Loan Pricing Greatly Improved as Forced Selling Leads Stocks Lower

Rate sheets were a bit delayed this morning as lenders scrambled to get a gauge of fallout and figure out what percentage of their pipeline would need float downs (all of it?). The general policy on a float down is your pricing stays the same but the rate is lowered to current market.

Your lender has their own rules and definitions of current market but I will say this: LOAN PRICING IS UBER-AGGRESSIVE TODAY!!!

I spy with my little eye rate sheet rebate paying at 4.625. No but seriously Chase is the clear cut winner of the "Best C30 Pricing" award followed by Citi then Wells, GMAC, and BoA. The order of aggression might flip flop depending on your region and individual pricing tiers but from a  broad based perspective you can lock a 720+ borrower at 4.75% with no points today. 

INDICATIONS ARE: 30 day locks are 25 to 30bps better. 60 day locks are about the same. 5.0 notes are priced through the roof.

THE WHY AND HOW....

Currency devaluation is clearly the biggest influence today as everyone and their manager are short the Euro.

The Euro fell to levels not seen since 2006 as investors appear to be pricing in fears of a global deflationary spiral. Also  pressuring the EU currency lower was a report that French President Nicholas Sarkozy allegedly threatened to pull France out of the Euro currency if Germany didn't get totally on board the "bail out" bus. This all happened last Friday at the crisis summit but still shows how high political tensions are abroad  .  Don't forget French banks are the largest holders of Greek debt---by a landslide---and any currency they use will likely go into the crapper.

With "fear" shrinking demand for risk, dollar denominated U.S. Treasuries are officially in face melting status. The 3.500% coupon bearing 10 year TSY note is +0-31 at 100-22 yielding 3.42%. The 2s/10s curve is 5bps flatter at 265bps. The influence of the stock lever is obvious when comparing Treasury futures to Stock Futures.  Treasuries in GREEN, Stocks in RED

Here is the sector breakdown for stocks...the usual suspects are leading the way lower: FINANCIALS , MATERIALS, AND TECHNOLOGY

"Rate sheet influential" MBS coupon prices are higher but greatly lagging their benchmark guidance givers. The FN 4.5 is +0-14 at 101-22 yielding 4.307%. The secondary market current coupon is 8.5bps lower today 4.218%. CC yield spreads are as follows: +79.6bps/10yr TSY, +75.8/10yrIRS, +208BPS/5yrTSY, +144.1/5y10yTSY blend. Nominal  and option-adjusted spreads are wider today as TSYs dip on a flight to quality. Implied volatility is higher as traders buy protection from the possibility of another evacuation from risk averse tactics (unwind of flight to safety).

As far as REPRICES FOR THE BETTER go...your best bet is for smaller regional lenders who were hoping rates might move higher in the near term and didn't pass along gains this morning. But I wouldn't overlook the bigger lenders either, we are well above levels where the majors published rate sheets. On the other hand I know the big boys are SUPER AGGRESSIVE and unlikely to get much more aggressive unless certain lender  get mad because  I just called them out for being priced worse than Chase.

I really don't have much to say in regard to directionality today. The broad market is weak.  Volatility once again shot the moon (give me that queen of spaids!)  today and traders are selling the indexes. This move lower is generally forced selling as more sellers surface  the bid/ask spread widens and price levels dip lower....which triggers model sell signals which leads to more selling and more selling. BID WANTED!  No market participant has a firm grasp of where  the next move will take us...everyone is flying by the seat of their pants. Its a day trader's paradise....

While debt issues and political strife abroad (weaker currency and higher bank borrowing costs (LIBOR))  are a prime motivation for another leg lower in stocks, don't take anything for granted. It is a Friday and no DAY TRADER wants to leave positions open heading into the weekend.  GUTFLOP is key....secondary managers should be  communicating float down and renegotiation policies.