Mortgage Market Update as of Friday, May 18, 2007

TGIF!!!!!! 

The sun is shining.....temp is nice and comfy.........and it's Friday.........it's a great day!!! 

Well, now that takes care of the good, fun stuff.  In terms of the mortgage market.......

"Don't try to catch a falling knife."  This is what Bond traders are saying to each other in the pits as mortgage bond prices continue to drift lower with no clear signs of stabilizing just yet.  That being said, rates increased again.  As the day closes out, bonds are performing horribly so we may see more of an increase come Monday. 

Global stock markets have been performing well of late and this positive trend has sucked the money out of the global Bond markets, including our US Bond market.  Remember, mortgage bonds and stocks compete against each other.  The current downward momentum in Bond prices will be difficult to stop, with Stocks continuing to climb higher.  But should Stocks experience a correction from their recent rally, Bonds may benefit. 

Also working against Bonds is the lack of high impact data for the next week or so.  The Bond market could use a series of bond-friendly reports to help reverse this ugly downtrend, but the upcoming economic calendar is pretty thin. Today's University of Michigan's Preliminary Consumer Sentiment Index was reported at 88.7, which was slightly hotter than expectations of 87.0, but Mortgage Bonds had no reaction.  With no news to influence prices, we must pay attention to the technicals and the picture at the moment is not very pretty.

Hopefully your customers did take your "suggestion" to lock their rate earlier in the week when we saw signs of this week's rate increases. 

Have a GREAT weekend. 

~Santos