AM Mortgage and Real Estate Blog

Treasuries and MBSs started weaker this morning prior to 8:15 when the Feb ADP private jobs hit. The weaker report stopped the bleeding somewhat but the stock indexes contend to point to a stronger 9:30 open. The reaction to the soft jobs growth was blamed on the very severe weather, would-be employers uneasy about hiring. 

A one-off event in the Ukraine? Based on how US and global markets performed yesterday, markets are not concerned about the situation. It is a political issue but not one that will cause investors too much concern as long as Putin doesn’t renew military aggression. We expected a short-lived reaction in the financial markets but were surprised about how fast markets pushed into the background. Putin has said a few times in the last 24 hours he sees no reason for additional military action and has ended the war games exercises that had been going on for a week. Putin also saying he has no interest in taking over Crimea.  Putin though also didn’t back down and said he would do what was necessary to protect Russians in the Ukraine. The situation isn’t over and will likely be a heated issue for months to come within the G-7, the IMF, the EU and the US and maybe even in the UN, although Russia has no fear of the UN since it can veto anything coming out of the security council.

Interest rates when viewed  a wider basis have been relatively flat for three weeks after taking away the 24 hour reaction to the Russia/Ukraine developments. The 10 yr note has been tied between 2.77% and 2.70% for most of the time since the beginning of Feb. MBS prices swinging in a 100 basis point price range and 6 bps in rates. Most investors and economists still holding to the view that the underlying economy is a better than what most of the weaker data has suggested. Recent reports have been mixed; consumer sentiment better, new home sales strong, the ISM manufacturing index better than estimates but the employment sector still weak. It is difficult to change investors outlook that the economy is better than any of the weak data reported that won’t change until we see data for March which won’t be available for another few weeks. Whether the economy is growing or stalling can be debated but presently the economic outlook is decidedly bullish.

Employment on Friday; expected markets to remain in narrow ranges until then. Nothing is expected from the Ukraine; technically still holding very minor positive readings on the 10 and MBSs. Best to keep locked through the employment report.