Mortgage Rates--


Prior to 8:30 when weekly jobless claims were released the 10 yr note had dropped to 2.25% frm 2.29% at the close yesterday. Weekly claims were expected to be up a little (+5K), as reported claims declined 5K to 348K, the lowest level in four years. Last week’s claims included the 12th of the month and will be used in the calculation of the March employment report on April 6th. Continuing claims fell to 3.352 mil frm 3.361 mil last week; the 4 wk average declined to 355K frm 356,250K last week. The slightly better claims took some of the improvement away, at 9:00 the 10 yr +4/32 at 2.28%; mortgage prices +2/32 (.06 bp); by 9:30 however the bond and mortgage markets recovered. Mortgage prices at 9:30 +7/32 (.22 bp) and the 10 yr +10/32 at 2.26%, up just one basis point from its level prior to the claims data.

Stock indexes trading in the futures markets were weaker prior to the claims report and did not improve. The stock market is ripe for a correction as we have noted but the longer outlook remains quite bullish for equities. Goldman Sachs yesterday said buying equities now is the best opportunity in our lifetimes----a rather astounding comment unless our lifetime is defined as a few months. Europe’s economy is struggling and China is forecasting its growth rate will slow to 8.0% frm 11%+. At 9:30 the DJIA opened -70, NASDAQ -20 and the S&P -9. Global equity markets are weaker on concerns of weakness in China and Europe.

The last month or so Europe had faded to the background after Greece got its bailout funds to avoid default. Now however, Europe is back in the minds of traders. Interest rates in Spain and other EU countries are increasing as renewed concerns of debt concerns are reviving. Europe’s economy is weakening based on recent data, if its economy continues to soften it brings into question whether the debt ridden countries will be able to meet the austerity plans required to gain assistance from the ECB and IMF. Some of the current improvement in US rates can be attributed to renewed safety trades.

Two data points at 10:00; the Jan FHFA home price index was expected up 0.4%, it was unchanged. Dec home price index originally reported +0.7% was revised to +0.1%; yr/yr price declined 0.8%. Feb leading economic indicators were a little better at +0.7% against +0.6% forecast; Jan LEI revised lower to +0.2% frm +0.4%.

The 10 yr note tried twice already this morning to move below 2.25%, both times it failed to move lower. MBS prices at 10:00 lower than at 9:30; down 3/32 (.09 bp) frm 9:30 levels.