The stock market is up this morning, coming at the expense of mortgage backed securities. Currently, the mortgage market is slightly down from yesterday’s close at -9 bps. Today is an action packed day with several important economic reports, and most importantly the release of the Fed’s Minutes at 2:15 PM EST.
Yesterday, Existing Home Sales were reported up by 2.7%, which was less than expectations but at least continues the positive momentum from April. Interestingly, New Home Sales came in today worse than expectations with a drop of 0.6%. Though slightly conflicting, both reports indicate that the housing market’s recovery will be slow and gradual.
Also reported today was a much better than expected Durable Goods Orders. Analysts had predicted for there to be a slight decline of -0.5%, but the numbers actually came in at an increase of 1.10%. This is the largest surge we have seen since September of 2004. It is also the second straight month of gains. Many are hoping that this is one more signal that we are headed in the right direction for a potential recovery from our current recession.
Mortgage Backed Securities are trading in a very tight channel. Currently, they are sitting on a very important floor of support. Traders are awaiting the much anticipated FOMC minutes not so much to see if they take any actions, but rather to the actual wording in the report. There is speculation that they will announce their position on whether the programs they enacted to help drive mortgage rates and consumer financing will be slowed down or terminated. As always, this report has the potential to really move markets, so we will be paying close attention to the market upon its release. For now we are staying in a nuetral stance, but wairy of the potential for volatililty as the day progresses. We will keep you informed of any major developments.
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