MortgageJaw.com

Just like in an earlier post Mortgage Rates Will Rise, looks like demand is slowing down at least at the 5-year auction. The big one will be watching for the 10-year Treasury auction since they are  the ones that are tied into mortgage rates. It will be very interesting over the next few weeks to see how the market will react about mortgage rates. Some are saying mortgage rates will stay the same and the market has already set the price. Others are saying that mortgage rates will be jumping up by maybe one whole percentage point. Only time will tell which way the mortgage rates will go, and we will not know for sure until we are fullying into April and after the 10-year Treasury note aution takes place then. Here is an article from CNBC, Hope this helps

http://www.cnbc.com/id/36018558

Weak 5-Year Auction Sends Treasury Yields Up Sharply

Published: Wednesday, 24 Mar 2010 | 1:16 PM ET

By: CNBC.com with wires

Investors soured on the latest round of debt auctions, greeting a sale of five-year notes Wednesday with low demand that sent Treasury yields well higher.

The $42 billion sale fetched a yield of 2.605 percent, full 10 basis points, or 0.10 percentage points, higher than where the five-year was trading when the results were released at 1 pm. A higher yield reflects lower demand as the government must provide investors with more incentive to buy the product.

Demand also was below average, as show in the 2.55 bid-to-cover ratio, a figure that measures the amount bid for each dollar auctioned.

The indirect bid, which reflects foreign demand through primary dealers, was 40 percent.

Prices on Treasuries added to a sharp earlier drop that sent benchmark 10-year yields to their highest in a month, on strong economic data and worries over appetite for the government’s enormous debt issuance.

New orders for long-lasting U.S. manufactured products, or durable goods, rose for the third straight month in February, and inventories posted their biggest gain since December 2008, government data showed.

The news comes as analysts are already preparing for a possible positive turn in the U.S. job market in next month’s payrolls report, while the Federal Reserve has promised to keep interest rates near zero for the foreseeable future.

An improving economy coupled with low rates could be a toxic combination for bonds, which perform well during times of economic weakness but see their value eroded by inflation.

“The Fed seems very reluctant to raise rates, and in the meantime we’re getting stronger data. This durables report was pretty good,” said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.

“There is the expectation of a strong payrolls number. If you couple that with a Fed that is probably going to still be on hold for a long time, it is not terrific for the long end of the Treasury market.”

The benchmark 10-year note was down more than a full point in price, yielding 3.82 percent versus Tuesday’s close of 3.69 percent.

Reflecting inflation fears, the 30-year bond fell nearly 2 full points, down 1-28/32 in price to yield 4.73 percent against 4.61 percent on Tuesday.

Helping to temper some of the worst of the bond market sell-off, data showed sales of newly built U.S. single-family homes fell for a fourth straight month to a record low in February, heightening fears of renewed weakness in the housing market.

The Commerce Department said sales fell 2.2 percent to a 308,000 unit annual rate from an upwardly revised 315,000 units in January.

Existing five-year notes were down 13/32, yielding 2.50 percent versus Tuesday’s close of 2.43 percent.

During trade Wednesday, the 5-year note’s yield rose as far as 2.56 percent, its highest since Jan. 14.

Two-year yields rose as far as 1.09 percent, their highest since early January.