Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on March 31, 2010

Locking Stance: LOCKING    Mortgage Bonds: 0bp

Mortgage backed securities seem to be in a state of confusion again as they drift generally lower and have failed to produce significant gains over the last couple of trading sessions, even being forced backward every time they attempted to make strides.  That is creating another ugly looking chart which I will get into later.

Data today started off with MBA Purchase Applications, which showed the housing market may be starting a recovery after “hibernation”.  Purchase Applications rose 6.8% to mark the fourth gain in the last five weeks while Refinance Applications are barely breathing, so to speak.  Next up on the docket, and arguably the most important item today, was the ADP Employment Report, which traders use to inaccurately forecast the coming Jobs Report.  The ADP Employment Report is showing disappointment, indicating a loss of 23,000 in private payrolls while a gain was expected.  That is good for MBS prices today, hence their initial rise, but again that rally attempt failed.  The other report vying for the top spot today was the Chicago PMI which came in below expectations of 61.0 with a 58.8 showing.  This is yet another favorable report for MBS prices, yet their rally attempts keep failing.  We still have a couple of Feds talking today as Atlanta Federal Reserve Bank President Dennis Lockhart will be speaking on the economic outlook to a business leaders lunch in Hartford and Federal Reserve Gov. Elizabeth Duke will be speaking on restoring credit to communities at the Western Independent Bankers conference in Scottsdale, Arizona, both at 12:30.

So why all of the confusion today?  Well, despite the favorable data, today is the last day of the Fed’s MBS purchase program and that begs to question where MBS prices, and thus mortgage rates, will go after the Fed is done manipulating the markets.  Remember that “mortgage rate bubble” I talked about before?  Not only is the Fed going to stop becoming a purchaser of MBS, but they are going to have to start selling that $1.25 trillion at some point!

Looking at the charts, we see them turning ugly yet again.   That retracement I mentioned is likely over already is definitely shaping up that way, though support is still holding for the moment.  Stochastic indications have turned negative and have plenty of room to allow MBS prices to drop.  Additionally, the 10-day moving average has pierced through the 200-day MA, the 25-day MA is about to break below the 50-day MA, and both the 50-day MA and 100-day are turning lower.  The only moving average showing gains is the 200-day MA and that may just make things worse for the long run.

What does this mean for Mortgage Rates?  Mortgage rates may have improved slightly this morning, though those gains are already gone.  Both the short-term outlook and long-term outlook are favoring higher mortgage rates at this point.

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