Morning Report - The Bernank speaks at 10:00 EST

Vital Statistics:

	Last	Change	Percent
S&P Futures	1669.5	3.9	0.23%
Eurostoxx Index	2817.3	-4.3	-0.15%
Oil (WTI)	95.92	-0.3	-0.27%
LIBOR	0.274	0.000	-0.13%
US Dollar Index (DXY)	83.91	0.044	0.05%
10 Year Govt Bond Yield	1.93%	0.01%
Current Coupon Ginnie Mae TBA	104.2	0.1
Current Coupon Fannie Mae TBA	102.8	0.0
RPX Composite Real Estate Index	199	0.2
BankRate 30 Year Fixed Rate Mortgage	3.65

Markets are up again on no real news. Bonds and MBS are more or less flat

Mortgage Applications fell 10% last week as the recent rise in interest rates has taken its toll. The refi index was down 12% while the purchase index was down 3%. It appears that the 10 year has found a level here, at least for the short term.

McMansion builder Toll Brothers (TOL) reported better than expected earnings this morning. Revenues increased 38%.  Contracts increased 57%. ASPs were up huge - 16%. Backlog was up 69%. Toll's results more or less mirror what the other homebuilders have reported, although the growth was larger in the builders that focus on starter homes and first move-up buyers. 

We had a lot of Fed-speak over the past couple of days. New York Fed President William Dudley said that it will take 3 to 4 months to make a determination over whether the economy is strong enough to stand an end to QE. St. Louis Fed Head James Bullard also said that purchases should continue. The Fed is concerned about the sequester's effect on the economy, which will mainly be felt over the summer. Finally, the Bernank is scheduled to testify before Congress at 10:00. The minutes of the April 30 meeting will also be released today. 

The New York Fed released its mortgage backed securities purchase advice recently. In spite of the hike in interest rates, the MBS purchases stayed the same:  3 million MBS a day, of which the lion's share is conforming (something like 80%). You would think the Fed would be more aggressive when rates increase and back off when they fall, but that isn't what they are doing. 

It looks like Mel Watt faces an uphill climb to confirmation. The choice is seen as 100% political, while most Republicans think we need a technocrat who understands finance. The fear is that the partisan wrangling and posturing over Watt will poison the well so much that any sort of bipartisan housing bill will be more or less impossible. Principal mods aside, that would probably mean the end of HARP 3.0 which would extend HARP eligibility to late 2009 and 2010 vintages.