Mortgage Rates



Prior to 8:30 weekly jobless claims the bond and mortgage markets were unchanged. Weekly claims were expected at have declined to 368K frm originally reported 380K last week. Claims as reported were at 386K, down 2K frm a revised 388K last week. Not a good report for the employment sector. Continuing claims increased to 3.297 mil frm 3.271.mil; the 4 week average that smooth’s the claims increased from 369,250 to 374.750. The reaction to the weaker report pushed mortgage prices up 3/32 (.09 bp), the 10 yr note yield down to 1.96% frm 1.98%, the DJIA frm +50 to +12. Not much change from levels prior to the 8:30 report with three more data points at 10:00.

Spain sold 2.54 billion euros ($3.3 billion) of two- and 10-year bonds at an auction today. The country’s government had set a maximum target of 2.5 billion euros. Spain sold the 10-year benchmark bonds at an average yield of 5.743%, compared with 5.789% on the secondary market before the auction, and 5.403% when it last sold the debt in January. It auctioned two-year securities at 3.463%. Generally a little better than what was thought, but still higher than in January as Spain and Italy are increasingly confronted with budget cuts that can’t be met. German bunds advanced and futures contracts rose to a record as investors sought the safest assets. Italian 10-year bond yields climbed for the fourth time in five days after a report showed the nation’s industrial orders plunged more than forecast in February.

At 9:30 the DJIA opened +8, the 10 yr note +5/32 at 1.96% -2 bp and mortgage prices +2/32 (.06 bp).

Three reports at 10:00. March existing home sales expected up 0.7% were down 2.6% to 4.48 mil annualized; yr/yr sales of existing home sales are up 5.2%. Inventory levels declined 1.3% to 2.37 mil homes for sale, a 6.3 month supply. Listed inventory is 21.8% lower than in march 2011. The median price of sales $163,800.00 up 2.5% frm March 2011. The Philly Fed April business index was expected at 10.3 frm 12.5 in March, it was at 8.5; new orders component at 2.7 frm 3.3, employment index at 17.9 frm 6.8 and prices pd at 22.5 frm 18.7 in March. March leading economic indicators at +0.3% against forecasts of +0.2%.

The existing home sales decline is directly impacted by the decline in inventory levels; if inventories fall then sales will do likewise. The Philly Fed was disappointing as was the Empire State manufacturing index on Monday (any index over zero is considered growth but with the overall index at 8.5 there isn’t a lot of it.

At 10:10 the 10 yr note rate at 1.95%, it fell one basis point on the 10:00 data; mortgage prices +4/32 (.12 bp). Still a bullish bias in the bond and mortgage markets but not much compared to two weeks ago. The 10 yr will likely test 1.90%, if it does that may be about all there is for a while----at least until the FOMC meeting next week, or unless more debt problems increase in Europe.