Mortgage Rates---



Treasuries and MBSs opened better this morning on some weakness in the stock index futures in early trading. At 9:00 the DJIA -11; the 10 yr note +7/32 at 2.23% -2 bp and mortgage prices +9/32 (.28 bp frm yesterday’s close. The Jan Case/Shiller home price index hit. U.S. single-family home prices were unchanged in January, suggesting the battered housing market continues to crawl along the bottom, a closely watched survey said on Tuesday. The composite index of 20 metropolitan areas was flat in January on a seasonally adjusted basis. A Reuters poll of economists forecast a decline of 0.2 percent after December's 0.5 percent drop. But on a non-seasonally adjust basis, prices tumbled 0.8 percent. On a yearly basis, prices fared a little better with January notching a 3.8 percent decline compared to the year before, in line with expectations and an improvement from December's 4.0 percent drop.

At 9:30 the DJIA opened better, +21, 10 yr +6/32 at 2.23% -2 bp and mortgage prices +7/32 (.22 bp).

At 10:00 the Mar consumer confidence index from the Conference Board, thought to be at 70.1 frm 70.8 in Feb. As reported the index was 70.2 frm a revised 71.7 in Feb originally 70.8; the present situation index at 51.0 frm 46.4 in Feb the highest since Sept 2008, the expectations index at 83.0 frm 88.4. The 12 month outlook on inflation also increased. The reaction added a little improvement in mortgage prices and treasuries.

Also at 10:00 the Richmond Fed business index data was a little weaker than thought. The two reports have pushed the stock indexes lower (DJIA at 10:05 -15) 10 yr note rate 2.21% -4 bp on the day.

At 1:00 this afternoon Treasury will start the auctions for the week with $35B of 2 yr notes. It should go well with the recent increase in rates; if not we can expect some pressure in the bond and mortgage markets.

The 10 yr has near term resistance at 2.20%, a break below that would suggest a move down to 2.10%. The Fed through Bernanke’s speech yesterday is going to keep the FF rate low as the Fed has been saying for six months. Bernanke continues to fret about the underlying strength in the economy even with most private economists painting a more favorable outlook. As long as traders and investors are convinced the Fed won’t increase rates anytime soon the outlook for the long end of the curve, including mortgage markets, won’t increase much as we have noted previously.