Florida Mortgage Rate Forecast – July 13, 2010

by Florida's #1 Mortgage Planner on July 13, 2010

Locking Stance:  LOCKING    Mortgage Bonds:  –9bp

Yesterday was an interesting day to say the least.  The 3-month T-Bill Auction went very well with the bid/cover rising to 4.64 despite its continued $30B size, and the yield dropped to 0.150%.  The 6-month T-Bill did not fair quite as well, though still respectable, with its bid/cover dropping slightly to 3.90 and its yield dropping to 0.200%.  However, the 3-year T-Note Auction did not go so well with its bid/cover dipping slightly to 3.20 and its yield dipping slightly to 1.055%.  That looks good on the surface, but the yield was about 1bp above the 1:00 bid and demand from buyside accounts was light.  Not a bad report, but certainly not overly favorable either.

Data today covered several small to medium scale reports, the most impactful being the International Trade Report.  The ICSC-Goldman Store Sales report and the Redbook report showed some weakness in store sales, though this data is not impacting the markets.  The NFIB Small Business Optimism Index, another good to know but not impacting report, showed a drop from 92.2 to 89 and is indicative that optimism among small business owners is diminishing.  The International Trade Report showed the Trade Balance Level (Balance of Trade) at $-42.3B versus the consensus of $-39.0B, but its underlying data is mixed.  The trade gap worsened, but there was a nice rebound in exports.  Without getting into all of the details, this report was actually unfavorable to MBS prices and low mortgage rates despite its “worse” appearance.  Still to come is the 4-week T-Bill auction at 11:30 and the likely next market mover, the 10-year T-Note auction at 1:00.

The charts are skewed today as we had the monthly mortgage bond coupon rollover which was again at –34bp.  This negated the +3bp close and shows as a –31bp move instead, creating a red candlestick that drops all the way to support within the sideways trading pattern.  This can be good or bad for the future as it could provide a pseudo retracement and allow MBS prices to rise, though that does not appear to be happening, or it can create a negative breakout with further price deterioration.  We will need to wait a day or two to find out exactly which direction MBS traders will decide to go.

What does this mean for Florida Mortgage Rates?  Mortgage rates are holding fairly steady but the future is questionable at the moment.  The risk/reward ratio remains unfavorable and we should know more about where mortgage rates are headed within the next day or two.

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