The early trade was flat, treading water in both bonds/stocks and then Consumer Confidence came along. The March index jumped 6.1 points to 52.5, reversing February’s sharp decline. The Present Situation component rose to its highest level since August while Future Expectations jumped over seven points. The rebound was expected but maybe not to this level after February’s weather, etc. depressed the figures.
Case Shiller 20 city home price index was also released, down .7% year on year. The reading was in line with economist’s expectations. While a number of cities are starting to see improvement (San Diego, Dallas, Charlotte) on a year over year bases, only San Diego had a month on month increase. Stability is starting the creep in but it will still take time for a bottom to form.
With month end/quarter end upon us, the sideways to upward bias we have seen in mortgage pricing will come to a halt. Post data, the 10 year note sold off 8/32’s and mortgage backs went from unchanged to down 7/32’s. Plain and simple, we are developing a better bias for higher treasury yields and Austin mortgage rates as the economy looks to pick up steam and the Fed’s quantitative easing measures go away.
Bearish trend signals remain good on daily charts but the market has been correcting and may continue to hang in there until Friday’s Employment Report. What troubles us with the chart is the lack of any substantial rally given the support of month end buying, short covering, and very oversold conditions. Since the selloff last week, we have only rallied for three eights of a point.
In a nutshell, borrowers need to be wary of waiting to lock in this market. The potential for worsening Austin mortgage prices is high as our work projects 4.0% on the 10 year before we see 3.75% (currently 3.88%). If there is a White Knight, it could come via an Employment Report (7:30 am cst Friday) that is well below expectations, say flat to negative.
With the “street” looking for plus 200K and whisper numbers running as high as plus 400K, stock traders are all bulled up and bond traders are decidedly nervous. The other shoe that could drop might be a flight to quality treasury buy due to a domino effect in sovereign debt. With Greece on the ropes, talk has turned to Portugal and Spain and the downgrades that are certainly possible. Could be a rolling thunder.