Wednesday, February 25, 2009

The mortgage market is sagging under the combined weight of this afternoon's Treasury auction of $32 billion of 5-year notes, Fed Chairman Bernanke's continued aversion to suggesting the Fed is any closer to expanding its securities-purchase operations into government debt and investors disappointment that President Obama's address to Congress did not contain more in terms of concrete details regarding his administration's dual objective of stimulating the economy and slashing the federal deficit.

Mortgage investors completely shrugged off this morning's Existing Home Sales report that showed a much larger-than-expected 5.3% decline in the pace of sales last month. Under more "normal" market conditions a decline in the pace of existing home sales would tend to be supportive of steady to slightly lower mortgage interest rates. The current period is obviously anything but normal - and this bit of macro-economic data drew nothing more than a passing glance from most traders.

Continuing with the theme of unexpected weakness in the housing sector the Mortgage Bankers of American reported this morning that their seasonally adjusted index of mortgage applications, a value which includes both purchase and refinance requests, dropped by 15.1% during the week ended February 21st after posting an outsized 45.7% gain the previous week. Purchase applications fell 2.6% during the period while refinance applications sank 19.1%.