Mortgage Rates



Prior to 8:30 data the 10 yr and mortgage prices were unchanged. At 8:30 three data points; weekly jobless claims were expected to be about unchanged, as reported claims were up 13K to 380K and last week’s claims were revised from 357K to 367K. Continuing claims were down 98K to 3.251 mil. Claims much higher than thought but the caveat is being explained by Easter week that distorted the claims data. Always has amazed me that economists and analysts that come up with forecasts and estimates don’t seem to take holidays into their estimates until after the data is reported then we have excuses. That said, it is what it is.

March PPI was thought to be +0.3% overall and +0.2% for the core (ex food and energy); as reported the overall PPI was unchanged and the core jumped 0.3%. Yr/yr overall PPI +2.8%, yr/yr core +2.9%; the headline implies inflation a little hotter than what the Fed pegs as its acceptable target of 2.5%. Looking into it we find though that the increase in the core PPI was mostly due to light truck prices increasing in March.

The Feb international trade deficit was expected at -$52B, as reported the deficit was -$46.03B.

The focus this morning on the 8:30 data is about the increase in jobless claims, although since Easter holiday week may have distorted the data somewhat. The jump in the core PPI has been dismissed due to the increase in light truck prices. Inflation isn’t much of an immediate issue now. Janet Yellen, Vice Chair at the Fed commented; “I consider a highly accommodative policy stance to be appropriate in present circumstances,” Yellen said yesterday in a speech in New York. She also said that allowing the Fed’s program to extend the maturity of the assets on its balance sheet to expire in June wouldn’t amount to a policy tightening. She agrees with Bernanke by saying unemployment will decline “only gradually.” “Over the next several years, I anticipate that we will fall far short in achieving our maximum employment objective, ”Yellen said. Still, “considerable uncertainty surrounds the outlook, and I remain prepared to adjust my policy views in response to incoming information.”

At 9:30 the DJIA opened +20, 10 yr note at 2.02% -1 bp with MBS prices up 4/32 (.12 bp).

At 1:00 this afternoon Treasury will complete its auctions with $13B of 30 yr bonds, re-opening the bond issued in February. The 10 yr yesterday and the 3 yr note auction on Tuesday were both OK but were not met with very strong demand, today’s 30 will likely be the same, not too cool but not too hot, just right.

Treasuries and mortgages are being trumped a little so far this morning by the stock market. The stock market has ignored the increase in jobless claims so far, the DJIA opened +20 but since then the index as well as the NASDAQ and S&P indexes gaining ground. The mortgage market was +4/32 (.12 bp) at 9:30, at 10:00 up 1/32 (.03 bp). The 10 yr note, driver for mortgage markets was up 4/32 at 9:30, now up just 1/32. The wider outlook is bullish for the bond and mortgage markets, however the 10 yr has found resistance at 2.00% levels. The idea of another easing move from the Fed is still out there but the recent swift decline in yields after the weak March employment report may have already discounted the easing move; and there is still a lot of analysts and traders holding that the Fed will not ease any time soon.