Market: We’re flat. Yesterday we were up 34 bps. This is a trend, now, and not a blip. There is consistent pressure for mortgage-backed securities (mbs) to rise to the 100- and 200-day moving averages, which we are sitting on right now. That means rates holding steady at their current very low levels, between 5% and 5.25%. [Disclaimer: YOUR rate might be higher, and it might be lower. That depends on a lot of things, not just the current market. Get a pro to check for you.] [Incidentally, I am a pro. <grin>]
Analysis: As usual analysis is complicated. This morning’s data (ISM and pending home sales) were better than expected, which for months now has meant that mbs would retreat and stock would rise. But for the past two weeks, that has not been so. It’s not the Fed, this time – the Fed is buying mbs, of course, but buying them in ever-smaller quantities, and buying mostly the 5% and 5.5% coupons, meaning that they are providing no pressure for rates to go below 5%. That pressure, what of it exists, is coming from the broader market. And frankly, people, it makes no sense.
There’s no big move to the upside. There is no immediate prospect of rates dropping back into the 4.5% range. But still, there is this persistent pressure on mbs pricing that is holding things right where they are, instead of losing ground, as analysts expected (myself among them). I wrote last week that the only thing I could point to was back-bench sentiment that the economy really wasn’t bottoming out and that there were worse things to come, but as time goes on that argument is less and less persuasive to me. So I don’t know what it is. Ideas? What do you think?
Cj
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