Commentary: Uncle Sam will be in the credit market today looking to sell $35 billion of 5-year Treasury notes. The auction will conclude at 1:00 p.m. ET and I'll provide results on my website as soon as possible following the conclusion of this event.
Today's sale comes after yields moved significantly lower yesterday driven by "flight-to-quality" buying as anti-government demonstrations in Libya continued to be met with violence. If the bidding at the Treasury auction is aggressive by both domestic and foreign investors - resulting in higher prices and lower yields for the 5-year note -- look for mortgage interest rates to move sideways to fractionally lower as the afternoon progresses. A poorly bid Treasury auction will almost certainly cause mortgage rates to edge higher into the close of trading today. Judging by current trading activity in the 5-year Treasury note futures contract - the probabilities do not favor a strong, mortgage market friendly result at today's auction.
In other news of the day the National Association of Realtors reported a 2.7% increase in the pace of January Existing Home Sales. Mortgage investors yawned. The lion's share of the sales pace improvement came from a surge in distressed sales - with investors and cash buyers snapping up properties at fire sale prices. Until/unless the pace of existing sales shows sustainable demand on the part of Joe Consumer this data set will likely be heavily discounted by credit market participants.
As they do every Wednesday the Mortgage Bankers of America have released their Mortgage Application Survey figures for the week ended February 18th. Overall loan demand increased 13.2% during the period with purchase and refinance applications increasing 5.1% and 17.8% respectively. The average national contract rate for 30-year fixed rate mortgages finished at 5.00%, down by 12 basis-points from the prior week, up by 20 basis-points from four-weeks ago, and down by 4 basis-points from the year ago mark. Refinance applications accounted for 65.7% of all applications taken during the week and represent 62.8% of all prospective loan volume.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
