Category → Weekly Review
Tuesday Trivia
Treasuries and mortgages opened a little better this morning taking the 10 yr treasury down to 3.40% its near term resistance; the stock market indexes in pre-market trade were showing a lower opening. Mortgage prices up slightly at 9:00 about where they were at 9:30 yesterday; but by 9:15 mortgage prices were declining along with the 10 yr which once again failed at 3.40%. 9:15 30 yr mtg price -3/32 (.09 bp), the 10 -4.32 3.44% +1 bp. At 9:30 the DJIA opened -25, the 10 yr -5/32 and mortgage prices -5/32 (.15 bp).
Last night in a speech in Atlanta (Stone Mountain) Bernanke said that the recent rise in commodity prices will likely be “transitory” and prices will fall back. He went on to say though that the Fed must be watched “extremely closely,” encouraging bets that interest rates may be raised sooner than previously expected. The remark that commodity prices and energy prices will back down is somewhat surprising although he couched it with the famous comment that the Fed will watch and react accordingly if inflation creeps into end prices. Bernanke’s comments echoed his March 1 statement to lawmakers that Fed officials were “prepared to respond as necessary” to inflationary pressures. The Federal Open Market Committee, said following its March 15 meeting that it “will pay close attention” to the evolution of inflation and inflation expectations.
Bernanke’s comments in his speech shows the increasing division within the Fed about how long to continue keeping the FF rate at zero to +0.25% as it has since 2008; for the last couple of weeks one after another Fed officials have increasingly warned the US should end its tightening and begin to increase rates soon. Bernanke saying present inflation pressures in commodities and energy prices being “transitory” is his apparent response to the increasing concerns within the Fed. Bernanke remains convinced the economic recovery is not yet on solid ground, remarks like he made last night may be his way of jaw-boning the bond market from sending prices lower and yields higher. We don’t rally have to say it but, if rates increase even a little the depressed housing sector will be further constrained. Will the markets buy Bernanke’s “transitory” view about inflation? Back in the day he also said the sub prime mortgage markets were likely to be contained and managed. Is the US immune to inflation? Brazil, Russia, China, India, likely the European Union on Thursday and emerging market countries all increasing rates. Answer: No.
China increased its interest rates last night by 0.25% for the fourth time since the global financial crisis to limit the risk of asset price bubbles in the world’s fastest-growing major economy. The one-year lending rate will increase to 6.31% from 6.06% effective tomorrow. The one-year deposit rate will rise to 3.25% from 3.0%. On Thursday the ECB is widely expected to increase its base rate to head off inflation in the region which is now at +2.6% and higher than its 2.0% target rate on inflation.
Crude oil is lower today after reaching 30 month highs; with China increasing interest rates and oil supplies seen as increasing oil is a little lower today. That said, it is highly unlikely the demand for oil will decline regardless of increasing rates and China trying to slow its economy. Oil supplies won’t likely increase enough to offset the coming summer driving season and the Mideast oil world is far from stable.
The only economic report today; at 10:00 the March ISM services sector index expected at 59.5 frm 59.7. As released the index fell to 57.3; the new orders component 64.1 frm 64.4, prices pd at 72.1 frm 73.3 and employment at 53.7 frm 55.6. The repot not as good as was expected, the reaction is support the bond market and adding additional selling in equity indexes.
Two Fedsters out today: Kocherlakota of Minneapolis and Plosser of Philadelphia; (12;45 for Kocherlakota and 1:30 for Plosser)
Later today at 2:00 the minutes from the March 15th FOMC meeting will be released. Possibly a little more detail on the debate over QE and inflation expectations.
Once again the bellwether 10 yr, driver for mortgage rates, failed on its attempt to move below 3.40% this morning. The 10 has recently found a home trading between 3.40% and 3.50%, not much of a range but keeping mortgage rates stable. We remain bearish for the direction of interest rates on the wider perspective. For all of Bernanke’s confidence inflation won’t get a toehold, the Fed will end QE and the FF rate will likely be increased before the end of the 3rd Q.
Monday and More ………
No market moving news over the weekend, the 10 yr and mortgages opened better this morning after reversing and rallying a little on Friday. There are no economic releases today and this week is thin on measurements of the economy. The stock market is opening slightly better this morning but a little tedious. Later today (7:15 pm) Ben Bernanke will be speaking to the Atlanta Federal Reserve Bank Financial Markets Conference in Stone Mountain, Georgia.
Goldman Sachs out revising its outlook for Q1 from +3.5% to +2.5% and commented there are risks to the economic outlook. Goldman believes, as most now are coming around to believing, that the Fed will increase interest rates sooner than what had been expected. Most until recently were thinking the Fed would not increase rates until 2012 or later. Rates going higher around the globe, the US will be forced by inflation concerns and a stronger economic outlook to make the move before the end of this year. The Fed will likely increase rates in the 3rd Q unless there is a huge swing in the economic outlook.
Corporate profits have been the driver for the equity markets and the strong gains on the key indexes, going forward however it will be consumers that will set the tone. With crude oil making new highs almost daily these days and food prices likely to jump substantially over the next few months, will consumers have to retrench? Gasoline prices now over $4.00 in most of the country and escalating commodity prices it is reasonable to believe consumers will cut discretionary spending somewhat. Employment is improving yet still quite weak; the real unemployment rate when discouraged workers and those now with temp jobs are added back the true unemployment rate is at 15%.
Thursday the ECB will meet and will likely increase its base rate. The ECB has telegraphed its intentions to do so for the past two weeks and not likely to change. Not sure yet about the impact on US rates but with most major central banks increasing rates the likelihood that US rates will work lower is extremely high. German 10-year government bonds fell for an eighth day, the longest run of declines since June 2006, as speculation mounted the European Central Bank will increase interest rates
At 9:30 the DJIA opened +14, the 10 yr +5/32 at 3.43% -2 bp and mortgage prices +5/32 (.15 bp).
This Week’s Economic Calendar:
Monday;
7:15 pm Bernanke speaks
Tuesday;
10:00 am Mar ISM Services Sector index (59.5 frm 59.7)
2:00 pm Fed minutes from Mar 15th FOMC meeting
Wednesday;
7:00 am weekly MBA mortgage applications
Thursday;
8:30 am weekly jobless claims (-2K to 386K; con’t claims 3.70 mil frm 3.714 mil)
3:00 pm Feb consumer credit (+$2.5B, Jan +$5.0B)
Friday;
10:00 am Feb wholesale inventories (+1.0%)
The near term outlook for the rate markets will likely be choppy with not much decline but not much increase either. The outlook however is for rates to edge higher. The 10 yr has successfully held 3.50% twice last week, now a key near term support. As long as it holds mortgage rates will not creep higher but won’t decline either. The 10 has resistance at 3.40%, unless there a trend reversal in equities 3.40% will probably hold. The longer outlook for rates is for them to move up as long as the economy remains firm as it is presently.
The Week Ahead
This Week unlike last week there are events and data points everyday for the bond and mortgage markets to consider. This is employment week with the March employment data on Friday, early expectations are for non-farm jobs to increase 185K with non-farm private jobs up 203K, the unemployment rate is expected unchanged at 8.9%. In the meantime Feb personal income and spending out on Monday, Mar consumer confidence on Tuesday, Thursday has weekly jobless claims, the Chicago purchasing mgrs index, Friday the ISM national manufacturing index.
Recent better than expected earnings reports and relaxing of concerns from Japan has boosted equity markets and interest rate markets are taking on a more negative technical pattern. We remain bearish for the outlook on rates, however we are not looking for rates to move substantially higher. The prime and only reason the bond and mortgage markets rallied recently was over safety moves on the Japanese nuclear problems.
Not only economic data this week, but Treasury borrowing. Tuesday $35B of 2 yr notes, Wednesday $35B of 5 yr notes and Thursday $29B of 7 yr notes. Recent auctions still seeing OK demand but not quite as strong as auctions last year. Debt problems in Europe (Portugal, Spain, Greece and Ireland get coverage in the media but are not having any noticeable impact on US bond markets.
Monday Minutia – I’M Back!
I have been awol for quite awhile but here is an update on the market’s and what to expect today and this week!
Treasuries and mortgages opened a little better this morning with the key stock indexes lower. The world still focused on Japan’s earthquakes and Tsunami. There are now three nuke plants in jeopardy of a meltdown and the Tokyo stock market was hammered hard last night, the largest loss in 2 yrs, down 6.0%. Crude oil continues its decline on continued belief demand will decline in Japan. There are no economic reports scheduled today, the calendar has data points mid-week however. This week is marked by tomorrow’s FOMC meeting with the short policy statement out at 2:15 Tuesday afternoon.
This Week’s Economic calendar:
Tuesday;
8:30 am Empire State manufacturing index (17.0 frm 15.43 in Feb)
Feb import and export prices (N/A)
10:00 am NAHB housing market index (17 frm 16)
2:15 pm FOMC policy statement
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Feb housing starts and permits (starts -4.4%, permits +2.0%)
Feb PPI (+0.6%; core +0.2%)
Q4 current account balance (-$110.0B)
Thursday;
8:30 am weekly jobless claims -10K to 387K; con’t claims 3.750 mil frm 3.771 mil)
Feb CPI (+0.4%; core +0.1%)
9:15 am Feb industrial production (+0.6%)
Feb capacity utilization (76.5% frm 76.1%)
10:00 am Feb leading economic indicators (+0.9%)
Mar Philadelphia Fed business index (28.0 frm 35.9 in Feb)
The DJIA opened down 65 at 9:30, the 10 yr note +10/32 at 3.36% -3 bp and holding below 3.40% since last Thursday. Technically the l0 yr note and mortgage markets are breaking some resistance levels.
Japan crude lower on the belief demand in Japan will decline, emerging market equity markets rallying on re-building boom that will be huge in Japan. Most all attention now is on Japan’s problems but the Mideast is still out there with continued protests in a number of states in the region while Qaddafi is waging war with protesters in the oil region and ports. In Europe a week ago comments from the ECB that it would be considering increasing interest rates next month to head off increasing inflation; now that looks less likely, England didn’t increase rates and there are voices calling for the ECB to hold rates low to keep recovery moving forward and less concern over inflation increasing. ‘s woes are filtering around the world;
The rest of the day today for the bond and mortgage markets will be dependent on how equity markets trade; so far the key indexes are weaker but not much. Tomorrow’s FOMC meeting should keep investors and traders from major moves. The Fed will keep interest rates at their present levels, talk about concerns over inflation, still worry over the strength of the US recovery with slow improvement in employment and no signs of recovery in the housing sector.
Monday Minutia – 11/29
Well if you are reading this then you survived Thanksgiving and the following day known affectionately as “Black Friday”! Someone will need to eductae me as to the merits of eating, drinking, and being meery at Thanksgiving and then carting your ass down to the local shopping center to stand in line and get into your favotie store at midnight for some bargains?!? I heard a number of stories in regards to experiences and it is a wonder that there are not stories of riots due to some of the shopping tactics employed by the veteran Black Friday shoppers!
After hitting the lows of the year on rates about 3 weeks ago, the Federal Reserve launched the vaunted QE II (Quantitative Easing II) and the world and domestic markets met the launch with anthing but enthusiasm! Rates spiked dramatically up (.375% to .625% in rate) and have since seemed to stabilize but have not as yet begun any substantive settling down. What is influencing the market right now?
- High unemployment and the weak housing market continues to hold back economic growth.
- Uncertainty on the housing market brought on by the foreclosure mess and the “robo signing” scandal continues to hold down any chance at a housing recovery.
- Unemployment is still high at 9.6%. When factoring in discouraged workers and those that have “settled” for part time work we are looking at a number more like 17.1% nationwide!
- Inflation is not a factor at a 1.1% year over year rate.
- QE II is designed to create inflation so those of us that are operating on less income can pay more for the ggods and services we need to survive!?!? (you figure that one out)
On the economic calendar for this week is:
- 9:00 am Case/Shiller 20 city home price index (+1.0%)
- 9:45 am Chicago purchasing mgrs index (59.8 frm 60.6 in Oct)
- 7:00 am Weekly MBA mortgage applications
- 8:15 am ADP employment data (+58K new private job growth)
- 8:30 am Q3 productivity (+2.4% frm +1.9%)
- Q3 unit labor costs (-0.4% frm -0.1%)
- 10:00 am Nov ISM manufacturing index (56.4 frm 56.9 in Oct)
- 2:00 pm Nov auto and truck sales (autos 3.71 mil, trucks 5.35 mil)
- Fed’s Beige Book (detailed report on the economy)
- 8:30 am weekly jobless claims (+16K to 423K: con’t claims 4.20 mil frm 4.182 mil)
- 10:00 am Oct pending home sales (unch frm Sept)
- 8:30 am Nov employment data (non-farm jobs +130K, non-farm private sector jobs +140K; unemployment unchanged at 9.6%)
- 10:00 am ISM Services sector index (Nov 55.0 frm 54.3 in Oct)
- Oct factory orders (-0.8%)
Expect more volatility on the rate markets as we work through the reports and the holiday season. Thanks and have a great day!
Market Update July 26th
As we head into another month end we continue to enjoy interest rates that have not been seen since the 1950′s! Just the other day I had the opportunity to quote a 15 year fixed rate loan (< $417,000) at an interest rate of 3.750% and a 1.000 point cost! Never in my 26 year career have I ever quoted any type of fixed instrument with a rate less than 4.000%! If you are a fence sitter and are waiting for the bottom of the market, take a sanity pill, jump off the fence, and lock in a rate TODAY. Rates may go a bit lower but the risk to the upside is far greater at this time. Don’t miss out on a great opportunity to take advantage of these rates combined with some very attractive home prices in the Bay Area.
If your interested in seeing a successful businessman’s view of the state of our administration and economy, you may be interested in giving this short video a view! Doing business in China is more stable and predictable than in the US?? Kind of causes you to take pause when you think about it.
This week Treasury will borrow a total of $104B, $4B less than a month ago, in 2 yr, 5 yr and 7 yr note offerings, the demand for the debt is expected to be good but we have noted some minor anomalies in the demand for US debt in recent auctions. That said, traders still expect the auctions will meet with decent demand; if however the demand ever weakens the rate markets will spike higher quickly.
This Week’s Economic Calendar:
Tuesday;
9:00 am Case/Shiller Home price index (+4.0% in May)
10:00 am July consumer confidence index (51.0 frm 52.9 in June)
1:00 pm $38B 2 yr note auction
Wednesday;
7:00 am Weekly MBA mortgage applications data
8:30 am June durable goods orders (+1.0%, ex transportation +0.5%
1:00 pm $37B 5 yr note auction
2:00 pm Fed Beige Book economic report
Thursday;
8:30 am weekly jobless claims (-4K to 460K; continuing claims 4.55 mil frm 4.49 mil)
1:00 $29B 7 yr note auction
Friday;
8:30 am Q2 advance GDP (+2.5% frm +2.7% in Q1)
8:30 Q2 employment cost index (+0.4%)
9:45 am July Chicago Purchasing Mgrs index (56.0 frm 59.1 in June)
9:55 am U. of Michigan consumer sentiment index (67.0 frm 66.5)
What’s Ahead For Mortgage Rates This Week : May 3, 2010
Mortgage markets improved last week on tame inflation data, a benign statement from the Federal Reserve, and ongoing credit problems in Greece.
The factors combined to drop conforming mortgage rates to their lowest levels in 6 weeks.
It’s an unexpected development considering that mortgage rates were supposed to rise post March 31, 2010. That was the day the Fed’s support for mortgage markets ended.
Since then, however, a month-long string of devastating economic and meteorological events within the Eurozone sparked a global flight-to-quality that benefited “safe” assets such as mortgage bonds.
May 2010 may not be so kind.
The week starts with news that Greece reached a $147 billion bailout agreement with the IMF Sunday. This is a plus for the Eurozone and mortgage market negative. Rates should rise on the bailout.
Also on Monday, the government releases Personal Consumptions and Expenditures data.
PCE is the Fed’s preferred inflation gauge and it’s expected to show an annual read of 1.3 percent. Anything higher and rates should rise.
Then, for the rest of the week, employment data takes center stage.
- Wednesday : ADP releases its private sector employment data
- Thursday : The government releases initial jobless claims
- Friday : The government releases April’s job report
Jobs are key to the U.S. economic recovery, tied to consumer spending, consumer confidence, and mortgage delinquencies. If job growth is better than expected, mortgage rates should rise. If job growth is worse, rates should fall.
There’s no “best day” to lock this week so keep an eye on the market. However, if rates rise as quickly in May as they fell in April, you won’t have much time to act.
What’s Ahead For Mortgage Rates This Week : April 26, 2010
Mortgage markets worsened last week in see-saw trading. By the time Friday’s market closed, mortgage rates were higher across the board — ARMs, fixed rates, FHA and conventional.
The biggest stories of last week were actually non-stories.
First, the ash cloud from Iceland’s Eyjafjallajökull volcano dissipated, allowing warehouses to move inventory, airlines to move people, and businesses to move product. In addition, Greece moved closer to securing emergency funding that will help it stave off default.
When these two issues were threats earlier in the month, mortgage bonds rallied on safe haven buying, driving rates down. As the threats lessened over the course of last week, however, mortgage bonds sold off and mortgage rates rose.
By contrast, this week features lots of stories. Economic data will be at the forefront, as will the Federal Reserve which meets for one of its 8 scheduled meetings of the year.
- Monday : Greece is expected to announce an aid package
- Tuesday : Case-Shiller Index reports on home values from February
- Wednesday : Fed adjourns from its 2-day meeting
- Thursday : Initial Unemployment Claims are released
- Friday : GDP and consumer confidence numbers are released
Furthermore, Wall Street will have its eye on the Senate’s questioning of key Goldman Sachs employees in the wake of the SEC’s fraud charge.
In general, news that’s “good” for the U.S. economy will be bad for mortgage rates, and vice verse. And with mortgage rates changing as quickly as they have been, rates could really rise in a hurry.
The best defense against rising mortgage rates is to execute a rate lock. If you’re nervous about rates moving higher, call your loan officer and execute your rate lock today.
What’s Ahead For Mortgage Rates This Week : April 19, 2010
Mortgage markets improved last week for the second week in a row. And, also for the second week in a row, rates were down on “safe haven” buying — just not for the same safe haven reasons as before.
If you’ll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.
Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the “less risky” description and as Iceland’s volcanoes shut down air traffic in Europe, mortgage bonds benefited.
That was early in the week.
Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market’s weekly close.
Conforming and FHA rates are as low as they’ve been since March.
This week, there’s not much data due until Thursday, but even Thursday’s releases won’t make a huge impact on rates.
- Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
- Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
- Producer Price Index : A “Cost of Living” index of business. A weak reading is expected because inflation is low.
Then, Friday, New Home Sales is released.
The bigger risk to home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days. Keep an eye on the markets and your loan officer on speed dial. Markets can — and do — change quickly.
You’ll want to time your lock accordingly.
What’s Ahead For Mortgage Rates This Week : April 12, 2010
Mortgage markets improved last week to the delight of rate shoppers.
Against a sparse economic calendar, Wall Street turned its attention to geopolitics in Greece and the Eurozone. It didn’t like what it saw. Safe haven buying buoyed mortgage bond markets last week as pricing recaptured two-thirds of its monumental losses from the week prior.
Despite last week’s surge, however, conforming and FHA mortgage rates remain near their worst levels of the year and appear poised to increase throughout the summer months.
The U.S. economy is improving. From last week:
- Pending Home Sales posted a strong monthly improvement
- Wholesale Trade data pointed to higher consumer spending ahead
- Inflationary threats on the economy are receding, according to the Fed
Furthermore, continuing jobless claims were down again.
Good news for the economy is generally bad news for mortgage rates. Last week, that wasn’t the case because of Wall Street’s want for “safe” assets right now. This includes mortgage bonds and is helping to keep consumer rates low. When the safe haven buying eases, rates should climb.
Meanwhile, this week, the calendar is back-heavy.
There’s no real data until Wednesday’s Consumer Price Index, and then there’s a flurry of new releases through Friday’s market close including Retail Sales, Consumer Confidence and Housing Starts.
Strength in these issues should push mortgage rates back up.
If you’re floating or shopping a loan right now, be wary of market volatility. Rates have been jumpy since April 1 and mortgage rates are changing quickly. This week, locking in before Wednesday may be your safest, near-term rate locking strategy.