We have a world class secondary market department and they are kind enough to send out weekly updates to us sales monkeys. I like posting it as it is both a great source of technical and anecdotal information. Please let me know your thoughts!
The Week Ahead in the Capital Markets - January 7, 2008
“Stand by for a tumultuous 2008 as the market struggles to move from the shadows back into the light of sounder banking… accompanied by Fed Funds levels at 3% or lower.” – Bill Gross.
“Mortgage rates are now officially low. Conforming loans with rates in the low-to-mid 5% range are streaming in to pipelines. Mortgage rates fell 0.55% in the past two weeks alone, and thirty-year fixed rates are near levels where they spent much of 2003 and 2004. The spread between mortgage and Treasury rates has stopped widening for the moment. Therefore as Treasury rates dropped, mortgage rates came down. Mortgage yields traded about 2.10% over equivalent Treasuries in the past few weeks.
While credit is still tight and property values very much in question, we expect loan volume to pick up nicely this week. It has been seasonally low for the entire industry. Loan volume is usually about half of its usual pace over the holidays, and this time around was no different.
Jumbo fixed rates continue to languish. Prices are about 2 ½ points behind equivalent conforming loans, and rates hover at historical wides, roughly 0.75% over conforming rates. The jumbo market remains a tale of two investor types: portfolio jumbo ARM rates are aggressive as funding costs drop and banks seek to fill portfolios; jumbo fixed rates are high as the securities market struggles along, offering no good outlet for aggregators.
Bankers cheered as the yield curve steepened. Tough economic news pushed short-term rates down sharply. The difference between ten-year and two-year Treasuries closed last week at 1.11%.”
In the wake of Friday’s pitiful jobs report, odds predicted the Fed will cut rates to 3.75% this month and to 3.50% by March. All of this in spite of oil trading at the long-feared $100 per barrel level, and gold reaching its 1980s high of $850 per ounce.
By the way, I was thinking about this. I think now I'm the only TV host with facial hair, if you don't count the cast of “The View.” – David Letterman
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