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Market Update - Friday, February 13, 2009 10:13am ET

By
Mortgage and Lending with American Financial Resources, Inc.

 

Current Trend Direction: Sideways

Risks favor: Bias Towards Locking 

Current Price of FNMA 4.5% Bond: $100.75, -16bp

Bond prices are trading lower so far today on this shortened holiday session that will see the Bond markets close at 2:00pm ET.  On Monday, President's Day, both the Stock and Bond markets will be closed.  Market action could be choppy today, as Wall Street starts to clear out early for the three day weekend.  Our next Daily Update will be on Tuesday February 17. 

Stock markets were plunging yesterday, but rallied at the close to near unchanged after Reuters reported that the Obama administration is trying to hammer out a new program to subsidize mortgages to fight the credit crisis.  The plan would seek to help homeowners before they fall into arrears on their loans.  Current programs only assist borrowers that are already delinquent. There are no details yet on this plan. 

The current $789B stimulus bill is expected to be passed today by Congress and be on President Obama's desk to sign into law this weekend.  Stocks remain under pressure as many investors feel the plan will take some time before it has an impact on the economy. 

Here are some of the details regarding the tax credit that have been released so far - The tax credit has been scaled down to $8,000 from $15,000, or 10% of the value of the home for any first time homebuyers who purchase homes from the start of the year until the end of November.  It starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.  Buyers will have to repay the credit if they sell their homes within three years.  More details are to come, and we will be sharing with you the impact of the stimulus plan once we go through the final version that is signed into law. 

Yesterday, the NY Fed reported they purchased $23.2B in Mortgage Backed Securities from February 5 through February 11, bringing the year-to-date total to almost $115B. 

Consumer Sentiment (unsurprisingly) came in a bit gloomier than had been expected, showing a reading of 56.2 where 60.2 had been anticipated. 

Mortgage Bonds are again facing a dual layer of resistance, which will make any meaningful gains difficult.  And Stocks are due for a relief rally from very oversold levels, which is also adding pressure to Bonds.  Because of these factors, a bias towards Locking continues to appear to be the smart strategy.

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Larry Bailey

856-470-1101 ext 419 Office

609-975-9182 Direct

609-228-6378 Fax

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