Brookline Condominiums

Overnight selling in U.S. Treasuries after Thursday's big rally pushed prices down and yields, which move in the opposite direction, up, as the markets opened on Friday. This flurry of profit-taking by foreign investors kept prices down, but Treasuries did not give back all of Thursday's gains. Treasuries were also hurt by a big sale in the German bond market that pushed yields up, making those bonds attractive investments. Domestic economic news was supportive of Treasuries, but the indicators were not strong enough to turn bonds around. Therefore, mortgage rates, which are based on yields, held close to Thursday's levels.

Industrial production in February rose 0.7 percent, which was a tad lower than the predicted 0.8 percent increase, but much better than the 2 percent decline in January. Part of the increase was due to the colder weather that boosted production in utility plants. Capacity utilization, the percentage of mines, factories and utilities in full operation, eked up to 81.2 from 80.9 - slightly below the forecast for an increase to 81.4.

The University of Michigan's preliminary consumer sentiment report for March came in at 86.7, duplicating the final reading in February. Analysts expected it to tick up to 88.5 percent.

Equities wind up a great week

The three major stock indexes closed in positive territory for the day, for the week, and they are off to a positive start in 2006. At Friday's close the Dow Jones industrials were up 5 percent on the year, the Nasdaq composite had gained 4.3 percent and the Standard & Poor's 500 index had added 4.6 percent.

Trading was volatile because it was a quadruple witching day. The markets were boosted by the constant buzz that the Fed would halt its rate hikes after the March 28 meeting. And part of the optimism on the street this week stemmed from the perfect mix of economic growth and low inflation - a blend that might not warrant further Fed action. The price of oil also edged back down, falling 81 cents to $62.70 a barrel.

As of 4 p.m. EST:

The Dow Jones industrial index closed up 26.41 points (+0.23 percent) to 11,279.65; the Nasdaq composite gained 6.92 points (+0.30 percent) to 2,306.48, and the Standard & Poor's 500 index gained 1.92points (+0.15 percent) to 1,307.25.

The 30-year Treasury bond closed down 12/32 in price with the yield rising to 4.71 percent, from 4.69 percent on Thursday.

The 10-year Treasury note closed down 7/32 in price with the yield rising to 4.67 percent, from 4.64 percent on Thursday.

The five-year Treasury note closed down 4/32 in price with the yield rising to 4.61 percent, from 4.59 percent on Thursday.

The two-year Treasury note closed down 2/32 in price with the yield rising to 4.64 percent, from 4.62 percent on Thursday.

At 4 p.m. EST, average mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year conventional fixed-rate mortgage at 6.112 percent, up from 6.11 percent on Thursday.

The 15-year conventional fixed-rate mortgage at 5.717 percent, down from 5.735 percent on Thursday.

Coming up:

Economic news for next week is sparse, but what there is could impact the markets. New and existing home sales and durable goods orders for February will shed light on the housing and manufacturing sectors, while the producer price index will look for inflation at the wholesale level.

On Monday, however, only the index of leading economic indicators for February is on tap, and its impact is questionable. This report looks at the economy three to six months down the road, and it is expected to fall 0.3 percent, which would be a big decline from the 1.1-percent increase shown in January.

Because Treasury yields rose slightly on Friday, it is unlikely that mortgage rates will edge down any further. They should, however, hold near present levels over the weekend and into Monday.

Carolyn Siegel

Carolyn@interest.com

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