GOOD FRIDAY!!!

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The bond and stock markets are closed today for Good Friday. I apologize for my error that the bond market would be open today; that was what we were told---obviously incorrect. Mae Culpa.

Although markets are closed today, Feb personal income and spending were reported; income was up 1.1% while spending increased 0.7%. Estimates were for income to be +0.9% and spending +0.6%; January income was down 3.6% and spending up just 0.2%. Better income and spending, if markets were open, would likely support stock indexes and add slight pressure in the bond and mortgage markets.

At 9:55 this morning the final monthly U. of Michigan consumer sentiment index was reported much stronger than expected. The index at 78.6 was expected at 72.5, the previous reading was 71.8. The increase in sentiment contradicts the Mar consumer confidence index released on Tuesday this week; that index saw a big decline, from 68.0 to 59.7 on estimates it would be at 66.9. Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes.

The two reports this morning, if markets were open, would likely have improved the stock market and likely have the bond and mortgage markets trading weaker.

The bond market, although closed, remains technically overbought based on all momentum oscillators. The likelihood of some retracement is high. Next week is employment week with March data to be reported on Friday.

Following the Rates

The 10 yr and MBSs started a little weaker this morning; early trading in the stock indexes pointing to a slightly better open at 9:30. Neither market however was much different from yesterday’s closes. In Cyprus today, after being closed for two weeks, the banks opened for the first time. Yesterday most everyone was expecting the possibility of huge unruly crowds; lots of The bond and mortgage markets started the day a little weaker with security was planned as the world waited to see how citizens would react. Nothing happened, the opening of banks was very orderly with not many rushing to withdraw the maximum 300 euros per day. According to reports and video coverage the lines at banks were small, no more than 20 to 30 people lining up. “We expected much more people,” said a manager of a Bank of Cyprus branch. “Fortunately there are only some people who needed cash for the day, but customers reacted fantastically. We expected some people to be more aggravated.”  The controls on withdrawals will continue for the next seven days.

The German 10 yr bund yield rose one basis point to 1.28% after declining to 1.25%, the lowest level since Aug. 3. The yield has dropped 10 basis points this week. Spain’s 10-year yield rose one basis point to 5.09%. The rate has risen 23 basis points this week. Italian bonds (10 yr) at 4.78% was down from 4.86% earlier today, the bond up 26 bp this week. German unemployment unexpectedly rose in March; the unemployed increased 13K in the month against forecasts of a decline of 2000. Europe’s stock market today were all better on relief there were no incidents in Cyprus when their banks opened.

8:30 data; weekly jobless claims were expected to be up 4K, as reported claims were up 16K to 357K and last week’s claims were revised up frm 336K to 341K. The 4 week average increased to 343K, up 2,250; continuing claims did decline to the lowest level since July 2008. The final Q4 GDP report was expected at +0.6%, growth was +0.4% after the preliminary data last month was a growth of 0.1%.

By 9:00 this morning the US stock indexes were losing all of the early improvement; the 10 yr note rate fell back to unchanged at 1.85% and 30 yr MBSs after opening down 8 bp were also back to unchanged. At 9:30 the DJIA opened  +14, NASDAQ +2, S&P unch; 10 yr note +1 bp at 1.86%, 30 yr MBS price -6 bp frm yesterday’s close.

9:45 this morning brought the March Chicago purchasing mgrs. index; expected at 56.1 frm 56.8, the index fell to 52.4. Another measurement that suggests the economy may be slowing; the new orders component fell to 50 frm 60 on February. Consumer confidence slipped on Tuesday, the employment picture still too high. Would be employers and people overall are beginning to realize that Obama Care, originally touted as a cost cutting measure, will in fact cost businesses and individuals more---about $2K a year on average according recent data from American Actuaries’. Now that the reality is setting in, it is another drag on hiring full time workers.

Later today, at 1:00 Treasury will auction $29B of 7 yr notes. Yesterday the 5 yr auction went OK, about in line with demand for previous 5 yr auctions.

The recent decline in interest rates has been a safe haven event caused of course over the debt crisis in Cyprus. It is too early to call it over, but presently the 10 yr note , based on momentum oscillators and a key moving average, is registering overbought readings. When the 14 day relative strength indicator falls to present levels we expect some consolidation at best, at worst an increase in rates. The 10 is testing its 100 day average at 1.84%, it hasn’t traded below it since the beginning of the year.

The US stock market will be closed tomorrow for Good Friday although the bond and mortgage markets will trade.

Keep up with your home loan at globalhomefinance.com

Markets Trade in Tight Range

Interest rate markets continue to trade in a tight range, this morning the 10 yr note started down 4/32 at 1.93% +1 bp and 30 yr MBS price at 8:30 -3 bps. US stock indexes early today were pointing to a better opening at 9:30, the same as yesterday; but yesterday after opening better the DJIA dropped 117 points before ending -64. The EU is still impacting markets; although the troika and Cyprus leaders cobbled a plan to keep the country from falling out of the European Union, the plan is not likely to go down well with investors both in Cyprus and other weak EU countries. Yesterday the Dutch finance minister said the plan worked out was a blue print for future banking crises in the EU; his remark sent the DJIA down 117 points. Last night he back-pedaled and in essences retracted his remark. It a common occurrence in the EU for officials to say something then get their mouth’s smacked by other officials, or after seeing the reaction, recant.

At 8:30 Feb durable goods orders were better than expected, up 5.7% and Jan revised from -4.9% to -3.8%. Consensus estimates were for orders to have increased 3.9%. Orders for aircraft increased 95.3%, Boeing saying it received orders for 179 planes in Feb. Auto sales also boosted orders, up 3.8% the most since last July. Ex-transportation orders durables declined 0.5%, Jan though was revised from +2.3% to +2.9%. The increase in orders will likely increase the GDP estimates for this quarter. There was no noticeable reaction to the report.

The Case/Shiller 20 city housing index for Jan, out at 9:00, was expected at +8.2% yr/yr; as reported the 20 city price increase was right on at +8.1%. In Dec the yr/yr increase was +6.8%.  On a month to month basis prices increased 1.0% after increasing 0.9% in Dec. Case/Shiller data is dated, two months in arrears, but does get a little attention. Not one of our favorite series though.  No reaction to report.

At 9:30 the DJIA opened  +67, NASDAQ +14, S&P +7. 10 yr at 9:30 1.94% +2 bp; 30 yr MBS -6 bp, FHA -12 bps.

Two major reports at 10:00. Feb new home sales were expected down 3.5% to 426K units (ann.), sales as reported were 411K (ann.), down 4.6%. Jan sales were +13.1%. The median price increased to $246,800.00, up 2.9% yr/yr. Based on current sales there is a 4.4 mo supply. Although a little weaker, overall new home sales holding up well. Builders saying finding employees is beginning to be a problem and land prices are increasing.  March consumer confidence was thought to be at 67 frm 69 in Feb; the index dropped to 59.7, not what we wanted to see, however there was no initial reaction to the drop in confidence. The report and the U. of Michigan consumer sentiment index is subject to emotional variances.

At 1:00 this afternoon Treasury will begin the monthly auctions of notes totaling $99B. Today $35B of 2 yr note, likely to see good demand. Wednesday $35B of 5 yr notes and Thursday $29B of 7 yr notes.

It is Spring time; at least that is what the calendar says but with 7” of snow on the ground it surely doesn’t feel like it. In the oil world though prices are increasing as they generally do this time of the year. Crude increased $0.83 yesterday, this morning up another dollar. Fill up now or pay the price later.

Technically speaking; the MBS markets continue to struggle at present levels, the 30 yr FNMA coupon for April has yet to break above its 2 and 40 day averages. The 10 yr note is slightly better but it too is struggling at its 20 and 40 day averages. The relative strength index on the 10 is presently in positive territory but is slowing and not as bullish as at the beginning of the month. We hold with our overall forecasts; interest rates are not likely to decline much frm present levels and not likely to increase much either. As long as the Fed and other central banks remain accommodative rate should be contained in the present wide range, from 1.90% to 2.05% on the 10 yr. 30 yr MBSs have to move up to 103.03 and hold to change the soft current outlook.

For all your home loan needs look up globalhomefinance.com.

Time to Buy a House

Why Now is the Perfect Time to Buy a House With home prices rising for the third straight quarter, it is pretty hard to argue that the housing market recovery hasn't picked up steam. In fact, according to S&P Case-Shiller, home values increased 7.3% in the last quarter of 2012 alone. That means we are seeing the bounce from the home value bottom. Combined with mortgage rates with a national average in the 3% range, and you have the perfect storm for the best time to buy a home. But there is a problem - as the recovery continues, affordability will fall. Home values will continue to stabilize and improve, and mortgage rates are going to rise. Contrary to what the press would have you believe and what many people now think, the government doesn't control mortgage interest rates. While the Fed has been able to manipulate and affect mortgage rates with things like quantitative easing, it is not the same as control. The housing market is recovering as part of the US economy as a whole, and with that recovery is a natural increase in mortgage rates. That means that even as house prices rise, so will mortgage interest rates, providing a double whammy to buying power. YEAR-OVER-YEAR CHANGE IN HOME VALUES; SOURCE: S&P CASE-SHILLER Last Week's Mortgage Rates Recap Last week we ended the week with slightly better mortgage rates than we started, and improved rebate pricing. However as we warned, there was lots of intraday volatility - mortgage rates and pricing fluctuated throughout the day. We saw swings of as much as .500 in rebate in a day, which on a $200,000 loan is $1,000. We ended the week with risks greatly favoring locking in interest rates. Most of this market movement was created due to the ongoing concerns in Cyprus as well as the positive bias that continued in the stock market regardless of that concern. This Week's Mortgage Rates Forecast Risks Favor: LOCKING As most of last week focused on Cyprus, it helped to keep mortgage rates stable and even to improve slightly. However, in the early hours of the morning this AM European Union leaders agreed on a bailout package intended to keep Cyprus in the euro zone and rebuild its devastated economy. That bodes poorly for mortgage interest rates, as there is no reason to see a flight to safety to bonds. Also, as shown in the chart above, the technical indicators on the MBS (mortgage backed securities) market also point to rate weakness. This week for any consumers who are less than 30 days from closing, we advise to lock. This week already appears to be one of a rising interest rate environment, and along with a number of key economic reports and a holiday week, volatility is a given. BOTTOM LINE: Lock in these low rates and don't look back.                                           RateAlert’s Most Trusted Mortgage Loan Officers MLOs that subscribe to RateAlert’s Executive service have the training and market knowledge, along with the data at their fingertips, to expertly help you navigate the difficult and sometimes treacherous process of obtaining home financing and securing some of the best rates the market has to offer. If you would like to learn more about how to time the market to obtain the best interest rates, don’t hesitate to contact the MLO who sent you this commentary. Cyprus secured a bailout from its creditors; ending a week of financial panic that threatened to see the island nation become the first government to leave the euro zone. In the late hours of Monday morning Cyprus agreed to the outlines of an aid package, paving the way for 10 billion euros ($13B) of emergency loans to stave off the threat of default. The accord imposes losses that two European Union officials said would be no more than 40% on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second-biggest, which will be wound down. Europe’s stock market rallied on Monday and early Monday bolstered US stocks for a better open at 9:30. The Cyprus solution is the first time since the credit and debt crisis began in Greece in 2009 that bank depositors and stock holders are being forced to take losses; all shareholders and bond holders in the Cyprus Popular bank that will be closed. The deal will undoubtedly bring into focus the safety of deposits  and bonds issued by other banks in the larger countries in the EU that are still facing debt issues (Italy, Spain, Portugal). At 9:00 this morning on the Cyprus deal the US stock indexes were pointing to a strong open; early today it appears that today may be the day when the S&P 500 index moves to an all-time high at 1565. The 10 yr at 9:00 -7/32 at 1.96% +3 bp and 30 yr MBSs -9 bp frm Friday’s close. At 9:30 the DJIA opened weaker than it was trading in the pre-market futures, +26, NASDAQ +11, S&P +5; all of the indexes were over twice as higher than at the actual open. MBS prices at 8:30 -21 bp, at 9:30 -2 bps. Already today a lot of volatility. There are no economic reports today but Fed chief Bernanke will be in discussions with IMF and BOE officials on lessons learned from the crisis. Hardly a topic that has much meat given the renewed increase in the EU over their banks and the Cyprus crisis. More bank issues now turning to Spain. Spain's government will impose heavy losses on investors at nationalized banks and hire external advisers to help it manage the banks' assets. A number of key reports this week and Treasury borrowing $99B of notes at its normal monthly auction. No reports today; tomorrow Feb durable goods orders, and new home sales; weekly claims on Thursday and the final Q4 GDP data. Two indicators of consumer confidence this week; the Conference Board’s consumer confidence index and the final Mar U. of Michigan consumer sentiment index. The Cyprus deal this morning has removed some of the safe haven concerns that drove the 10 yr note yield down briefly to 1.90% last Tuesday; this morning the 10 at 1.95% has pushed the note back over its 20 and 40 day averages. In the MBS market the 30 yr Apr FNMA coupon never did break above its 20 and 40 day averages (price). The outlook remains bearish, but not severe. The fixed income market is still tied to how the stock markets trade. As long as the equity markets continue to improve the bond market isn’t likely to decline in rates. On the other side; as long as the Fed is still holding its QE purchases there is little likelihood rates will increase much. Technically, the 10 has resistance at 1.90%, support at 2.00%; 30 yr FNMA MBS has resistance at 103.03 price and support at 102.00 (current price . Although a deal was reached to keep Cyprus from existing the EU, the reaction in the US and German bond markets hasn’t been much. Visit us at globalhomefinance.com for all your home loan needs.

Mortgage and Bond Rates

A little better start in the mortgage and bond market this morning even with the stock indexes opening better. It remains all about the Cyprus banks and whether Cyprus can come up with 5.8B euros in order to get bank rescue money from the ECB. Yesterday the gauntlet was laid down to Cyprus by the ECB and EU officials; raise the money by Monday or the rescue is off. Tough talk as there has been in the past, but in recent past crisis’s in Spain, Italy and Portugal the deadlines were achieved in various forms to avoid any systematic EU meltdown. Will it be different this time? Markets are taking the Cypriot banking crisis in stride so far, no massive runs in Europe’s stock markets, the US stock market holding well and while there has been a certain amount of safety moves into US and German bond markets, the amount hasn’t been extreme.

Why so much angst over a country with very small population and not a major economic contributor to the EU? Unless Cyprus stays in the EU there is speculation that even if one country is allowed to exit the Union, it would set a precedent for other members to walk away. Keeping the 17 member EU intact is seen as critical to the future cohesiveness of the entire Union. Allowing one country to leave, even a tiny one like Cyprus, is seen by many to represent a crack in the entire EU. No one really knows for sure what the consequences would be if it is forced out but as in all past episodes over the last three years in the region, the worst case scenario dominates thinking. Based on the latest info, according to the troika, Monday is the deadline for Cyprus to raise 5.8B euros. What happens if the country doesn’t is the unknown keeping markets on edge.

At 9:30 the DJIA opened +25, NASDAQ +13, S&P +5; 10 yr note at 1.92% unch and 30 yr MBS price +9 bp frm yesterday’s close.

There are no economic releases today and little expected news other than what may slip out from Europe. It should be a quiet session ahead of Monday’s supposed deadline for Cyprus and possible additional news over the weekend. In Germany Angela Merkel told a closed-door meeting of legislators in Berlin today that she’s annoyed the Cypriot government hasn’t been in touch with the so-called troika of international creditors for days. She vented a little more anger than she has in the past, saying Cyprus is testing the EU’s resolve and it isn’t acceptable.

The main reason US interest rates have declined somewhat over the last few days is about safety. The move of money into safe havens though, has not been dramatic compared to panic moves into US bonds as in the past upheavals over the last couple of years. The US stock market, although not rallying, is holding well. The take away is that for all the talk and fears being vented over Cyprus, so far it is mostly talk with not much investor reaction. If the crisis is avoided markets will return to more direct fundamentals; the economy and normal issues that are always present. The US economy is strengthening, the bond and mortgage markets outside of the recent Cyprus situation, hold slightly bearish biases. We still hold that interest rates will not increase much over 2.00% and that rate markets will not decline much----unless the EU is seen as unraveling, and isn’t likely.

For any home finance needs find us at globalhomefinance.com

Bond and Mortgage Markets

ADVICE:  For loans being locked for 15 - 30 days, we suggest…(more) Generally quiet in early activity this morning in the bond and mortgage markets; trade in the stock index futures at 9:00 pointing to a better open at 9:30. In Europe stock markets are weaker, continuing to decline on the renewed debt crisis that  surfaced in tiny Cyprus. In an effort to get financial assistance frm the ECB and IMF the country announced it would simply take money frm bank deposits; the plan endorsed by the ECB and IMF. The original idea was to take 6.75% of customers’ accounts under 100,000 euros and 10% of deposits that are over 100K euros (much of it money frm Russian depositors). After protests raged against the “theft” the country’s parliament delayed the vote, considering taking less, if anything, from savers that have less than 100K euros. Banks in Cyprus remain closed until Thursday. According to estimates, if the government actually does raid accounts the amount is about 5.8B euros ($7.5B). EU finance ministers appear to be back-tracking on the demand to raid small accounts under 100K euros. Feb housing starts and permits, the only data today; starts were up 0.8% to 917K annualized units, less than expected but offset by increased starts in January from what was initially reported. Jan starts originally recorded down 8.0% were revised to -7.3%, in terms of units the revision totaled 910K frm 890K originally reported. Taken together the two months are in line with forecasts and continue to confirm the sector is improving. Feb building permits were stronger than estimates at +4.5% to 946K units, units were expected at 925K. Stock indexes gained a little more on the data.   The bellwether 10 yr note is at its 40 day average, so far unable to break below it. 30 yr MBS price also at a critical technical level, its price unable to move above its 20 day average. At 9:30 the stock market opened better; the DJIA +38, NASDAQ +10, S&P +4; the 10 yr note at 9:30 1.94% down 1 bp and 30 yr MBS price +6 bps. Today the FOMC meeting gets underway; there won’t be any news though until tomorrow afternoon at 2:00 with the policy statement, then at 2:30 Ben Bernanke will hold his press conference. Expect questions from reporters to range frm the renewed debt concerns in the EU to details on the economy and plans to exit QEs. The Fed is not about to exit the $85B of monthly purchases of treasuries and MBSs until at least the end of the year---if then. While the US economy is improving, the resurrection of the EUs problems will keep the Fed and other central banks accommodative. With little additional news from the EU, and tomorrow’s FOMC policy statement and Bernanke’s press conference, today is likely to quiet with little changes in the bond and mortgage markets. The stock indexes have started better this morning however we do not expect any major changes. In the near term the bond and mortgage markets are looking slightly better; most of the strength however is based on minor moves to safety in US and German bond markets over the uncertainty about Cyprus contagion. Standing on its own Cyprus is a hiccup in the wider perspective; the fear is that if the country actually does take depositors money, other EU countries may also try it. That isn’t very likely, but the concern over it has pushed some money into safety of US notes and German bunds.

Look at Globalhomefinance.com for any home loan needs.

Market Snapshot 03/15/2013

European stocks weaker this morning, in early US futures trading markets were relatively unchanged, the 10 yr note -3/32 at 2.04% at 8:30. 8:30 data didn’t move markets; Feb CPI in line with forecasts +0.7% overall, and ex-food and energy +0.2%. Inflation is no problem and attracts little attention in markets. The Empire State manufacturing index was expected at 10, as reported 9.24 frm 10.4 in Feb. Neither data had any immediate impact on markets. Overall CPI at +0.7% was a little higher than thought but not a concern, the increase to 0.7% was mainly due to increases in gasoline prices in Feb; since Feb gas prices have moderated. Gasoline prices climbed 9.1% last month, the biggest advance since June 2009. That drove a 5.4% gain in overall energy costs. The core rate +0.2%, is where the focus always is and it was tame and in line with estimates. The Empire State report was a little disappointing but still held above zero; new orders index fell to 8.2 frm 13.3, the price index at 25.8 frm 26.3 (good) and the employment index declined to 3.2 frm 8.1. If the stock market were not so bullish as it is these days, the Empire State would have pushed indexes lower.

At 9:15 Feb industrial production was thought to be up 0.5%, it increased 0.7% the most in three months; January production was revised to unchanged. Frm -0.1%. Manufacturing which accounts for 75% of industrial output increased 0.8%, the 3^rd gain in the last four months. Feb factory usage was expect at 77.5%, as reported use of factories was at 79.6% the best since Mar 2008.

At 9:30 the DJIA opened -27, NASDAQ +1, S&P -2; 10 yr note unchanged at 2.03% and 30 yr MBS prices also unchanged.

At 9:55 the last data this week, the U. of Michigan mid-month consumer sentiment index was forecast at 77.5, as reported the index fell to 71.8, a huge decline and the lowest index reading since Dec 2011 when it fell to 69.3. Until this report the data this morning was, on balance, better than expected but didn’t get any support in markets. The soft sentiment index however triggered additional selling in the equity market and jumped the 10 yr back to 2.00% -3 bp on the day with 30 yr MBS prices up 10 basis points in price frm 9:30 levels.

Yesterday the 30 stocks in the DJIA index made another new high, the 10^th in a row for the index, yet the broader market as measured by the more significant S&P 500 index still can’t push to a new high. Yesterday the index closed at 1563.23, the high close is 1565.15, so close but not even the most bullish could generate enough interest to break through. This morning the stronger Feb industrial production and factory use were much better than expectations but didn’t influence the markets so far. Today options expire that at times can increase volatility through the day.

We still have a bearish interest rate market based on all of our technical models, however the strength of the bearishness has waned in the last week after rates exploded last Friday on the Feb employment report. The level to watch now is 2.06% on the 10 yr note, a close above it will imply more increases. On the other side, there is very strong resistance at 1.95% for the note. Next week the FOMC meets on Tuesday and Wednesday, after the strong Feb employment data and other better than expected reports on the economy what will the Fed think when the FOMC policy statement is released Wednesday afternoon? We expect trade early next week to be rather flat ahead of the FOMC meeting.

GLOBALHOMEFINANCE.COM

A Quick Market Snapshot 03/13/13

Prior to 8:30 when Feb retail sales were reported the 10 yr note at 2.00% was -2 bp and 30 yr MBSs were up 6 bp frm yesterday’s close. Retail sales for Feb was expected to be a little soft on concerns the payroll tax increase might continue slow spending seen in January. The estimate for overall sales was +0.6% and when auto sales are extracted, up 0.2%. Sales increased 1.1% and ex-auto sales +1.0%. Feb sales ex-autos and gasoline were up 0.4%. Jan overall sales was revised to +0.2% frm 0.1% and ex-auto sales from +0.2% to +0.4%. The stronger sales report turned markets; at 8:45 the 10 yr note -5/32 at 2.04% +2 bp frm yesterday’s close and 30 yr MBS price down 9 bp frm the close yesterday. US stock indexes were weaker prior to 8:30, at 8:45 back to unchanged. Feb retail was the strongest in the last five months, adding more conviction the economy is improving.

The Feb employment report last week also was better than markets were expecting, now retail sales adds to the optimism that recovery is happening quicker than thought. Even the Fed should be surprised with the number;  the Fed has continued to say the economy is improving but not as rapidly as retail sales and the Feb employment data has indicated. Eight of 13 major categories in the sales report showed increases last month, led by a 5% jump in receipts at gasoline stations that reflected higher fuel costs. Sales also climbed at building materials outlets, auto dealers and general merchandise stores. Next week the FOMC will meet on Tuesday and Wednesday with the policy statement released Wednesday afternoon; how will the Fed frame the recent firmer data? Bernanke will likely hold that the economy still has soft spots and that unemployment is still too high. The Fed will continue the QE buying of $85B of treasuries and mortgages, in the eyes of the Fed the easing is helping and it will continue for months ahead.

US retail sales data didn’t help stock markets in Europe, all three major markets in the region were slightly weaker today on soft industrial production data. Production in the 17 nation euro zone in Jan declined 0.4% on estimates of a decline of 0.1%. Yr/yr production down 1.3%. Europe’s economy struggling and presents a drag on global markets. In China its economy also slowing as the country turns inward toward domestic improvements and away frm relying mostly on exports.

Earlier this morning the weekly MBA mortgage applications data; the overall composite index -4.7%, the purchase index -3.0% and the re-finance index -5.0%. The interest rate for 30 yr conforming mortgages increased to 3.81% for 80% loans with origination fees included, an increase of 11 bp frm the previous week and the highest rate since last August. Until last Friday’s employment report 30 yr rates were about unchanged frm the prior week but the strong data sent rates climbing Friday morning. Both the purchase and re-finance indexes the previous week were up 15%.

At 9:30 the DJIA opened -4, NASDAQ -0.4, S&P -0.7; 10 yr note at 2.04% +2 bp, 30 yr MBS price -12 bps.

Jan business inventories at 10:00 was expected up 0.5%; as reported inventories increased 1.0%, Jan inventories originally +0.1% were revised to +0.4%. The increase in inventories the largest since May 2011. At the January sales pace, businesses had enough goods on hand to last 1.29 months, up from 1.28 months in the prior month and the highest since August. Business sales dropped 0.3%, reflecting declines at factories and wholesalers. Purchases at retailers advanced 0.3% after a 0.4% gain in Dec.

At 1:00 Treasury will auction $21B of 10 yr notes, yesterday’s 3 yr auction was somewhat disappointing, the 10 yr is much more interesting as it impacts mortgage rates and long term fixed income investors. The demand will be important, at last month’s 10 yr auction the 10 went 2.04%, the demand last month was somewhat soft compared with previous recent 10 yr auctions.

Treasury will report the Feb budget data at 2:00; markets are expecting the deficit for the month at -$205B.

By 10:00 this morning the stock indexes were trending lower, unable to improve on the retail sales report. Unless the S&P can make a new all-time high today or tomorrow, it is unlikely to happen until the conclusion of the FOMC meeting next Wednesday. The longer it takes the S&P to make a new high, (it is 16 bp away at 10:00), the more nervous traders will become and in turn may push the stock market down on profit-taking ahead of the FOMC meeting. That said, we do not expect a serious decline in stock indexes which will keep interest rates frm declining much. Any improvement in mortgage rates should be used to lock in critical deals; we don’t believe the bond and mortgage markets will lose their bearish outlooks either fundamentally or technically.

Consumer snapshot and Market snapshot

Last Week's Mortgage Rates Recap
Last week saw a definitive drop below key technical market support levels, capping off with higher mortgage rates on Friday as the markets responded to the February employment report. Mortgage interest rates ended the week about .125% higher than they started. Remember that this is an industry average, and may vary from lender to lender.


This Week's Mortgage Rates Forecast
Risks Favor: LOCKING ON MARKET IMPROVEMENTS
The technical indicators this week show that Mortgage Backed Securities are oversold, meaning we should see some MBS market recovery. That's a lot of technical jargon to say that rates should rebound a little bit this week, but only a little bit. This week for consumers who are 2 weeks and further from closing, we will look to lock on market and rate improvement at the first sign that the improvement is stopping. For consumers who are within 7-10 days of closing, locking on any improvements is probably the safest measure because there will be no time to recover lost ground in the case of a deterioration. We will not likely see drastic interest rate movement, but we will probably see pricing fluxuation throughout the week.

BOTTOM LINE: Overall we are seeing mortgage rates trending up on signs of an improved economy and record stock market performance. There will be some windows to maximize mortgage interest rate and rebate pricing this week, if you stay in close contact with your MLO (Mortgage Loan Originator).

                                      .

Market Snapshot

Treasuries trading a little weaker early this morning while trade in

stock index futures were slightly weaker prior to the 9:30 open. There are no scheduled economic reports today. At 9:30 the DJIA opened -9, NASDAQ -6, S&P -2; 10 yr note unchanged at 2.05% and 30 yr MBSs +4 bp.

After the strong increase in interest rates last week and the stock market running to new all-time highs on the DJIA (S&P still hasn’t made it), this week is likely to see some minor improvement in rate markets while the stock market rests. At least that is what we expect, but until there is a significant decline in stock markets here and globally, interest rates have more propensity to increase than decline much.

Three key data points this week; Feb retail sales, industrial production and factory usage. Congress working on the budget this week; Republican’s plan has no chance with cuts to Medicare and Medicaid, no cuts on Pentagon spending AND no new taxes. Democrat’s plan; increased taxes on high income earners and corporations and no cuts on Medicare or Medicaid, also a non-starter. The two parties are so far apart that a consensus seems highly unlikely. Also this week Treasury auction 3 yr, 10 yr and 30 yr notes and bonds beginning on Tuesday through Thursday. The total of $69B is $10B less than what Treasury has been borrowing in the last six months, the cuts are in the 10 yr and 30 yr auctions.

French industrial production fell more than expected in January as Europe’s second-largest economy teetered on the brink of its third recession in four years. In Germany, after a sluggish in Q4 the Bundesbank predicts it will rebound in the current quarter. Confidence among investors and businesses jumped in February and retail sales rose the most more than six years in January. Still, factory orders unexpectedly fell and industrial production stagnated. The European Central Bank last week cut its forecasts and now expects the euro-area economy, Germany’s biggest export market, to shrink 0.5% this year before growing by 1.0% in 2014. The German economy will expand 0.4% this year, according to the Bundesbank. In China industrial output had the weakest start to a year since 2009 and lending and retail sales growth slowed, although China is still seen as the global economic engine.

Fitch lowered Italy’s sovereign rating to BBB+ from A- with a negative outlook, according to a statement released March 8. That’s three levels above junk and one higher than Spain. Italy’s 10-year yields climbed five basis points, or 0.05 percentage point, to 4.64%. Germany’s 10 yr bund at 1.51% on Friday, this morning 1.52%.

In the US the decline in unemployment and strong increases in non-farm payrolls and private sector jobs surprised about everyone on Friday, (non-farm jobs +236K, non-farm private jobs +246K). The decline in the unemployment rate to 7.7% isn’t as positive as it appears, many simply not looking for a job, that eliminates them from the employment sector. On balance the Feb employment data was much better than had been thought sending interest rates up along with stock indexes. There is little reason now to expect interest rates will decline much on any rallies.