Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on May 26, 2010

Locking Stance: LOCKING    Mortgage Bonds: 0bp

Mortgage backed securities kept see-sawing all day yesterday, finally ending the day up 25bp, roughly at the level I released yesterday’s report.  Already today we have been seeing another up and down day, so volatility will remain.  In general, MBS prices will likely stay around the flat line this morning and make their move this afternoon, if at all.

Yesterday’s Treasury Auction of the 2-year T-Note was rather soft, with a bid/cover of 2.93, surprising the markets a bit with the current flight to quality being seen.  Overnight, stocks around the are on the rebound after yesterday’s plunge.  With stocks hitting support and coming back yesterday, MBS prices may see even more pressure today.  Federal Reserve Chairman Ben Bernanke (FOMC Voting Member) spoke last night to the 2010 Institute for Monetary and Economic Studies Conference International Conference on central bank independence, transparency, and accountability.  I will try to analyze it more later and report again if need be, but at quick glance it seemed that Bernanke was blaming politics for much of the lack of credibility of central banks, and that includes around the world.

Data plays today are still coming, but a couple have been released already.  MBA Purchase Applications showed another 3.3% drop in purchase applications, though refinance applications jumped 17.0%, skewing the Composite Index again, as it was reported up 11.3%.  With low mortgage rates currently, it is no wonder that refinance applications rose, but the concerns are for purchase applications and the future of housing.  Once rates go back higher, those numbers on both sides could get really ugly.  And speaking of housing, New Home Sales will be out at 10:00, though keep in mind it is last month’s data, before the tax credit expiration.  Durable Goods Orders was also released this morning and came in above expectations, with a 2.9% versus 1.5% reported in New Orders, which brought the year/year to 18.9%, up from 11.9%.  Remove transportation and we have a slightly different story as the report showed –1.0%, though the year/year also rose to 18.0%.  Crude Inventories are also on the way, but traders will likely see-saw while they wait for this afternoon’s 5-year T-Note auction’s results.

What does this mean for Mortgage Rates?  We still need a corrective move higher in the near-term, though the medium-term and long-term outlooks remain positive for steady to lower mortgage rates.  Volatility will remain, so locking is my bias and will likely remain so until the correction is over.

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