Locking Stance: LOCKING Mortgage Bonds: –34bp
Mortgage backed securities failed to rally again yesterday and ended the down falling further. Today does not appear like they will be gathering any steam either, leaving us hoping for a sideways pattern at best. Yesterday’s fall was following several Fed speeches; Charles Plosser (Philadelphia) stated he does not favor more bond buying, Rosengren (Boston) stated further monetary stimulus depends on economic data, and Kocherlakota (Minneapolis) stated that asset buying will have minimal impact.
Today’s data certainly is not helpful either. Jobless Claims were just below expectations, coming in at 453K versus 459K, which brings its 4-week moving average down to 458K, marking the fifth straight week of declines. Real GDP came in at 1.7%, just above expectations of 1.6%. The GDP Price Index, aka Chain Deflator, came in inline with expectations at 1.9%. That brings the year/year Real GDP to 3.0%, up from 2.4% the first quarter. And finally, Chicago PMI was just released and beat expectations with a 60.4 versus the 56.0 expected and up from 56.7. That should be the final blow to ensure MBS prices do not attempt to test resistance again. With the move lower, MBS prices fell below their 10-day moving average and are about theri 25-day moving average. Any continued move lower that does not see a rebound would take them below the “sideways trading pattern” range and likely set up a downtrend.
What does it mean for Florida Mortgage Rates? Mortgage rates are again edging higher today. The outlook is not solid and we may remain in fairly stable mortgage rates. However, there is a chance mortgage rates continue there rise beyond recent levels.