Florida Mortgage Rate Forecast

Locking Stance: LOCKING Mortgage Bonds: -28bp

Mortgage backed securities certainly bounced around yesterday, but ended up slightly higher than when we posted and kept some hope alive that the trend would not be broken. Well, today they are off to another bad start, again triggered by data surrounding the state of the economy and that raises concerns again.

Data this morning started off with the weekly Jobless Claims, which came in at 472K, essentially inline with expectations of 470K. The 4-week moving average dipped slightly to 485.5K. The numbers are coming down slightly, but the 4-week moving average is still 25K higher than last month and not a positive signal for tomorrow’s Jobs Report. Nevertheless, since the numbers are edging lower, traders are being optimistic and that is sending MBS prices lower. Productivity and Costs was the next item on the agenda and showed Productivity at –1.8%, just above estimates of –1.9%, and Unit Labor Costs at 1.1%, just below estimates of 1.2%. This is a better than expected report, but again essentially inline with expectations, but traders are running with it. The surprise of the day was the Pending Home Sales report which came in at 79.4, a surprising jump of 5.2% from 75.7 and the first signs of life from the housing sector in a while. Ben Bernanke and FDIC’s Sheila Blair were testifying before the Financial Crisis Inquiry Commission in Washington and Big Ben acknowledged that the too-big-to-fail policy was a big part of the problem and stated that the Fed was slow to recognize the sub-prime crisis and that the run-up in house prices obscured the problem. Wow, is a government official actually accepting part of the blame? Nah, can’t be.

Still to come is the Treasury Announcement of the upcoming 3-year T-Note, 10-year T-Note and 30-year T-Bond auctions. We will also see the 10-year TIPS Auction this afternoon. The added supply and the potential for a weaker than expected auction today could add to the decline of MBS prices. Of course, they could also become the savior of the “freefall”. The biggest player of the week is still yet to come as tomorrow’s Jobs Jamboree will certainly play a huge role in shaping the future of mortgage rates.

What does this mean for Florida Mortgage Rates? Mortgage rates are again edging higher today and the outlook remains questionable for record low mortgage rates. The risk/reward ratio is certainly not favorable at this point, though things can change quickly.

{ 0 comments }

Locking Stance: LOCKING Mortgage Bonds: -34bp

Mortgage backed securities are once again heading down and bringing “fear” back into the equation. Things were looking bad as the day began, but nothing compared to what the final bit of data brought on and, just as was stated in yesterday’s radio show, this week’s data is truly shaping the future of mortgage rates.

The day started off with the MBA Purchase Application report which showed Purchase Applications rose 1.8% and Refinance Applications rose 2.8%. While it is certainly nice to see positive numbers for a change, remember that these numbers are from severely depressed beginnings. Next up on the list was the ADP Employment Report which forecasts (typically inaccurately) what lies ahead in Friday’s Jobs Jamboree. This morning’s ADP Employment Report estimates Private Payrolls coming in at –10,000, which is actually better than what was expected, but still not much of a surprise and MBS prices did not move much as a result. The final data play for the day was just released about ten minutes ago, the ISM Manufacturing Index which threw a huge surprise into the mix and MBS prices are plummeting as a result. The ISM Manufacturing Index came in at 56.3, well above estimates of 53.0 and moved up from last report’s 55.5, moving in the opposite direction of what was expected. You can expect some volatility as the “dust settles”, but this is certainly not good for MBS prices and mortgage rates. We have Crude Inventories coming up, though it is not a player usually. We also have Elizabeth Duke and Richard Fisher speaking in a while, so their words may make some waves as the day progresses.

Looking at the charts, this move lower negates the gains of yesterday and puts MBS prices back below the higher resistance layer and right at the lower one. For mortgage rates to remain low, this lower resistance will have to prove itself to be support, so time will tell. Stochastic indications remain positive, but are rapidly approaching the top of the overbought spectrum, so this move lower may be indicative of what lies ahead. Again, it will take a day or two, certainly with all the data coming the next two days, the trend will be solidified and we will see if new record low mortgage rates can be set, or if it is time for mortgage rates to stabilize, if not move higher.

What does this mean for Florida Mortgage Rates? Mortgage rates are edging higher after some positive economic data and that moves the risk/reward ratio back to unfavorable. The trend is not broken yet, but some serious concerns are “in the air”.