Yesterday started strong in the mortgage markets but by the end of the day MBS prices while still holding some gains had fallen back; down 11 bp frm the level at 9:30 yesterday. There wasn’t much movement in either stocks, bonds or mortgage markets yesterday as traders still trying to get a handle on last week’s FOMC announcement that surprised markets with the intensity the Fed is going to apply to purchasing MBSs.
Spain’s Deputy Prime Minister out today saying the nation will consider seeking external aid if the conditions were acceptable. Spanish bonds are headed for their biggest monthly gain in a year after the European Central Bank said it will act to reduce borrowing costs if countries request assistance. Spain is scheduled to sell as much as 4.5 billion euros of debt due in October 2015 and January 2022 tomorrow.
Mortgage applications for home purchases declined in the September 14 week, down 4.0% following an 8.0% increase during the holiday shortened prior week. Applications for refinancing rose 1.0%. Mortgage rates moved mostly lower in the week including for 30-year fixed mortgages with conforming balances (under $417,500) which averaged 3.72% (with points) for a three basis point decline in the week and a new record low in Mortgage Bankers Association data.
At 9:30 the DJIA opened +17, NASDAQ -2, S&P +1. The 10 yr note at 9:30 1.76% -5 bp; MBS 30 yr price +43 bp, 15 yr fixed +10 bp.
At 10:00 August existing home sales out; forecasts called for an increase of 2.2%. Sales +7.8%, a nice improvement and a 2 yr high. Sales up 11% yr/yr; there are 2.47 million units for sale down 18% yr/yr. The median sales price at $187,400.00, +9.5% yr/yr. According to NAR there is a 6.1 month supply. Homes under $100K declined. Based on the data the housing sector continues its slow improvement, any gains are welcome but there is still a long way to go.
Japan joins in on the increased asset buying stimulus following the US; the Bank of Japan increased its asset-buying fund by 10 trillion yen ($126B), following new debt-purchase plans by the U.S. Federal Reserve and the European Central Bank this month.
Last Friday the bellwether 10 yr note yield increased and closed above its 200 day average; but it didn’t hold and the rate fell back below it on Monday. A positive sign that the 200 day average is holding any increase in rates; the average was tested on 8/16, 8/20 and 8/21 but held and rates declined on treasuries and mortgage markets. Momentum oscillators however are still slightly negative but all are improving. Japan’s easing today, the ECB debt purchase plan, and the Fed’s commitment to purchase $40B of MBSs for an extended period have strengthened the technicals in the MBS and treasury markets.