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 - October 22, 2007
Just make it to May (the date of the next national secondary conference). That was the mantra of attendees at the national mortgage conference in Boston last week, as they bemoaned the terrible condition of today’s mortgage market. The upshot of the conference was that while volume is slow, the mortgage business remains a tale of two originator types: those that can effectively compete with agency products, and those that cannot. The spread markets (jumbo core, alt-A, sub-prime) have recovered somewhat since the Fed rate cut, but securitization volume is pitifully weak, and originators of spread products are still looking for answers.
“Jumbo loan prices are holding steady. Two weeks ago, spreads moved tighter and they remain at decent levels, equal to pre-collapse levels of the summer. A few jumbo securities have traded, and liquidity is creeping back. The same cannot be said for sub-prime loans. The BBB- ABX index set a new low last week, in spite of hopes for a bail-out from the master conduit proposed by the Treasury. Regarding conforming products, mortgage rates did not fall as far as Treasury yields last week. The prospect of greater volatility pushed mortgage rates 0.15% higher relative to Treasuries. The yield curve, as measured by the difference between two- and ten-year Treasuries, also steepened by 0.15%. Financial companies that borrow short and lend long cheered the news.”
Odds for a Halloween rate cut soared. According to Fed-funds futures, a 0.25% cut next week is almost certain, and futures are predicting sub-4.00% Fed funds for next summer.
Given the severity of the bond market collapse, the stock market has been surprisingly quiet. Sure the Dow took 126 days to move from 12,000 to 13,000, and just 58 days to zoom to 14,000. And then it was hit hard late last week. But a recent blog put today’s volatility in perspective: “Friday’s 366-point decline rates as only the 626th largest in since the start of the Dow in 1896. Put in another way, we have seen drops of this magnitude or worse on 2% of all trading days over the past 111 years.” Tread carefully because stocks could post some historically volatile numbers in the days and weeks ahead.
According to a new report, security screeners at our nation's airports -- this is scary -- failed to find fake bombs hidden on undercover agents 60% of the time. ... President Bush said today, “Well, who cares about fake bombs?” – (Jay Leno)
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