Countrywide’s stock has tumbled to 2005 levels in spite of being recognized as an industry leader in A-paper lending. But earlier this week Countrywide reported a 33% drop in second-quarter earnings and said the losses were due to defaults of prime (rather than subprime) loans, investors' belief was shattered. Now Countrywide, and many other public lenders, are being lumped in with the rest of the battered mortgage industry, and many investors are betting it has further to fall.

So the 10-yr now seems to be below 5% (beginning this morning at 4.86%), and Treasury security prices have improved nicely. Why haven’t 30-yr A-paper prices come along for the ride? Investors are nervous, pure and simple, about mortgages, and bonds backed by those mortgages. Even A-paper, FNMA, FHLMC, and GNMA backed loans are feeling the pressure. So money managers are “fleeing” to the safety of other debt instruments, leaving even A-paper product lagging. The markets now see a 95% chance that overnight rates will be left unchanged at 5.25% in August, while they see roughly a 90% chance that the Fed will remain on hold in October, up from 85% last week. Longer term, the markets are beginning to increase the probability that the Fed will cut interest rates in the first half of next year.

Speaking of the economy in general, equity (stock) prices have gotten hit lately, including today, as the “R”ecession word begins to creep into the newscasts again. Durable Good and Jobless Claims were the economic news du jour. Durable Goods were expected +2%, and Jobless Claims were expected to go from last week’s 303k to 310k. Durable Goods were +1.4%, ex-Transportation -.5%. Jobless Claims were -2k to 301k.

A husband read an article to his wife about how many words women use a day...
30,000 to a man's 15,000.
The wife replied, "The reason has to be because we have to repeat everything to men...
The husband then turned to his wife and asked, "What?"