2nd Mortgage Info

Unless you spent Sunday spelunking in Howe's Cavern, you probably know that at about 11 a.m. the other shoe finally dropped. After weeks of anticipation and speculation, Treasury Secretary Henry Paulson announced that the federal government had taken over Freddie Mac and Fannie Mae.

Markets are currently pricing in the following probabilities for future interest rate moves:

FED - OIS Implied Rates

Markets are pricing in a 4% chance of a 25bp hike by the next meeting on Sept. 16.

U.S. Treasury Secretary Henry Paulson made the rounds of all the media outlets this morning, touting his bailout rescue plan of government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

"This is not something I want to do, but this is necessary," said Henry Paulson in a interview with CNBC.

In an effort to support the U.S. housing market at the minimum cost to the taxpayer, the U.S. government announced on Sunday plans to takeover Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac which have come under severe pressure as mortgage delinquencies continue to soar, and house prices collapse.

In a statement released on the Fed's website following an announcement of a takeover of GSEs Fannie Mae and Freddie Mac, Fed Chairman Ben Bernanke threw his support behind the Treasury Department's decision, saying the move would help stabilize the financial system.

"I strongly endorse both the decision by FHFA Director Lockhart to place Fannie Mae and Freddie Mac into conservatorship and the actions taken by Treasury Secretary Paulson to ensure the...

Traders expect U.S. bonds to potentially move lower with very little data for markets to digest next week. The main data releases in North America are expected later on in the week with the issuance of U.S. PPI, retail sales and the University of Michigan/Reuters consumer sentiment figures.

"Outside of data, traders will look for more fallout from the credit market crisis including a possible U.S. de facto nationalization of Fannie Mae and Freddie," he said.

Mortgage delinquencies for U.S. homes in the second quarter of 2008 moved up six basis points from the previous quarter to 6.41% of all loans outstanding, marking a 29-year high, according to the MBA's National Delinquency Survey released Friday.

A report on housing prices by Global Insight says that although prices for single-family homes are still heading downwards across the country, the rate of decline has gone down and "extreme overvaluation of house prices is essentially non-existent."

The Canadian and U.S. employment reports for August followed by the Canadian Ivey PMI will be today's main highlights for North America. In the afternoon, markets will also hear from San Francisco Fed President Janet Yellen (non-voter).

U.S. nonfarm payrolls declined for the eighth straight month, falling more than expected by a total of 84k jobs in August, according to the Bureau of Labor Statistics on Friday. The unemployment rate was pushed up four-tenths to 6.1% (6.055%), well above expectations that it would remain at 5.7%.