Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on February 10, 2010

Locking Stance: LOCKING    Mortgage Bonds: +3bp

Mortgage backed securities closed down 18 basis points and above their 100-day moving average, just as expected.  However, factoring in the monthly mortgage bond rollover of –38 basis points, the chart appears as if MBS prices fell 56 basis points and closed below their 100-day moving average, which dramatically changes the future, hence the requirement to change stance to locking.  The monthly rollover does not affect mortgage pricing, but it does affect the “picture” and chart readers like myself (and most traders) do not like the pattern formed and will likely keep MBS prices from regaining their ground and closing back above the 100-day MA.  The next few trading days are crucial, but it does not look good right now.

OK, so why did MBS prices fall yesterday with no significant data reported?  Remember that I discussed the fact that Treasury Auctions were in the drivers’ seat?  Well, traders saw the results of the 3-year T-Note, which were mixed and worse than the prior month in the bid/cover and also in indirect buyers, and began to sell off mortgage backed securities as well.  Data is fairly scarce today as well, so traders’ will be eyeing the 10-year T-Note auction’s results at 1:00.  Federal Reserve Chairman Ben Bernanke testifies to the House Financial Services Committee on the subject of "Unwinding Emergency Federal Reserve Liquidity Programs", Philadelphia Federal Reserve Bank President Charles Plosser speech on lessons of the financial crisis to the World Affairs Council of Philadelphia, and Federal Reserve Gov. Daniel Tarullo testifies to the Senate Banking Subcommittee on International Trade and Finance on the subject of Equipping Financial Regulators with the Tools Necessary to Monitor Systemic Risk.  I suspect that Big Ben’s testimony will have an effect on the markets, likely negative.  MBA Purchase Applications showed a 7.0% drop in Purchase Applications and a 1.3% rise in Refinance Applications, certainly not a sign of a recovering housing market.  The International Trade report showed the Balance of Trade to be $-40.2B versus expectations of $-35.7B, which is good for MBS prices. 

What does this mean for Mortgage Rates?  Mortgage rates are likely to hold steady or possibly rise slightly today.  The outlook has changed dramatically for the moment, but is not certain and the next few days will set the record straight.

( a copy of this report is also available at MBS Commentary under “Blog”)

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