Market Snapshot 10/13/2011

Mortgage payment too high? Our dedicated loan officers will try eveything possible to get your mortgage payment more suitable to your needs! Apply today at http://globalhomefinance.com/apply.php !!

After seven days of decline in bond and mortgage prices, this morning some support. The early trade this morning had the stock indexes a little weaker, also after seven days of improvement. Yesterday the 10 yr note came very close to our expected target at 2.30% when it hit 2.27% on reaction to the poor 10 yr note auction; the 10 closed yesterday at 2.21%. Still technically bearish but possible to see some bounce as long as equity markets also slip back a little.  

Weekly jobless claims were -1K to 404K, expectations were for an increase to 410K; continuing claims -55K to 3.67 mil. There was no market reaction on the report at 8:30. Also at 8:30 the August trade deficit hit at -$45.6B at a four-month low as exports held close to an all-time high.

Nothing new of substance out of Europe this morning, just more talk from the ECB. Europe continues to hold the global economic recovery in its claws and is dragging every economy lower. The inability to come up with a plan is getting very old; 17 countries and large banks jockeying to avoid defaults and losses. It isn't possible though the keep on tilting at windmills. Policy makers earlier this month pushed back a debt-crisis summit to Oct. 23, as leaders are try to solve the crisis. European Central Bank President Jean-Claude Trichet said it’s now up to governments to solve Europe’s debt crisis as leaders get ready for a summit in Brussels in 10 days.

At 9:30 the DJIA opened -80; the 10 yr note +11/32 at 2.17% -4 bp and mortgage prices at 9:30 +7/32 (.22 bp) on 30s and +4/32 (.12 bp) on 15s.

Besides trading on each click on stock indexes the bond and mortgage markets will have to contend with this afternoon's $13B 30 yr bond auction. Yesterday the 10 yr auction didn't generate as much demand as expected.

So far this morning we are getting the bounce we were looking for. The 10 yr at 10:00 at 2.14% -7 bp and mortgage prices at 10:00 +12/32 (.37 bp). As long as there is weakness in equity markets as is the case so far, the bond and mortgage markets should hold gains today. That said, the stock market has built a had of stem recently with improved forecasts by most economists for Q3 and Q4 growth. Technically the bond and mortgage markets remain bearish in the near term, any improvements should be used to get business done. To change the outlook the 10 yr note would have to fall back to 2.04% and lower, until that occurs treat rallies as counter trend moves.