Market Update February 17

Tue, Feb 17 – 5:00 PM ET – Florida Mortgage
Market Wrap: The bond market benefited from ‘flight to safety’ buying as investors fled the stock market. The bond rally lifted our benchmark 4.5% FNMA bond 50bp higher for a close at $101.12. Treasury issues also fared well. A $31 billion auction of 3-month bills and a $30 billion auction of 6-month bills were well received with greater bid to cover ratios of 3.13 and 3.01 respectively. Ten-year Treasuries jumped 206bp providing further evidence of flight to safety buying. Foreign buying was strong in December as the monthly Treasury International Capital (TIC) report showed a higher than forecast net inflow of foreign capital into the U.S. of $34.8 billion vs. a consensus estimate of $20 billion. The day’s economic news fed recessionary fears with a particularly ugly NY Empire State Mfg. Index. The volatile Index fell to a record low in February with a far worse than expected reading of -34.65 vs. a forecast of -24.0. January’s level was -22.2. The day’s housing news wasn’t much better. The National Association of Home Builders/Wells Fargo Housing Market Index remained in single digits for the fourth consecutive month with a reading of 9, up from last month’s record low of 8. The sub-indexes of current new home sales, six-month expectations for new home sales, and prospective buyer traffic in new homes suggests there has been virtually no improvement in the housing market for new, single-family homes. Stocks fell from the open over global banking concerns and continued to sell-off following the day’s economic news indicating the recession is worsening. The Dow lost 297 points to close at 7,552 with Wal-Mart the only Dow component closing higher after posting a greater than forecast quarterly profit. The broader S&P 500 Index plunged 37 points to finish at 789 while the NASDAQ Composite Index fell 63 points to close at 1,470.

4:06 PM ET - President Obama signs the new stimulus package into law. Stocks were trying to make a comeback but moved lower after the signing. Stocks think it is more like a spending package than a stimulus package. The Dow closes at session lows – down 300 points at 7,552. MBS still in positive territory. Oil much lower at $35/barrel down $2.50.

1:52 PM ET - U.S. homebuilder sentiment surprisingly rose in February but were still near all-time lows. The NAHB/Wells Fargo Housing Market Index sqeeked out a 1 point gain to 9 from the record low of 8.

12:26 PM ET - Equity markets still under considerable pressure pushing dollars into the safe haven of the debt markets. The Dow is off 285 points while the 4.5% MBS is higher by 44bp.

9:50 AM ET - MBS trading higher as Stocks near low levels hit back in late November. NY Empire Index plummets to record low of -34.65. Treasuries soaring as investors seek safe haven. Oil falling by $2.50 at $35/barrel as demand wanes.

8:15 AM ET - Global stocks drop on continued fears of a worldwide recession will continue. Stock futures plunging here in the U.S. Treasuries advance the most in a week as investors seek safe havens. Oil falls to $36.61/barrel down 88 cents. MBS not yet open.