Our one trick pony (Federal Treasury) buying mortgage backs, attempting to keep mortgage rates low

Slip sliding away, you know the closer your destination , the more you slip sliding away.

Simon and Garfunkel hit song not only talks about lost opportunities in life but in mortgage pricing as well. Case in point:

  • Weekly unemployment Claims up 36K to 667K, 
  • Continuing Claims up 114K, both record highs
  • Durable Goods, down 5.2%, more than twice the market’s expectation
  • Completing the hat trick, New Home Sales fell to a new all time low 309K units. 

One would think with this type of glooming economic data that bonds would rally and mortgage pricing improve. Not the case. Currently, the 10 year note is off 14/32’s trading at a yield of 3.0%. As we mentioned yesterday, this is the line in the sand that will need to hold. If not, expectations will be for another 1 point loss to our target yield of 3.09% will develop.

The 30 year bond has also suffered, down 45/32’s to yield 3.68%. All of the above has its roots embedded in a few fundamental issues. First is the supply of treasuries coming to market. Today we will auction 22 billion of 7 year notes for the first time in 16 years. Flooding the market with paper is definitely weighing on the fixed income sector. Number two, a bear market rally is likely developing in stocks. Currently, the Dow is up over 80 points with investors smelling a rally within the bear market trend.

broken-piggy-bank-artFinancials are leading the charge as Fed Chief Bernanke reiterated a number of times how the government is not interested in nationalizing the banks. Mortgage backs have been the bright spot in fixed income, down 3/32’s as spreads between MBS and treasuries continue to tighten. Trouble is, we’re down over 1 point for the week. Technically, the chart has a bearish bias as 14 day slow stochastic and 8 day ADX are endorsing a bearish trend. Good news is we still have our one trick pony (Federal Treasury) buying mortgage backs, attempting to keep mortgage rates low.

Hang in there, the clouds will lift soon.

About Max Leaman Austin Mortgage

GREAT RATES, LOW FEES, CLOSE ON TIME™ ---- 2012 Ranked #1 Austin Residential Mortgage Lender (Austin Business Journal) 2010, 2011 & 2012 Five Star Professional (Texas Monthly) 2009, 2010, 2011, 2012, 2013 PrimeLending Chairman's Circle Award 2009, 2010, 2011, 2012 Scotsman Guide Top Originator (Top 200 Mortgage Professionals in U.S.A.) Better Business Bureau "A+ Rating" National Lender Rankings (Scotsman Guide): Top Purchase Volume (No. 10) Most Loans Closed (No. 32) Top Dollar Volume (No. 88)

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