Delojozafado

Mortgage Resets: One Shoe Dropping

Well, this weeks Treasury auctions are the miller that tells the tale! 71 billion floated out in a week. The 30 year basically down sharply BEFORE Thursday's auction and then collapsing in the Auction. The bid ratio was a paltry 2.1. The Ten year was then of course beaten down as well to a 3.35 yield in sympathy. The Treasury is going to be floating out over a $135 billion in 30 year notes alone this year. After yesterday the only hope for the Treasury bonds is that we get a substantial correction in the stock market over the Summer months. That would not save the "Q" polluted 20 & 30 year bonds but would at least bring the ten year and lesser maturities back up in price as investors flee to their relative safety.
The Game is over with the "Q" easing. Look at the price action in international (NOT international US based) oils like BP,STO,RDS/B and the ETF ENY (Canada) since the Fed meeting in March. Look at the price action in oil itself. UT ..OHH we are heading for +$60 with in a week? The price of Nat gas has vaulted through $4 as well making a huge percentage move in just days. Silver backed off some after smashing through $14, but the gold, silver and platinum are moving ahead again this morning. If gold breaks out of the $865- $920 trading range to the upside then the US Treasury,Fed and Long Term bond holders in general are going to have the hurtin' put on them.
What all this MEANS??? Is that the sub 5% /30 year mortgage rate is about to become a missed window of opportunity for the would-be buyers awaiting lower housing prices. The lower prices are coming no doubt but will the actual cost of ownership be going down? Not likely as taxes, utilities, and insurance as well as mortgage loads increase against the known expectation for inflation in what is now perceived by most to be in the mid term NOT long term out look.
There is still some disinflation afoot as evidenced by the telecom action this week as well as the sanguine attitude towards this weeks unemployment numbers as a derivative somehow being a positive. All of this is going to ultimately weigh on wages and pension benefits to those employed in the public sector. More disinflation pressure I suppose. In all the euphoria over the Stress tests underwriting the major banks no one seems to pay any attention to the Treasury's & fed's stipulation that the expectation going forward is for an additional 700 Billion in write downs still on their way for these banks. Sure they will now be expected to survive it but at what cost? Anyone like the TMV,TBT, or SRS?