On Friday the rate markets fell to their lowest levels since last April on the employment report, but by the afternoon, the rally reversed and yields increased slightly on the session. The bellwether 10 yr note fell to 3.10% and mortgages slid under 5.00% before both ended the day a little higher in rate—but not much. Still an extremely uncertain economic outlook; although the stock market is betting on continued and quick economic recovery, the bond market appears to be betting the other way with demand for long term debt very strong. The recent decline in rates has most market thinkers scratching their heads to explain the strong demand while equity market gurus are scratching their heads wondering why the equity markets haven’t rolled over in a long awaited and expected correction.
The bond and mortgage markets opened a little better this morning after a volatile session last Friday on the larger decline in Sept job losses than expected. At 8:30, the 10 yr note +5/32, mortgages +2/32, the DJIA index futures +20. At 9:00, the 10 +9/32, mortgages +4/32 and the DJIA +18. At 9:30, the DJIA opened +21, 10 yr +10/32 3.18% -4 BP, mortgage prices at 9:30 +5/32.
At 10:00, the Sept ISM services sector reported the overall index was expected to have increased to 50.0 frm 48.4 (50 is pivot from contraction to expansion). The services sector overall index increased to 50.9; new orders component at 54.2 frm 49.9, prices pd declined to 48.8 frm 63.1 and employment component increased to 44.3 frm 43.5. Any index under 50 is considered contraction, over 50 expansion. No initial movement on the report.
This week is headlined with more borrowing from the Treasury. Today, its one yr bills (no problem for markets) and, at 1:00, Treasury will auction $7B of 10 yr inflation-indexed notes. It really gets underway tomorrow and through Thursday with $71B of notes to be sold. Recent strong demand for treasuries is expected to continue so we are not experiencing any price declines in the treasury market. For three months now, demand for the record borrowing from Treasury has been exceptionally strong, surprising many; now it is taken as gospel the demand will continue from domestic and foreign investors. No inflation fears out there and it seems investors behind the scenes are increasingly concerned the economic recovery will not be a V but a W, expecting stocks to trade back lower. So far, however, the stock market stands tall with only minor setbacks as investors continue to step on any declines in the key indexes. Investors are extending duration by stepping into the long end of the curve; amazing how strong the bond market is given the recent decline in rates over the last few weeks.
Market Minute information for October 5, 2009 provided by:
 Patsy Bailey Mortgage Banker |
 4801 Lang Ave NE Suite 100 Albuquerque, NM 87109 4001 Office Court Ste 603 Sante Fe, NM 87507 Cell: 505.715.3231 Office: 505.473.4045 ext.109 E-mail: patsybailey13@gmail.com |
For more information on home financing, visit my Albuquerque Mortgage Page.
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