Weekly Mortgage Overview: 1/28/2013

By January 28, 2013Mortgage Overview

This week has a lot of data: the FOMC meeting, Treasury auctioning $99B of notes, and the January employment data. Also on the table, the Senate is expected to vote on the suspension of the debt ceiling that passed the House last week. Last Friday the bond and mortgage markets fell under strong selling pressure on increasing better outlooks in the EU, lessening the need of any safety concerns that drove interest rates down last summer. The stock market, now at five year highs, is also forcing investors to leave the fixed income markets, especially treasuries and to a lesser degree MBSs. Friday the 10-year note yield jumped to 1.95% and is very likely to increase more; traders will test 2.00%, maybe today.

The FOMC policy statement on Wednesday afternoon takes on even more significance after the minutes from the December meeting indicated there are increasing discussions within the Fed about an exit strategy from the easing moves the Fed has been doing for three years. While we don’t believe the Fed is anywhere near comfortable with the unemployment level or the strength of the economy, just the hint of any discussions about an exit is additional evidence that US and global interest rates have ended the declines as we have suggested for the last two months. Not to say the markets can’t improve on weaker equity markets, weaker economic data, or supportive comments from Bernanke; however, any rallies now are not likely to push rates substantially lower. The interest rate markets remain quite bearish as the week begins on Monday with December durable goods orders.