Florida Mortgage Rates – Weekly Report

by Florida's #1 Mortgage Planner on February 15, 2010

As I have now started posting regularly on MBS Commentary, I have decided to keep all posts here duplicated there, at least for now.  MBS Commentary is still under development, so expect many changes coming, possibly even a complete redesign.  Nevertheless, it is up and running. 

What Happened Last Week?

What a week considering there was hardly any data to move the markets.  Needless to say, news took a front seat and started the week off with Greece’s potential default on its debt in focus.  Of course, the European Union won’t allow that to happen, though it will be interesting to see how Spain and Portugal’s rising debt problems are resolved. Additionally, China’s decision to take measures to cool their economy had some effect on our markets.  Locally, the Treasury Auctions were also in the driver’s seat and the dismal results just kept coming in and the longer the term, the worse the results.  That spelled bad news for mortgage rates for the most part, though the the complete selloff caused a retracement to begin as well.  And finally, making the charts look miserable, there was the monthly mortgage bond rollover.  By the end of the week, had edged slightly higher and began to edge lower again as expected (see last week’s report).

What Lies Ahead for This Week? 

Unlike last week, this week has plenty of data to shake the markets, or light a fuse under their butts.  The week started off taking a day off in observance of President’s Day, so expect volatility to be encountered this week as well.  Data starts flowing in Tuesday (tomorrow) and just keeps coming.  While Treasury Auctions are non-existent except the short-term Treasuries, the Treasury Department will be announcing upcoming auctions of the 2-year,  5-year, and 7-year T-Notes.  As the week progresses, we will see data on housing, the economic recovery, and ending with inflation.  Without getting into detail, you can see there is plenty of data and events that can push or pull on MBS prices, and thus mortgage rates.

What Do the Charts Say?

Starting this week, I am putting the technical analysis into its own section, so here it is.  Despite the skewed movement caused by the monthly rollover, MBS prices dropped significantly and when you look at the charts like most traders do, you could see the need for a retracement which began as the week drew to a close.  If you have been following the daily forecasts, you knew the retracement would get back to around the 10-day moving average (MA), which it did. 

MBS prices are above their 50-day MA, but don’t get your hopes up as this was required to get a solid retracement.  While it does provide hope, the charts still favor MBS prices falling.  The 10-day MA was repelled by the 100-day MA, failing to make a positive crossover.  The 25-day MA is threatening to do the same thing with the 50-day MA, though momentum should take it through, at least briefly.  The 200-day MA held as support this time around and may be the testing ground if MBS prices fall again as I suspect they will.

Stochastic indications are favorable for a rebound in mortgage backed securities as they are on the low side of the chart.  That being said, there is plenty of room for further downward movement, so this is not a guarantee by any means.  Overall, the charts still favor MBS prices moving lower and mortgage rates heading higher as a result.

The Bottom Line…

This week will likely see mortgage rates edge slightly higher but as data flows and with the expected increased volatility, take things day by day.

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