We are starting off the week pretty much unchanged from Fridayâ€™s close with the 10yr sitting at 1.90%. You do get the feeling that the bond/mortgage markets are fighting to make-up for the lost ground last week that was spurred on by the release of Fed minutes. Friday was an encouraging sign because there was no follow thru selling. The NFP report was not overly impressive but it was something to get the bond bears going again.
However, apparently that was not meant to be as almost all thought the market reaction to Thursdayâ€™s minutes was an over-reaction. The good news is that the economic calendar this week is very light until Thursday so it gives the markets a chance to reassess. The bad news is that it is a heavy week of â€œFed speakâ€ which is a term used to describe the numerous speeches that members of the Federal Reserve do from time to time. This week we have:
Now these guys give speeches all the time but it is a week where there are a lot of them. Given what happened last week, I expect a greater attention will be paid to what these guys have to say. I am not expecting any earth shattering information from these speeches but you never know. We do have a market that is highly dependent on the Fed so any signs of future involvement from the Fed that is not known will drive the markets.
The â€œgoodâ€ news to come out last week is that mortgage applications were down a robust 21.6% for the last week of 2012. We do usually report this release but last week was pretty eventful and it just did not make the cut. This is good news because it does hinder supply in the market which will help maintain a strong bid for mortgages. So while mortgages will go down if the Treasury market goes down, it should result in mortgages going down less. This is commonly referred to as mortgage tightening.
There is some industry news information worthy of mentioning that came out between Bank of America and FNMA. It appears that BofA has thrown in the towel and decided to settle its exposure to outstanding and potential repurchases for loans between 1/1/2000 thru 12/31/2008. This does include loans that were originated from Countrywide as well of BofA. The settlement was for $3.6 billion. What is does do for BofA is that it helps put the distance from that dreadful Countrywide acquisition behind them. So that $4.1 billion price tag for Countrywide back in 2008 continues to make the signing of Jason Bay look like a brilliant move.