Mortgage Rates




Treasuries and mortgages are fractionally better this morning but not much. Friday the 10 yr note pushed through 1.90%, a key technical resistance level. Stock indexes in pre-market opening were trading weaker supporting the bond market. In Europe over the weekend Greece and France voted out the leadership that drove the massive austerity plans that have crippled Europe. France elected Francois Hollande and ousted Sarkozy; Sarkozy and Germany’s Angela Merkel were the architects of the severe cuts in spending in the debt riddled countries of Greece, Portugal, Ireland, Italy and Spain that has routed what was left of the economies and driven unemployment to depressionary levels. The results of the elections in the two countries came after a tumultuous few weeks that saw the Dutch government fell as Britain’s conservative led coalition took a whipping in local elections. Most analysts believe voters in Europe are in favor of balanced budgets and good fiscal governance but the spending cuts are too severe and too quick. Germany and France, especially Germany, have forced unemployment higher and dealt the euro economy into a very deep recession.

Here in the US the stock market had a bad week last week and we expect additional selling this week as investors are increasingly concerned valuations in many of the “hot” issues have become too expensive. Europe’s recession is slowing China and investors see recent US data as evidence the US will slow. That the US will slow growth flies in the face of the most recent Fed forecasts; last week the Fed raised its outlook for GDP growth this year and next compared to their outlook in January. Uncertainty is the word of the moment.

At 9:30 the DJIA opened -46, NASDAQ -13, S&P -4; 10 yr note +2/32 at 1.87% -0.5% while mortgage prices up 2/32 (.06 bp).

This week Treasury will auction $72B of notes and bonds; $32B of 3 yr notes tomorrow, $24B of 10 yr notes on Wednesday and $16B of 30 yr bonds on Thursday. There isn’t much in the way of key economic releases this week. This afternoon at 3:00 March consumer credit; it is one our favorite reports each month although there isn’t a lot reaction when it hits. Credit is expected to have increased $11.0B after +$8.7B in Feb; our focus is on revolving credit (credit card usage) not so much on the headline. Consumer credit has been surging the last six months driven by non-revolving credit, credit in large part that's used to fund vehicle purchases. Revolving credit, which also turned higher late last year, has however been lagging and contracted slightly for a second month in a row.



Last Friday crude oil plunged $4.00, this morning down again now trading well under $100.00 (see below). Oil fell to the lowest level in more than four months after European election results fed speculation that austerity efforts will be derailed and weaker-than-expected jobs data underscored concern the U.S. economy may falter. Crude for June delivery plunged as much as $3.15 to $95.34 a barrel in electronic trading on the New York Mercantile Exchange early this morning. The contract tumbled $4.05 to $98.49 Friday, the lowest close since Feb. 7. Prices slumped 6.1% last week, the biggest weekly drop since September. Over the last three weeks crude as fallen from $104.00.

The remainder of the day will likely be directed by the stock market; the indexes are already off their opening levels. Like a broken record, the 10 yr has never traded below 1.90% for more than three days; the point being that the present levels of long term US rates should be monitored closely. We are not forecasting rates will increase, what we see though is that in the past the 10 yr and mortgages have run into solid resistance under 1.90% on the note.