Daily Commentary by Larry Baer: Trading activity in the mortgage market is once again thin and sporadic. Few investors are interested in taking big risk positions in front of the results of tomorrow's Spanish government's 10-year bond auction - and to a lesser degree in front of tomorrow's initial weekly jobless claims report.
Market concerns about the creditworthiness of the euro-zone's fourth largest economy have deepened in the past week. Yields on the Spanish government's 10-year bonds have risen above 6.0%, a level that has proven to be a trigger point for other financially troubled euro-zone countries. If tomorrow's auction results for Spain's 10-year bond produce a yield of 6.5% or higher -- most analysts believe Spain will be at the point were its debt-servicing costs will have become unsustainable. Should this scenario develop, look for a massive wave of capital to begin fleeing the euro-zone for the relative safety of U.S. dollar denominated assets like Treasury debt obligations and mortgage-backed securities - a condition almost certain to support steady to perhaps fractionally lower mortgage interest rates here at home. I'll keep you posted on this developing story.
Coming on the heels of a surprisingly soft March nonfarm payroll report - tomorrow's 8:30 a.m. release of the initial weekly jobless claims report will draw more attention than normal. The majority of economists currently project the number of Americans filing first-time claims for government unemployment benefits declined by 10,000 during the week ended March 13. If the actual number matches or falls below the consensus estimate the news will likely prove to be slightly mortgage interest rate unfriendly. However, if the weekly report shows labor market conditions have not perked up as many observers expect -- the news will likely prove supportive of steady to perhaps fractionally lower rates. This one is too close to call - especially because seasonal adjustments related to Easter holiday may skew the number. In my judgment, this data will become much more reliable in another week or two -- once all the holiday adjustments are washed out -- than it is right now. Heads up.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey for the week ended April 13th. The composite index, a value that includes both purchase and refinance requests, gained 6.9% during the week. The refinance index spiked 13.5% while the purchase component of the index fell 11.2%. (It is important not to read too much into the weekly moves at this time of year due to potential seasonal adjustment problems related to Easter.) Refinance requests accounted for three-out-of-every-four loan applications taken last week.
The contract rate for 30-year fixed-rate conforming mortgages finished at 4.05%, down 5 basis-points from its week ago level, down 14 basis points from four weeks ago and down 92 basis points from the year ago mark.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
