooner. With any luck, we will open the new door as the old one closes. More as it becomes available.

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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