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 - December 3, 2007
It was like kissing your sister. Yes it was a good thing that the agencies left conforming loan limits the same – if they strictly followed the housing price index, they would have lowered the loan limits. Unfortunately, so many originators were hoping for an increase to, say, $1 million that the announcement left the mortgage market feeling a little flat.
“If you needed a conforming fixed loan, last week was your week. Not so much if you were looking for a jumbo loan. Conforming mortgages soared, chopping a full 0.25% off of fixed mortgage rates. Jumbo loan prices unfortunately continued their downward spiral relative to their conforming brethren. AAA jumbo tranches continue to trade poorly, and jumbos are trading a full point worse than a month ago. Meanwhile, mortgages had a decent week relative to Treasuries; mortgage rates are still at four-year wides (2.00% higher than Treasuries), but they reversed some of their recent, dramatic ascent. And bankers have reason for hope: The yield curve is steeper than it has been in three years. And check out August fed-funds futures: 3.10%!”
In what may end up being a dead cat bounce, financials led stock indices on a tear last week. A spate of financial news – Citi receiving a capital injection, E-trade selling some ABS, Bernanke talking about a Fed ease, Paulson arguing for a sub-prime bailout – took the financial sector index up 10% from its lows. The financial stocks are still down considerably, of course. The sector has fallen back to the same level it was seven years ago.
Plenty of cat-calls met Paulson’s proposal to freeze sub-prime note rates, but broad government intervention is nothing new in times of real estate crises and illiquidity. The Federal Reserve Act and many other changes resulted from financial panics. Years ago, Fagin assured Oliver Twist that pick-pocketing was a moral thing to do. It was taking from the greedy rich and giving to the needy poor. One hundred years ago, a group of bankers met with J.P. Morgan and found a way to end the Panic of 1907. They injected cash in to the system then, and we’ll probably see more of the same before this crisis is through.
Here's what I don't understand: Rudy Giuliani had three wives and he's not the Mormon candidate? – (David Letterman)
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