Earlier today, treasury yields fell to their lowest levels in a month as Greece continues to slip into the ocean. Stocks are also in the soup, down 74 points on the Dow. A couple of missed earnings reports and a sack of rotten Gyros did the trick.
Currently, the 10 year note is up 10/32’s to yield 3.76%, very close to our range high (low yield) expectations of 3.75%. Mortgage backs are plus 4/32’s on the day. Stocks are up a baker’s dozen on the big board as very overbought conditions are in a dog fight with stellar 1st quarter earnings.
Just when Goldman looked to be on the ropes, they reported earnings that blew away the street. $5.59 versus analysts expectations of $4.01 is not a bad quarter. Apple and Yahoo will release today after the close. Wait until you see Apple’s numbers.
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The tactical bias for Austin mortgage rates and pricing is to remain neutral, trading a range on the 10 year note between 3.75% and 3.82%. Stocks want clarity on the Goldman/SEC issue which will lead bonds to react accordingly. Our work on the 10 year note chart is providing neutral to bullish trend signals and overbought conditions at the same time. Classic example of a mixed bag.
riday, March Housing Starts came in above expectations, UP 1.6%, at an annual rate of 626,000 units. Throw in revisions to February and starts were UP 8.9%. Single-family starts were down a tad for the month, but for all of Q1, they were UP at a 41% annual rate versus the Q4 average. New Building Permits for March also beat estimates, UP 7.5% to a 685,000 annual rate. Some experts feel we're in the early stage of a substantial rebound in home building. And they point out that the pace of building is still slow enough that inventories can come down even as new construction increases.
In breaking news, the SEC has charged Goldman Sachs with fraud on subprime loans. John Paulson (Paulson and Co.) seems to have been in the mix as well, selecting specific subprime securities and then shorting (betting against the security) with CDO’s through credit default swaps. It’s complicated and not a good situation for Paulson and Goldman. By the way, their stock is off $23.00 while the Dow is off over $100.00.
This week's economic data and comments from Fed officials painted a picture of a gradually improving economy with very low inflation. March Core CPI inflation rose at a tame 1.1% annual rate. This economic environment is favorable for bond markets, and Austin mortgage rates ended the week a little lower.
Weekly Unemployment Claims filled the too cold category as the rose 24K, much higher than analysts had expected. The plus 484K reading is the highest level seen since the snowstorms in late February. Blame has been laid on Easter and Cesar Chavez day. Wonder what will happen to next week’s numbers since April 20th is National Cuckoo day.
Stock market strength has pressured bonds, notes, and mortgage backs as we head towards the close. With the Dow up 96 points trading well over 11,000 and S & P’s over the 1200 level (which was good resistance and very psychological), the path of least resistance is for additional improvement. JPMorgan gave stocks the boost from the get go, beating earnings expectations by 10 cents and saying all the right things about credit quality improving etc. The 10 year note opened in the red but by only a few 32’s, holding onto the breakout level below 3.83% yield on the 10 year note.
