March 14, 2012

ALERT: Rates Up .375% On Big Bond Selloff

March 14, 2012

ALERT: Rates Up .375% On Big Bond Selloff

My upward rate bias going into last week was dashed by concern about Greece and other Eurozone debt issues, and as I noted Monday, rates were flat to slightly down on that same mood.

But mortgage bonds (MBS) have sold sharply since yesterday, and the Fannie Mae 3.5% coupon (that’s a benchmark lenders use to price mortgage rates) is down 67 basis points today alone. This chart* of today from MortgageNewsDaily’s MBS Live service says it all:

This loss today is on top of a 34 basis point loss yesterday.

Yesterday’s loss took the Fannie 3.5 MBS coupon below its 50 day moving average, and today’s loss brings it below the 100 day moving average. It’s a rather steep drop to the 200-day average, so if we can’t cling to the 100-day, rates could rise more.

As for this week: rates are up about .375% since Monday. Main catalysts of bond selloff are:

-Better U.S. economic fundamentals.

-The Fed yesterday changed its outlook from ‘modest’ to ‘moderate’ economic growth

-The Fed’s most recent bank stress tests showed pretty good results

For now, markets are shaking off risk/worry about Eurozone debt. It could return, but it’s going to take some really bad non-US news for MBS to rally and bring rates back down in the next couple days. As for U.S. data, here’s what’s coming.

Stay tuned: Twitter | Stocktwits | Facebook
*MBS Live chart used with permission