Mortgage Rates



Before 8:30 treasury markets were trading slightly weaker and stock indexes a little better, it changed after the 8:30 release of Q4 GDP. Expected at a growth rate of 3.1%, as reported +2.8%; the 10 yr note bounced up a little and mortgage prices improved and stock indexes declined. The report is the first of three over the next three months and usually gets revised when the preliminary report hits next month; nevertheless after the Fed released its weaker forecasts for growth in 2012, and 2013 on Wednesday the softer Q4 growth is getting a lot of attention this morning. If inventory builds are removed GDP was up just 0.8%. For all of 2012 growth up 1.7% compared with +3.0% in 2010. Consumer spending in Q4 was up 2.0%, economists were projecting +2.4%, Q3 up 1.7%---holiday shopping was less than estimates. Q4 savings rate declined to +3.7%, the lowest in years.

The bond and mortgage markets rallied a little on the 8:30 weaker GDP data; MBS trading was volatile with prices swinging from +.22 bp to +.09 bp; at 9:15 +.09 bp with the 10 yr treasury +4/32 at 1.93% -1 bp. At 9:30 the DJIA opened -36, the 10 yr note +6/32 to 1.92% -2 bp and mortgage prices +3/32 (.09 bp).

The final data this week at 9:55; the U. of Michigan consumer sentiment index, expected at 74.0, as reported 75.0, up frm 69.9 at the end of Dec. Current conditions at 84.2, expectations at 69.1 frm 68.4 two weeks ago, 12 month outlook 82 frm 79 two weeks ago. The sentiment and current conditions the highest since Feb 2011. There was no reaction to the data in either stock indexes of the bond markets.

European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are “very close” to reaching an agreement on a private-sector involvement in a Greek debt swap this month. Greece and its creditors are haggling over the terms of an accord to reduce the country’s borrowings, three months after private bondholders agreed to a 50% cut in the face value of more than 200 billion euros ($263B) of debt by voluntarily swapping bonds for new securities. Earlier this week officials were saying a deal would be resolved by today, now the talk is “in the next three days”.

Technicals looking more bullish, the 10 yr note has more to go before it runs into resistance. The rest of the day the bond and mortgage markets will take their lead from the equity markets, stock indexes at 10:00 at their worst of the day so far.