Mortgage Market Update
November 9, 2009 by Lenderama
Filed under Mortgage Mess
Sorry for the late post today as I am still making my transformation so-to-speak, preventing earlier access to the internet. As I have said recently, change is inevitable, though this time it is good for mortgage rates, at least for the foreseeable future. I will get into why a little bit later on.
Last week certainly held some surprises as the data unfolded and mortgage backed securities reacted. As has been occurring, data seemed to be mixed as far as the economic recovery goes, leaving the main events of the week at the forefront, those two being the Jobs Jamboree and the FOMC Meeting, particularly the Policy Statement. The Fed again downplayed inflationary risks, though MBS prices fell as mortgage bond traders were hoping for an expansion of the Fed’s MBS purchasing program beyond the $1.25 trillion. Mortgage bond traders did shrug off this negativity and fought back to move higher Wednesday, which continued through the remainder of the week. Friday’s Jobs Jamboree showed more jobs lost than expected and despite the revisions to prior month’s that offset the excess, mortgage backed securities rose on the headlines of double-digit unemployment as the Unemployment Rate was reported at 10.2%. All-in-all, MBS prices finished the week up only 10 basis points, but breaking through resistance to forecast lower mortgage rates ahead.
This week, data is comparatively scarce with the main focus being the weekly Jobless Claims and Consumer Sentiment, along with a host of Treasury Auctions. Here is the breakdown of currently scheduled events…
- Monday: 3-month T-Bill Auction (11:30), 6-month T-Bill Auction (11:30), 3-year T-Note Auction (1:00)
- Tuesday: Dennis Lockhart Speaks (9:15), Janet Yellen Speaks (10:00), 4-week T-Bill Auction (11:30), 10-year T-Note Auction (1:00), Richard Fisher Speaks (7:00)
- Wednesday: No data – Veteran’s Day
- Thursday: MBA Purchase Applications (7:00), Jobless Claims (8:30), Crude Inventories (10:30), 30-year T-Bond Auction (1:00), Money Supply (4:30)
- Friday: Balance of Trade (8:30), Import and Export Prices (8:30), Consumer Sentiment (9:55), Charles Evans Speaks (10:30)
With recent Treasury Auctions showing continued strong demand, the spillover into mortgage bonds should aide in keeping mortgage rates low. The notable Treasury Auctions this week are the 10-year T-Note on Tuesday and the 30-year T-Bond on Thursday, both of which could have a big impact on MBS prices depending on their results.
As we look at the charts, here is where change has happened, and quickly. We went from a negative looking chart to one that all but guarantees lower mortgage rates ahead. Fortunately, my gut was wrong, but I was dead on saying we would know the direction of mortgage rates by week’s end. Currently, stochastic indications, along with other positive signs, all point to strength in MBS prices. The 10-day MA has now crossed over the 25-day MA and the 50-day is moving upwards towards another positive crossover if mortgage bonds can keep going. Stochastic indications are on middle ground, so there is plenty of room for upward movement to come.
The bottom line is we have a trend reversal and things are now looking favorable for lower mortgage rates for the foreseeable future. As always, there will need to be a retracement of the recent move higher, so you may need to lock your clients in the coming days if they will not have time to wait for the next leg higher.
