A stronger than expected Employment report on March 6 pushed mortgage rates up to the highest level of 2015. Since then, however, nearly all of the news, both globally and in the US, has been favorable for mortgage rates. In Europe, the European Central Bank (ECB) began its sovereign bond purchase program on March 9. The added demand from the ECB has helped push bond yields lower around the world. In addition, Greek and eurozone officials have made little progress in agreeing to terms for the Greek aid package. This caused investors to shift to safer assets, including US mortgage-backed securities. In the US, the major economic data released since the Employment report has been weaker than expected. Retail Sales, Industrial Production, and Housing Starts all have fallen well short of the consensus. Since slower growth reduces expectations for future inflation, this economic data has been good for mortgage rates. Finally, the largest improvement in mortgage rates took place on Wednesday after the release of the Fed statement. Fed officials downgraded their outlook for the economy and inflation, causing investors to push back their expectations for the timing of federal funds rate hikes.
MBS prices are up nicely this morning, up 9/32nds. No economic data was released this morning. The Dow is also up. It is above 11,000 for the first time in 18 months. Last week was a great week for the mortgage market. MBS prices improved about 24/32nds during the week. Most of the improvement followed a very strong 10 yr Treasury auction. Strong demand and foreign participation fueled a rally in Treasury prices, which spilled over to MBS prices. Also kind to MBS prices during the week were the minutes from the 3/16 Fed meeting. The minutes showed that the Fed was nearly unanimous in their belief that Fed funds rates need to stay very low for an extended time and that inflation was not a concern. Next week will be full of significant economic announcements. On Wednesday both CPI and Retail Sales for March will be released and on Thursday Industrial Production will be released. Glen Corso, Executive Director of the Community Mortgage Banking Project, joined the show to discuss further the need to voice concerns about the 5% risk retention provisions in the current Financial Reform bill before the Senate. Glen described that passage of the bill with [...]