Mortgage Rates



Prior to 8:30 treasuries and mortgage prices were up a little but generally unchanged. At 8:30 Jan retail sales, expected +0.8% overall and +0.5% when auto sales are excluded, as reported it was a strange outcome. Overall sales were up just 0.4% but when auto sales are eliminated sales were up 0.7% suggesting not many autos sold. The reaction improved treasury and mortgage prices and pushed stock indexes lower. Also at 8:30 Jan import prices were up 0.3% and export prices up 0.2%.

German Finance Minister Wolfgang Schaeuble said Europe is better prepared for a Greek default than two years ago. German investor confidence surged to a 10-month high in February as global growth improved and Europe’s debt crisis showed signs of abating. Italian and Spanish borrowing costs fell to the lowest in at least 11 months at debt sales today as investors ignored downgrades by Moody’s Investors Service. Euro-area finance ministers are due to convene in Brussels tomorrow for their second extraordinary meeting in a week after telling Greek officials to identify additional cuts of 325 million euros ($428 million). The measures are among conditions that must be met by tomorrow for Greece to secure a 130 billion-euro rescue needed to avert financial collapse. The comment that Europe is better prepared for a default in Greece might temper a default if Greece cannot meet requirements needed for the bailout. No matter the day or the new Greece’s debt issues seem to go on forever, will it end soon? The bond market this morning is seeing some buying, some over weaker retail sales but also some safety buys on Schaeuble’ s comments.

At 9:30 the DJIA opened -30; the 10 yr note +7/32 at 1.95%, MBS prices +6/32 (.18 bp) frm yesterdays close.

At 10:00 Dec business inventories, expected up 0.5%, as reported +0.4%, sales were up 0.7% with a 1.26 month inventory to sales ratio. The equity market saw some initial selling on the data with rate markets edging a little higher in prices.

The 10 yr note, better this morning, has moved to its 40 day average, for the last five sessions the note yield has been above it. Interest rates continue to trade in a narrow range with not much changes in either mortgage rates or the yield on the 10 yr. Tomorrow the Fed will release the minutes of the 1/25 FOMC meeting, today like yesterday, we don’t expect much movement in either bonds or mortgage prices. The rest of the session will focus on how equity markets trade; there is a growing belief that stocks are set to continue the recent rally. Although opening a little weaker this morning if the market turns around and rallies as it did yesterday after opening weaker, it will take away any significant improvement in the bond and mortgage markets.