Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on May 25, 2010

Locking Stance: LOCKING    Mortgage Bonds: +28bp

Mortgage backed securities are in rally mode today, but we failed to get a genuine retracement, which is needed still.  MBS prices are up today, though with the need for a retracement, or correction, I simply cannot advise to continue floating at the moment.

The reason for the move higher this morning started over in Australia, with their stocks moving lower, which has been spreading across the world.  The dollar continues to gain strength at the moment, which is pulling oil prices lower, adding to the desire to shift money from stocks to bonds and treasuries, including mortgage bonds.  The good news is that this move should put this afternoon’s 2-year T-Note auction in the “strong results” column.  There are some warnings though, such as the fact stocks are now testing support.  If that support holds, or even gets stocks to reverse course, MBS prices could begin a move to move in the opposite direction, and quickly.  Keep in mind that MBS prices have already pulled back 10bp from their highs.  Yesterday’s short-term Treasury auctions were strong, though a bit mixed.

Data today covered the housing front as we saw the Case-Shiller Housing Price Index (HPI) released.  The report showed the 10-city unadjusted change at –0.4%, though when seasonally adjusted it showed a 0.2% rise.  The unadjusted year/year change is now at 3.1%.  The Composite 20 Index came in at 2.4%, below expectations of 3.0%.  That puts prices generally flat across the country, though some areas have seen price increases along with sales increases, including here in Florida.  Store sales across the board (Redbook and ICSC-Goldman Store Sales) showed declines in their reports, hinting consumers are saving more.  Consumer Confidence was just released and came in at 63.3, considerably higher than the 59.0 expected, and up from 57.9.  That optimism could be what triggers a reversal in MBS price direction.

What does this mean for Mortgage Rates?  Mortgage rates edged lower out of the starting gate, but the short-term still shows a need for rates to move higher briefly.  The long-term outlook remains good for steady or lower mortgage rates at the moment.

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