Friday Market Conditions

02/22/2008

In very early trading this morning (7:00 AM) the 10 yr note traded 14/32 higher in price than the close yesterday; but by 9:00 the 10 was back to unchanged. Treasuries have nothing to work with today with just some Fed-speak hitting later. Trade is trying to add to yesterday's gains with the technical picture looking better providing these levels hold. The lack of drivers could weigh on bonds though with a recovery in stock land likely taking a bite out of the gains. All we have today is Dallas Fed Pres Fisher speaking at 1:30.

NY has a snow storm brewing, that may keep markets somewhat more orderly today as many won't make it in; and with no economic news until next week and being Friday the potential of a quiet day exists. That said, financial markets continue to demonstrate huge volatile ranges as investors and traders look for something to drive stocks and bonds.

Bloomberg has a story out today on the difficulties in foreclosing delinquent mortgages. The basis is that many lenders (servicers) that are attempting to foreclose on properties can't produce the mortgage note, without legal evidence attorneys for defendants are staving off foreclosure by arguing that since the lender can not produce to note there is no evidence the lender actually owns the mortgage. In the story there is one man highlighted that hasn't made a payment since 2002 and is still in his house as the judge refuses to grant the foreclosure since the note can not be produced. More losses for investors holding the mortgages, and that will add the investor reluctance to step back in the MBS markets. It seems that there is no end to the mess caused by the sub primes and other mortgages that were originated in the past six years.

Since there isn't any anticipated news or data today, the markets should stay quiet. Next week the economic calendar is full with existing and new home sales for Jan, the Jan PPI, personal income and spending and two treasury auctions (2 yr and 5 yr). Next week also has Bernanke headed to the House and Senate to meet the semi-annual requirements of what used to be known as Humphrey-Hawkins; the fed chief is required by law to testify on monetary policy and the economy twice each year (Feb and August). With all that next week, today should be a day of rest-----hopefully.

The rest of the day for the rate markets will be influenced by how the equity markets perform. At 10:00 the stock indexes are slightly better but show no enthusiasm with the data and Bernanke next week. So far this morning when the stock market futures were aiming at a strong opening the rate markets were unchanged, by 10:00 though the DJIA was sliding back to unchanged that added a little support to treasuries and mortgages.

Talk about poor thinking; in this environment with mortgage companies foreclosing on thousands of properties and the spotlight on everything coming from big mortgage companies; Countrywide is hosting a huge expensive ski resort conference in Colorado. Countrywide apparently doesn't know when to lay low, especially when the company is the poster boy for all that is wrong with mortgage lending.

Crude oil, after backing down yesterday on T. Boone Pickens's remarks, was up this morning, but unchanged at 10:00. The dollar is a little weaker this morning but also quiet.