Quick update as I seem to be burning daylight.  Earlier today, the Federal Reserve Bank of NY (Empire State Manufacturing Index) released its latest read on that sector, falling nearly 10 points to 11.9.  The Prices Paid component (inflation gauge within the index) jumped 10 points in the same period.  The employment number did improve but overall, new orders falling 5.1 point did the damage.  Debt ceiling concerns are now front and center.  We probably will hit the mark (14.3 trillion) before day’s end but due to some tricky accounting by Treasury Secretary Geithner, addition time has been bought (10 to 11 weeks).  Stay tuned as this debate heats up, most likely ending in a last minute deal with spending cuts and a ceiling bump.  The National Association of Home Builders Index was also released, holding steady at 16.  The index has been flat for weeks from very low levels showing little signs of momentum yet it has stabilized.  It’s better than the alternative.  Technically speaking, the market is forming a neutral inside day (we’ll talk about this in Secondary 101).  The pattern tells us that directional movement is not strong but given the fact that this market keeps on ticking (uptrend/rally), slightly improving yields/mortgage pricing is the path of least resistance.  We like the market and expect it to revisit the highs (low yield/best pricing) early this week.  Speaking of “keep on ticking”, Jennifer and I went to see Frankie Valli and the Four Seasons on Friday with the Dallas Symphony.  As our seats were a little messed up (computer error), we did a little changing after starting a conversation with a man and his daughter next to us.  Small talk about how their car reservation got messed up as well.  Small talk usually leads to “so what do you do” etc.  He was in town to explore the possibilities of his daughter attending SMU.  He also had a friend and neighbor in the mortgage business from Walnut Creek, his home town.  The friend and neighbor is Bill Katakis, Prime Lending’s branch manager in Walnut Creek CA.  Small world.

Scott Eggen
SVP, Capital Markets
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252

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© 2011 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing

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Durable goods orders rose from 0.7% in February (revised higher from -0.9%) to 2.5%. This print today was above most economists’ expectations of a 2.3% increase. Orders for capital goods (non-defense) ex-transportation also rose, posting up 3.7% from February (Feb also revised higher from -1.3% to +0.5%).  Mortgage applications fell 5.6% as purchase applications fell 13.6%.  Refinance applications remain well-below their 10-year average despite mortgage rates remaining 100 bps below their 10-year average (30-year fixed mortgage). 

Today’s $35 bln 5yr note auction has been rescheduled from its regular 12:00 PM CT time slot to 10:30 AM CT to avoid overlapping with the Fed statement.  All eyes are awaiting the conclusion of the Fed’s two-day FOMC meeting this morning at 11:30 AM CT when their official statement is released. We will have around an hour and forty-five minutes to pick apart the statement before Chairman Bernanke will hold the FOMC’s first post-meeting press conference. The press conference is being held to improve transparency, per the FOMC, and to improve communication to the public. What will be interesting to see is how much the market moves between the time the official statement is released and the time Bernanke sits down to talk.  The Chairman may emphasize or de-emphasize a specific part of the statement, changing the interpretation of its meaning. There are some critical topics that everyone will be watching for from today’s FOMC news.  Many are hoping that Chairman Bernanke gives us more clues to the status of the Fed’s Quantitative Easing (QE2) program (which is scheduled to end sometime in June), and hope he also touches on the $14.3 trl debt ceiling (which is expected to be reached on May16). 

Weakness overnight has not yet been severe enough to affect conditions on dailies.  Current levels are off about 4 ticks in the lower coupons with the 10yr trading a 3.35% yield.  Key support is now the 8-day moving average that currently sits around 120-07(3.38yld).  A sustained break below that price point would neutralize the bullish trend that has been in place.  We look for the market to trade at current levels before the FOMC release.  Buckle up!

Joe Webb
VP Trading, Pipeline Management
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252

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© 2011 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing

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New Home Sales rose 11.1% month on month in this morning’s release for March.  Sales in the Northwest and West rebounded from very low February levels.  The South was the only region to not see an increase.  Looks to us like the rebound in March was closely tied to the strong, weather related dip in February.  The industry remains slow but steady yet volatile.  Stocks have slumped in the early going as most of Europe and Asia are closed.  Toyota reported a 63% drop in production, doing nothing to help the Nikkei or their stock.  Currently, the Dow is off 45 points while the Naz is down 1.50 points.  The Dallas Fed reported that their manufacturing survey dipped 16 point to 8.1.  Although this region is showing growth, it’s at a turtle’s pace.  New orders did the damage, falling 9.3 points.  The Dallas report comes on the heels of last week’s disappointing Philly Fed Survey which should be reflected in Q1 GDP of 1.75%.  The week ahead will feature more housing data tomorrow via the Case-Shiller report.  Consumer Confidence and the Richmond Fed Survey will also be on tap.  Durable Goods will be Wednesday’s child along with any policy statement and/or interest rate changes form the FOMC.  That meeting starts tomorrow and will conclude at 12:30 pm cst Wednesday.  Weekly Claims, Q1 GDP, Pending Home Sales, and the Kansas City Fed Survey will be on the docket for Thursday.  We’ll end the week with the Employment Cost Index (Pet of the Fed), Personal Income and Outlays, Chicago Purchasing Managers report, and the Michigan Sentiment Survey.  As you can see, lots to move the market this week.  Technically, trading has held within the range formed over the last week.  We continue to test support but seem to rally back on every attempt to turn the market bearish.  3.34% has capped the rally (currently at 3.36%) while 3.46% has acted as good support.  Keep and eye on stocks and the FOMC policy statement on Wednesday.  They will set the tone.

Scott Eggen
SVP, Capital Markets
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252

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© 2011 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing

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