Hope everyone enjoyed their Thanksgiving break and had a great time with family and friends. We certainly needed it with the bankruptcy of LandAmerica announced on Wednesday. Comments are below.
Our bond market is being helped ever so slightly this morning by the sell off we are seeing in the equity market. Dow Jones is currently off by 425 points. Mortgage backed Ginny Mae bonds are up slightly for the 5.5% coupon at 2/32nds. So pricing will be about the same as the close on Wednesday before the Thanksgiving break. Asian and European equities are off due to fears about the contracting global economy. Treasury yields are at record lows as there has been a continued flight to safety. Both Treasury Secretary Paulson and Fed Chairman Bernanke are scheduled to speak about the economy today. The futures market is pricing in a 26% chance of a 75bps cut and an 74% chance of a 50bps cut at or before the December 16th FOMC meeting. Currently, the Ten Year yield is at 2.87% (2.97% on Friday) and the 2-10 yield spread is at 191bps, steepening 6bp since Friday morning.
Treasury rates continue to head lower this morning, with the 10-yr hitting 2.87%. (So if you tie up $1 million with the government for 10 years, you'll earn less than $29k per year.) Fortunately mortgage prices are tagging along for the ride somewhat, with prices better by roughly .250. This week we'll see the unemployment data on Friday. Before the Employment data, today we have the ISM national manufacturing index and Construction Spending (ISM is expected to drop slightly, and Construction Spending is expected to drop .9%). Productivity and ISM Services are scheduled for Wednesday. Finally, Factory Orders will be released on Thursday. There is little of note tomorrow, but on the 3rd we have ISM Services, Productivity, the Beige Book, and an ADP employment report of questionable correlation to the government's employment report on Friday. We can look forward to the usual Jobless Claims on Thursday, along with Factory Orders. Friday we hit the jackpot with Nonfarm Payrolls (expected -300k), Hourly Earnings, the Average Workweek, and the Unemployment Rate. Current expectations for the headline grabbing number are running around 6.8%.
LandAmerica Financial Group Inc., one of the biggest title insurers in the U.S., filed for bankruptcy protection prior to Thanksgiving. They agreed to sell its two main title-underwriting subsidiaries, Lawyers Title Insurance Corp. and Commonwealth Land Title Insurance Co., as well as United Capital Title Insurance Co., to Fidelity National Financial Inc. This raised more than one eyebrow, as the bankruptcy comes less than a week after Fidelity National's plan to acquire LandAmerica fell apart. http://biz.yahoo.com/ap/081126/landamerica_fidelity_national.html?.v=1
The government-insured share of new mortgage applications continues to grow relative to conventional home loan applications, according to the weekly application survey of the Mortgage Bankers Association. During the month of October, 33% of home loan applications were for government-insured loans, the MBA said. That compares to 10% in October of 2007. The October high water mark for Federal Housing Administration and Veterans Affairs loans is the highest government-loan share of the market seen since 1991. The government share hit a low of 6% in August of 2005. Also reported last week; Seniors will be able to use Federal Housing Administration reverse mortgages in conjunction with the purchase of a new home under new guidelines issued by the Department of Housing and Urban Development
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