Mortgage Rates Continue to Fall

Mortgage rates fell again today, as the Treasuries and MBS’s put in another good day. The 10yr is now at 1.88% and the 30yr MBSs up 33BPS today.  The stock indexes ended lower today but given the wide swings we call this a quiet one.  Equity markets beginning to look top-heavy, with a possible correction coming. Equities are selling off, but the Euro remains stronger and WTI Crude is up.   These three markets have tended to be correlated lately.

February new home sales looked good on the headline but it really was not that good, as the annualized sales at 539K is less than half of what housing was doing before the Wall Street meltdown.  The increases reported were the best percentage increase since April 2008 if that tells you something. 

Tomorrow February durable goods orders, a very key data point, will come out early.  We will also see March crude oil inventories out mid-morning and again another Treasury auction with 5yr notes being sold and announced at noon.

I have been cautiously floating for the past few days as the technicals and models still look bullish. As noted previously price action always trumps all the fundamental news circulating. The reason - everything known is embedded in market movements.  Many times, more often than not, trading on fundamentals for short term outlooks is not as profitable. The outlook I have today is the 10yr will likely to decline to 1.80%, another 7 bps from current levels before I re-assess the situation – but I have been wrong before.

In summary, rates have been on a nice move lately, so if you have been floating you have been rewarded.  If the benchmark 10yr note can hold and close under 1.90, I think there will be better times ahead, but I would look to lock loans closing in under 15 days.