Mortgage Rates--



Early this morning a quiet start I the bond and mortgage markets. At 8:30 Q1 advance GDP report was expected at +2.5%, as reported the economy grew 2.2% in the quarter. Less than expected but neither the stock market or the bond and mortgage markets showed any reaction to the weaker quarter. Q4 2011 GDP was 3.0%. Consumer spending in Q1 up 2.9% frm +2.1% in Q4; a smaller contribution from inventories overshadowed the biggest gain in consumer spending in more than a year. The GDP estimate is the first of three for the quarter, with the other releases scheduled for May and June when more information becomes available, and usually sees revisions to the advance report. The Q1 employment cost index was +0.4% about in line with forecasts; yr/yr up 1.9%.

The weaker GDP didn’t move markets much; slower growth in Q1 was expected, that is lower than most estimates didn’t surprise, at least based on how the markets are acting. Minor price declines in treasuries and mortgages as US and Europe’s stock markets didn’t experience significant selling. By 9:00 this morning the 10 yr note traded unchanged from yesterday while the MBS markets were weaker with 30 yr FNMA’s down 4/32 (.12 bp). Stock indexes at 9:00 were better following Europe’s stock markets trading better today.

Standard & Poor’s cut its rating on Spain by two levels to BBB+, citing concern that the country will need to pour more money into its lenders. The downgrade has fueled concern that France may be next for a downgrade on its debt. Meanwhile Spain’s Economy Minister Luis de Guindos ruled out seeking a bailout. Optimism always comes from politicians, markets continue to expect Spain will need a bailout sooner rather than later. Spanish unemployment, already the highest in the European Union, rose to 24.4% in the first quarter, just below the 24.55% record of March 1994. The yield on Spain’s 10-year benchmark bonds rose 13 basis points to 5.96%, pushing the spread with similar German maturities to 429 basis points from 415 basis points yesterday.

More than 75% of the 270 companies in the S&P 500 that reported results since April 10 have topped analysts’ estimates. Eight out of 10 groups in the S&P 500 delivered better-than-forecast results, as financial, telephone and technology companies led with a positive rate of more than 10%. Earnings rose 6.9% on average. Better results have propelled stock indexes higher and this morning even with a weak Q1 GDP the indexes started better.

At 9:30 the DJIA opened +28, NASDAQ +8, S&P +4. The 10 yr note at 9:30 -2/32 at 1.95% unchanged, MBSs -3/32 (.09 bp).

The U. of Michigan consumer sentiment index was expected unchanged at 75.7, the index two weeks ago. The sentiment index increased to 76.4 frm 76.2 at the end of March, current conditions at 82.9 frm 86.0 at the end of March and expectations index at 72.3 frm 69.8. Weaker than a month ago but somewhat better than two weeks ago. Stock indexes succumbed and declined a little and US interest rates not much reaction.

Nothing has changed on the technical’ s; still mostly bullish but the 10 yr continues to slow when it’s yield moves close to 1.90%. We have noted many times here that the 10 yr note has very strong resistance at that level. While 1.90% is a wall for the note, 2.00% is also a wall keeping rates low. Mortgage rates based on the weekly MBA data released Wednesday are at their lowest levels ever. Wed take some exception to that, mtg rates were a little lower for a few days back in late Sept but literally only a day or