Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on April 8, 2010

Locking Stance: LOCKING    Mortgage Bonds: +9bp

Mortgage backed securities managed a nice rally, but that rally may be fizzling out today, and the corrective move may come to an end.  We also could be looking at a change in the short-term outlook, even breaking the recent trend, but that remains to be seen and in this current environment, I am not willing to take the risk.

Yesterday’s 56 basis point rise was due to several factors, but mostly due to a solid 10-year T-Note Auction.  The 10-year T-Note’s results showed a stable 3.625 bid/cover, though the High Yield rose slightly to 3.900%.  That means yields continue to climb, but that traders seem to be happy with Treasuries, and thus other debt instruments like mortgage bonds, overall.  But there are some concerns moving forward, and some favorable outlooks as well.  Federal Reserve Chairman Ben Bernanke noted that the economy has stabilized and is beginning to grow again, but that he is still concerned about rising mortgage delinquencies, troubled commercial real estate and long spells of unemployment, though not so much about inflation.  Consumer Credit made a dramatic drop, down $11.5B, destroying hopes that the steepest consumer credit contraction on record would come to an end.  Tight credit standards and the consumer’s mood to save are certainly not helping the economic recovery.

Chances are you have already seen the headline data for today, that is Jobless Claims.  Jobless Claims came in worse than expected, at 460K versus 436K, but the Labor Department was quick to blame Easter and even the Cesar Chavez holiday in California for distorting this week’s report and warning that seasonal volatility could shake up the numbers for several weeks.  The 4-week moving average rose to 450.25K from 447.25K and continuing claims fell to 4.550M, the lowest level of the recovery.  Continuing claims’ improvement does show a favorable picture, though it is still clouded by discouraged workers falling out of the insured unemployment pool.

Later today we will see Minneapolis Federal Reserve President Narayana Kocherlakota speak at the Helena, Montana, Business Leaders Luncheon.  Remember that he is raising the need for the Fed to discuss its MBS selling strategy, noting a need for a slow and steady MBS selling program, roughly $20B per month (12:45).  Federal Reserve Vice Chairman Donald Kohn will also be speaking about the economic outlook at the Community Leaders Luncheon at the San Francisco Fed (4:00).  And even Federal Reserve Chairman Ben Bernanke will speak on "Economic Policy, Lessons from History," to the Center for the Study of the Presidency and Congress’s 43rd Annual Alexander Hamilton Awards Dinner, in Washington (8:30p).  But none of these speeches will likely affect the markets more than today’s 30-year T-Bond Auction, which will have its results released at 1:00.

What does this mean for Mortgage Rates?  Mortgage rates have improved some since yesterday, as expected.  The short-term outlook may be changing and will be dependent on today’s Treasury Auction at 1:00.  The long-term outlook still remains most favorable for higher mortgage rates at this time and the corrective move may be coming to an end.

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