Mortgage Rates



A better start this morning on weaker stock market indexes and technical factors. At 9:00 the DJIA -74, the 10 yr +10/32 at 2.33% -4 bp and MBS prices +10/32 (.31 bp). 8:30 brought the only data today; Feb housing starts and building permits. Starts were thought to be up 0.8%, as reported starts declined 1.1% to 698K units annualized, January starts were revised from +1.5% to +3.7%; single family starts declined 9.9% while multi-family starts increased 21.1%. Feb building permits were stronger than the +2.3% estimate, up 5.1% to 717K annualized units, permits the highest since Oct 2008. There was little reaction to the data.

The rate markets remain oversold based on our various length relative strength indexes; the selling in the bond market over the last nine days has pushed the rate up 27 basis points and pushed up mortgage rates by 25 basis points. The 10 yr note is still below last year’s high of 3.77% and the average of 3.87% over the past decade.

Looking over the news wires this morning there are many, including us, that believe the bond market is due for a little bounce; comments such as “the bond market has overrun itself” and many references to the same technical momentum oscillators we use. We still want the 10 yr to test 2.40% and hold it before we can actually count on a brief improvement. This morning a good example of the continued bearishness, at 9:00 the 10 up 10/32 with its yield at 2.33% -4 bp and MBS prices +10/32 (.31 bp); by 9:30 the 10 year up only 4/32 and MBS prices up 4/32 (.12 bp). At 9:30 the DJIA opened -78, the 10 yr note +6/32 while MBS prices +5/32 (.15 bp), already the bond market has lost some ground from earlier. So far similar to yesterday when the bond market opened better but collapsed through the rest of the day.

If today is the day for a nice retracement it will depend on how the stock market trades the rest of the day. That market is overdue for a correction, even the strongest bulls believe equities are overbought for the near term, discounting a continuing stronger recovery than what the Fed is expecting. So far the bond and mortgage markets are not exuding much confidence that rates are ready to retrace the recent spike; the DJIA off 95 point and yet the 10 yr note can only manage a 7/32 price improvement and mortgage prices up just 5/32 (.15 bp) frm yesterday’s heavy selling.