As I listened to the speech last night I also thoughty about the reaction that the bond markets will have. Now I know this sounds pathetic but after many years of doing this I guess this thought process comes with the territory. I say this because as I was sitting at home last night I was thinking that this was not going to be good for bonds and was expecting a 3.00% 10yr this morning with all things being equal. We did close @ 2.97% so if we did get to 3.00% it wasn’t exactly a major move. Well I am happy to report that my assessment was wrong in where the market would be this morning. I stand by my rational but the fact that we are at 2.94% is more of a factor of that “all things being equal” statement not being equal. We have Verizon to thank. Yes that is correct, your cell phone provider, while ripping you off for the price of their service, has thrown us a little bond rally bone this morning. Now why is that? It is because Verizon sold $49 billion in corporate bonds and traders sell treasuries to hedge against higher yields once the deal settles. So once the debt is sold then the hedges are bought back. The hedge was put on last week on one of our off days (I believe it was last Tuesday). So there you have it. This is a morning where all things are not equal and for a change we seemed to get the better end of that abnormality. We do start to heat up tomorrow with the economic calendar as we get Initial jobless claims @ 8:30 followed by a whole slew of numbers on Friday. In totality I could see a decent market move as a result. Especially if what is report is leaning towards one direction on economic growth or lack thereof. However, the deck is cleared on economic reports for today so we will just have to see if this Verizon infused rally is sustained. Today is Wednesday so we get the MBA’s Weekly Application Survey. The numbers were not very good and here are the highlights: - Mortgage application decreased 13.5%...ouch! - The Refinance Index decreased a whopping 20% and has now fallen 71% since the recent high for the week ending 5/3/13. In addition, it is now at its lowest level since June 2009. - The Purchase Index also saw a drop of 3.0% - The refinance share of mortgage activity decreased to 57% from 61% and is now at its lowest percentage since April ’10. - The ARM share continues to be unimpressive in-spite of higher rates @ 7% which is unchanged from the prior week. - The 30yr conforming rate was 4.80% w/.46pt - The 30yr Jumbo rate was 4.84% w/.41pts…yes the same as conforming. - The 30yr FHA rate was 4.56% w/.28pts - The 15yr rate was 3.83% w/.42pts - The 5/1 ARM was 3.59% w/.43pts Today is obviously September 11th. As a result we all have memories of that dreadful day 12yrs ago. Many of us have personal memories of loved ones lost on that day and for those not directly affected you can never erase what you saw on television that morning. I did know 7 people who died and one of those was a childhood friend who worked for Cantor Fitzgerald which was on the 101-105 floors of 1WTC. His name was John Gallagher and he was married for a few short years and had an infant son who was born around the same time as mine 13yrs ago. Unfortunately he did not get to spend more time with his lovely wife or ever get to see his little boy become the young man that my son is today. These are the types of things that we take for granted almost every day except for reflective days like today or when another tragedy occurs in our lives. It is worth noting because we have gone through what we deem as a rough few months in the bond markets. Yes, we may not make as much as we did in the past when rates were 3.75% on a 30yr. Yes, we recently had to experience the loss of some co-workers due to lay-offs that are affecting our entire industry. But we live for another day and I know there are at least 2,996 people who wish they had that luxury and endless family members who regret that those innocent folks did not get that additional day. Let alone the many unnecessary years that were taken away from them. So let’s put everything into perspective and hope that as long as we have our health then nothing that we face is all that bad. The fact that we get another chance each day is really all that matters.
Posted on: Wed, 11 Sep 2013 14:53:41 +0000
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