Mortgage Weekly Preview by Virna Brown of Greenpark Mortgage
Last Week; Another decent week for the bond and mortgage markets, the benchmark 10 yr treasury yield fell 8 basis points to its key near term support at 3.60% and mortgage rates for 30 yr loans were also down 8 basis points. The week was punctuated by the 470 point fall ion the DJIA, the political defeat of a Democrat in one of the most democratic states in the country, and waffling in Washington politics as politicians stampeded to the center to adopt a populist stance. Voters in Mass, Virginia and New Jersey have sent a clear message to Washington; stop giving money to bailouts, stop the health care bill before it is passed since no one actually knows what it contains, and a general disgust with the entire political climate that appears to ignore job creation, get out of bed with large banks, and wild poorly conceived spending that so far only has run up the deficits. One of the most surprising developments last week was the way the Senate is back-peddling the confirmation of Ben Bernanke for his second term. Greenspan, Paul Volker, Warren Buffett, most former Fed officials; and last but not least, investors want Bernanke confirmed but now its populist movement for weak minded politicians that are increasingly worried they too may be tossed on the unemployed rolls in Nov that has weakened Bernanke support. I the end he will be confirmed after the posturing has worn itself out; don't change the surgeon in the middle of the operation.
This Week; should be one of increased market volatility in the financial markets. The equity markets are likely headed lower but the action will be choppy with rallies and selling causing big swings in prices and sentiment. Equities have been too far ahead of reality for two months, even the most bullish of traders and investors (for the long run) are expecting stocks to decline. The week has $118B of Treasury auctions with 2 yr, 5 yr, and 7 yr note auctions that always generate concern; however, heavy selling in the stock markets will act as a counter balance to keep the interest rate markets in a tight range early this week. Economic data this week has much to chew on; existing and new home sales for Dec, two measurements of consumer sentiment, and the first look at Q4 GDP on the advance report on Friday (estimates are for GDP growth in the quarter to have increased 4.6%). Top it off with the FOMC meeting on Tuesday and Wednesday with a lame duck Fed chairman at the helm. Bernanke's term ends at the end of this month, will the Senate get off its election fears and confirm him for a second term? Yes, the Senate will, but posturing Senators coming up for re-election in Nov will continue to draw headlines----the confirmation vote will be close. Pres Obama is leading the attack on bank reform, unlikely he will back away given the recent messages from voters that the status quo is no longer acceptable.
Greenpark Mortgage Corp.