Florida Mortgage Rate Forecast – August 26, 2010

by Florida's #1 Mortgage Planner on August 26, 2010

Locking Stance:  LOCKING     Mortgage Bonds:  +3bp

What a turn around in mortgage backed securities we experienced yesterday and we see those concerns mentioned before are apparently overwhelming the markets.  We mentioned yesterday that things were looking good, which they were at the time of our report, but the 4.0% FNMA mortgage bond dropped and failed to break free of their sideways pattern.  The 3.5% FNMA mortgage bond also fell back below resistance and we may be looking at the formation of a head-and-shoulders pattern, which is a negative signal.  Further price erosion today could be indicative of “change”.  The good news is that we remain above the 10-day moving average on both charts at the moment.  The result is that we do not like the way the charts are shaping and are erring on the side of caution.  We may be back to floating quickly, but a “surprise” might be lurking in the shadows.

The main reason for the change was the fact that yesterday’s 5-year T-Note Treasury Auction did not go over very well.  While the bid/cover ratio was a respectable 2.83, the fact that it was the smallest auction amount of the year reflects that demand may be dropping.  Additionally, the stop-out rate was 1bp above the 1:00 bid, another negative.  The good news was that buyside participation remained respectable.  Eyes will certainly be on the 7-year T-Note auction due out this afternoon, but traders are already reacting to this morning’s Jobless Claims numbers.  Jobless Claims came in better than expected at 473K versus 495K and showed improvement from last week’s 504K (revised 4K higher).  That brings the 4-week moving average up to 486.75K despite the 31K (second biggest decline this year) improvement over last week.  The key to where mortgage rates are headed will likely rest on tomorrow’s GDP and Consumer Sentiment.

What does this mean for Florida Mortgage Rates?  Mortgage rates are holding steady today and likely will do so at least until this afternoon’s Treasury Auction.  The outlook is moving to a more uncertain pattern with concerns growing.  Tomorrow’s data will likely be the deciding factor.

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