Mortgage Rates----



A better start in the bond and mortgage markets this morning after the strong selling last week. The bond market, temporarily oversold on the quick selling last week, should bounce back a little but won’t change the present bearish bias, but so far today the early improvement has lost all its momentum. That said, as we have noted previously interest rates are not likely to increase a lot as long as the Fed is keeping short rates low. Any significant decline in rates will have to be driven by a pullback in the stock market. At 8:00 the 10 yr note +8/32 at 2.27% -2 bp, mortgage prices +5/32 (.15 bp); by 9:30 when the stock markets opened -13, the NASDAQ unchanged; the 10 yr fell back to unchanged and MBS prices +2/32 (.06 bp).

This week’s economic data is thin, what there is focuses on the housing sector with existing and new home sales for Feb. This morning Apple announced it plans to pay a dividend and buy back $10B of its stock, returning some of its $97.6B in cash and investments to shareholders. Not a surprise, it was widely expected.

The only data today; at 10:00 the March NAHB housing mkt index, expected up to 31 frm 29, as reported a little disappointing, the index was unchanged.

Federal Reserve Bank of New York President William C. Dudley said signs the economy is improving don’t dispel “meaningful” risks to growth, including higher gasoline prices, fiscal cutbacks and a weak housing market. “The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established,” Dudley said today in a speech in Melville, New York. “But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.” A recent survey of a number of economists and analysts showed 90% of those surveyed do not believe the Fed will keep the FF rate at zero to +0.25% through 2014 as the Fed continues to chant. The economy is improving, the biggest voice against the strength is the Fed as it tries to temper optimism in attempts to avoid having to raise rates. The rightly believes higher rates now will hinder and slow growth in the economy.

A little disappointing so far this morning; the bond and mortgage markets opened better earlier but couldn’t hold even with a minor decline in stock indexes. That the rate markets couldn’t even hold a small gain in prices doesn’t bode well for our view that there should be a little bounce in the otherwise bearish rate markets. We will stick with our prediction of a little improvement based on momentum oscillators remaining oversold, however we can’t stress hard enough the recent spike in rates is significant that the bond market will not likely decline much (rates).