Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on March 26, 2010

Locking Stance: CAUTIOUSLY FLOATING   Mortgage Bonds: 12bp

I find myself tempted to change stances briefly as I know a corrective move, or retracement, is in the wind, but I still do not like the markets right now.  If you want to float and try to get a better rate during this retracement, you will likely be safe for a short period so exercise extreme caution.

Let’s get into what happened yesterday afternoon before we get into today and what is likely in the future.  Yesterday afternoon, as I mentioned, saw the results of the 7-year T-Note and its results were disappointing as expected.  MBS prices took a nosedive immediately, but then rebounded to close down only a few basis points.  Why?  Several things.  Many traders likely already valued in a poor performance.  Many people on the short side likely took some profit taking.  And, probably more importantly when simply looking at the charts, you can only stretch a rubber band so far before it must snap back.

So what can we expect today?  Data coming out this morning included the GDP, and Consumer Sentiment.  Real GDP was reported at 5.6%, but that is below expectations of 5.9% which also happens to be where it was last report.  More important to MBS prices and mortgage rates is the GDP Price Index, aka Chain Deflator, as it is a measure of inflationary pressures.  The GDP Price Index was reported at 0.5%, above expectations of 0.4% which also was where it was last report.  Overall, not a favorable report for MBS prices, but warnings of future drops in GDP are helping calm the markets.  Consumer Sentiment was reported at 73.6, just above expectations of 73.0, and up from 72.5 last report.  Again, not favorable in general, but MBS prices are edging higher.  At 11:30, Federal Reserve Gov. Kevin Warsh speaks to Shadow Open Market Committee symposium on maintaining central bank independence, in New York and at 4:00,  St. Louis Federal Reserve Bank President James Bullard speaks on structural economic modeling at Fed International Research Forum on Monetary Policy in Washington.

The charts show negativity virtually across the board of indicators.  There are two rays of hope, or rather of retracement.  Whenever there is a significant leg down, there has to be a solid retracement before the next leg down can begin.  With stochastic indications moving into the oversold spectrum, along with the seemingly unsupported strength we are currently seeing, that retracement has likely begun.  However, the long term outlook is such that a downtrend is in the process of being formed.

What does this mean for Mortgage Rates?  Mortgage rates will likely hold steady or may even edge lower for the short-term though the long-term outlook is most favorable for higher mortgage rates.

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