Mortgage Rates Mixed

Mortgage rates were mixed today, as the market started off soft, but by the time I submitted my morning report, it was becoming extremely volatile.   There was no pull back on the stock market this afternoon, as indexes climbed right into the close.

Interest rate markets did manage to hold well. April new home sales were off the chart, increasing 17% with 100K more than market forecasts - new home sales are contracts signed but not yet closed. The increase to 619K is the largest levels back to the beginning of 2008, shortly before the financial collapse that almost broke markets. The monthly increase was biggest since 1992. The median sales price +9.7%. The number of sold but not yet under construction +209K the best since May 2007; the increase will add to construction spending through the summer.  These are shocking numbers and along with the increase in existing sales is a green light for the Fed to move in June. Incomes increasing and credit requirements lessening. Equity markets took the improvements as positive even with the Fed increasing rates that will push mortgage rates higher, although will still be historically low rates.

This afternoon’s 2yr note auction was strong helping support the yield curve. Tomorrow weekly MBA mortgage applications at 6:00AM.  Also we will see the Treasury auction off $34B of 5yr notes.

I admit surprise this morning, first in the huge increase in new home sales last month,  and how well the bond and mortgage markets traded. Rates fractionally higher and MBS prices lower but minor compared to what we would have expected. The housing data was for April, since then rates have creeped up a little but that doesn’t explain the increase in sales. Looks great for housing now but there will likely be an adjustment when May new home sales are reported next month. Both the MBS and the 10 yr successfully held at their respective 100 day average again that has held and selling going back to early January on the 10. Two near term support levels has the 10yr at the 100 on the 10 at 1.88% and then 1.93%.

I am remaining bearish, with the technical indicators all negative. I do not try to play the market with the way rates are today.  The rally in equity markets today bothers me, and likely will continue its wild swings on the key indexes. The equity markets rallied from improvements in Europe’s markets and the continuing increase in the US dollar.