Mortgage Rates



Treasuries and mortgages started better this morning but not much; the stock markets in Europe weaker and pushing US indexes down. The elections in France and Greece over the weekend while not a shock, is causing additional fears over debts in all global markets. Greece is the centerfold today as coalition members meet to strike a new government. Greek stocks declined to the lowest level in two decades as political leaders met for a second day to try to form a government after an election that raised questions about the nation’s euro membership. The leader of the Syriza party who has vowed to rip up the terms of Greece’s international bailout, was handed the mandate to try and form a government today after the New Democracy failed to forge an agreement.

There are no scheduled economic reports today; at 1:00 Treasury will auction $32B of 3 yr notes. Likely the auction will meet with good demand with the global economic outlook declining on continual debt issues in Europe with 7 of the 17 euro currency members now officially in recession. Germany remains the only country in the EU that will avoid recession in some degree. German industrial output rose more than three times as much as economists forecast in March, adding to signs that its economy may have avoided recession. Production jumped 2.8% in March after declining 0.3% in February.

The DJIA opened -50, NASDAQ -20, S&P -7. The 10 yr note at 9:30 +3/32 at 1.85% -2 bp and MBS 30 yr prices +3/32 (.09 bp). Since 8:00 this morning there has been no change in US interest rates----sitting quietly as is the recent pattern. Opening up or down then spending the rest of the session with little movement in either direction.

Greek debt defaults appear more likely now than prior to the forced budget was passed in March. The country may be the first developed nation to default on its debt. Two months after forcing through the biggest-ever sovereign bond restructuring, Greece once again faces the prospect of becoming the first developed nation to default on its debt. The government taking office after this weekend’s election has 30 days to decide whether to make today’s interest payment on 20 billion yen ($250 million) of 4.5% notes maturing in 2016, or default. Then, by May 15, officials must decide if they’re going to repay the 436 million euros ($555 million) due on a floating-rate note issued a decade ago. At the moment in a fast moving situation, Greece appears to be headed to exiting the EU and will default. According news reports most Greeks don’t want to go back to the drachma but citizens also don’t want more cuts in spending and jobs.

Gold is crashing today to a four month low ($1612.00); the technicals on gold are increasingly more bearish. Crude continues to decline this morning as global economies slow ($97.00).

We still look for the bellwether 10 yr note to fall to 1.80% after the break of 1.90% last Friday. This is the third day below 1.90%, one more day and we have a new record for the number of days the 10 has traded below 1.90%. Europe back in the spotlight on the recent elections will continue to drive global; investors to US treasuries keeping interest rates from increasing. The Greek problems will keep money flowing into long term treasuries on increasing concerns Greece will default and increasing evidence global economies are slowing growth.