Florida Mortgage Daily

Locking Stance: LOCKING    Mortgage Bonds: –22bp

Mortgage backed securities have been all over the map this morning already as data flowed and knee-jerk reactions abounded.  Looking at the charts, we have now arrived at the solid retracement level I have been talking about, but it may not remain as simply a retracement, so don’t be quick to think lower mortgage rates are coming back.

Retail Sales was the major player today and was reported at 0.3%, well above the consensus of –0.2%, though down from 0.5% last report.  Take out autos and we see a slightly different picture as the numbers were 0.8% versus the 0.0% expected and up from 0.6% last month.  Certainly not a favorable report for mortgage bonds and MBS prices fell.  Then came Consumer Sentiment, reported at 72, below the consensus of 74.0 and down from last month.  MBS prices rebounded as a result but have since fallen again.  Why?  As traders digested the Consumer Sentiment data, inflation expectations came in at 2.8%, up from 2.7% last report and that is possibly spooking the markets.

What does this mean for Mortgage Rates?  Mortgage rates rose slightly this morning and may continue to do so though the future remains uncertain.  The charts still favor mortgage rates to climb more.

Locking Stance: LOCKING    Mortgage Bonds: –16bp

Mortgage backed securities managed to rally behind the strong results of yesterday’s 10-year T-Note auction, but this morning is more downward movement, breaking below their 25-day and 100-day moving averages, again.  Can they climb back up?  Don’t count on it.

International Trade was reported this morning, showing the Trade Balance Level at $-37.3B, higher than estimates of $-41.0B.  Jobless Claims were reported at 462K, slightly higher than estimates of 460K and the 4-week moving average rose to 475.5K.  This afternoon will see the most important Treasury Auction, the 30-year T-Bond.  Nevertheless, MBS prices are following the charts, edging lower and sending mortgage rates higher.

What does this mean for Mortgage Rates?  Mortgage rates continue to edge higher today and the outlook is still most favorable for them to continue to do so.

Locking Stance: LOCKING    Mortgage Bonds: –22bp

Mortgage backed securities managed to edge out some more gains yesterday, even after falling considerably for a while.  The 3-year Treasury Note auction was well received and the results were quite favorable for MBS prices to climb, and indeed they did, ending the day up 15bp.  But they also showed their weakness during the day and with the monthly mortgage bond rollover (-34bp), the charts are once again skewed and maybe to the detriment of MBS prices and mortgage rates. 

MBA Purchase Applications was reported this morning and showed purchase applications rose another 5.7%.  While we have now seen gains the last two weeks, the index is still quite depressed and will need several more weeks of gains before we can say there is clearly greater demand, which may be caused merely by the approach of April’s stimulus expiration.  Also, refinance applications fell 1.5%.  Wholesale Trade was reported at –0.2%, up from –0.8% last report.  Crude Inventories was reported up 1.4M.

Later today we will see Treasury Secretary Tim Geithner testify before House Appropriations Financial Services Subcommittee on FY2011 Treasury budget, which should be interesting.  But before that, we will see the results of the 10-year Treasury Note auction and that could shake the markets depending on the results.

What does this mean for Mortgage Rates?  Mortgage rates are edging slightly higher today.  The outlook is still not etched in stone, but the odds remain most favorable for mortgage rates to climb some more.

Locking Stance: LOCKING    Mortgage Bonds: +15bp

First, you probably already noticed the site looks different, that is because the full design did not transfer, but it is safely at the new host.  When time permits, I will make some changes, so don’t be surprised when the site looks different in the near future.  With the successful transfer completed with this site, the remaining sites are going to be transferred in the coming days and I hope to have everything completed by the end of the week.

OK, back to the real business.  Mortgage backed securities are back on the rise, and while there was not a “solid” retracement, MBS prices are holding above their 10-day moving average.  Yesterday lacked data and that fact will continue through today.  However, Treasury Auctions are in the driver’s seat, with longer-term auctions taking place today and through Thursday, ending with the 30-year T-Bond.  Yesterday’s results were very strong still and that is helping MBS prices and mortgage rates.  Today will see the results of the 3-year T-Note and as the terms get longer, expect more of an effect on MBS prices.

What does this mean for Mortgage Rates?  Mortgage rates are holding steady, if not edging slightly lower, though the long-term outlook is not certain.  In the future, odds are almost right on middle ground, with higher mortgage rates remaining a possibility.

Locking Stance: LOCKING    Mortgage Bonds: –6bp

My normal breakdown of today’s events is going to be omitted due to web hosting issues I am encountering.  You may of noticed MBS Commentary is no longer operating due to a database connection issue.  Well, this is but one site that was effectively destroyed due to my web hosting company migrating to a new server.  The websites have been down for over a week and I have yet to receive a fix or even a response from the hosting company in regards to the issue.  As such, I am currently in the process of transferring my websites over to a new hosting company.

Please be patient as I switch hosting companies and hopefully I will have all of my websites back up and running within the next week.  I plan on resuming normal posts here tomorrow, hopefully after fully migrated to the new host’s server and with a successful database migration.  I am hoping there will be no technical issues or lost data as there have been in the past.

Thank you for you understanding….

Locking Stance: LOCKING    Mortgage Bonds: –47bp

Greetings from Santiago, Chile where the earth is still shaking every so often, but certainly not as much as the mortgage bond market.  I told you yesterday that I did not like the way the mortgage backed securities charts’ looked and today you can see why as they have finally begun that overdue correction.  Now we have to wait and see if it is just a correction or what pattern will develop.

Today’s headlines are all about the Jobs Jamboree.  Nonfarm Payrolls came in better than expected at –36K versus –50K.  January and December revisions also added 35K net, making the whole report unfavorable for MBS prices.  The Unemployment Rate was better than expected as well as the Unemployment Rate held at 9.7% versus expectations of 9.8%.  Average Hourly Earnings were below expectations, coming in at 0.1% versus 0.2%.  And Average Workweek was below expectations at 33.1 versus 33.6.  Overall, the Jobs Jamboree numbers were unfavorable for mortgage bonds and MBS prices have plummeted as a result.

What does this mean for Mortgage Rates?  We finally have seen the beginning of a corrective move as I have been expecting.  While the future is not certain, odds still favor mortgage rates climbing from here.

(Note:  So far in Santiago I have not seen a whole lot of damage from the outside of buildings, but just as with the terminal, looks can be deceiving.  Aftershocks continue to be felt here.)

Locking Stance: LOCKING    Mortgage Bonds: +15bp

Mortgage backed securities continue to hold their ground, springing back to wards the flatline each day after moves up and down attempt to break free.  Things appear to look better, though I still do not like the charts overall, especially since we lack a solid correction.

Data today included the weekly Jobless Claims report, which came in slightly better than expected at 469K versus 475K, which is down from 496K last week.  The 4-week moving average dropped to 470.75K.  The 4-week moving average plays a more important role as it smoothes out the weekly increases and decreases, especially when there are special factors, such as the winter storms we have been experiencing.  Nonfarm Productivity was better than expected, coming in at 6.9% versus 6.3%.  Part of what is helping mortgage bonds today is the fact Unit Labor costs were lower than expected, coming in at –5.9% versus –4.5% and that helps ease inflationary fears.  Pending Home Sales dropped 7.6% as the Pending Home Sales Index came in at 90.4, down from 96.6 prior.  The NAR was quick to blame the weather though reality has shown a continued weak housing market despite the weather.

This afternoon has several Treasury Announcements coming up and that will likely add pressure to MBS prices.  Traders of mortgage backed securities will surely be watching these announcements, especially the 3-year T-Note, the 10-year T-Note and the 30-year T-Bond.  Remember that the added supply can bring down MBS prices, especially the longer term Treasuries.  Chicago Federal Reserve Bank President Charles Evans will also be speaking to the CFA Society of Chicago this afternoon.

What does this mean for Mortgage Rates?  Mortgage rates have been holding their ground, remaining steady or slightly improving lately.  The future is becoming more uncertain, though today may see a breakout of the very narrow sideways pattern they have been in. 

Locking Stance: LOCKING    Mortgage Bonds: –6bp

Mortgage backed securities continue to maintain a confused state of mind regarding their direction.  There still has not been a corrective move, yet they hover around their 100-day moving average, drifting slightly lower each passing day.  I doubt this will last much longer as this week holds plenty of data, including Friday’s Jobs Jamboree.

Data today has already been somewhat favorable as the ADP Employment Report was inline with expectations but the prior report was revised lower, typically favorable for MBS prices.  MBA Purchase Applications showed purchase applications rose 9.0% and refinance applications jumped 17.2%.  While these are steps in the right direction, the numbers are still far from a “recovery”.  The only good news for jobs right now is the Challenger Job-Cut Report which came in at 42,090, hitting the lowest total since mid-2006.  The ISM Services Index was slightly better than expected, coming in at 53.0 versus 51.0.  Still to come is the Beige Book at 2:00.

Minneapolis Federal Reserve Bank President Naranyana Kocherlakota speech yesterday also showed his concerns about economic recovery and the jobs market, certainly favorable to MBS prices.  Dallas Federal Reserve Bank President Richard Fisher was speaking on globalization and the recovery to the Council on Foreign Relations in New York today, as was Boston Federal Reserve Bank President Eric Rosengren speaking at a conference on post-crisis capital markets in Philadelphia.  Rosengren stated that the Fed’s low interest rate is “now totally appropriate.”  Still to come today is Atlanta Federal Reserve Bank President Dennis Lockhart’s speech on credit markets and the economic outlook to the New York Association for Business Economics.

What does this mean for Mortgage Rates?  Mortgage rates are likely to hold steady again today, though the Beige Book may change that.  The outlook remains most favorable for mortgage rates to edge back higher.

(Note:  MBS Commentary is still down due to the hosting company’s lack of support to correct the database connection.  I may have to start all over, but will take some time and the article that was posted may be lost forever.)

Locking Stance: LOCKING    Mortgage Bonds: –9bp

Mortgage backed securities once again failed to mount a sustainable rally yesterday despite numerous data reports that were favorable.  I still do not like how the charts look, hence why I favor the locking stance as there still needs to be a correction and that will likely trap MBS prices in a sideways pattern.

Data is virtually non-existent today, with just some minor players that do not make waves typically.  The day will be riddled with various Feds talking up a storm.  We will see Boston Federal Reserve Bank President Eric Rosengren speech at a conference on post-crisis capital markets in Philadelphia, Minneapolis Federal Reserve Bank President Naranyana Kocherlakota speech to Allied Executives Business & Economic Outlook Symposium in Minneapolis, and Dallas Fed President Richard Fisher is scheduled to be interviewed on the Nightly Business Report/PBS.  The markets could very well move on what these Feds say.

What does this mean for Mortgage Rates?  Mortgage rates will likely hold steady or move higher.  The future outlook remains most favorable for higher mortgage rates.

Locking Stance: LOCKING    Mortgage Bonds: +3bp

Mortgage backed securities are still trying to break the potential sideways pattern, but odds remain unfavorable for their success.  Looking at the recent run up that lacks a retracement shows this very clearly.  Of course, other things are indicative as well.

MBS prices are not moving much at all today as you can see.  That is a serious problem for the future because today was the release of the Fed’s favorite gauge on inflation, the PCE report (Personal Consumption Expenditures Index).  Today’s PCE report showed inflation was inline with expectations, coming in at 0.0% and at 1.4% year/year, which was lower than last reading.  Personal Income was well below expectations, coming in at 0.1% versus 0.4%.  Consumer Spending was above expectations, coming in at 0.5% versus 0.4%.  Overall, the entire Personal Income and Outlays report was very favorable to mortgage backed securities, but they are failing to move higher.  The ISM Manufacturing Index is another “biggie” and was released today.  The ISM Manufacturing Index also was favorable for mortgage rates, coming in at 56.5 versus expectations of 57.5.  Even this morning’ short-term Treasury Auctions went favorably for MBS prcies.

Part of the reason MBS prices aren’t climbing is that Richmond Federal Reserve Bank President Jeffrey Lacker is stating that there is little to no chance of a double dip recession.  He is also saying there is no need to make a decision on the Fed’s exit sequence though it is natural to start at asset sales.  Looking at the charts, you can see that the “rubber band” is stretched considerably right now and is keeping MBS prices from pushing higher.

What does this mean for Mortgage Rates?  Mortgage rates should be dropping right now, but they are holding steady.  For the long run, it still appears that a mortgage rates will be trapped in a sideways pattern.

(On a side note, my hosting service migrated my sites to a new server and damaged several of them in the process, including the new one, MBS Commentary, which I hope will be back soon.)