Mortgage Rates



Treasuries and MBSs opened better this morning; all about Greece and technical factors. Yesterday markets were buoyed by news that Greek politicians had come to an agreement to meet conditions to get another infusion of money to avoid default on March 20th, overnight the summit meeting in Brussels didn’t approve the austerity plans, apparently because the various cuts in spending were not specific enough. Greece must pass its latest austerity package into law and identify 325 million euros ($431 million) in spending cuts before euro-area governments endorse a second bailout for the country, Luxembourg Prime Minister Jean-Claude Juncker said. One Greek politician said the roadmap proposed for Greece is wrong and he can’t vote for the accord as is. The Greek parliament is due to vote on the measures this weekend. Euro-region ministers are set to meet again on Feb. 15. The German finance minister, briefing lawmakers in Germany on estimates by the so-called troika assessing Greek progress, said that Greece’s pledges would leave debt at as much as 136% of gross domestic product by 2020. The target was to reduce debt to 120% of GDP by then.

Technically, yesterday the 10 yr note held at its near term support level at 2.05% (intraday 2.07%, close 2.04%). This morning bouncing back on the uncertainty over Greece, the 10 is getting another round of safety moves ahead of the weekend. Mortgage prices better but not much change from yesterday morning’s pricing. The 10 yr at 9:30 at 1.98%, resistance now at 1.94%.

We are getting questions and frustrations from some people questioning why there is so much attention to Greece. If Greece defaults the fear is that it will spread through the EU with other countries teetering on the edge of default. Greece defaulting is seen as a huge problem from Europe’s banks as well as the implications for Europe falling back into deep recession; a domino effect. For all the talk about Greece’s austerity budget, unless Germany and France step up with more financing there is no plan that will end the crisis.

The DJIA opened down 112 points at 9:30 on Europe; the 10 yr 1.98% -6 bp while mortgage prices traded +7/32 (.22 bp) frm yesterday’s close.

Earlier this morning the Dec trade deficit was about in line with forecasts, -$48.8B, a six month high as the US is importing more than exporting. No direct reaction to the data.

At 9:55 the mid-Feb U. of Michigan consumer sentiment index was expected to decline a little to 74.5 frm 75.0 at the end of Jan; the index was weaker at 72.5 The current conditions index at 79.6 frm 84.2 two weeks ago, expectations at 68.0 frm 69.1 and the 12 month outlook unchanged at 82. The weaker indexes pushed the DJIA to a new low on the day but the bond and mortgage markets didn’t move on the report. The only thing left in a week that had little economic data, at 2:00 Treasury will report the Jan budget data, a deficit of $40.0B is expected.

With 100% attention on Europe’s debt problems and no approval on the Greek austerity plan, the rest of the day will likely be relatively quiet with treasuries and mortgages holding about where they are presently trading and equity indexes weak. Unlikely we will see additional price gains in either treasuries or MBSs. What occurs or doesn’t occur in Europe over the weekend (Greek parliament is scheduled to vote over the weekend) will dictate how markets trade on Monday. IF Greece wasn’t driving trade the bond and mortgage markets would likely be moving higher in yield and lower in prices as many pundits are now turning bearish on the bond market in favor of equities.