Commentary: Mortgage investors gave this morning's news that initial weekly jobless claims declined by 36,000 little more than a passing glance. The near-term direction for mortgage interest rates hangs on the results of today's 30-year Treasury bond auction.
A well-bid 30-year bond auction today following yesterday's very strong demand for 10-year Treasury notes could prove to be "just-the-thing" to put an end to the roughly two-week long surge in mortgage interest rates. The key will be whether investors (particularly foreign investors) will be willing to bid as aggressively for today's longer-dated securities. Yesterday foreign central banks and large money managers set a new bidding record at Uncle Sam's 10-year note auction.
If investors are as aggressive at this afternoon's 30-year bond sale -- most of the pressure that has propelled benchmark yields on most government debt instruments to nine-month highs will be largely reversed. That would certainly be welcome news for the prospects of steady to fractionally lower mortgage interest rates. On the other hand, you can essentially "take-it-to-the bank" that a poorly bid 30-year bond sale will shove mortgage interest rates rudely higher before the day is over.
Be very disciplined here. Do not initiate new "floating" loan positions until/unless the price of the Fannie Mae 4.0% 30-year mortgage-backed security can muster the momentum to close above 96.781.
I'll provide the auction details on my website as soon as possible once the final gavel falls at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
