Thursday 7/10/08 ... Trying to Stay Positive

By: Matthew Graham •
Earlier in the week, concerns over the solvency of Fannie Mae and Freddie Mac drove the Mortgage Market into somewhat of a depression.  A day later a key government official stated that they were sufficiently capitalized.  This helped Mortgage Backed Securities to improve greatly, and they rode that wave through the next day.  But this morning a different government official said that the two were basically insolvent. 
 
This hasn't hurt mortgages nearly as much as it did earlier in the week.  In fact, they are holding equal to yesterday's levels.  a) The contributing factors to this are twofold: the stock market is having a hard time making any gains and b) a current testimony by Henry Paulson and Ben Bernanke to the House Financial Services committee is giving an indication that these financial sectors will soon come under heavier regulation which some traders undoubtedly feel will decrease some of the risk associated with Mortgage Backed Securities.
   
 
The Numbers:
The very best qualified 30 year fixed rates are at 6.0% again today.

 
The News:

 See Rates from Lenders in Your Area
  •     Jobless Claims
    • significantly better than expected.  Normally a bad sign for MBS, but hasn't impacted to much today.
  •      Foreclosures
    • rose 53 percent in June year over year and repossessions increased the most in the history of the report which only goes back to January 2005
Lock/Float Conclusion:


Floating for now.  The market direction for the day likely will not become apparent until the post-statement Q and A is finished.  After that traders will be rushing to synthesize their final interpretations.  Of course, many traders will be making decisions as this plays out, but after these types of statements, the time period following the close of the statement is usually more volatile that the action during the statement and Q and A.