Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on April 28, 2010

Locking Stance: CAUTIOUSLY FLOATING    Mortgage Bonds: –16bp

Mortgage backed securities had one heck of a day yesterday as two countries saw their debt downgraded.  Portugal was dropped to A-2 from A-1 and Greece was dropped to junk, both causing drops in stocks which sent money into mortgage bonds, and other “safe havens”.  As a result, MBS prices rose 50 basis points yesterday, piercing several key resistance layers.  Now we need to see where the dust settles and if they can break the long-term downtrend.  The 2-year T-Note auction saw strong results, allowing MBS prices to hold their gains.

Today has some minor data, but news surrounding the European debt crisis and subsequent bailout packages will likely overshadow that data and maybe even the FOMC Meeting Announcement.  MBA Purchase Applications showed a 7.4% rise in purchase applications and a –8.8% drop in refinance applications.  Not surprisingly, government purchase applications were considerably higher than conventional for purchases.  In about two weeks, we should see reality hit the markets again as the tax credit “stimulus” expires.  Crude Inventories will be out at 10:30, but don’t expect much.  Besides news over in Europe, traders will be waiting for this afternoon’s double-play, the 5-year T-Note auction followed by the FOMC Meeting announcement (1:00 and 2:15 respectively).  Remember, the Fed’s Policy Statement is much more important than their rate decision.

Time for more technical analysis now that the picture has changed significantly.  Yesterday, MBS prices broke the latest set of tops, and pierced through their 50-day moving average, resting essentially at their 100-day moving average and just below their 200-day MA.  This morning, they have pulled back from this second set of “double resistance”, but so far have managed to remain higher than their 50-day MA, which is a good sign.  If they can hold their ground, we will likely see a nice breakout higher and lower mortgage rates again, but they will have to break some very strong resistance still.  There remains some negative indications, but right now the odds are mixed and the 50-day MA must hold for a brighter outlook to remain.

What does this mean for Mortgage Rates?  The outlook is once again uncertain, with mortgage rates edging lower yesterday but facing tough obstacles today.  If mortgage rates can hold steady or even edge lower from here, we may have a nice picture for lower mortgage rates.  However, if they fail to hold, mortgage rates will be heading higher again.

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