Locking Stance: CAUTIOUSLY FLOATING Mortgage Bonds: 0bp
Mortgage backed securities rebounded yesterday, then crashed again this morning before rebounded yet again. The bottom line is the pattern is not leaving anything definitive right now as we come to a close this week. Things may yet change, so we must remain cautious.
There were several key data plays today as we saw Personal Income and Outlays (includes PCE), Consumer Sentiment and the ISM Manufacturing Index. Personal Income was higher than expected at 0.5% versus 0.3% and rose to 3.3% year/year. Consumer Spending was inline with expectations at 0.4% and its year/year dropped to 2.7%. Core PCE (the Fed’s favorite gauge on inflation) was inline with expectations at 0.1% and its year/year is at 1.4%, just below the Fed’s target range of 1.5-2.0%. Consumer Sentiment came in at 68.2, above estimates of 67.0 and up from 66.6. But the big event really was the ISM Manufacturing Index, which came in at 54.4, just below expectations of 54.5 and down from 56.3. This became the main event because it is opposite what we just saw in yesterday’s Chicago PMI report. As a result, the earlier data was overwhelmed and the traders sentiment now favors MBS prices, at least for the moment. Remember, traders are “moody” and that may change things.
What does this mean for Florida Mortgage Rates? Mortgage rates are actually rebounding from this morning’s pricing, so floating is in order. The overall outlook remains unclear at the moment and will need another trading day (or a few) to finalize its pattern.