Update: Mortgage Bonds are still negative but off the lows of the day so at this point we can very carefully FLOAT.
Here is today's Market Snapshot from Rate Alert.com:
Interest rates jumped overnight and opened this morning higher with prices of mortgages down along with treasuries. At 8:30 March durable goods orders were much lower than expected on the overall at -1.3% against +0.4%, when auto sales are withdrawn orders jumped 2.8% against forecasts of an increase of 0.6%. Total orders unexpectedly dropped, depressed by a 67% plunge in demand for commercial aircraft that is often volatile. Feb durable goods orders were revised from +0.9% to +1.1%. At 9:00 this morning the 10 yr note -9/32 3.82% +4 bp, mortgage prices -8/32 (.25 bp) and the DJIA futures +13. At 9:30 the DJIA opened -17, the 10 yr got a little support on the open, -7/32 at 3.80% and mortgage prices -5/32 (.15 bp).
At 10:00 March new home sales were expected to be up 6.7% to 330K units (annualized); HOLY COW! sales jumped 26.9% to 411K units and that is after upward revisions to Feb and Jan (Feb from 308K to 324K, Jan from 315K to 338K). The NE +35.7%, Midwest +4.3%, South +43.5% and the west +5.7%. The median sales price $214K with just a 6.7 month supply down from 8.6 months in Feb. The way off the charts improvement hasn't done much to the bond market so far but did turn the equity markets up from trading lower prior to the release.
Greece continues to have impact on US bond rates and the dollar; the Greek government today sent a letter formally requesting the release of an EU aid package to help the government stave off a default. Stocks in Europe rose and the euro snapped declines that drove it to a one-year low against the dollar as Greece asked the European Union for the aid package. Greek bonds and stocks plunged yesterday, dragging down European markets, as Moody's Investors Service cut its rating on Greek debt one step to A3 and the EU revised up the country's budget deficit. Credit-default swaps on Greek government bonds fell 54 basis points to 591 today, after rising to a record 650 basis points yesterday. The 10 yr treasury yield climbed from near its lowest in a month as Greece called for the activation of the financial lifeline of as much as 45 billion euros ($60 billion) to help it avoid a default.
Talk from a number of Fed officials this morning that the Fed should begin selling assets it accumulated in the bailout binge; six members of the FOMC want the Fed to sell some or all of the $1.25T of MBSs it bought over the past year. Bernanke however is not likely to get on board that train now, as long as there is still concern that this recovery is flawed with the housing markets still declining and unemployment high. The Fed is very unlikely to begin selling assets until it is convinced by doing so it won't disrupt markets; the idea the Fed would dump MBSs on the market anytime soon is far fetched. The MBS markets are still on life support, but the venelator has been removed and improvement is slowly gaining momentum; yesterday the first private label MBS was issued since the crash in 2008; it was for jumbos, 225 loans with an average loan of $933K and average credit score of 733---a nice start.
Treasuries are headed for a weekly loss on concern rising debt supply will deter buyers at the next week's auctions, much better than expected Mar durable goods orders, and continual evidence that the economic recovery is gaining momentum. So far 85% of all S&P stocks that have reported earnings have been good and some much better than expected. Germany's economic rebound is also increasing. As long as the world is convinced the global economy is recovering the path for interest rates will continue to be higher. Sovereign debt will push rates higher as governments have to borrow and in turn compete with the private sector. That said, we continue our outlook that rates while increasing won't spike quickly---a slow path upward.
Not likely the bond and mortgage markets can turn around today with the very strong economic releases and next week's $118B of Treasury borrowing. The magnitude of price declines in mortgages and treasuries through the rest of the session will depend on how firm the equity markets trade off the data points today.