Up and down, up and down, that’s been the story of mortgage rates for the past few weeks. While rates are distinctly higher than they were three or four weeks ago, it has not been a smooth ascent. Everyday we are seeing mortgage backed securities trade in a fairly wide range, leading to wild intraday swings. Yesterday was no exception, MBS started the day terribly, and pared their losses by the close of trading. Today MBS have started the day distinctly better, although it is really anyone’s guess as to whether the gains will hold up throughout the day.
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Following the trend for the week, there is almost no economic data of note today, and outside of Jobless Claims on Thursday, there’s not much scheduled for the rest of the week. Given the events of the week, it’s pretty difficult to make any sort of intelligent guess as to where our markets will go over the next couple of days. There is an ECB meeting scheduled for tomorrow which could have some impact, but I doubt that it will ultimately be all that significant.
As I noted yesterday, mortgage rates have had a tendency to tick up in the winter and spring months for the past two years before falling back to lower levels, and there are conditions present that could cause similar action this year. President Obama asked yesterday for a delay of the sequestration deadline (currently March 1) so that Congress could work out a budget compromise. The Republicans are initially balking at the proposal. If the sequestration goes through, the result will be a 7.3% cut to defense spending, a 5.1% cut to non-defense spending, and a 2% cut to medicare. This will take a BIG chunk out of GDP this year. Speaker of the House John Boehner commented:
“President Obama first proposed the sequester and insisted it become law. Republicans have twice voted to replace these arbitrary cuts with common-sense cuts and reforms that protect our national defense. We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes.”
The Republicans want to replace some of the defense cuts with cuts to social programs, while Democrats would like to offset some of the cuts with tax increases. I’ll be pretty surprised if the situation gets resolved prior to the last minute, and the resulting uncertainty will probably keep rates from rising too much. After sequestration is dealt with, we’ll have to deal with the debt ceiling (again) in May, and the impact on rates will likely be similar.
Anyway, we’ll see if this rally holds up. If it does, mortgage pricing will be slightly better today.
ABC: Monopoly Gamers Choose the Cat to Replace the Iron. In keeping with the spirit of the game, they should have replaced the iron with a cable box.
Tom Junod: All the King’s Drones. I don’t think there is a better working feature writer than Tom Junod.
Mobute Sese Seko: We the Targets: Obama’s Combat Lawyers and a Fairy Tale of Law.
Glenn Greenwald: Chilling Legal Memo From Obama DOJ Justifies Assassination of US Citizens.
Washington Post: Brennan Nomination Exposes Criticism on Targeted Killings and Secret Saudi Base.
Reuters: RBS Fined $615 Million For Rate Rigging. This is a gots-to-go situation.
Ritholtz: Why the Ratings Agencies Deserve the Death Penalty.
Washington Post: No, There Probably Isn’t a Bond Bubble.
Yves Smith: Judge Rakoff Delivers Big Blow to Bank of America and JP Morgan in Flagstar Mortgage Putback Ruling.
McClatchy: Housing’s Growing Recovery Still a Long Way From Normal.
Craig Calcaterra: Previewing Today’s Ryan Braun Idiocy.
AP: Postal Service to Cut Saturday Mail to Trim Costs. Budget cuts uber alles!
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