While daily volatility was high this week, Austin mortgage rates ended just slightly lower than last week. The primary factors influencing Austin mortgage rates were offsetting. The economic growth data released this week was stronger than expected, but inflation remained low. While the first two Treasury auctions produced impressive results, the final one was relatively weak.
Currently, the 10 year note is down 20/32’s (yield 3.49%), MBS down 6/32’s, and stocks up 75 points on the big board. Stocks will hold the key as to where Austin mortgage rates go next. The current pattern (stocks) has been for sellers to lean on the market when it rallies (5 out of the last 7 days). We will want to watch the late afternoon trade (from 2:00 to 3:00 cst) to see if they can hold today’s gains. Failure to do so will improve mortgage pricing while a positive close, especially 50 points or more, will put additional pressure on our stuff.
There were few major surprises in the economic news this week, and little change in the stock market. While there was a great deal of daily volatility, Austin mortgage rates ended the week nearly unchanged.
While a number of Fed Governors are pounding the rate rising drum, the policy statement continues to favor low rate, easy money well into 2010. What they would like to do is communicate an upcoming transition period. One that would produce a soft landing instead of going cold turkey. With their focus on employment and inflation, it would seem that rates will remain low until the unemployment picture stabilizes and then starts to improve.
Apple blew the doors off with earnings at $1.82 per share. PPI posted better than expected numbers and certainly takes the Fed off the inflation hook. Housing numbers didn’t impress anyone. We’ll stick with our neutral market call while leaning towards the bullish camp.
Stronger than expected economic data, solid earnings reports, and upward revisions to the Fed's growth forecast propelled the Dow stock index above the 10,000 level for the first time since October 2008. However, these same factors were unfavorable for Austin mortgage rates, and they ended the week modestly higher.
Market action, as I mentioned earlier has been a two way street. With earning season (stocks) in full swing, volatility has really picked up in both equities and bonds. Mortgage backs have been the worst performer on the day with spreads to treasuries widening as sellers continue to lean on the market. Currently, the 10 year note is off 7/32’s (yield 3.45%), MBS off 9/32’s, and stocks off only 1 point on the big board. Technically, we are trading a lower lows, lower highs type of pattern. By nature it is bearish and suggests higher interest rates, worsening Austin mortgage pricing present the higher probability. We will want to pay close attention the 10 year yield as it approaches 3.48% - 3.50%. That level is key support and “should” provide a near term bottom, followed by a rebound. If that level does not hold, MBS could feel another ½ point of pain. Play defense as the trend is not your friend!
Weak dollar, higher oil, new high in gold, stocks near unchanged, and bonds doing a little better. We’re feeling a bit like Bill Murray in “Groundhog Day”. Same trade just a new day. One memorable line from the movie; (Phil) Do you know what today is? (Rita) No, what? (Phil) Today is tomorrow. It happened. In a nut shell, what we have here is too much money chasing too few assets that are worth owning. Throw in a mixed bag of economic data and a seasonal supportive 4th quarter (for fixed income), it’s hard to see much of a change in Austin mortgage rates into year end.
Look at it this way, if you had 500 million or so to invest what would you do? Buy stocks after a 55% run from the bottom? Loan money to others or increase company investment, betting on a V shaped recovery? Or, buy treasuries which yield a real rate of return around 4.75%. Give me Uncle Sam’s full faith and guarantee any day or at least until there is no doubt about an economic recovery.
After several weeks of economic announcements generally exceeding forecasts, weaker than expected labor and manufacturing data, along with comforting comments from Fed officials about inflation, helped mortgage markets this week. Reacting to the data, investors shifted funds out of the stock market and into bond markets, and mortgage rates ended the week at the lowest levels since May.
