Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on April 2, 2010

Locking Stance: LOCKING    Mortgage Bonds: –53bp

Greetings from Brasil this morning.  Yeah, you have to love trying to figure out where in the world I am writing from.  Heck, sometimes I don’t even know where I am.  Enough of that crap, let’s get down to the real business at hand.

Does anyone out here know who took the floor?  By floor, I of course mean the floor of support as it appears nothing is going to stop MBS prices from falling.  I am not sure the charts could get much uglier than they are right now, but once again, we will need a corrective move so be ready to float briefly in the near future.  You can partially thank the Fed for mortgage bonds’ demise, but you can even thank that ADP Employment Report for getting traders thinking this morning’s Jobs Report could be ugly.

That’s right, this morning was the Jobs Jamboree, the first Friday in every month that makes its mark on the mortgage market.  This morning’s report showed Nonfarm Payrolls at 162K, below expectations of 200K, but positive nonetheless.  Additionally, the prior two reports (January and February were revised up 62K).  The Unemployment Rate held at 9.7% as expected.  Average Hourly Earnings came in at –0.1% versus expectations of 0.2%.  And the Average Workweek was reported just above expectations, at 34.0 hours versus 33.9 hours.  Overall, the report would generally be favorable for mortgage backed securities, nay for two things.  One is that there is still job growth.  The other could be blamed on the ADP Employment Report which came in negative when expectations were for a positive result.  Remember that traders react to that report as a forecast of the Jobs Report, hence many traders probably were hoping this morning’s report would be much worse.

Looking at the charts, we have now seen MBS prices fall 125 basis points since they last peaked, just 3 days ago. All moving average have turned lower as I forecasted with the exception of the 200-day which reacts slower, but is flattening out now.  The 10-day MA is in a virtual nose-dive along with prices.  The 25-day MA broke below the 50-day MA and now has its eyes on breaking through the 200-day MA.  Arguably, that “mortgage rate bubble” has popped finally, now that the Fed is done inflating it.  The only ray of sunshine in the charts is that with a move like this, there has to be a correction and that will mean mortgage rates will dip slightly for a brief period, though they may not even get back to today’s prices depending on when that correction starts.  We may still a while before that happens, though stochastic indications are now into the oversold spectrum.

What does this mean for Mortgage Rates?  Mortgage rates remain in a climb, though the short-term outlook will change soon.  The long-term outlook is still clearly favoring higher mortgage rates for the future.

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