Mortgage rates in San Diego are closed for locking. Hence, this report is for tomorrow.
We're changing our position from lock to float. This may be a short-term opportunity but it is one, nonetheless.
Former Pakistani Prime Minister Benazir Bhutto was gunned down this morning. While nobody has claimed responsibility for the assassination, Bhutto's supporters are assessing blame on the current leader of Pakistan, General Musharraf. Last month, Bhutto was critical of Musharraf's suspension of the Pakistani constitution, suspension of the judiciary, and declaration of martial law. Musharraf claimed that he needed to declare martial law to root out the Radical Islamic terrorists in Pakistan.
Governments across the world, including the United States, have been critical of Musharraf's declaration of martial law. World governments are calling for swift investigations and prosecution of the assassins. There will be an international witch hunt and pressure on Musharraf for a swift response.
In today's domestic economic news, the durable goods number was much lower than expected and consumer confidence was up...
FORGET ALL OF THAT.
Pakistan is a sovereign state with nuclear weapons. General Musharraf is in a huge pickle and is operating under a microscope. The terrorists smell anarchy, in Pakistan, and operate best under those conditions. If Musharraf pulls a play from the benevolent dictator's playbook, Bhutto's supporters, and the international community, will suggest he is covering up his guilt. If he doesn't declare martial law, terrorism may very well flourish in Pakistan and the international community will be calling for his resignation.
That's a lot of pressure for a guy with his finger on the Armageddon button.
Expect a flight to safety (READ: Treasuries) from riskier assets. Mortgage bonds should benefit from this flight to safety trend during the Pakistan situation. This could very well improve mortgage rates in the near term. Be prepared to act quickly as this volatile situation changes.
Recommendation Change: Float all mortgage applications.
