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).

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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.