The continuance of human and economic tragedy in Japan has set off another round of volatile trading. Just a few hours ago, a 6.2 earthquake hit Japan, the most powerful aftershock since Friday's devastating earthquake. Buildings were shaking but as of now, no risk of another tsunami is present. The latest threat to Japan and their citizens is the instability of four nuclear reactors. That fear has sent stocks reeling and bonds flying. Oil is lower, off $4.00 a barrel while most commodities are on the slide. Gold is off over $40.00. Stocks across the globe took a hit with Japan off nearly 11.0%. Stateside, the Dow opened nearly 300 points lower but is currently off its lows, down 231. Bonds jumped at the open with the 10 year note up close to 1 point. Mortgage backs have following suit but are muted with gains on current coupon MBS plus 9/32's. We did have some economic news this morning as the NAHB Housing Index rose 1 point to 17. It is now at its highest level since May 2010. New York's Empire State Manufacturing Index was also released, up a touch over 2 points to 17.50. Within the index, new orders were weak, suggesting it will be hard to maintain this level into the future. We also have the Fed Open Market Committee meeting today (1 day affair) with results or any change in policy due out at 1:15 pm cst. Given the latest in Japan, we expect little to no change. With the 10 year note trading at 3.27%, we have matched the lowest yields since December. Chart wise, the positive tone is underpinning bullish sentiment on most time frames and oscillators. We need to keep in mind that this rally is solely based on flight to quality fear trading. Conditions are extremely volatile and can reverse at any time. Handicapping where interest rates go is a tough business as we don't know what we'll face next. Incredible how intertwined the global economy is. One more thought; for your customers that missed the last interest rate bus, waiting to refi if rates when to 0%, they have a second chance.

Scott Eggen
SVP, Capital Markets
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252

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