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Thursday, January 8, 2015

Mortgage Bond Market Analysis - I Wish I Locked on Tuesday edition

There are a number of things driving the market this morning and they are pushing the benchmark bonds lower resulting in higher rates.  If you read my blog much you know that I always recommend locking ahead of any kind of jobs data since good data in this area means a sell-off for bonds which moves rates higher.  The fact that we had a nice strong run-up before the data should have made everyone content with locking rates knowing that they got some of the lowest rates available over the last year which have been as low as they've been in history.

If you or a client has a loan and you haven't locked yet, you saw the FNMA 3.0 benchmark bond fall 28 basis points yesterday and the GNMA 3.0 benchmark fall 54 basis points.  This morning the weekly jobless claims numbers came in slightly worse than expected at 294 vs. 290 but it's still below 300 which shows stability and strength in the economy.  Pair that with yesterday's ADP Private Payroll numbers, stabilization in oil, remarks from Chicago Fed president yesterday afternoon that the Fed may not raise rates until next year and the thought (based on comments from the ECB President Draghi) that the ECB will soon begin some measure of quantitative easing by buying sovereign bonds and you have a recipe for the bulls - at least in the equity market.  On these things, the equity market is up sharply today following a nice move up yesterday and when this happens it's usually money shifting from the bond market (investors selling bonds, driving bond prices down and rates up) and buying equities (stocks).  Here's this morning's chart:

I believe that I said it in my blog yesterday and I'll say it again that rates are fantastic.  I would have no qualms about locking today to take advantage of how good they are as well as trying to get ahead of some more potential sell off tomorrow if we get good non-farm payroll numbers which I suspect we will.  There is a caveat regarding the employment numbers we have seen this week and that is that these numbers are still seasonal, meaning that they include temporary workers hired for the holiday season and nobody knows how many of them will be offered permanent positions.  We won't know the real numbers until next month but for now, perception is reality.

On docket for tomorrow:  As you may have gleaned, tomorrow is a big day for economic data.  We have non-farm payrolls which aren't expected to be as strong as last month by a long shot but the expectation is still for 245K new jobs which is decent.  We also get the unemployment rate which is expected to go down to 5.7 from 5.8% and we get wholesale inventories which are expected to be a little lighter than last month at .3 vs. .4.  Please feel free to call me if I can help with anything mortgage-related:  702-812-1214.  Please share and subscribe to my blog and "Like" The Wunderli Team facebook page so that you can get any intraday and end-of-day updates I write (which won't be on my blog) along with news regarding mortgage programs.  Make today great.

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