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Mortgage Market Report 6/18/12: The Impact of Greek Elections

This mortgage market report will provide the data and insight from trading on Wall Street. Interest rates are derived from the yield on mortgage backed securities (bonds). When the pricing of mortgage backed securities (MBS) goes up you can expect lower interest rates. When MBS pricing goes down, expect higher pricing on interest rates for home mortgages. 

Once the Pro Bailout party secured victory in the Greek election, stocks across the world rallied and yields on treasuries pushed higher.  Trouble is, it didn’t last long.  Greece has three days to form a new coalition government (we’ll see) and their issues have not gone away.  Bottom line is that they have been given a “stay of execution” or a little breathing room to see if a plan can be put in place.  Meanwhile, the focus has quickly turned to Spain as 10 year yields in that country have risen above 7.0%.  Spanish debt is getting pounded and money is leaving their banks in bushel baskets.  President Obama will be meeting today with Chancellor Merkel of Germany.

Stateside, June  NAHB Housing Index gained 1 point to 29.  Sluggish yet better.  The week ahead is one of the more high profile weeks of the month.  Housing Starts, Building Permits, Existing Home Sales, Leading Economic Indicators, and a 2 day FOMC meeting (starting tomorrow) will highlight the week.  We expect the Fed to stand pat.  More on that Wednesday.   Technically, once stocks stopped going up, bonds stopped trading to higher yields.  The pattern is neutral to bullish in nature.  Currently, the 10 year note is up 1/32nd to yield 1.58% (off the best levels of 1.56%).  Mortgage backs are off the best levels of the day as well, now plus 2 to 3/32’s.  The constricting range should be with us until we get results of any change is the FOMC ‘s strategy (Wednesday at 1:15 pm cst).  Until then, we expect treasuries and mortgage pricing to stay “home on the range”, not moving much from current levels.

Scott Eggen

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