TGIF!!!!
Surprise, surprise...more sub-prime mortgage related losses are hitting the financial sector this morning. Stocks are trading lower and Bonds are trading slightly higher after Wachovia Corp announced a loss of $1.1 Billion in the value of their Collateralized Debt Obligations (CDO's). CDO's are investments partly comprised of subprime mortgages, and as subprime mortgage default rates have risen, the values of these CDO's have fallen significantly.
And because Stocks are again to the downside Bond prices are being supported as proceeds from sold Stocks get parked into Bonds. Both the Dow and S&P 500 benchmark indices have just broken below their 200-day Moving Averages. Unless they can recover, this could mean that Stocks could move much lower, which would help Bond prices.
In other economic news headlines, the US Balance of Trade for September narrowed to a deficit of -$56.5 Billion. This was slightly smaller than expectations and actually the lowest trade deficit in more than two years. A surge in exports due to our weak Dollar is responsible, as foreign buyers can more readily afford our US produced goods and services, as their own currency simply goes further against our weakening Dollar. While a lower trade deficit is good news for our economy - the weakening Dollar continues to be a concern, as it is inflationary, and bad for Bonds longer term.
Bond prices are continuing to dance around a floor of support; however, should Bond prices drop below these important floors, we will quickly switch to a Locking stance and you will be hearing from me. As for now, I suggest to float any interest rate locks for now.
Our rate for a 30-year fixed still remains at 6.50% for a 30-year fixed mortgage, no points.
Holiday Announcement - Veteran's Day
The bond market will be closing early today at 2:00pm ET and will be closed the entire day on Monday for observance of Veteran's Day. Our next Morning Update will be published on Tuesday, November 13.
Have a GREAT weekend!
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