Treasuries and mortgages opened firm this morning ahead of the Sept existing home sales at 10:00. The dollar is being hit again this morning, adding support to the stock indexes and the bond market; the finance ministers finished their meeting in South Korea with a statement that MAYBE the G-20 will think about adopting a plan to make currencies more attuned to markets and the economy rather than moving closer to a currency war that has been brewing for months; the dollar this morning is pushing into lows against the yen not seen in years. European stocks climbed after Group of 20 finance chiefs heightened speculation the Federal Reserve will announce further stimulus measures next week.  


Ben Bernanke spoke early this morning (8:30) saying the central bank and other regulators are “intensively” examining financial firms’ home-foreclosure practices and expect preliminary findings next month. “We have been concerned about reported irregularities in foreclosure practices at a number of large financial institutions,” ...... “We are looking intensively at the firms’ policies, procedures, and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures.”  He didn’t comment on the outlook for the economy or monetary policy, eight days before the Fed meets to decide on what economists and investors expect will be a plan to boost growth by restarting large-scale securities purchases. After discussing foreclosures, he devoted much of his remarks to the Fed’s housing-market efforts, such as studies, conferences and events serving troubled borrowers.


The DJIA opened +50; 10 yr at 9:30 +14/32 2.51% -6 bp and mortgage prices +7/32 (.22 bp) on 30s and +5/32 (.15 bp) on 15s.


At 10:00, the only data today, Sept existing home sales, expected up 2.9%, increased 10.0% to 4.53 mil annualized. A big jump but not what the headlines would suggest; most closings were part of the tax credit, 35% of the sales were distressed sales and now with the foreclosure issues sales in Oct won't do so well. The median home price $171,700.00 with a 10.7 month supply on the markets, inventory levels did decline 1.9% but still leaves a huge overhang, especially when the foreclosure moratorium ends. There was no reaction to the better report in the bond or mortgage markets on the report.  


This Week's Economic calendar:


            9:00 am Case/Shiller 20 city home price index (+2.0%, August +3.18%)

           10:00 Oct consumer confidence index (49.0 frm 48.5)

            1:00 pm $35B 2 yr note auction


           7:00 am Weekly MBA mortgage applications

           8:30 am Sept durable goods orders (+1.7%; ex transportation orders +0.1%)

          10:00 am Sept new home sales (+2.4% to 295K units annualized)

           1:00 pm $35B 5 yr note auction


          8:30 weekly jobless claims (+3K to 455K)

          1:00 pm $29B 7 yr note auction


          8:30 am Q3 advance GDP (+2.0% frm +1.7% in Q2)

                       Q3 employment cost index (+0.5%)

         9:45 am Oct Chicago purchasing mgrs index (57.5 frm 60.4)

         9:55 am U. of Michigan consumer sentiment index (68.0 frm 67.9)


Interest rate markets are likely to continue their narrow trendless range through the week ahead of the QE and elections next week. Over the past two weeks mortgage prices and mortgage rates have been generally flat with prices moving in a very narrow range. The Fed will step up and announce large scale buying of treasuries when the FOMC meeting concludes on Nov 3rd, in the meantime the Nov 2nd elections, while generally conceded to Republicans, is still a soft point for markets; the margins of victories and the number of them will be closely monitored as a measure of consumer discontent that has increased dramatically over the past 9 months. The health care bill a true mess, and government spending have consumers increasingly nervous over the economic outlook. Can the new make up of the House and Senate change the underlying fears of consumers? Will Pres Obama stand strong and use his veto powers to hold health care as it is currently written or will he concede the bill is flawed and work to fix it? These and other key questions will dominate through the remainder of the year.



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