Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on June 2, 2010

Locking Stance: LOCKING    Mortgage Bonds: -3bp

Mortgage backed securities stabilized yesterday and remained in a fairly short trading range.  The trading range thus far today is even shorter, but concerns can be seen, much of what I talked about in my weekly Mortgage Market Update and BlogTalkRadio show appears to be coming to fruition and may mean disaster is lurking in the shadows.  Only time will tell for sure, but risks certainly outweigh rewards.

Yesterday’s Treasury Auctions continued to see very strong results.  The 3-month T-Bill saw a bid/cover of 4.51 and yields edging lower to .160%.  The 6-month T-Bill saw a bid/cover of 4.01 with its yield stable at 0.220%.  One note is that the 6-month T-Bill results, while strong, were slightly weaker than last week.  Overall, these results were likely what kept MBS prices from falling.  MBA Purchase Applications were released this morning and confirmed another decline in Purchase Applications (-4.1%) with Refinance Applications rising slightly (+2.4%).  As mortgage rates rise and refinance applications begin to drop off, the index will have a hard time holding ground as the housing market does not appear to be recovering.  Pending Home Sales rose to 110.9, up 6.0%, but those numbers are for April, before the end of the tax credits, so watch out for what lies ahead.  We have some more short-term Treasury Auctions in a while, but nothing will likely shake the markets on this front.

Looking at the charts, we see concerns as I have mentioned elsewhere.  For starters, we did not see a solid retracement and I mentioned any attempted move higher would likely falter and possibly indicate a trend reversal.  Well, MBS prices continue to try and break above their 10-day moving average, but it continues to hold them back and things are looking more and more like they are ready to move lower again.  Stochastic indications do have room for them to climb, but if they do not break free, they will be falling at least back to their 25-day moving average.  There are still some good signs that may save them from a freefall, such as the 50-day and 100-day moving averages edging closer and closer to crossing above the 200-day moving average, but even that may not occur if prices cannot hold their ground or make gains.  Overall, the chart is looking less good than before and this may be the beginning of a trend reversal, so be careful.

What does this mean for Mortgage Rates?  Mortgage rates are holding steady and may continue to do so.  The outlook is questionable with the risk/reward ratio unfavorable to floating.  While mortgage rates may again edge lower, that scenario is slowly becoming less likely.

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