Mortgage Bond Markets are experiencing a nice Monday rally with our benchmark FNMA 4.5% coupon up 26bps. An alert to float has been issued but as always, in a volatile market environment like this make sure your clients are working with a market savy loan professional who keeps a keen eye on market movements and a finger on the lock trigger. Happy Monday to all.
Here is today's Mortgage Market snapshot from RateAlert.com:
Treasuries and mortgage markets started early this morning with a little price declines but by 9:00 the 10 yr note crawled back to unchanged and mortgages were trading slightly better from Friday's close (+2/32, .06 bp). The index futures were generally flat at 9:00. At 9:30 the DJIA opened +5, 10 yr +6/32 at 3.86% -02 BP and mortgages at 9:30 very strong up 7/32 (.22 bp).
There are no economic reports today; at 2:00 this afternoon Treasury will release the budget data for March; with tax season Treasury will have a surplus of $67.5B according to estimates after months of deficits, the Feb deficit was -$191.0B. April will also show a surplus, then back to monthly deficits with the US deficit increasing each month.
This Week's Economic Calendar:
Tuesday;
8:30 Feb international trade balance (-$39.0B)
Mar import and export prices (N/A)
Wednesday;
7:00 Weekly MBA mtg apps
8:30 Mar CPI (+0.1%; ex food and energy +0.1%)
Mar retail sales (+1.1%; ex autos and trucks +0.5%)
10:00 Feb business inventories (0.3%)
2:00 Federal Reserve Beige Book (Fed's detailed economic data)
Thursday;
8:30 Weekly unemployment claims (-20K to 440K; continuing claims +50K)
9:15 Mar industrial production (+0.7%)
Mar capacity utilization (73.3% frm 72.7% in Feb)
10:00 Apr Philadelphia Fed business index (20.0 frm 18.9 in Mar)
Friday;
8:30 Mar housing starts and permits (starts +5.7%; permits +2.3%)
9:55 U. of Michigan Consumer sentiment (75.0 frm 73.6 at the end of Mar)
I read an article last week penned by one of the so-called mtg market gurus that was another "sky is falling" opinions that mortgage interest rates would increase because the Fed has finished buying. The end of the Fed buying MBSs has roiled mortgage originators for a month now and some in the industry use it to keep originators looking the wrong way. The withdrawal of the Fed has had absolutely no impact on mortgage rates directly; rates have increased but it has nothing to do with the Fed's exit. Rates are edging higher, and they will continue to do so as long as the economic outlook remains positive. Mortgage rates are increasing, not from the Fed ending the MBS purchases, but because all rates are moving up; mortgages just following along as the always do. What we watch very closely is the yield spread (differential) between the bellwether 10 yr treasury and 30 yr MBSs; the spread has not changed at all since early March. Those that believe its the Fed's removal has caused rates to increase should be discounted until the spread actually begins to widen between the 10 yr note and mortgages; and understand mortgage rates are not increasing because the Fed will not buy anymore.
Feb foreclosures jumped 3.1% confirming foreclosures are increasing and as we have pointed, will continue to increase through most of the year. Foreclosures and delinquencies now total 7.9 million loans.
Not yet; the stock market is a solid as a rock and refuses to retrace even with some of the most bullish investors and traders expecting it to do so. As long as equity markets hold there isn't much likelihood treasuries and mortgage rates will decline. We believe e the 10 yr note and mortgage rates will set into an other trading range for awhile between 4.00% and 3.80% on the note and the same range for 30 yr fixed MBSs.
Greece is still a concern for global markets but so far the global financial crisis a Greek default would trigger hasn't happened and won't. The yield difference, or spread, between 10-year Treasuries and Greek bonds of the same maturity narrowed by 56 basis points to 271 basis points today. That compares with 359 basis points on January 23, 2009, the widest since the introduction of the euro in 1999, Greece got a promise of as much as 45 billion euros ($61 billion) in loans yesterday from the euro-region and International Monetary Fund to help cover its financing needs and avoid a default. The agreement may remove a concern that helped drive the euro 4.8 percent lower against the dollar this year even as signs emerged that global economic growth is accelerating.
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