The Week Ahead in the Capital Markets  -   May 27, 2009

The Obama put is facing its first test.  Can it hold?  Will it keep mortgage rates low?  The Federal Reserve is doing all it can.  Purchases of mortgage-backed securities have taken the Fed’s mortgage holdings above $350 billion.  The spread between mortgage and Treasury yields [...]

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Henry Ford said you could have a car in any color you like, as long as it’s black. Today you can have any mortgage rate you like, as long as its 4.875%. Mortgage-Treasury spreads near 2.00% – thanks to all of the President’s horses and all of the Treasury’s men – have kept mortgages below [...]

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“…the bottom is coming in to view.”  The bottom of the housing market, that is.  Mark Zandi, Moody’s chief economist, believes home sales hit bottom in the first quarter of this year, and prices will bottom in the fourth quarter.  Zandi expects prices to fall sharply through the summer and fall before bottoming out at [...]

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Never fear.  We have a new put option protecting us.  Remember the Greenspan put?  That’s the one that protected the stock market in the late ‘Nineties.  It was always safe to buy stocks because Greenspan would lower rates to support stocks every time they dipped.  Today we have the Obama-Bernanke-Geithner put option.  It works like [...]

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