It’s already been a bumpy ride in the mortgage-backed bond market this morning. Watch today’s you tube video to understand why.

Current outlook:locking bias

Two separate reports released this morning showed that manufacturing activity in the Chinese & British Economies was stronger than expected.  Chinese & European stock markets are all rallying on the news.

US manufacturing also showed signs of recovery this morning.  The Institute of Supply Management released their monthly report on manufacturing this morning which showed that activity slowed in July but a slower pace than previous months.

Looking ahead this week, we will get a look at inflation numbers tomorrow when the Personal Consumption Expenditure (PCE) index is released.  On Thursday we’ll get next week’s treasury auction schedule.  Finally, on Friday the all-important jobs report is released.

For now, we’re going to recommend a locking position as much of the recent economic data is suggesting that the economy may be poised to move towards recovery.

Current Outlook: locking

Mortgage rates are unchanged from Friday.

This week’s schedule for US Treasury fixed-income securities auction:
The US Treasury is scheduled to sell a high volume of T-bills, notes, and bonds this week. On Monday, $6 billion in Treasury-inflation-protected 19.5-year notes will be auctioned; along with $32 billion in 13-week bills and $31 billion in 26-week bills. On Tuesday, $27 billion in 52-week bills will be auctioned, along with a heart-stopping $42 billion in two-year notes. On Wednesday, the Treasury will auction $39 billion in five-year notes. And on Thursday, $28 billion in seven-year notes will be auctioned. In total $205 billion in securities will be sold.

Here is a link to read the blog post on the new mortgage rules which could delay real estate closings.

Current Outlook: bias towards locking on short-term transactions with additional supply of treasury bills.

Stocks are rallying on a flurry of positive earnings data from Ford Motor Co., AT&T, and 3M.

However, stocks are also benefiting from National Association of Realtors report which showed that existing home sales rose for the 3rd straight month in June.  The same report also showed that inventories fell to 9.4 months vs. 9.8 the month before.  This is great news to share with homebuyers who are concerned about the housing market.

There is significant technical support for mortgage-backed bonds at present levels but we still think locking is the best play if you haven’t already.

Current Outlook: locking

Working against mortgage rates this morning is news out of the WSJ that CIT group has temporarily secured funding to keep them out of bankruptcy.  Later today the index of Leading Economic Indicators will be released.  Should this report be better than expected rates would likely move higher.

Later in the week we get Wells Fargo earnings on Wednesday & existing home sales on Thursday.  The momentum in the market suggests that locking is the best policy right now.

Other notable earnings reports due out this week:
*Dupont
*Catepillar
*UnitedHealth
*Apple
*Microsoft
*McDonald’s
*American Express

Current Outlook: bias towards locking

Analysts’ expectations were for 363,000 jobs lost last month. The report issued this morning showed that the economy lost over 100,000 more than this. The unemployment rate in the US now stands at 9.5%, the highest level since 1983.

Bad news for the economy is typically good news for mortgage rates and we’re seeing that this morning. For a more complete explanation on how the monthly jobs report impacts mortgage rates please refer to this link.

For now, technical trading patterns do not look favorable for interest rates. We are going to continue to float to see if rates can push lower but we need to be cautious because in today’s markets volatility can erase gains quickly.

Current Outlook: Cautiously floating

This morning’s S & P Case-Shiller report shows that although home prices declined in all of the 20 urban markets it covers, the annualized decline was less than previous reports (for an explanation as to why this particular report is thought to be more accurate than other real estate reports watch the first 3:00 minutes of this you tube video I made last year).  Many analysts think this may signal the “bottom of the market”.  As a result, mortgage-backed bonds have retreated this morning.

In addition, technical trading patterns are likely also playing a role as prices traded near resistance yesterday afternoon.

Current Outlook: Locking in the near term