Posts Tagged ‘10 year US Treasury bond yield’

Greece EU exit looks more and more likely

Posted on: May 21st, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting May 21st 2012.

The bond and mortgage markets started slightly weaker this morning but have managed to hold close to unchanged with stock indexes trading a little better. There are no economic reports today. This week Treasury will auction $99B of notes beginning tomorrow through Thursday; with rates now at historic lows the demand will be the measurement of how well the auctions go off. Economic reports this week have April existing and new home sales, durable goods orders and of course weekly jobless claims.

In Europe the EU summit starts Wednesday. German and French finance chiefs are scheduled to meet in Berlin before the summit meeting. Concern Greece will exit the euro erased about $4 trillion from global stock markets this month. There is a strong desire for keeping Greece in the 17 county currency, although Germany still holds court with its insistence for severe austerity. Greece will have another election in June, in essence to determine whether voters want to stay or go; while the election isn’t framed as a do or die thing, that is what it will be. Hedge funds reduced wagers on a rally in commodities to the lowest this year on mounting speculation that Greece will leave the euro, slowing global growth and curbing demand for everything from copper to soybeans. US stock indexes trading higher on comments from China it would support the economy and German and French officials prepared to meet before a summit. There is an increasing belief that Greece will leave the euro currency, that belief will keep US interest rates from increasing much. According to one report 90% of respondents now believe Greece will go. On Saturday at Camp David G-8 leaders urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the European Union’s bailout deal.

Speculation has risen that the Fed may need to add to the $12.8 trillion already spent to avert a second recession in three years after reports showed jobs are growing more slowly than forecast and Bernanke said April 25 that the Fed “remains prepared to do more as needed.” For first time since it announced Operation Twist in September, the Fed’s preferred gauge of measuring traders’ inflation expectations is poised to fall for a second straight month. Six weeks frm now the Fed’s Operation Twist is set to end, with inflation not a factor and the weakening global and US economy there is likely to be increasing speculation the Fed will either extend it or have another plan to keep interest rates from increasing.

At 9:30 the DJIA opened +25, NASDAQ +5; Facebook trade started lower than its IPO price last Friday -$3.00 frm the IPO price of $38.00. The 10 yr note -3/32; mtg prices traded about unchanged from Friday.

Interest rate markets continue their bullish bias, mostly on the inability of Europe’s leaders to come to any significant plan to keep Greece in the EU while softening and supporting moves to boost growth with spending increases. Two plus years and counting as the region chokes on debts it can’t pay and disagreement on how to create a miracle that will save the EU. If Greece leaves the fear of contagion to Ireland, Portugal and Spain will increase exponentially. The remainder of the day the bond and mortgage markets will take their lead from the US stock market; At 10:00 the key indexes are slightly better but appear to be struggling to hold gas.

Mortgage rate outlook and market preview for the week starting May 7th 2012.

Posted on: May 7th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting May 7th 2012.

Treasuries and mortgages are fractionally better this morning but not much. Friday the 10 yr note pushed through 1.90%, a key technical resistance level. Stock indexes in pre-market opening were trading weaker supporting the bond market. In Europe over the weekend Greece and France voted out the leadership that drove the massive austerity plans that have crippled Europe. France elected Francois Hollande and ousted Sarkozy; Sarkozy and Germany’s Angela Merkel were the architects of the severe cuts in spending in the debt riddled countries of Greece, Portugal, Ireland, Italy and Spain that has routed what was left of the economies and driven unemployment to depressionary levels. The results of the elections in the two countries came after a tumultuous few weeks that saw the Dutch government fell as Britain’s conservative led coalition took a whipping in local elections. Most analysts believe voters in Europe are in favor of balanced budgets and good fiscal governance but the spending cuts are too severe and too quick. Germany and France, especially Germany, have forced unemployment higher and dealt the euro economy into a very deep recession.

Here in the US the stock market had a bad week last week and we expect additional selling this week as investors are increasingly concerned valuations in many of the “hot” issues have become too expensive. Europe’s recession is slowing China and investors see recent US data as evidence the US will slow. That the US will slow growth flies in the face of the most recent Fed forecasts; last week the Fed raised its outlook for GDP growth this year and next compared to their outlook in January. Uncertainty is the word of the moment.

At 9:30 the DJIA opened -46, NASDAQ -13, S&P -4; 10 yr note +2/32 at 1.87% -0.5% while mortgage prices up 2/32 (.06 bp).

This week Treasury will auction $72B of notes and bonds; $32B of 3 yr notes tomorrow, $24B of 10 yr notes on Wednesday and $16B of 30 yr bonds on Thursday. There isn’t much in the way of key economic releases this week. This afternoon at 3:00 March consumer credit; it is one our favorite reports each month although there isn’t a lot reaction when it hits. Credit is expected to have increased $11.0B after +$8.7B in Feb; our focus is on revolving credit (credit card usage) not so much on the headline. Consumer credit has been surging the last six months driven by non-revolving credit, credit in large part that’s used to fund vehicle purchases. Revolving credit, which also turned higher late last year, has however been lagging and contracted slightly for a second month in a row.

Last Friday crude oil plunged $4.00, this morning down again now trading well under $100.00 (see below). Oil fell to the lowest level in more than four months after European election results fed speculation that austerity efforts will be derailed and weaker-than-expected jobs data underscored concern the U.S. economy may falter. Crude for June delivery plunged as much as $3.15 to $95.34 a barrel in electronic trading on the New York Mercantile Exchange early this morning. The contract tumbled $4.05 to $98.49 Friday, the lowest close since Feb. 7. Prices slumped 6.1% last week, the biggest weekly drop since September. Over the last three weeks crude as fallen from $104.00.

The remainder of the day will likely be directed by the stock market; the indexes are already off their opening levels. Like a broken record, the 10 yr has never traded below 1.90% for more than three days; the point being that the present levels of long term US rates should be monitored closely. We are not forecasting rates will increase, what we see though is that in the past the 10 yr and mortgages have run into solid resistance under 1.90% on the note.

Continued downward pressure on rates as concerns from global recession spread.

Posted on: April 30th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting April 23rd 2012.

The bond market opened a little better early this morning with slightly weaker stock indexes. The 10 yr note at 1.91% and MBS prices +4/32 (.12 bp) at 8:30. March personal income at 8:30 up 0.4% a little better than forecasts, personal spending though at +0.3% a little softer than thought. On the report treasuries and mortgages didn’t show any reaction. US stock indexes early this morning trading lower, following the markets in Europe.

The DJIA opened -10, NASDAQ -7, S&P -2; the 10 yr note +4/32 1.92% -1 bp and mortgage prices 3/32 (.09 bp) frm Friday’s close.

At 9:45 the April Chicago purchasing mgrs. index, expected at 60.0 frm 62.2 in March; it fell to 56.2. The three components; new orders 57.4 frm 63.3, prices pd at 68.6 frm 70.1 and employment at 58.7 frm 56.3. Overall a weaker report adding to concerns of slowing economy. The weakness is primarily due to inventory levels declining but respondents to the survey also were saying they were looking for a strong summer. The DJIA slipped a little on the report but mortgage prices and the 10 yr note didn’t show much initial reaction.

Treasuries going for their biggest monthly gain since September as slowing U.S. economic growth and concern Europe’s debt crisis is worsening, increased demand for the relative safety of US treasuries. Ten-year notes are slightly higher for a third day with Spain going into its second recession since 2009 and economists said U.S. reports this week will show growth in manufacturing and services slowed. Not only Spain, the UK is in a double-dip recession since the 1970s as its longest peacetime slump for a century persists; UK GDP declined in the last two quarters. The increasingly serious question for Europe is whether the massive austerity cuts demanded have failed to gain support and are for a number of countries unachievable, leading to further deterioration of economies and dragging other global economies down with it. In the US economists predict Labor Department data this week will indicate U.S. hiring increased in April, though not enough to reduce the jobless rate. Consumer spending climbed in March, but a little weaker than estimates. The concern we have for the 10 yr is that it still has not shown the ability to hold under 1.90% on rallies going back to October.

This week may point to a slowdown in manufacturing, services and construction. A gauge of factory activity (ISM manufacturing) will fall to 53.0 from 53.4 in March, according to the median forecasts. An index of services (ISM services sector), the largest part of the economy, will decline to 54.1 from 56.0, while a construction measure will also fall, economists said in separate surveys. A reading above 50 indicates expansion. We won’t put much confidence on the estimates that recently have been more dart tossing than accurate assessments. This week is more about employment than any other report; however the data this weeks has a number of key points.

The 10 yr note is approaching 1.90%, since last October the 10 yr has fallen below it on three occasions but in each case the note was unable to hold under it. Not sure what will occur now but history does have an impact; a sustained decline under 1.90% would embolden traders to push rates lower, the next technical resistance under 1.90% at 1.80%.

Mortgages rates hold lows as European debt mess resurfaces

Posted on: April 23rd, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting April 23rd 2012.

Mortgage prices starting better this morning with the 10 yr note yield at 1.92% down 4 basis points frm Friday’s close. There are no economic releases today. The stock market is opening lower supporting the decline in rates in early activity. U.S. stock futures lower this morning, following last week’s advance after data showed that manufacturing shrank in the euro-area and China while concern grew about Europe’s sovereign debt crisis. Most global markets are weaker as euro-area services and manufacturing declined more than estimated in April, while data indicated China’s production will contract for a sixth month.

Europe is in economic chaos as the debts of many countries are dragging its economy down; investors moving more money to safety into US treasuries forcing US rates back to levels 2 months ago. The Euro nations owe 386 billion euros ($508 billion) in bailouts for Greece, Ireland and Portugal after those nations were forced to seek rescues when their borrowing costs become unsustainable. Concern that Spain and Italy may follow has led their bonds to decline for six weeks, pushing yields toward the 7% level that triggered the other aid programs. A euro-area composite index based on a survey of purchasing managers in both services and manufacturing fell to 47.4, a five-month low, from 49.1 in March, London-based Markit Economics said in an initial estimate today. Economists had forecast an increase to 49.3, according to the median of 17 estimates. Like the US ISM services and manufacturing indexes, below 50 is considered contraction.

In the US this week it is all about the FOMC policy statement at the conclusion of the meeting on Wednesday afternoon and the following press conference Bernanke will hold. Lots of talk about the Fed stepping in for another QE, he likely will spend much of his press conference being questioned about it, and being questioned about what he believes it will accomplish. More jobs? Hardly. Strengthening the economic outlook? Hard to say. Another huge question; how much lower can US interest rates fall even with another easing? The Fed is already buying the equivalent of all treasuries issued this year and last.

Treasury will auction $99B of notes this week beginning tomorrow with $35B of 2 yr notes, Wednesday $35B of 5 yr notes and Thursday $29B of 7 yr notes.

The DJIA opened -130, NASDAQ -33, S&P -14; the 10 yr note at 9:30 at 1.92% -4 bp, MBS 30 yr price +6/32 (.18 bp).

Putting some perspective on US interest rates; the 10 yr note that sets the tone for mortgage rates is trading at 1.92% this morning. There is strong technical resistance on the 10 yr at 1.90%; there have been only 10 trading sessions where the 10 yr traded below it since last November 23rd. Three times since then the 10 yr went below 1.90%, it held under it for no more than three days.

European debt mess keeps US mortgage rates low

Posted on: April 16th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting April 16th 2012.

Treasuries and mortgage markets opened about unchanged this morning. At 8:30 two data reports; March retail sales, expected up 0.3%, was up 0.8% and ex auto sales +0.8% (ex-autos expected up 0.6%). April Empire State manufacturing index was expected at 17.5 frm 20.2 in March; as reported the overall index plunged to 6.56; new orders component at 6.48 frm 6.84 and the employment component at 19.28 frm 13.58—- over zero is considered expansion, more indication that there is a slowing in the manufacturing sector. The retail sales report is trumping the Empire State data this morning; stock index are better and at 9:00 the 10 yr note, after being up slightly (+3/32) was -1/32 at 2.00%, mortgage prices at 9:00 -2/32 after opening +3/32 prior to the 8:30 data.

Asian stocks fell overnight, with the regional benchmark index headed for its biggest drop in almost two weeks after the cost of insuring against a Spanish default climbed and U.S. consumer confidence dropped last Friday, clouding the earnings outlook for Asia’s exporters. Stocks also fell after five-year credit-default swaps on Spain surged to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout.

European stocks rebounded from four consecutive weeks of losses and U.S. index futures advanced after American retail sales increased more than forecast in March. Spanish bond yields climbed before a debt sale while the euro weakened. Credit-default swaps on Spain jumped 17 basis points to 519. Contracts on Italy rose seven basis points to 441, the highest level in almost three months. Spanish 10-year bond yields jumped as much as 18 basis points, to 6.16%, the highest level since Dec. 1. Five-year credit-default swaps linked to Spanish bonds jumped to an all-time high. Spain will sell 12- and 18-month bills tomorrow, followed by auctions of debt due in October 2014 and January 2022 on April 19.

At 9:30 the DJIA opened +85, the 10 yr note traded unchanged At 1.99% and 3-0 yr MBS prices unchanged.

Although Europe’s debt issues remain, this morning there is a little relaxation about the possibility of default as EU ministers are calling for the ECB to step up and buy Spain’s bonds to keep their interest rates from increasing more. So far nothing from the ECB but words implying it is “prepared” to act if necessary. The US bond market remains the safe port for investors and has been one of the reasons we have seen US rates fall over the last two weeks. US stock market is rallying this morning on the March retail sales increase, US interest rates are not seeing any selling on the better stock indexes; as long as the debt problems in Europe continue it should keep a bid in US treasuries, thus supporting the mortgage markets.

At 10:00 Feb business inventories were expected up 0.5%, as reported inventories increased 0.6%, sales were up 0.7% with an inventory to sale ratio unchanged from Jan at 1.28months. Also at 10:00 the April NAHB housing index, expected at 29 frm 28 in March, fell to 28, the first decline in 7 months; single family index at 26 down from 29. The drop in the NAHB index sparked some increases in bond and mortgage prices. The DJIA off its high, the NASDAQ has been weaker all session so far.

Technically the treasury and mortgage markets remain bullish; the 10 yr so far today is holding a gain as are mortgage prices, but at 9:30 both were flat on the day and now boosted by the NAHB housing mkt index and stock indexes off their best levels. Looks like the 10 yr is headed to 1.90% (at 10:10 1.96% -3 bp today).

Rates drop on bad employment numbers and revival of European debt mess

Posted on: April 9th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting April 9th 2012.

Friday’s March employment report (non-farm jobs up just 120K and private jobs +121K) was half what was expected by economist and analysts. The reaction was swift and strong sending mortgage prices up 28/32 (.88 bp) and the 10 yr note yield down to 2.04% -14 basis points. Mortgage rates down about 12 basis points. The stock market was closed on Friday for Good Friday; this morning the key indexes are catching up to the reaction to the soft employment. The DJIA opened at 9:30 -90, NASDAQ -44, and S&P 500 -15; within five minutes the DJIA was off 143. The 10 yr note +4/32 to 2.03% -1 bp while MBS prices were up 4/32 (.12 bp) frm Friday’s close.

Employment didn’t come close to the forecasts, while not unusual for the monthly report, it was so far off the mark it sent traders and investors back into treasuries on increased belief the Fed may be more inclined to ease further. It was not only employment that drove rates down; Europe’s debt problems are back again after a month or so of little news. Spain’s prime minister saying his country is in “extreme difficulty”. Once again investors are turning to safety on the idea Spain is going to need a bailout and reprise concern that Europe’s economies will drag the region into recession and resurrect the concerns that the EU may not survive. The renewed fears are hitting US equity markets; after the strong rally in the key indexes stocks were prime for some decline but until Spain and the employment report took control the pull back in stock markets was being thought of as a buying opportunity; now the outlook has become much less optimistic. Not only is Spain in the headlights; The European Central Bank’s financing for Portuguese lenders rose to a record in March. Portugal became the third euro-area country after Greece and Ireland to require aid and will receive 78 billion euros under its agreement with the International Monetary Fund and the European Union.

Although job gains in March were half of what the last four months revealed, is that enough to get the Fed to ease again? Not a question easy to answer; one month of disappointing job growth isn’t in itself enough to get the Fed to ease. Besides as long as long term rates are at the present low levels an easing move wouldn’t likely add much to pushing rates much lower. Low interest rates are not the problem for the economy, low rates haven’t driven employment up or done much for the housing sector. That said, the potential of another QE will be debated now for a month. Investors are plowing into Treasuries at a record pace as the supply of the world’s safest securities dwindles, ensuring yields will stay low regardless of whether the Federal Reserve undertakes more stimulus to fight unemployment.

Treasury will auction $66B of note and bonds beginning tomorrow with $32B of 3 yr notes, Wednesday $21B of 10 yr notes and Thursday $13B of 30 yr bonds.

After the huge rally in the bond and mortgage markets on Friday the technical outlook has improved. The 10 yr note yield well under its 20 and 40 day averages and all of the momentum oscillators we track went from neutral to bullish levels. Although the picture has changed we still believe there will be continued volatility in the bond market for the next week or two until things settle a little.

Analyst predict that mortgage rates will only rise slightly this year

Posted on: April 2nd, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting April 2nd 2012.

Treasuries and mortgage markets opened slightly better this morning ahead of two reports at 10:00. Stock indexes started a little soft. At 8:00 the 10 yr +4/32 at 2.20% -1 bp and 30 yr MBSs +3/32 (.09 bp). Friday interest rates increased slightly on end of quarter adjustments and a jump in consumer confidence; Feb personal spending also exceeded forecasts up 0.8%.

Bloomberg News in a recent survey of primary dealers concluded the yield on the benchmark 10-year note will finish 2012 at 2.48%, two weeks ago the 10 shot to 2.40% but quickly retreated and now is finding some minor demand at 2.20%. That’s the same as a January poll, suggesting the market isn’t ready to declare a bear market in bonds after a 30-year bull run. The optimism that rates won’t increase much is based on the expiration of the $1T Bush tax cuts expiring at the end of the year and continued high fuel costs that will sap consumer spending and stymy economic growth. Also in play, Bernanke has in the past said the Fed would do another QE if the economy rolled over.

Primary dealer holdings of U.S. government debt rose to $91B last month, from a net bet against the securities of $53.4B last May, according to the Fed. In the survey, 14 say the odds are that the Fed will need a third round of bond purchases, or quantitative easing, to bolster the economy. Yield forecasts at the primary dealers range from 2.0% at RBS, Scotia Capital and Barclays Capital to 3.0% at Deutsche Bank AG, Jefferies & Co. and BMO Financial. Even if the most bearish forecasts prove true, yields would remain below the average of 3.85% over the past decade, 4.98% over the past 20 years and 6.48% since 1982. Primary dealers’ track record of longer term forecasts isn’t any better than most other forecasts; the dealers at the moment are betting on an economic decline in the second half of this year. Nevertheless in the moment its worth considering. We have contended interest rates will not increase much this year, but at the same time we don’t expect rates to decline a lot from present levels.

At 9:30 the DJIA opened -11, the 10 yr note +9/32 at 2.18% -3 bp and 30 yr mortgage pricers8/32 (.25 bp).

At 10:00 Feb construction spending was expected up 0.5%, spending declined 1.1% and Jan was revised lower to -0.8% frm 0.1%; the decline was the biggest monthly drop since July 2011. The March ISM manufacturing index was expected at 53.0, as reported 53.4 frm 52.4 in Feb: new orders component 54.5 frm 54.9. employment index at 56.1 frm 53.2 and prices pd at 61.0 frm 61.5. The better than expected ISM data took the stock indexes off their lows and treasuries and mortgages backed off their best gains prior to the report.

The rest of the day will be watching the stock indexes, after a better ISM report the indexes are moving back to unchanged levels after the DJIA was down over 50 points prior to the report. The 10 yr note still holding a gain but is faltering momentarily at 2.15%.

Bernanke reassures that the FED will keep the Federal Funds rate at current level

Posted on: March 26th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting March 19th 2012.

Early this morning the bond and mortgage markets were under pressure with stock indexes trading higher on anticipation of a better open at 9:30. Mortgage prices started down 7/32 (.22 bp) but by 9:00 climbed back to unchanged frm Friday, the 10 yr note at 9:00 -5/32 frm -13/32 at 8:00 am, the yield at 2.25% +2 bp. Bernanke spoke this morning saying the drop in the unemployment rate may reflect a reversal of the large layoffs that occurred during late 2008 and over 2009. “To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” he said. He also reiterated that while the economy is improving, he still sees structural weakness that will require the Feds to keep the FF rate at this level for a lot longer. Last week there was some talk among traders that the Fed would not hold rates through the end of 2014 as the Fed had been saying, Bernanke didn’t put a time frame on his comments this morning but did counter the idea that inflation was heating up to the point that the fed would have to begin increasing rates.

At 9:30 the DJIA opened +97, NASDAQ +26, S&P 500 +11. The 10 yr note -3/32 at 2.24% +1 bp and MBS prices on 30 yr loans +3/32 (.09 bp).

The only data today; at 10:00 the NAR reported pending home sales for Feb (contracts signed but not yet closed). Forecasts were for sales to have increased +0.5%, as reported sales fell 0.5%. There was no reaction to the report, although as the day moves on the stock indexes are improving and mortgage prices slipping back a little; mortgage prices -4/32 (.12 bp) at 10:10, at 9:30 +3/32 (.09 bp).

Comments from Bernanke this morning that he will keep FF rates low and has no thoughts of any increases as far out as he can see has added support to both stocks and bonds. Concerns still persist in his mind that the economy remains fragile. His remarks stabilized the bond market which was weak. Even with the stock indexes rallying hard so far, the bond and mortgage markets are doing well considering that when the stock market does better the bond and mortgage markets suffer. Mortgage prices actually holding a minor improvement at 9:30, based on Bernanke saying the economic recovery is essentially improving more than what the Fed was thinking two months ago. Pressure on the rate markets is less than what would be the norm with the key indexes doing better because of his statement that the Fed would keep rates low with no increases in sight. It is reducing the link between equity markets and the bond markets; at least so far today.

Technically, 2.25% on the 10 yr note could well be a resistance level but at this time we need more trading to be sure. Still suggest locking on rallies as we don’t believe rates will decline much—-unless—Europe comes back to the edge of default and at the point that doesn’t seem likely, or the US stock market declines and too doesn’t show much promise even with many calling for a correction.

Strong pressure on rates as concerns over Greek debt mess settle

Posted on: March 19th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting March 19th 2012.

A better start in the bond and mortgage markets this morning after the strong selling last week. The bond market, temporarily oversold on the quick selling last week, should bounce back a little but won’t change the present bearish bias, but so far today the early improvement has lost all its momentum. That said, as we have noted previously interest rates are not likely to increase a lot as long as the Fed is keeping short rates low. Any significant decline in rates will have to be driven by a pullback in the stock market. At 8:00 the 10 yr note +8/32 at 2.27% -2 bp, mortgage prices +5/32 (.15 bp); by 9:30 when the stock markets opened -13, the NASDAQ unchanged; the 10 yr fell back to unchanged and MBS prices +2/32 (.06 bp).

This week’s economic data is thin, what there is focuses on the housing sector with existing and new home sales for Feb. This morning Apple announced it plans to pay a dividend and buy back $10B of its stock, returning some of its $97.6B in cash and investments to shareholders. Not a surprise, it was widely expected.

The only data today; at 10:00 the March NAHB housing mkt index, expected up to 31 frm 29, as reported a little disappointing, the index was unchanged.

Federal Reserve Bank of New York President William C. Dudley said signs the economy is improving don’t dispel “meaningful” risks to growth, including higher gasoline prices, fiscal cutbacks and a weak housing market. “The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established,” Dudley said today in a speech in Melville, New York. “But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.” A recent survey of a number of economists and analysts showed 90% of those surveyed do not believe the Fed will keep the FF rate at zero to +0.25% through 2014 as the Fed continues to chant. The economy is improving, the biggest voice against the strength is the Fed as it tries to temper optimism in attempts to avoid having to raise rates. The rightly believes higher rates now will hinder and slow growth in the economy.

A little disappointing so far this morning; the bond and mortgage markets opened better earlier but couldn’t hold even with a minor decline in stock indexes. That the rate markets couldn’t even hold a small gain in prices doesn’t bode well for our view that there should be a little bounce in the otherwise bearish rate markets. We will stick with our prediction of a little improvement based on momentum oscillators remaining oversold, however we can’t stress hard enough the recent spike in rates is significant that the bond market will not likely decline much (rates).

All eyes and ears on the FOMC statement this week.

Posted on: March 12th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting March 12th 2012.

This week we have a FOMC meeting followed by a statement, 5 relevant US economic reports, and some Treasury auctions. It will be interesting to see the statement after the FOMC meeting tomorrow as the members seem to be divide on how our economy is doing and what needs to be done. Some members are calling for rates to be raised before the 2014 mark which was set at the last meeting, and other are calling for more quantitative easing which would keep rates low. The economic reports being released this week are PPI and CPI, Philly Fed business index (expected to have improved in March), Feb retail sales (+0.7%), and Feb data on manufacturing with industrial production and capacity utilization.

As far as Europe and their debt crisis, Greece got its bail out money so it could avoid a default, but many are still considering it a default because of the large write down bond holders had to agree to. At the time I am writing this the 10 year US Treasury bond yield is just over 2% and is still in the narrow trading range it has been stuck in since November. Unless there are any shocking announcements made after Tuesday’s FOMC meeting I don’t see mortgage rates moving much this week. As I have said before I think we have seen the low for mortgage rates, but I don’t think they are moving higher for a while.