RateWatch - Something Odd Going On

Market: We're flat, as in 0bps movement, so far today. We've been trading in a narrow range, with a push to the upside on bonds (down on rates) for a few days now. I find this exceedingly odd, and will attempt to explain why. Rates continue 5.25% or thereabouts on the 30-year, lower (and MUCH lower sometimes) on ARMs, which yes, are still out there and making good sense for many.

Analysis: This is a tough market to read. We are sitting right on the 100-day moving average (and the 200-day moving average). For weeks, every time we touched that line, we retreated strongly. Any news, even bad news, was interpreted in the most positive possible light, and bonds sold off. The stock market is strongly up since March, and though bonds have not fallen by the same amount, the general consensus (here, too) has been that rates were trying to rise and that it was only a matter of time before we saw 6% and higher again.

Well, now I'm not so sure. This is very odd behavior for the market. The last couple days there has been some decent economic news, home sales higher, Case-Schiller index higher in 95% of the measured markets, consumer confidence much higher than expected, durable goods orders higher (but with embedded weakness), and ordinarily this would mean a selloff in bonds, especially as we're right at the top of a trading range. And yet, and yet. We even had a huge 5-year treasury auction yesterday, but the bond market actually ROSE following that auction.

So here's my interpretation at the moment: I think there is a nagging suspicion in the market that there is some really, really negative news coming. I think there's a fear that this summer was irrationally exuberant in terms of calling an end to the recession. I think that means that we're going to hang out right here on interest rates until at least the $8000 first-time homebuyer credit goes away (loans must be CLOSED by November 30).

That's my read. I could be wrong. I'm holding out at least a 25% chance that there could be a big move down in rates before the end of the year. I also wouldn't be surprised to see a large move upward. But if I were betting, and hey, that's kind of what I do here every day, I'd bet on holding right here.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

P.S. For you duplex buyer mortgage shoppers, just wanted to say that you'll need to be in underwriting (for conventional financing) by Monday unless you want to put 20% down. 80% becomes the loan limit on all duplexes as of Tuesday Sept 1. Just a word to the wise.

The Best Laid Plans of Mice and Men

I meant to post on Monday, but I couldn't sleep the night before and spent a couple of hours on the stairs in my house praying and trying to be grateful that I have it better than most, however it feels like sometimes I could lose it in heartbeat.

So I didn't post.

I meant to post on 9/11 on the tragic and still almost unbelievable loss of that day. The year after I participated in the "Rolling Requiem", an hour-by hour tribute to the dead through the singing of Mozart's Requiem mass beginning at 8:17am in every time zone. I've not forgotten that day; nor, I suspect, have any of you.

But I didn't post.

I meant to post on Wednesday the 12th, a day where I passed a test that a few years ago I failed. I hadn't thought I'd come that far. I also learned several very important things that I want to share, but I didn't have time when I got home at close to midnight.

And here we are on Thursday and hey! I have time!

The markets are fairly settled. There's the distinct possibility of a Fed rate cut of as much as .5% next week, which would be a very aggressive move. It would ease the pressure on those that need to refinance out of adjustable rate mortgages (Fed moves directly affect ARMs), and that could help ease the fears in the secondary mortgage markets. Frankly, I can't tease out how the Fed affects the entire world economy, so I tend to pull for those moves that make it easier for me and my clients to get loans done. That usually means rate cuts. Forgive the bias. But I do think that is what the Fed should do.

In an effort to expand our product range and provide more services to our clients we have developed a couple of new programs that are related to, but are not, mortgage loans. One is a huge undertaking that I'll have a whole post about relatively soon, and the other is potentially the most useful mortgage add-on that I've ever seen. More about those later.