Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on April 27, 2010

Locking Stance: CAUTIOUSLY FLOATING    Mortgage Bonds: +28bp

Well, I got it wrong, but I called it as I saw it (and still do as I do).  There are times when that happens, but news and other things play into the role of where mortgage rates and MBS prices move.  The charts remain negative as the long-term down trend has yet to be broken, but with the uncertainty in the world economies, mortgage backed securities still rose and are now testing the 50-day moving average which has held thus far.

Yesterday did not have any data plays and relied on news and the Treasury Auctions.  The short-term Treasury auctions went well, though yields did creep slightly higher.  The 5-year TIPS auction also saw strong results with the highest bid/cover ratio since October 1997 and hit a record low yield.  That being said, foreign participation was down.  Today will see the 2-year Treasury Note Auction at 1:00, so that could send MBS prices higher, or lower.

Today did have some data plays, and also marked the beginning of this week’s FOMC Meeting.  Consumer Confidence was the main data and beat expectations, coming in at 57.9 versus 53.5, and up from 52.5.  Generally, that is not good news for MBS prices.  The S&P Case-Shiller report came in, showing an unadjusted drop of 0.6% in the Composite 10 and an unadjusted 0.9% drop in the Composite 20.  Even with the Composite 10 seasonally adjusted, the gain was 0.1%, which was down from 0.4% and raises concerns.  Minor data included the ICSC-Goldman Store Sales and the Redbook store sales report.  The ICSC-Goldman report showed an increase of 0.2% week/week and 5.5% year/year.  The Redbook report showed 2.2% year/year, so the reports were mixed. 

So what is keeping MBS prices on the rise today?  Mostly uncertainty causing a flight to quality, namely from overseas as the Greek debt situation and now Portugal continue to raise questions.  Big Ben Bernanke was speaking this morning on how to achieve fiscal sustainability.  The Fed chief noted that a rising share of debt to GDP leads to higher interest rates and if high debt levels continue they could threaten the recovery.  He sees the structural budget deficit as a problem and that without change, the debt-to-national income rate will continue to grow.  Ben Bernanke believes that the U.S. economy cannot grow its way out of a high deficit and that reform is needed in entitlement programs.  Not only must health care costs be curbed but the U.S. tax code needs reform.  (Is he saying that he is in favor of the VAT?  Hmmm…)  So, traders are looking at the debt problems overseas, but not really at our own, or is it that our own economy is about to implode due to our government’s inability to control spending?

What does this mean for Mortgage Rates?  Mortgage rates are edging lower, though just how much remains in question as they are against resistance.  The long-term trend is for higher mortgage rates still, but in today’s environment, anything can happen as we are seeing right now.  Things may change this afternoon.

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