Demand was very good as 50% of the issue was taken by Indirect Bidders. Bid to cover ratios came in at 3.06 to 1. Both of those measures were above average. The issue was also “bid through the screen”, meaning that some got shut out even if they had at the money bids in. That is a sign of strong demand.
With the elections and the Fed meeting next week to hopefully clarify QE2, things could get wild. We also have the Employment report for October a week from tomorrow. Austin mortgage borrowers are advised to take advantage of any rate improvement we see as the skies have yet to clear.
Today there will be a vote in the House on the Fair Trade Act which basically will designate China as a currency manipulator. The next step is for the bill to be sent to the Senate. It is not expected to pass in the Senate, at least before the November 2 elections and the November G-20 meeting (Korea Nov 11-12).
Overall, we see the stock market as moving away from any notion of a double dip, instead feeling a little giddy about taking on more risk. Reason being is that traders view one of two scenarios playing out, both good for stock prices.
With the GDP release tomorrow, Austin mortgage borrowers are advised to lock their interest rates with the float down in preparation for a stress-free weekend. The treasury market has reacted favorably, but the MBS spreads are working against us… meaning that MBS pricing has not kept the pace with Treasuries.
Big picture still suggests low Austin mortgage rates will be with us for some time to come. Just get used to the volatility.
Daily studies, however, are still a bit skeptical of the strength. If we see a strong move above 123-24, hold on, we might be in for a ride to even lower Austin mortgage rates.
Notes, bonds, and mortgage backs have slipped as we go into the last hour and a half of trading. Stocks have been pinched as well, down 75 points on the big board.
Currently, the 10 year note is down 20/32’s (yield 3.49%), MBS down 6/32’s, and stocks up 75 points on the big board. Stocks will hold the key as to where Austin mortgage rates go next. The current pattern (stocks) has been for sellers to lean on the market when it rallies (5 out of the last 7 days). We will want to watch the late afternoon trade (from 2:00 to 3:00 cst) to see if they can hold today’s gains. Failure to do so will improve mortgage pricing while a positive close, especially 50 points or more, will put additional pressure on our stuff.
As predicted, Friday’s bearish close, along with this week’s record 137 billion in treasury auction supply has kept the market under pressure as we begin a new week. 7 billion in 5 year tips will greet the screen today, followed by 44 billion of 2 year notes on Tuesday, 41 billion of 5 year notes on Wednesday, and 31 billion of 7 year notes on Thursday. This could give the market a bit of indigestion. Traders talk about “no shows at the lows”, meaning that buyers will not show up even at cheaper levels. We believe that a strong overseas bid will continue and with most of paper being shorter in duration, the auctions “should” be much ado about nothing.
