Stocks have opened lower on weak economic and earnings data, which should help mortgage rates.  The Commerce Department reported this morning that 2^nd quarter GDP growth was more sluggish than analysts had expected.  Furthermore, they went back revised previous GDP growth figures lower for the past 3 years.

Also hitting stocks and helping mortgage rates was weaker than expected earnings reports from Chevron and Merck.

Mortgage-backed bonds (MBS’s) are rallying this morning pushing prices into an “overbought” level.  We will shift our outlook to floating for now.  But, next week brings a busy economic calendar so it may not last long.

Current outlook: floating

Stocks are trading higher in early morning trading, albeit on light volume.  Equities received a boost from better-than-expected earnings from Exxon Mobil, encouraging news from Disney, and better than expected jobless claims figures.

On the flip side mortgage-backed bonds (MBS’s) haves started the day weaker.  The main focus for interest rate watchers today is the US Treasury’s auction of $29 billion in 7-year notes.  Yesterday’s 5-year auction went very well so we don’t expect any major problems.

From a technical perspective MBS’s have traded within a tight trading range for 20 of the past 22 trading days.  Anytime we see this for a prolonged period we begin to get nervous about a breakout.  In my opinion rates have only one direction to go at this point.

Current outlook: locking