Thirty-year mortgage rates rose to 4.87% in the seven days ended April 9 from 4.78% the week before, which was the lowest since Freddie Mac began tracking the figure 37 years ago

By
Mortgage and Lending with John Tuggle, Senior Mortgage Loan Originator, Envoy Mortgage, Ltd. NMLS# 211187

Treasuries this morning in early activity (8:00) were sitting unchanged from last Thursday; by 9:00 prices were increasing and yields falling. At 9:30 the 10 +13/32 at 2.88% -4 BP, mortgage prices at 9:30 +1/32. Today treasuries will likely find a little support as the Fed will buy more treasuries, part of its plan to purchase $300B of treasuries announced last month at the FOMC meeting. Interest rate markets are being supported fundamentally by the Fed's buying of treasuries and mortgages, but traders are not overly enthused at the pace of Fed buying so far, more dabbling than taking big bites. Technically, the 10 yr note is supported at the 3.00% level, successfully tested on 9 occasions since early Feb (see chart above). The one thing Bernanke wants is to keep the long end of the curve from increasing in yield; 3.00% is critical in that regard.

The central bank plans to buy treasuries due from March 2011 to April 2012 today and from September 2013 to February 2016 tomorrow, according to its web site. The Fed has more than doubled the size of its balance sheet to $2.09T in the past year by purchasing financial assets including treasuries in an effort to spur growth. 

Thirty-year mortgage rates rose to 4.87% in the seven days ended April 9 from 4.78% the week before, which was the lowest since Freddie Mac began tracking the figure 37 years ago. Rates are 1.97% more than U.S. 10- year yields, widening from 1.46% points two years ago, and frm 2.60% last year. 

No economic releases scheduled today. This week however is full of reads on the economy. 

This Week's Economic Calendar:

             Tuesday;

                  8:30 Mar PPI (unch, the core rate +0.1%)

                         Mar retail sales (+0.3%, ex autos +0.1%)

                  10:00 Feb business inventories (-1.1%)

            Wednesday;

                  7:00 weekly MBA mortgage applications               

                  8:30 Mar CPI (+0.2%, ex food and energy +0.1%)

                         NY Empire State manufacturing index (-35.0 frm -38.2)

                  9:15 Mar industrial production (-0.9%)

                         Mar capacity utilization (69.7% frm 70.9% in Feb)

                  2:00 Fed Beige Book

           Thursday;

                  8:30 Mar housing starts (-5.3%)

                         Mar building permits (+0.5%)

                         weekly jobless claims (-9K)

                 10:00 Philadelphia Fed business index (-32.0 frm -35.0)

           Friday;

                  9:55 U. of Michigan consumer sentiment index (58.5 frm 57.3)

                  12:00 Bernanke speaking

Note that many of the releases are expected to be slightly better. 

Treasuries and mortgages are improving so far this morning; the 10 yr note is so well supported at 3.00% that it can't actually get there to re-test. Traders are completely convinced at the moment that 3.00% will not be breached that anytime the 10 gets over 2.90% buyers step up, so far a trade that has reaped nice gains. On the other side, when the 10 yield falls to the 2.75% area traders turn sellers. Early this morning the 10 traded at 2.93%, at 9:30 back to 2.85%. Mortgage rates of course follow the general direction of the 10, at 8:15 mortgage prices were off 2/32, at 9:30 up 5/32 frm Thursday's close. 

Markets in London and Hong Kong are closed today. 

The stock market is starting weaker adding support to treasuries and mortgages. More to the point however, it is a technical trade today in both equities and rate markets. The stock market blew up 246 points last Thursday, today talk on the NYSE is an overbought market. Treasuries are getting support today on technical's and the Fed buying more treasuries. With no direct data to focus on today the bond market will trade on how stocks perform. No treasury auctions this week takes the supply issue off the table. Take a quick look at the two charts; note the narrow ranges for both mortgages and the 10 yr; generally no directional movement  and likely to remain that way for the rest of the week. 


 PRICES @ 10:00 AM

10 yr note

99.04 +19/32 2.85% -7 BP * June 10 yr note contract 122.08 -3/32

5 yr note

99.21 +10/32 1.82% -7 BP

2 Yr note

99.30 +3/32 0.90% -5 BP

30 yr bond

96.21 +35/32 3.69% -6 BP * June 30 yr bond contract 126.31 +34/32

Libor Rates

(London closed)

30 yr FNMA 4.0 June

99.17 +5/32 (-1/32 frm 10:00 Thursday)

15 yr FNMA 4.0 June

101.00 +2/32 (+1/32 frm 10:00 Thursday)

30 yr GNMA 4.0 June

99.20 +6/32 (+3/32 frm 10:00 Thursday)

15 yr GNMA 4.0 June

102.02 +2/32 (+2/32 frm 10:00 Thursday)

Dollar/Yen

100.23 unch

Dollar/Euro

$1.3287 +$0.0104 (dollar weaker)

Gold June

$897.40 +$14.10

Crude Oil May

$49.26 -$2.88

Goldman-Sachs Commodity Index

369.22 -9.98

DJIA

7991.23 -92.15

NASDAQ

1638.96 -13.58

S&P 500

848.87 -7.69

Monday, 4/13/09 10:30am

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