Daily Commentary by Larry Baer: The modest sell-off in the mortgage market this morning has largely been created by profit-taking as mortgage investors move to book nice gains earned over the prior three trading sessions.
Today's early rally in the stock market has taken a little sparkle off of the safe-haven appeal of Treasury debt obligations and mortgage-backed securities. Against this backdrop many mortgage investors have elected to implement a better "safe-than-sorry" risk management strategy in front of today's Treasury auction of $21 billion worth of 10-year notes. A poorly bid 10-year note sale has the potential to add to the near-term upward pressure on mortgage interest rates. Until the final gavel falls at 1:00 p.m. ET most mortgage investors will likely be content to stand on the sidelines with their hands in their pockets rather than fretting about the auction results. I will post the auction result on my website as soon as possible once bidding concludes.
As they do every Wednesday, the Mortgage Bankers of America have released their national Mortgage Application Survey for the week ended April 6th. The composite index, a value composed of both purchase and refinance loan requests, declined 2.4% from the prior week's mark. The purchase index edged 0.5% lower while refinance demand fell 3.1%. Seven-out-of-every-ten loan applications taken last week were refinance requests.
The contract rate for 30-year fixed-rate conforming mortgages finished at 4.1%, down 6 basis-points from the prior week, up 4 basis-points from four-weeks ago, but down 92 basis-points from this same time one-year ago.
Looking ahead to the balance of the week - Uncle Sam will be back in the credit markets tomorrow looking to sell $12 billion worth of 30-year bonds. This final Treasury auction of the week will conclude at 1:00 p.m. ET. The inflation story will be told through the 8:30 a.m. release of the March Producer Price Index tomorrow -- followed by the March Consumer Price Index on Friday. Overall inflation is expected to remain benign but continuing high energy prices may soon cause a shift in this outlook. Assuming both inflation reports match current expectations the data is unlikely to exert a significant influence on the current trend trajectory of mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
