Today, one of the few days in a month that had a two consecutive day improvement in the treasury market

The 30 yr $11B auction this afternoon saw very strong demand; the yield came at 3.64% with a strong cover of 2.40 and indirect bidders (foreign investors) took down 46.17% of it. The result shot rates lower across the curve for about an hour before they fell back again to levels prior to the auction. Next scheduled supply binge comes in two weeks with 2 yr and 5 yr notes. Estimates are that Treasury will have to triple the amount it borrows this year.  

Two more warehouse lenders closing their doors after the horse left. Guaranty Bank, Dallas, one of the nation's largest warehouse lenders to non-banks, is reportedly telling customers that it will not renew their lines. PNC, owner of National City has pulled the plug on National City's warehouse lending operation, giving non-banks that borrowed from the unit 12 to 18 months to find new lenders.No word however, whether PNC is pulling out, they were one of the biggest warehouse lenders during the day. Banks seem to always go in the wrong direction; warehouse lending now, with all the tight underwriting and much higher quality loans being generated, should be a business to be in----obviously on a selective basis.  

Ken Lewis of BofA was talking today; he forecasts that the financial industry will be smaller in the future, that banks will be reigned in, and that much tighter regulations will be imposed. What a truly deep insight

MGIC, the largest MI, said it would defer by 10 years an interest payment on $390 million worth of subordinated debentures, igniting a steep selloff in its stock during the morning. "During this 10-year deferral period interest on the debentures will not be due and payable but will continue to accrue and compound semi-annually to the extent permitted by applicable law at an annual rate of 9%." Fitch immediately put the company on rate watch negative.  

The Fed is now considering banning YSPs; according to the official that is in charge, after testing new forms consumers still didn't understand.  Washington is running amok! What's to understand from the consumer; shop around, get the best rate at the lowest out of pocket expense. Does the Fed really believe consumers understand the details in the multi-page FNMA mortgage form?  

Barney the Frank blames the entire sub prime mess mostly on unscrupulous mortgage brokers. He has a following and its growing. Barney is having difficulty with the realization that while there was fraud and malfeasance by some brokers (who are now selling aluminum siding door to door); the fault of the sub prime and stupid lending came directly from Wall Street and large banks. Most of the loans made and up-streamed to Merrill, Citi, Bear Stearns et al were done on a whole loan basis; all of the three mentioned actually went out and bought mortgage originators in an effort to get more of the junk. Those firms couldn't get enough of the stuff, using their own quality control companies to look at every loan, they pushed those contract firms to pass on about every loan. With S&P, Moody's and Fitch in their pockets issuing AAA ratings, the markets were huge for the junk. Deep pockets with huge lobbying efforts have confused Barney.  

Crude oil shot higher and is likely destined to move higher; news that OPEC production is at a five month low drove prices up over $4.00. T. Boone Pickens calling for $75.00 oil by the end of the year.   

Another good day for the equity indexes; more short-covering and some value bottom picking. Not over yet though on the down side; the market was extremely oversold. The volume today o the rally wasn't great.  

The bellwether 10 yr note spiked up on the strong results on the 30 yr auction this afternoon, it traded below its 20 day MA on the yield chart, but has now fallen back to the average. It has been in a bearish technical pattern since Jan 15th. On the bubble now; the next, and more significant level is at 2.75%.  Technically, mortgages are slightly more bullish but only fractionally.  

. For five weeks the rate markets (mtgs included) have chopped back and forth with no real direction. With that as a background even with mortgages trading 4/32 better than at 10:00, we suggest locking rate locks. We need proof technically, it hasn't happened yet.  

PRICES @ 4:00 PM

Thursday, 3/12/09 4:30pm