Copied below are some commentaries that I have gathered from a few of my sources this week -
MMG Update - Friday, February 20, 2009 9:55am ET
Risks favor: Bias towards Locking
Mortgage Bonds are trading higher, as Stocks remain under selling pressure. And yesterday, the Dow fell to a six year low, below a level it had first surpassed back in 1997. Wow - not accounting for dividends, the Dow is at a level equal to what it was twelve years ago. You'd have to go back to 2002 for the lowest intraday level on the Dow of 7197 to find a potential floor of support. We'll be watching this level closely, as it's very possible to be tested today. And if Stock prices bounce higher off this level of support, it could ignite an overdue rally. However, that would be problematic for Bond prices, as dollars will flow into Stocks to chase the rally.
The Overall Consumer Price Index rose 0.3% in January, meeting expectations and leaving the year-over-year Overall Consumer Price Index (CPI) unchanged, the weakest reading since August 1955. The Core CPI, which strips out volatile food and energy, came in at 0.2%, versus expectations of 0.1%. Over the past 12 months, the Core CPI is up 1.7%, the lowest year over year inflation reading since mid-2004. But if inflation is so low - why is Gold at $1000/oz? Gold, the typical hedge against inflation has been skyrocketing - therefore, somebody appears worried that all this stimulus in a low interest rate environment will eventually lead to inflation.
Continuing with its purchase program, the NY Fed bought $19.9B of Mortgage Backed Securities between Feb. 12 and Feb. 18 bringing the total year-to-date to $135B - or about a third of the way through their stated budget of $500B.
The strong ceiling of resistance overhead continues to keep a lid on Bond pricing gains. Even weak Stocks haven't helped Bond prices break above resistance. This doesn't mean that prices can't improve down the road, but it still may be prudent to lock transactions and protect any modest gains, especially with the aforementioned dynamic in Stocks.
CONTINUING SLOW ECONOMIC SIGNALS SEE MORTGAGE RATES FALL FOR ALL PRODUCTS THIS WEEK
McLean, VA - Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.04 percent for the week ending February 19, 2009, down from last week when it averaged 5.16 percent. Last year at this time, the 30-year FRM averaged 6.04 percent.
The 15-year FRM this week averaged 4.68 percent down from last week when it averaged 4.81 percent. A year ago at this time, the 15-year FRM averaged 5.64 percent.
"Mortgage rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation," said Frank Nothaft, Freddie Mac vice president and chief economist. "And consumer sentiment fell in February for the first time in three months to near its lowest level since May 1980, while industrial production slowed in January by more than the market consensus. In addition, the Federal Reserve lowered its growth forecasts for this year during its policy-setting meeting on January 27-28, noting a deeper contraction in the economy as the credit crunch tightens.
"Meanwhile, the housing market is not doing any better. New housing construction slowed to an all-time record low of 466,000 homes (annualized) in January since records began in January 1959. And although homebuilder confidence ticked up in February from a record low, builder expectations of sales over the next six months hit a record low since it was first published in January 1985."
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.
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