At the start of the new fiscal year(tomorrow), it appears the USDA Rural Housing program will operate under Continuing Resolution authorization until the Agricultural Appropriations budget is finalized.  This frequently happens at the start of the new fiscal year when the House and Senate don’t finalize the budget prior to year end.  Taking last year as an example – budget was finalized on 10/21/09 and funds were loaded by 11/9/09.  There was a period in Oct’09 and beginning of Nov’09 – when the USDA Rural Housing Program issued “subject to” commitments.

We’re suffering from whiplash after bonds reacted to better than expected set of economic numbers this morning but then came right back.  Q2 GDP came in +1.7%, better than the expected 1.6% causing a knee jerk reaction.  Jobless claims were also better than expected at 453K, and Chicago PMI (a gauge of manufacturing activity in Chicago) showed unexpected improvement in September.

Now that the dust has settled, The 10 Year is at 2.53, and mortgage backs recovered from ugly levels to off 3/32s.  Equities have been volatile too, with the DOW going from +100pts to down 65 this morning.