Mortgage Rates

Mortgage Rates Friday the 10 yr note pushed slightly out of its month long trading range on another soft employment report showing growth continuing to decline on month to month basis. The 10 yr had very solid resistance at 1.565 for over a month on any rallies, Friday the note closed at 1.55%, this morning the 10 yr is trading down at 1.52% with stock indexes slightly weaker in pre-open futures trading. Not a lot of critical data this week; Treasury however will auction s, 10s and 30s Tuesday through Thursday. With the technicals looking better on the 10 yr and mortgages how well the bidding goes will set the tone. US stock market also plays its usual roll; if the indexes rally it will keep a lid on the bond markets continual improvement. Today begins Q2 earnings season with Alcoa starting the parade after the markets close this afternoon. Europe still in the headlights with interest rates in Spain up again today. The euro fell to its lowest level in two years against the dollar as regional finance ministers gather in Brussels to discuss crisis-fighting measures adopted by heads of government at a summit last month. Spanish and Italian bonds fell amid concern finance ministers will fail to agree on sufficient crisis-fighting measures to stem the euro area’s woes. Recapitalizations of banks by the European Stability Mechanism will have no need for a sovereign guarantee, commission spokesman said in Brussels today. Details of how the future system will work remain to be negotiated. Consumer prices in China rose 2.2% in June from a year earlier, according to a report released today. That’s the slowest pace in 29 months and compares with the median forecast for a 2.3% inflation rate. China’s economy is softening on Europe’s contagion that has infected US growth also. China cut rates last week and lessened reserve requirements for banks in a move to increase lending in the country. At 9:30 the DJIA opened -12, NASDAQ +1 and the S&P unchanged; the 10 yr note rate at 1.54% after being down to 1.52% earlier. Mortgage prices up 5/32 (.15 bp). Now that the 10 yr note has cracked its key resistance at 1.56% the technical outlook suggests the 10 yr could move to its low in early June at 1.47% and continue to push mortgage rates lower. As is the case, it’s a moving target though with Europe holding the key. There is concern now that the EU finance ministers will fail again to come up with agreeable details on supporting banks in Spain. Last week’s EU summit set the outline with ministers agreeing to help failing banks in Spain and Italy but as usual there was nothing specific, being left to the ministers to figure it out. Presently the view is there will be difficulty accomplishing the stated goal.