Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on May 5, 2010

Locking Stance: CAUTIOUSLY FLOATING    Mortgage Bonds: +25bp

Mortgage backed securities have had a nice run, but that run may very well be losing its steam.  The long-term downtrend does appear to have been broken and there are more positive signs coming into the charts now, which I will get into later.  That being said, the volatility can make you sick and it looks like the markets may be looking for a corrective move at this point.  Exactly when that correction begins could be today, later this week, or even delayed further, just be ready for it.

Some market-moving data took to the airwaves this morning.  I will get into the lesser impacting reports in a moment, but let’s get into the ADP Employment Report as traders use it to inaccurately forecast Friday’s Jobs Jamboree.  This morning’s ADP Employment Report came in at 32,000 and added a revision to March up to 19,000.  The report suggests strong numbers on Friday, but traders were looking for a larger increase, thus no real movement (confusion?) since the report came out.  MBA Purchase Applications showed a nice climb in purchase applications, up 13%, but that is likely due to those waiting until the last minute to purchase a new home and claim their tax credits.  The report showed refinance applications fell 2.1%.  Also of note is that government applications made up over 50% of purchase applications.  Still to come are the ISM Services Index and Crude Inventories, so volatility may continue.

The Treasury Department made their announcements this morning on their upcoming 3-year and 10-year T-Note auctions, as well as the 30-year T-Bond auction.  The 3-year T-Note auction will be $38.0B on May 11.  The 10-year T-Note auction will be $24.0B on May 12.  And the 30-year T-Bond auction will be $16.0B on May 13.  Additionally, Treasury Secretary Tim Geithner testifies before the Senate Finance Committee on the proposed bank tax in Washington (10:00) and Boston Federal Reserve Bank President Eric Rosengren will speak to the Money Marketeers of New York University (7:30p).

Looking at the charts, as mentioned earlier, we are seeing a much better picture, especially if MBS prices can make some more gains today.  Volatility is running rampant, so be careful with the “knee-jerk” reactions back and forth as they may trigger jumps into locking even before the proper time.  Stochastic indications are well into the overbought territory, but they are about the only negative indication and are not more powerful than moving averages crossing.  The 10-day moving average has crossed above the 50-day MA and is looking to cross the 100-day as we speak.  The 25-day MA has also turned higher and may take aim on a positive crossover next week.  One other negative, though also not very strong, is the fact we have had 5 consecutive “green” candles, which adds to the need for a correction.  Right now, it appears any correction will be held up by the 200-day MA, so even if we see a drop, the longer-term outlook allows for lower mortgage rates still if that 200-day MA truly holds.

What does this mean fro Mortgage Rates?  Expect a lot of volatility and do not get caught up in it.  If you get a queasy stomach watching the movements, just lock and be happy.  If you don’t mind risk-taking and can handle the repeated “mood swings”, floating will likely pay off.

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