Bonds and Mortgage Markets Open Unchanged

The bond and mortgage markets opened generally unchanged this morning with little news. There is not much data that will be out this week as the two key scheduled news will be the March ISM services sector index tomorrow and Wednesday the release of the March 16th FOMC minutes. February factory orders today came in at the lowest since March 2014. The data is soft and should help support the bond and mortgage markets this morning.

Interest rates have fallen rather rapidly since the March FOMC meeting and more recently last week’s speech by Yellen essentially refuting a number of regional Fed officials that had been expressing their desire to increase the FF rate. Yellen showed that she remains concerned about the global economic outlook and the potential of infecting US growth. The 10yr note yield dropped 12BPS last week to 1.78% as MBS prices last week increased 92BPS.

Markets are starting to hear from more Fed official today.  Everyone has an opinion, and they want to be heard – I wish they would just keep their mouths shut.

 Guess who has been cheating and hiding assets around the world. Files from a Panama law firm that creates shell companies show that politicians, criminals and celebrities worldwide have used banks and shadow companies to hide their finances, according to a series of reports by the International Consortium of Investigative Journalists. Leaders in Russia (Putin), Iceland, Argentina, Georgia, Iraq, Jordan, Qatar, Saudi Arabia, Sudan, United Arab Emirates, and Ukraine.

Currently at 10:00AM, we are seeing the markets starting the week with little change and no key reasons to sell or buy. The 10yr is up a tick at 1.79%, and MBSs are down 8BPS - probably somebody sneezed in Washington or another Fedspeak bonanza.  Last Friday we also had a flat day as markets and traders digest the recent strong rally in the rate markets. The techs remain bullish but I do not expect much immediate improvement in MBS prices or more declines in yields for the 10yr note. Time to consolidate and there is an increasing potential that prices will decline, although I do not expect any price weakness to change the bullish longer outlook. That said the risk of a correction or consolidation could push the 10yr yield a little higher to its initial support at 1.80%.

I noted Friday it may be appropriate now to lock in deals that are close to closing.  For deals that are a few weeks away from closing, I still think floating is reasonable at the moment.