What will happen to interest rates today?

We will start by floating this morning, but keep in mind it is a bearish market. If you are working with me I will stay close to our re-pricing alerts. I will lock interest rates based on the market today

Treasuries and mortgages opened slightly better this morning after two hard days of price declines and increased yields. At 9:00 the 10 yr +3/32 at 3.54% -1 BP, mtg prices +3/32, the DJIA futures +6 points. At 9:30 the DJIA opened +45, the 10 yr at 9:30 +4/32 and mortgage prices +3/32. This should have a positive impact on interest rates this morning.

At 9:00 the Case/Shiller home price index for August was expected to be down 11.90% yr/yr, improved 1.2% to -11.3% yr/yr for the 20 largest markets. It was the 4th month in a row prices have improved but still not much. Better than expected but not as good as the improvement seen in July. The headline said, it is a sign the housing markets are stabilizing. A step in the right direction but still a serious problem, we suspect the much of the improvement is due to the FTHB tax credit that is scheduled to run out at the end of Nov. Markets hoping Obama will extend the credit but reports of —–guess what—–fraud—-are surfacing that may keep the credit from being extended. Can’t go a day without reports of fraud in the housing sector. This does have a impact on interest rates in the coming weeks.

At 10:00 Sept consumer confidence from the Conference Board, expected at 53.5 frm a revised 53.4 (frm 53.1) in Sept, was weaker at 47.7. Not good but still not a major surprise. The result took the stock market lower and added a bid in the rate markets.

At 1:00 this afternoon $44B of 2 yr notes are up for sale by Treasury; the first of three consecutive auctions raising $116B. It is every other week Treasury goes to the well that so far has a deep reserve and strong demand for US debt that is used to fund the deficit that has ballooned to levels still hard to put in perspective. Not a problem for Congress or the administration however, it is business as usual in Washington—toss as much money as possible with the hope it helps. The $787B stimulus package was and is a waste, and some talk there may be more waste coming.

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