Mortgage Rates



Treasuries and mortgages opened slightly weaker this morning. At 8:30 March housing starts and building permits; starts were expected to be up 0.3%, they fell 5.8% the lowest level since Oct 2011, permits were thought to be -0.9%, they increased 4.5% to 747K the highest level of permits since Sept 2008. The starts headline didn’t impress; however multi-family starts were down 16.9% while single family starts were down just 0.2%. Prior to the data the 10 yr traded down 7/32 at 2.10% and MBS prices were down 3/32 (.09 bp); by 9:00 both were unchanged from the levels prior to the data. At 9:00 the DJIA index traded +83.

9:15 March industrial production, expected up 0.2% was unchanged; capacity utilization was right on estimates at 78.6% down from 78.7% in February. No initial reaction to the two reports in either the bond or stock market.

The world economy will expand 3.5% this year and 4.1% in 2013, the IMF said today in its World Economic Outlook, raising forecasts made in January from 3.3% for 2012 and 4.0% for next year. The U.S. will grow 2.1% this year and 2.4% in 2013, up from 1.8% and 2.2% in the lender’s January projections. The euro area economy is projected to decline by 0.3% in 2012, an improvement from the 0.5% in the IMF’s previous forecast. China is projected to grow 8.2% and Japan 2.0% this year. “The most immediate concern is still that further escalation of the euro-area crisis will trigger a much more generalized flight from risk,” the IMF said. “Geopolitical uncertainty could trigger a sharp increase in oil prices.” A 50% increase in the cost of oil would reduce global output by 1.25%, according to the report.

Some relaxing of safety moves to US treasuries this morning on Spain’s better than expected auctions in Europe. Spanish bond yields, which rose as high as 6.16% yesterday, fell to 5.91% after it’s Treasury sold more bills than the 3 billion euros it targeted for the auction. It was a better than expected outcome but a few hours after the auction Spain’s central bank chief said the country risks missing deficit estimates unveiled last month just hours after a successful bill sale dissipated some concerns that the government may have to seek a bailout. “The projected course of total revenues in the budget is subject to downside risks,” Bank of Spain Governor Miguel Angel Fernandez Ordonez was quoted. Spain isn’t out of the woods and any money managers continue to fear more debt bailouts will be needed.

At 9:30 the DJIA opened +100, NASDAQ +15 and the S&P 500 +9. The 10 yr treasury -7/32 at 2.01% and 30 yr mortgage prices -4/32 (.12 bp).

At about 11:15 the President is due to talk about something; not really sure what he wants to say but it is unlikely it will get much attention from markets.

Not a bad start in the rate markets this morning, a little lower in prices but with stock indexes rallying and a fractional relaxation over Europe so far not much selling in the bond and mortgage markets. Yesterday the 10 yr note at one point fell to 1.9% but couldn’t be sustained and ended the day unchanged at 1.99%. The bond and mortgage markets continue to be driven by safety moves into US treasuries and the idea the FOMC meeting next week will end with the policy statement confirming the Fed is considering another easing move---not in that plain of English but using Fed speak.