Market commentary

Mortgage applications rose 4.9% last week on upticks in both refinance and purchase applications, as the four-week moving average for refinance applications has doubled in the past five months as mortgage rates have fallen. However, applications remain well below recent peaks.

Durable goods orders fell 0.8%, however, ex transportation orders rose 1.7%, much better than the expected 0.4% increase. The transportation component is volatile as it includes aircraft orders which fluctuate dramatically month over month.

The bond market will be hit with a double dose of supply today as the Fed will be selling $8 to $9 billion of maturities between March `13 and October `14 as part of “operation twist, and the U.S. Treasury will be auctioning $32 billion in 5 year notes.

Treasuries caught a flight to safety bid Tuesday when EU Finance Ministers canceled their Wednesday meeting which was supposed to be the opening discussions of the newest EU summit. There is a large divide in Europe regarding how the bailout should be structured as well as how much of a haircut Greek bondholders should take. The current talk is of haircuts ranging from 40% (favored by the French) to 60% (favored by the Germans).

This morning U.S. Treasuries are trading lower in price/higher in yield and mortgage prices are approximately .25% worse than Tuesday’s mid-day improvement.