I thought I had a bad day yesterday until I watched the Lance Armstrong interview. So while yesterday was not a good day to be long and wrong, at least I do not have to walk the streets with people looking at me as a utter jerk who told lies and filed frivolous lawsuits for 14yrs. So while we all lost a little money yesterday maybe there is some solace in knowing that we did not lose millions of dollars from sponsors or our reputation.
There is no light way to put this other than the simple fact that mortgages got smoked yesterday. They underperformed a falling treasury market. It all started with some better than expected housing and employment data. A report yesterday showed that housing starts increased 12.7% in Dec. This was well above the consensus of a 3.3% increase. So this was the catalyst to treasuries trading off and then the mortgage bankers came to play.
A trading desk that we work with reported selling that was about double of what has been the norm over the last few weeks. It just was too much for even the Fed to swallow. Remember that we reported a high increase in mortgage applications on Wednesday so pipelines are apparently full. Plus if the industry is anything like what we saw this week regarding locks then it all makes sense. Locks were quiet for the 1st 2 weeks to start 2013 but everyone seemed to want to lock this week as we have experienced one of our busiest weeks in some time.
There is a ray of hope and that is the markets are up today. The gains are modest but at least we are not seeing any follow thru selling from yesterday. The 10yr is now at 1.86% and mortgages are in-line. We have a number at 9:55 (University of Michigan Consumer Confidence) but after that the calendar is bare. So hopefully we get a weak number and some more buying comes in. We do have a 3 day weekend in the bond markets due to MLK Day on Monday so we will see if traders cover some shorts that they obviously put on yesterday. We can only hope because we do have some ground to make up.
Have a great weekend.