Mortgage Rates moved higher yesterday following an exodus from bonds back to stocks. Much better than expected Consumer Confidence data sparked a rally in stock markets, unfortunately this came at the expense of fixed income securities like treasuries and mortgage backed securities. Most lenders repriced for the worse, consequently increasing consumer borrowing costs by .25 to .375 in discount points

Already out this morning is the Mortgage Bankers' Weekly Application index, this survey tracks the number of mortgage applications taken over the last week.   The report showed total applications, for the week ending April 24th, declined 18.1% from the prior week.  This can be attributed to higher borrowing costs and increased anxiety in the labor market.  

We also received the Advanced Gross Domestic Product (GDP) report for the first quarter of 2009.  This report is a preliminary measure of the total economic activity for every sector of our economy.   The Commerce Department estimates first quarter GDP contracted by 6.3%,  much more than the expected -5.0% contraction.   

On a positive note, consumer spending showed an increase of 2.2% following last quarter's drop of 4.3%.  After the release, dow futures came off their highs and MBS held steady.  Normally, this report would have resulted in a flight to safety where investors sold stocks and moved money to the safety of fixed income.  However, the positive note showing an increase in consumer spending helped negate the bad news.  Remember, consumer confidence yesterday was much higher and that report is more forward looking while the advanced GDP looks at growth last quarter while investors are more concerned about what is ahead.

Later today, the Treasury Department will hold another auction, this time it is $26 billion of 7 year treasury notes.  Like all Treasury auctions, the added supply of debt for sale will place pressure on treasury yields to increase which also places pressure on mortgage rates to increase as well.  Currently, the benchmark 10 year treasury note is trading north of 3.00 when just a couple weeks ago it was under 2.80.  As you can see, to attract new buyers, the yields must increase.  

Lastly, we will be receiving the Fed statement following the conclusion of their 2 day Federal Open Market Committee meeting. We do not expect a change to the already historic low Fed fund rates rate, but perhaps we may hear an update regarding the Fed's quantitative easing programs. Perhaps more funding for Treasury debt purchases or maybe a 50 yr bond issuance?  The statement will be released at 2:15pm eastern time.  Once the statement is released, click over to the MBS Commentary blog for complete analysis. 

So far this morning, MBS are holding steady, slightly above yesterday's closing levels.   Early reports from fellow mortgage professionals indicate one lender continues to offer 4.5% for a 30 year conventional rate mortgage.  To qualify, you must have a FICO credit score 740 or higher, loan to value of 80% or less, and be willing to pay all closing costs including 1 point loan origination/discount/broker fee.