7/8/09

Good morning. Treasuries and mortgages opened better this morning following the technical break of key resistance levels yesterday. Yesterday the stock indexes took a big hit supporting the bond and mortgage markets. More evidence is accumulating that the economy isn't on the road to recovery. While not falling as rapidly as earlier this year, job losses are continuing and with the exception of the two ISM reports (manufacturing and services---both still bearish) the various reports are not improving. As long as the consumer is suffering with declining home prices, job losses---many of which are not likely to return, and fears of further job uncertainty, the economy has little chance of recovery in the short run. Add in now that there is increasing talk of the need for another stimulus package and now we have this administration questioning its own policy initiatives. The present $787B stimulus package passed earlier this year has been an abject failure, wasted money that politicians used for pork and other non-job creation programs. Even the French are criticizing the Obama stimulus as being too little and way too slow. Talk of more stimulus is likely, so far the administration is cool on the idea; but just the talk is sending negative vibes.

At 1:00 this afternoon Treasury will auction 10 yr notes, a true test of demand at the long end of the curve that will have an impact on mortgage prices and rates based on demand. Not much other data to think about this week but at 3:00 this afternoon May consumer credit will be released; expectations are for another decline after a big fall off in April. There you go. If you have any questions, please give me a call.