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Tuesday, March 02 2010 00:00 |
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Energy Crisis
Treasuries continued trading in a narrow band with the ten year bond trading between 3.58 and 3.63 last week. Rates are expected to tick up in anticipation of the auctions March 9th, 10th and 11th in which the Treasury will sell $71bn in 3 year, ten year and 30 year paper. The Bloomberg survey consensus is that 10 year yields will rise to 4.12% by the end of the year.
According to Michael Santoli’s column in Barron’s this week, banks have the greatest amount of low yielding cash and Treasury securities on their balance sheets -31%- in 16 years. He calls this "potential energy" as these funds have the potential to fuel the economy. Sixteen years ago on 2 March 1994 the Dow closed at 3809 and the US was embarking on a 6 year economic tear.
Banks may be starting to feel the pinch of low yields: Luther Burbank, one of our wholesale sources, lowered the floor on their ARMs to 4.25%. They are underwriting at 1.2% and will loan to 70% of value on a purchase or no cash out refinance. We just received a rate sheet from a new bank that is staffed with old colleagues. They have apartment programs from ARM to 15 year hybrids which they are offering nationwide.
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