[rohry]

"More importantly, a backup in interest rates may bring to a halt the refi boom and the consumer consumption binge it has fed into. The sharp plunge in bond prices looks like it has much further to go. It has already retraced 38% of its recent rally. A 61.8% or 76.4% retracement may take yields back up to 5.5%. The 10-year note has already retraced 23.6% of its advance. A 61.8 or 76.4% retracement will take yields back over 4.75%. For the mortgage market, this means that home mortgage rates may move back up over 7%. If that happens, you can say sayonara to the housing market and the refi/consumer borrowing and spending boom."

[rohry]

Market WrapUp is delivered...

[Asclepius]

... If that happens, you can say sayonara to the housing market and the refi/consumer borrowing and spending boom" ...

I'll still have my dignity, thank you. Just not very much of it.

[Gritty]

Thanks for the post!

[STONEWALLS]

"RATES SHOOT UP: Results of Bankrate.com's Oct. 16 national survey and the effect on monthly payments for a $150,000 loan:30-YEAR FIXED, 15-YEAR FIXED, 1-YEAR ARM This week's rate: 6.23% 5.63% 4.52% Change from last week: +0.21% +0.18% +0.03 Monthly payment: $921.63 $1,236 $761.81 Change from last week: +$20.37 +$14.35 +$3.56 Mortgage rates rebound to a five-week high By Holden Lewis • Bankrate.com® If you locked a mortgage rate more than a week ago, you have reason to feel glad: Rates hit a five-week high. The benchmark 30-year fixed-rate mortgage rose 21 basis points to 6.23 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.46 discount and origination points. At 21 basis points, this was the biggest one-week increase in 11 months. Rates went up along with the stock market. Fueled by good corporate earnings reports, investors jumped back into stocks, and long-term interest rates rose. For weeks, many investors sat out of the stock market, keeping their money in ultrasafe Treasuries as stock prices continued to fall. Then, starting last week, a few corporations reported better-than-expected news. Among them were Yahoo, Walt Disney, American Express, IBM, General Electric and Home Depot. As a result, they and other big companies got boosts in their stock prices. Money poured out of Treasuries and into stocks. All of this caused Treasury yields to rise, and mortgage rates went up along with them. Oddly enough, even as corporate good news slowed this week and the pace of bad news accelerated, long-term interest rates continued to rise. Wayne Ayers, chief economist for FleetBoston Financial, hints that the recent economic news deserves a musical score by Ennio Morricone. The incoming data, he writes in a weekly newsletter, "are a weird mix of 'the good, the bad, and the ugly,' offering a confusing, even contradictory outlook on the future." He points out a weird phenomenon from last week. The nation's unemployment rate fell in September to a seven-month low of 5.6 percent. But employment fell by 43,000 jobs -- the first decline in seven months. About 35,000 of those jobs were lost in manufacturing, continuing a 26-month streak of factory job elimination. Even odder, Ayers notes that the U.S. Department of Labor's monthly payroll survey of 300,000 businesses shows a net loss of 36,000 jobs this year through September, while the Census Department's monthly survey of 60,000 households reflects a gain of 1.1 million jobs so far this year. Which is it? Is the U.S. economy losing jobs or gaining jobs? The answer is important to mortgage shoppers because bad economic news generally means lower rates and good economic news usually precedes higher rates."

As always, thanks Rohry and good luck to everybody!!

Stonewalls

[Soren]

From lemetropolecafe.com:

David Goldman, head of fixed-income research for BankAmerica Securities, calculates that "at current spreads [of interest rates to Treasury bonds], a portfolio of investment grade debt would break even with 10-year Treasury notes even if there were a default rate in excess of 40 per cent over the 10 years". That has never come close to happening, even in the 1930s."

"Now you may think that while this meltdown might be…of no more interest to most people than a jack-knifed trailer on the side of the highway. But this would be a mistake…customers for tech-intensive capital goods must, in many cases, finance their purchases. No bond market means less demand and a lower stock price. In general terms, the longer term growth of the economy requires a revival in capital spending….high interest rate spreads on corporate paper will keep capital expenditure low at least into the second quarter of next year. That means less economic growth, lower profits and fewer jobs."

[tubebender]

We had a call Friday from the local US Bank telling us if we moved additional funds into a money market account they would pay 2.56 %. I told her that sounded like a desperate move on their part to me.

We will see how long it takes for home loans to hit 7 %. With bonds losing favor will that money go into stocks?

Jim P seems to be changing his song about P/Es.

[Tauzero]

The small law firm my Ma works for did the title work for 21 refis on Friday.

One local bank has announced that it will not accept new refi applications for several weeks -- they simply can't process them.

Sounds like a top to me.