Recap of Last Week

  • FHA makes several credit policy changes...including adoption of HVCC guidelines  (from what we've read...its some not all of HVCC)
  • Washington Post reports FHA will fall under required capital ratio. FHA Commission says they will not ask for more money. Ex-FHA commissioner Brian Montgomery makes comments on "Voice of Housing" Blog
  • Fannie hires new Credit Portfolio Manager
  • Berliner discusses Loss Severities and the Lengthening Foreclosure Process
  • House Bill  3146 encourages warehouse lending
  • Bernanke says technical recession "very likely over"
  • Higher than expected PPI and CPI data. Retail Sales better than expected. Empire State Manufacturing better than expected. Business Inventories contract more than expected. Current Account Deficit is more than expected. Industrial Production better than expected. Capacity Utilization better than expected. NAHB Index on the screws. Jobless Claims less than consensus. Continuing Claims worse than expected. Housing Starts on consensus. Building Permits less than expected. Philly Fed better than expected.
  • Econ data mostly unfriendly to bond market, debt markets react with more of the same choppy range bound price action.

Rates range trade: we are working off the UST10YR Sept. high of 3.53% and the Sept. low of 3.27%. Last week, the 10 yr bounced between 3.37% and 3.49%, where several technical indicators cross paths...

The yield curve steepened, then flattened, then started steepening again. Not much change by week's end. The Range Trade PERSISTS!!!!!

The FN 4.5 ended the week lower, mortgage rates slightly higher.....

So far this morning...

  • Globally, stocks mostly lower with exception of China who cheered more government stimulus
  • Dollar stronger, Oil cheaper (under $70 barrel), Gold less expensive (under $1,000)
  • No US econ data
  • US stock futures lower. TSY futures prices higher. TSY yields lower. Yield curve flattening as long end outperforms (auction concessions).
  • FN 4.5 +0-07 at 100-22...which puts prices just about to where they opened last week. Here is a two day chart of FN 4.5 price action...

The Week Ahead...

  • FOMC meeting. Statement released on Wednesday afternoon.
  • TSY Supply: $43bn 2s/$40bn 5s/$29bn 7s...expecting yield curve to flatten (auction concession)
  • Fed to buy TSYs maturing between Dec 2013 and April 2016
  • Rates range trade until the range is no longer your friend. Wont know if breakout occurs until after it happens. Until then...expect chopatility. Will this be the week that our range breaks down?
  • Still trading technicals...high volume marks, VWAP, MA's, retracements, and momentum
  • We are more inclined to float near range price lows and lock near range price highs.

VIDEO: Are you keeping up with the world? Shocking Facts


My desk got rebuilt over the weekend. Here's how it turned out...