Mortgage Rates



8:30 economic releases took the small improvements out of the bond market this morning and improved the weak stock index futures which were trading lower. Weekly jobless claims were thought to be up 7K, as reported claims fell again by 13K to 348K, the lowest level in four years; continuing claims declined to 3.426 mil frm 3.526 mil last week. Jan housing starts were in line, up 1.5% to 699K annualized units; single family starts though fell 1.0%. Jan building permits were expected down 0.6% but actually increased 0.7%. Jan producer price index expected up 0.3% up just 0.1%, however the more important core (ex food and energy) surprisingly increased 0.4%. Inflation, the constant fear for fixed income investors, based on the Jan data is increasing a little. Treasuries slipped on the data taking mortgage prices lower. Fortunately for the bond market the Fed has made it clear the inflation data it focuses on isn’t CPI but the personal consumption expenditures that accompanies the monthly personal income and spending data. On a yr/yr basis the overall PPI up 4.1% and the core up 3.0%.


Three data points at 8:30 turned the 10 yr note from +5/32 in price to -9/32 at 9:00, the yield prior to 8:30 1.92%, at 9:00 1.97%. MBS prices up 3/32 (.09 bp) prior to 8:30, at 9:00 -7/32 (.22 bp). DJIA futures prior to 8:30 -50, at 9:00 +7, not getting the bounce traders were expecting on the better claims and housing data.


At 9:30 the DJIA opened +18, the 10 yr note -8/32 at 1.96% +3 bp and MBS prices -6/32 (.18 bp).
Nothing new out of Europe last night about Greece. Yesterday there were rather harsh comments from Greece officials toward Germany’s finance minister complaining that Germany wants Greece out of the EU. Greek politicians continue to add more cuts in order to achieve the needed funds to avoid defaulting in March, frustration increasing as each time Greece believes it has met the criteria set out by the EU, IMF and ECB it seems it comes up less than what is demanded. Greek citizens rioting and unsettling officials of the troika leading to more details and further austerity.


The final data today at 10:00; the Feb Philadelphia Fed business index expected at 10.0 frm 7.3 in Jan, right in line at 10.2. Interior components; new orders index 11.7 frm 6.9, employment 1.1 frm 11.6 in Jan and prices pd at 38.7 frm 31.8. Any index under zero is considered contractions, the higher the index the better the outlook. Employment at close to zero and a big decline from Jan provides another perspective on the stronger decline in weekly claims earlier this morning. There was no market reaction to the data in either stocks or bond markets.


Longer term interest rates continue to trade within a very tight range; essentially neutral, not bearish but not bullish either. Safety into treasuries over the Europe debt issues continues but with less than in the past. The 10 yr note, driver for 30 yr mtgs is finding resistance at 1.90% and support at the 2.00% level. MBSs in even a tighter yield range. The remainder of the day rate markets will track equity indexes and whatever any news out of Europe.