The trend trajectory of trading activity in the mortgage market is tilted slightly in favor of lower rates this morning - thanks in large part to a drop in existing home sales and another weak initial jobless claims report. Those two reports created just enough doubt about the near-term bottoming of the recession to create some selling pressure in the stock market. The government said claims for first-time jobless benefits climbed 27,000 during the week ended April 18th while existing home sales for March posted a sharper than expected 3.0% decline.
The Fed will be banging around in the credit market through about 2:00 p.m. ET today looking to buy longer-dated Treasury securities as part of the central bank's $300 billion program to support steady to lower rates for consumers and businesses. The results of this program on the trend trajectory of mortgage interest rates can best be described as "mixed" in purely academic terms - but no matter how you slice and dice it - in our business a steady mortgage interest rate environment trumps rising rates every time.
As mentioned in this space yesterday I think we can expect mortgage interest rates to remain relatively steady at, or near current levels until either data, or events, or both become significant enough to serve as a catalyst to spur an increase in trading activity in the mortgage market.
Tomorrow's durable goods orders and new home sales figures for March won't likely do the "trick" in terms of ramping up trading levels for mortgage-backed securities. So it looks like we will once again be temporarily joined-at-the-hip with the stock markets. Higher stock prices will tend to drag mortgage interest rates higher while lower stocks prices will probably support steady to perhaps fractionally lower rates.
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