Locking Stance: CAUTIOUSLY FLOATING Mortgage Bonds: -3bp
Apologies for my absence yesterday but I went to the dentist expecting a quick trip and ended with getting a tooth extracted and a daylong experience. It was a very informative day, however, so let’s recap it quickly before getting into today.
The Case-Shiller HPI was the first data to look at, which showed the 10-city unadjusted month/month change at 0.8%. Once adjusted, however, it was a flat 0.0%. That brings the year/year unadjusted to 4.1%. That brings us to two months of price moderation after Spring’s surge with the trouble spots (West and Florida) showing contraction. It will be interesting to see if prices continue to moderate. Consumer Confidence came in at 48.5, well below the 52.0 expected and down from 53.5. And finally, the 5-year T-Note auction went well with solid coverage and a stop-out rate one basis point below the 1:00 bid. All of the data was favorable to mortgage backed securities and mortgage rates heading lower, but strong resistance pushed MBS prices back below its level. Rep. Cardoza (D) did give much details, but he plans to introduce mortgage modification that allows homeowners to refinance into “fixed” rate loans regardless of income, LTV, or credit history. Another failed government “salvation” attempt? Most likely, but don’t worry as we all get to pay for it. Yes, don’t buy into the BS about taxes, all of us will be seeing our taxes increase, just in more subtle ways.
Today is already proving that the resistance level, now attacked four times, simply does not want to break and that means that mortgage rates may be ready to turn back higher. If it does, the best we can expect is a sideways trading pattern to form. There is not much data today, with MBA Purchase Applications showing Purchase Applications rose 2.4% and Refinance Applications dropping 1.6%. The EIA Petroleum Status Report showed Crude Oil Inventories were down 500K barrels. Not much reaction in the markets, at least not yet. Stocks are down slightly and MBS prices are off their lows, maybe setting up to attempt another crack at overhead resistance. Their only hope for today is likely this afternoon’s 7-year T-Note auction, results at 1:00.
What does this mean for Florida Mortgage Rates? Today may be mortgage rates’ last chance to break lower. While we are skeptical, today’s 7-year T-Note auction may allow this to happen. If not, expect a change in stance this afternoon.