Florida Mortgage Rate Forecast – September 2, 2010

by Florida's #1 Mortgage Planner on September 2, 2010

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.

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