Thursday, August
23rd, 2007
Mortgage Market Update
In
an interesting move yesterday, four major US banks stepped up
to the Fed’s “Discount Window” and borrowed $500 Million apiece.
Speculation is swirling over the motives behind the borrowings
by Bank of America, Citigroup, JP Morgan Chase, and Wachovia Bank.
Most analysts believe the Discount Window borrowing by these huge,
well capitalized banks was largely symbolic, and designed to calm
financial nervousness in the credit markets.
It
may take some time to discover the true reason behind the borrowings,
but a clue may come from the Fed this afternoon at 4:30pm ET when
they report on the total amount of Discount Window borrowing over
the past week. It will be interesting to see just how much liquidity
has been injected into the banking system via the Fed’s Discount
Window borrowing system - especially following the Fed's cut to
the Discount Rate last week.
Today,
the Bank of Japan (BOJ), Japan ’s Central Bank, decided to keep
any changes to their primary interest rate on hold for the time
being, in an effort to help stabilize financial markets. The
BOJ would probably have liked to bump up their rates to fight
local inflation, but they realized it may have prompted a
further unwinding of the “Yen Carry Trade” and could lead to additional
disruptions in global stock and credit markets. Their decision
to hold on rates was a positive for the US Stock
market today, as our Stocks typically come under heavy selling
pressure as the Yen Carry Trade unwinds
Mortgage
Bonds remain above a floor of support at the 100-day Moving
Average. With this floor just beneath present levels
and the next ceiling of resistance about 42bp higher, at
the 200-day MA - we continue to advise floating.
But should prices turn lower and move beneath the 100-day MA,
we will shift to a locking bias.
Today’s Economic and Geopolitical
News
There is no additional
economic news at this time.
top of page
| 
