[cid:6BA8E2BA1C0248108DB87A498B2244B0@johng] Mortgage Time
Mortgage Market News for the week ending March 26, 2010
Compliments of
John Girardeau
Southern Mortgage Company
PHONE:
(803) 642-6448
southernmortgage@bellsouth.net<mailto:southernmortgage@bellsouth.net>
PO Box 2676
Aiken, SC 29802
Events This Week:
Durable Orders Rose
Sentiment Higher
Home Sales Down
Manufacturing Mixed
________________________________
Events Next Week:
Mon 3/29
Personal Income
Wed 3/31
Chicago PMI
Thur 4/1
ISM Manuf.
Fri 4/2
Employment
Mortgage Rates Rise on Weak Auctions
A combination of factors was negative for mortgage markets this week, and mortgage rates ended higher. Large budget deficits and economic troubles in smaller European Union nations made bonds less attractive to global investors. In addition, stock market gains sent the Dow to an 18-month high, which pulled funds out of fixed income investments. Finally, with just one week remaining for the Fed's MBS purchase program, comments from Fed Chief Bernanke about potential future MBS sales added to the pressure in mortgage markets.
For months, investors have been concerned that the enormous supply of debt needed to fund US government spending would force yields on US Treasury securities to rise to attract purchasers. This is what took place this week. Demand was surprisingly weak at all of this week's record Treasury auctions, especially from foreign investors, and yields were pushed higher. Since mortgage-backed securities (MBS) compete for investors with Treasuries, MBS yields rose as well, pushing mortgage rates higher.
In a speech on Thursday, Fed Chief Bernanke added to the volatility in mortgage markets with his comments about the possible timing of future sales of MBS from the Fed's portfolio. To support the economy, the Fed has purchased almost $1.25 trillion of MBS since the start of 2009. The Fed has made clear from the start that it was a temporary measure and that it would eventually sell its MBS holdings when the economy was healthy enough. Earlier this month, Bernanke stated that he did not expect the Fed to sell assets "in the near term". On Thursday, however, his language changed a little. While Bernanke assured investors that MBS sales would be gradual and that they would only take place if the economy were strong enough to handle it, he opened the door for the start of Fed MBS sales at an earlier date than previously anticipated.
Also Notable:
* February Existing Home Sales fell 1%, while New Home Sales dropped 2%
* An agreement was reached for the EU and the IMF to bail out Greece if necessary
* The Dow stock index rose to a new high for the year
* The Fed purchased $8 billion in agency MBS, with about $7 billion more to go
[cid:91404766F15A462DA2204D1C50B82B9F@johng]
Average 30 yr fixed rate:
Last week: -0.02%
This week: +0.15%
Stocks (weekly):
Dow: 10,900 +150
NASDAQ: 2,400 +25
Week Ahead
The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 200K jobs in March. Before the employment data, Personal Income will be released on Monday. The Chicago PMI will come out on Wednesday, and the ISM manufacturing index will be released on Thursday. Consumer Confidence, Construction Spending and Factory Orders will round out the schedule. In addition, the Treasury will announce the size of upcoming auctions on Thursday.
To learn more about news impacting interest rates and mortgage markets, go to www.mbsquoteline.com<http://www.mbsquoteline.com>
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