Stocks down Bonds Improve

The recent downturn in the stock market has helped the bond market improve. In turn mortgage rates have improved also. The Dow has lost approximately 500 points, Mortgage Bonds have improved 100 bps. No new economic reports due until next week.

Mortgage Bonds Under Pressure

Mortgage Bonds are under selling pressure and are having a rough week overall after being pushed lower than the resistance level. Things may get worse before they get better; however,
Bonds have a strong floor of support, with the 200 day moving average, and it is unlikely that pricing will fall below that level

Housing Inventories Rise

Although existing home sales were in line with expectations; the inventory of unsold homes rose to a level of 9.6 months, which is a little concerning. Overall the report was not bad but Bonds are trading just below a tough ceiling of resistance and are considered overbought and this may cause Bond prices to retreat from the ceiling at the 200 day moving average.

Suprise From the Fed

In a surprise move, the Fed reduced the Discount Rate by a half percent this morning. The Discount Rate is the rate the Fed lends money to commercial banks, credit unions and other large lenders. It is different then the Fed Funds Rate, which is the rate that banks lend funds to other banks. The cut did provide some liquidity relief to the market but did not directly affect mortgage rates. This may help the financial markets a bit but the long term effects are uncertain

Good News, Bad NEws For Mortgage Bonds

Yesterday the Producer Price Index(PPI), which measures wholesale inflation, showed a mixed read on inflationary pressures. This was viewed negatively by the Bond market, the bad news, and the market was off. Today, the Consumer Price Index(CPI) had some good inflation news and the market has been improving. The CPI for July was reported at 0.1% and the more closely watched Core CPI at 0.2%. This was in line with expectations and suggests that Core Inflation may be stable to moderating.

Bonds Move Higher on News from Europe

Mortgage bonds are improving on new and unexpected news from Europe. French Bank BNP Paribas, announced it has temporarily halted withdrawals in three of its mutual funds that have exposure to US subprime credit. The news caused mortgage bonds to trade higher, as well as, Stocks lower.
BNP is the second largest bank in Europe.

Home Loan Market Nervous

Bonds are trading just slightly lower as stocks attempt to rebound higher following Friday's big sell off. The home loan mortgage market is watching the markets with baited breathe. With no high-impact economic reports scheduled for release today; the direction of bonds, therefore home loan rates, will likely rely on stocks and other financial news. Remember, as Bond prices move higher, mortgage interest rates generally move lower. This applies to the conforming market and not the Alt-A and Subprime markets, that have faced liquidity problems and withdrawal from the market by many of the major companies.