Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on April 14, 2010

Locking Stance: LOCKING    Mortgage Bonds: –12bp

Mortgage backed securities’ attack on the 25-day moving average began to fail yesterday, resulting in a significant pullback.  They mounted another attack today, again failing and setting up what looks to become a full retreat.  The driving force?  Mostly Fed speeches.

Monday’s Treasury auctions went well and set up the first wave of attacks, but that strength is gone.  Bernanke is again speaking today, maintaining the status quo, minus one important thing, he is not reiterating that they will keep rates low for an extended period.  That is all that needs to be omitted to send MBS prices lower.  Bernanke continues to warn about what we all already know, but Congress keeps disregarding, that the nation’s debt is out of control.  Ben Bernanke warned that our nation’s debt could exceed 100% of GDP within the next decade.

Data today is mixed for MBS prices.  The main focus was the Consumer Price Index, or CPI, particularly the Core CPI which excludes volatile food and energy.  Overall CPI was 0.1%, inline with expectations, but the year/year is up 2.4%.  The Core CPI is tamer, showing a 0.0% change, below expectations, with the year/year rate at 1.2%.  Hurting MBS prices as far as data is concerned was the fact Retail Sales beat expectations of 1.2% with a 1.6% reported.  Even when you remove autos, Retail Sales beat expectations.  MBA Purchase Applications showed a huge drop, wiping out all the recent gains, showing a 10.5% drop in purchase applications.  Refinancing applications are down another 9.0% as well.  We still have more Fed speeches to go, so hang on tight.

Looking at the charts, we continue to see plenty of negativity, adding that the 50-day moving average just crossed below the 200-day MA.  Additionally, the 25-day is proving to be very strong resistance and continues its drive lower, eliminating the MBS price rally and signaling the potential continuation of the long-term downtrend I have discussed even yesterday.  Stochastic indications are also signaling the end of the rally, so despite the push and pull going on today, it looks like the future is back to higher mortgage rates, this time including the short-term outlook.

What does this mean for Mortgage Rates?  The short-term outlook has changed to favoring higher mortgage rates and the long-term outlook remains most favorable for higher mortgage rates, again becoming a solid forecast.

UPDATE:  I did not see it, but apparently Ben Bernanke mentioned the need to keep rates low for an extended period of time outside of the main speech.  It was certainly not written into it, according to the prepared speech posted on the Fed’s website.  The result was another rally attempt, which has since fizzled.

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