Mortgage Rates



Early trading was generally unchanged but both equities and the bond and mortgage markets opened slightly weaker. China announced the lowest economic growth target since 2004 and European services and manufacturing output was less than earlier estimated. China cut the nation’s economic growth target to 7.5% from an 8.0% goal in place since 2005, the driver for economic growth is slowing. European services and manufacturing output shrank in February more than earlier estimated and at 10:00 estimates were for Jan factory orders were for a decline of 1.9%.

This week private investors holding Greek debt have to decide whether to accept the haircut on debt that is mandated to get funds for Greece to avoid default. The Greek government has set a 75 percent participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility. Euro-area finance ministers last week authorized the EFSF to issue bonds for the swap. Whether that 130 billion-euro package can proceed will depend on the outcome of this week’s swap. A German investor letter advised private investors to reject the Greek bond offer. Yogi was right on…..it ain’t over ‘til it’s over.

At 9:30 the DJIA opened -13, the 10 yr note -3/32 at 1.99% and MBS prices -2/32 (.06 bp).

Two data points at 10:00; Feb ISM services index expected at 56.0 frm 56.8, it was better at 57.3. New orders component at 61.2 frm 59.4 in Jan, employment index at 55.7 frm 57.4 and prices paid index at 68.4 frm 63.5. Overall a mixed report, the overall index better but employment continues to drag. January factory orders were expected to be weak, as reported orders fell 1.0%, the largest decline in orders since Oct 2010. The reaction improved the stock indexes but no noticeable reaction to the data in the bond and mortgage markets.

The week ahead is about employment on Friday (expected to show 207K non-farm jobs and 220K non-farm private jobs with unemployment at 8.3% unch frm Jan),Europe’s mess is still on the radar in the bond market, and now with China forecasting growth at the lowest in five years all are combining this morning keeping the bond and mortgage markets stable with slightly lower stock indexes. The US interest rate markets are well contained in the narrow ranges that have mostly held now for since last November. The near term has the 10 yr note in a narrow 20 basis point range and MBS markets in a 100 basis point price range since the end of January.