October 20, 2014

Good Afternoon

First off, what a beautiful weekend!! Hopefully you had a client to show a house because they would certainly show better with 75-80 degree temps, blue skies, birds chirping vs. a 45 degree gray day in a drizzle with no leaves on the trees.  You pick.

A quiet open in the bond and mortgage backed security markets this morning… same across the aisle as stock indexes opened up quietly and a little weaker. This is both due to the fact many investors are sitting waiting for the Federal Open Market Committee meeting this week  and the all powerful  FOMC policy statement. Markets unsure what the Fed will do about ending QE3 as the Fed had previously stated;  expect the Fed to end it

US stock indexes were essentially unchanged early this morning but at 9:30 the DJIA opened -44, NASDAQ -16, S&P -6. 10 yr at 9:302.26% -1 bp and 30 yr MBS price +9 bp from Friday’s close and +2 bps from 9:30 Friday morning.

At 10:00 NAR reported pending home sales for Sept, the expectations were for an increase of 0.8%, as reported +0.3%; yr/yr sales however were up 1.0%, the first increase year over year increase in nearly 12 months.. According to NAR 15% of potential buyers are not able to get financing. Last week FHFA announced efforts to lessen some of the issues that are keeping many would-be buyers from being able to buy. We’ll see how that plays out.

An article in the WSJ today addressing how investors and traders have been burned with their bets that interest rates would increase this year. On Wed. 10/15 when the bellwether 10 yr dropped to 1.85% bearish views on higher rates went out the window. As we noted then it was a complete capitulation by rate market bears. Since then rates have increased a little but there are no heavy bearish positions being placed now that rates are going to run up. Weak global economies, mostly middling economic reports in the US and continuing escalation of global geo-political issues have moved investors into treasuries. The US 10 yield still is the highest of all G-7 countries, making it an attractive trade in global markets.