Well the Olympians, especially Phelps sure made us proud.  I have to admit to being a basketball nut and I got up to watch the 2:30 game vs. Spain.  It was one of the best games I have ever watched.  It was close right up to the last few minutes.  I was so happy for D-Wade, LeBron and ok Kobe et al.

Back home, the financial markets have experienced highs and lows while challenging common opinion and perceptions. Who would have imagined that oil prices would touch $147 per barrel, that Countrywide and Bear Stearns would cease to exist and that Fannie and Freddie’s stock prices would dip below the $5 level? And just like last year, economists and strategists are again calling for an increase in yields. The median of 52 estimates in a Bloomberg survey between August 1 and August 8 was for 10-year Treasury yields to rise to 4 percent by the end of 2008. However 10-year Treasury yields continue to tease the expert consensus and move down below the 3.80 percent level on Monday. August 25th, 2008.  It certainly confounds me though, that the actual mortgage rates haven’t fallen further in light of these treasury yields.

Rising spreads indicate that credit concerns are not showing any sign of easing. The 10-year treasury Eurodollar (TED) spread is up from about 24 basis points in January to 73 basis points, and may widen further as prices in the forward market show. Treasury yields continue to consolidate as as a result of a “flight to quality” bid in the market stemming from Agency and financial institution liquidity strains. The rise in the spread is not permitting mortgage rates to follow in tandem with their treasury cousins, resulting in a resiliency in their yields.

Last week created a lot of concern about the health of  Fannie Mae and Freddie Mac, however, mortgage markets remained relatively stable. Although the GSE functions of buying loans from lenders and creating securities for sale to investors is not in question, it’s unclear if the companies will survive in their current forms. Combined, they guarantee $5 trillion worth of home mortgages, or roughly 40 percent of all U.S. mortgages outstanding and play an instrumental role in providing liquidity for mortgage financing that underpins the housing sector and ultimately, the health of the economy. Any GSE failure would be epic and have far-reaching implications beyond U.S. borders. So, if there is no bailout from private investors, the U.S. Treasury will step up.  Any way you shake it - uncertainty will probably cause rates to go up.  If you are on the fence, give us a call sooner rather than later.

The recent drop in oil prices has certainly brought cheers to all motorists and consumer stocks. Hurricane Gustav looks like it will go into the Gulf of Mexico and as a major ‘cane.  This is going to hurt oil prices until it is figured out if the storm will impact production. Speaking of Gustav - there are three other systems out there that bear watching.  One (Invest 95) looks like it is going to go towards Bermuda but there are two more right behind it that bear watching.  Fay is still dropping copious amounts of rain.

Don’t forget we will soon be doing FHA loans and we still have our unmatched service.  You can always get us - and I mean always - home numbers are provided and we always carry our cells.  Call the Bayside Bombers - can’t hurt!