Weekly Mortgage Overview: 2/25/2013

By February 25, 2013Uncategorized

This week: On Friday, as it appears now, the $85B in automatic spending cuts will go into effect. A lot of talk and slings and arrows between the two political parties have not led to any effort to avoid the cuts. Does it really matter? Given the movements in US and global stock markets, it doesn’t look like investors care much. The global equity markets continue to improve and US interest rate markets have seen little change over the last three weeks. Global markets believe that in the next week or so there will be a deal worked out that will rectify the automatic cuts. The 10-year note and MBSs have seen very little change in the last few weeks: the 10-year note yield trading in a 10 basis point yield range and MBSs in about a 6 basis point range on the rates.

Treasury will begin auctioning $99B of notes Monday with $35B of 2-year notes, Tuesday $35B of 5-year notes and Wednesday $29B of 7-year notes. The economic calendar has a number of key data points: nothing on Monday; Tuesday January new home sales; Wednesday February consumer confidence and January pending home sales; Thursday the second look at Q4 GDP that is expected to be revised higher to +0.5% from -0.1% on the advance report; and Friday the February ISM manufacturing index. Those are the main points this week; along with them, personal income and spending for January and weekly jobless claims.

The bond market and mortgage market continue with a slightly bearish outlook. Most all of our models remain bearish; however, the strength of the bear has lessened over the last week. The 10-year has very solid resistance at 2.05%; until the note can decline under 1.95% the outlook remains neutral at best. A close over 2.05% on the 10 will trigger more selling and a run up of about 10 more basis points in the rate.