Mortgage Rates



Treasuries and mortgages started slightly weaker this morning with stock indexes trading higher and stocks in Europe rallying. Nothing significant has changed, mostly seeing technical moves after declines in interest rates and six days of selling in the US stock market.

Weekly jobless claims at 8:30 were in line with forecasts, -1/k to 367K; continuing claims, those who’ve used up their traditional benefits and are collecting emergency and extended payments declined by about 40,500 to 3.04 million. The market is assessing that the data indicate the surge in claims in the first three weeks of April was probably tied to the timing of the Easter holiday rather than a deterioration in employment. The number of people on unemployment benefit rolls was the smallest since July 2008.

The March trade deficit was larger than forecasts at -$51.8B, forecasts were for the deficit at -$49.9B; no reaction to the report. A 5.2% jump in imports, the biggest in more than a year, swamped the 2.9% gain in exports, which also reached a record.

The stock market opened better this morning; the DJIA started +45, NASDAQ +13 and S&P +9. The 10 yr note yield at 1.90% +7 bp frm yesterday’s close but it is the new 10 yr issued yesterday at the auction. The auction yesterday was at 1.855% so the new 10 is up 3 to 4 bp. Mortgage prices weaker at 9:30 but not much, down 3/32 (.09 bp).

Europe remains a main factor in the global markets; Greece is the centerpiece. Greek voters rejected the heavy austerity put on them by EU officials and moves it closer to default and exit from the European Union. While investors are flooding into US treasuries on safety concerns, it is not likely in the end that Greece will be kicked out of the EU, it would cost billions for the ECB and other EU countries based on analysts’ estimates if Greece were to default. European governments have poured money into Greece since its first rescue was agreed in April 2010 in a bid to keep the country in the euro. The ECB also stands to lose much if Greece walks away from its obligations. The central bank bought about 50 billion euros of the government’s bonds to push down yields and help the nation retain access to the capital markets. Trade imbalances between the 17 national central banks using the single currency -- indicates that the Bank of Greece owes its counterparts 104 billion euros, according on expert. That is what we hear today, tomorrow will likely have a different slant. The prime reason markets and investors panic over Europe’s debts is that it is always uncertain about what will occur next; that isn’t likely to change for a long time (years), and will continue to roil markets as officials continue to try to hold the Union together.

This afternoon Treasury auction $16B of 30 yr bonds; yesterday’s 10 yr was considered OK but the stats were not up to the recent averages. It was seen as good primarily because of the low yield after the recent decline in rates.

At 10:00 the new 10 yr note is at 1.90% after the old 10 was unable to break resistance at 1.80%. Mortgage prices a little weaker but not much. The larger outlook remains bullish however the yields on interest rates are at levels that historically (over the last eight months) have failed to decline much more than where we have them now. That said, we don’t expect rates will increase much, and it would take the 10 yr note to increase over 2.00% to be concerned. The 30 yr FNMA at 104.09 bp has support at 103.69 bp. The remainder of the day the bond market will traded on the stock market which is moving higher this morning.