Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on February 18, 2010

Locking Stance: LOCKING    Mortgage Bonds: –12bp

If you have been following my reports over the last few days, you already knew that this move higher recently was merely a retracement and as you can see, I clearly called that correctly while most “mortgage gurus” held false hope.  I hate to egotistical, but I am left wondering if these gurus truly understand how to read the charts or even if they fully understand the markets.  In fact, if you have been following my reports for a long time, you know that I do not live in the “day” solely and always look to the longer term and have a nearly 100% accuracy of forecasting that longer term.

Yesterday saw data and, more importantly, the FOMC Minutes come in unfavorably for MBS prices.  The FOMC Minutes, or Fed Unplugged, showed that some Feds are getting antsy over the Fed’s $2 trillion balance sheet and are anxious to start selling off some of their “assets”, including their mortgage bond holdings.  By the end of the day, MBS prices fell 44 basis points, causing those gurus to send out alerts to lock.

That brings us to today’s data.  Jobless Claims was among the first to be released today and was favorable to mortgage backed securities as it was higher than expected at 473K versus the 440K expected.  On the inflation front, the Producer Price Index, or PPI, came in higher than expected at 1.4% versus 0.8% and up from 0.2% in the prior month.  Even the Core PPI was higher than expected, coming in at 0.3% versus 0.1% expected and up from the 0.0% prior.  The PPI is not looked at heavily as an inflation gauge, but it certainly hints of inflationary pressures.  Leading Indicators (LEI) was next, coming in at 0.3% and below the expected 0.5% and down from 1.1%.  The LEI is pointing to a deceleration in growth, but one aspect of that slowdown is the emergence of constraints in the supply chain.  If you know about supply and demand, you know this could also point towards inflation down the road.  And the final report released thus far, probably the most important for the day, was the Philadelphia Fed Survey.  The Philly Fed was slightly higher than expected, coming in at 17.6 versus 17.0, showing that the weather didn’t slow down the business activity in Philadelphia’s manufacturing sector.  Overall, data is mostly unfavorable for MBS prices.

Looking at the charts, another negative pattern appears to have formed, a head and shoulders pattern.  Adding to the negativity is the fact MBS prices failed to break through the 100-day moving average (MA) and even have fallen through their 10-day, 25-day and 50-day MAs all in one day.  Currently, the 200-day MA is holding its own, but an attempted move higher was held back solidly by the 25-day MA and the 50-day MA as well as MBS prices are again testing the 200-day MA support level.  Will it hold?  Good question, but I doubt it.

What does this mean for Mortgage Rates?  Mortgage rates are back on the rise and that rise may be swift.  The long term outlook is once again most favorable for higher mortgage rates?

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