Mortgage Bond Market Analysis - Mixed Friday

I'm always happy when Friday gets here but it's extra good after a Thursday night college basketball game where my alma mater, the University of Utah, blew out Arizona State 83-41.

This morning brought us a few bits of economic data - mixed again, as usual.  GDP was adjusted downward from 2.6 to 2.2 but since it was above expectations of 2.1, this is tempering gains that would otherwise be higher based on the other economic data.  The Chicago Purchasing Manager's index was a HUGE miss at 45.8 vs. expectations of 58 and previous of 59.4 - there would be a lot more bond buying because of this if it weren't for the slight upside surprise of the GDP.  Another thing helping the market this morning is consumer sentiment index which came in at 95.4 vs. expectations of 94 but a few points below the previous reading of 98.1.  Finally, pending home sales disappoint with a reading of 1.7 vs. expectations of 2.4 but better than the previous reading of -3.7.

In all, this recover is very meager and is helping to keep rates low.  The fact that inflation is non-existent will allow the Fed to keep the Fed Funds rate at its current level for the foreseeable future - many Fed officials don't think they need to start raising the rate until 2016.  Here's a snapshot of this morning's chart:

 A quick check of the bond market shows that the benchmark bond is at its high for the day, currently up 23 basis points at 101.86 - 11 basis points below the first resistance level.

Next week:  As you know if you've been reading my posts, the first week of every month is a big week for economic data with ADP Private Payrolls on Wednesday, Jobless Claims on Thursday and Non-Farm Payrolls and the unemployment rate on Friday.  All of these, especially the last two, can impact rates in a big way.  There are also several other data points for the week but we'll get to those on a daily basis.  Contact me if I can help with a mortgage - 702-812-1214.  Make it a great day and a better weekend.

Mortgage Bond Market Analysis - My Son's 14th Birthday edition

Happy 14th birthday to my son though his birthday isn't doing much to move the market and neither is the economic data that was released this morning.  I often find it funny what the market chooses to focus on.  For instance, Durable Goods Orders blew away expectations, coming in at 2.8% increase vs. 1.7% expected, but ex-transports it missed expectations, coming in at .3% vs. .5%.  January CPI came in at -.7% vs. expectations of -.6% and core CPI was .2% vs. expectations of .1% (non-existent inflation means there is no reason for the Fed to raise interest rates) and this is very bond market friendly.  Finally, Initial Jobless Claims came in at 313K vs. expectations of 290K.  This is a big miss and should be pushing bond prices much higher except for the durable goods orders that came in so much higher.  However, the main DG numbers that investors usually focus on are the ex-transports but that's not where the focus is this morning.  Normally, with CPI numbers and jobless claims numbers where they are, we'd be having a much bigger day but the benchmark bond is well off the morning high by 29 basis points.

Considering that investors pushed the bond higher in the early morning and then sold off when the data came out, I would be cautious if you float.  Here's a peak at the chart:

The RSI is at about 50 - midway between overbought and oversold so this is a non-factor right now.  The resistance level of 101.97 is proving to be quite strong as it was tested yesterday and failed to close above it and it was tested again this morning and has held up so far with the benchmark bond currently trading down 7 basis points on the day at 101.82 which is 39 basis points off its morning high.  The first level of support is 101.46 so there's a bit of a ways to go if the bond market sells of big which I don't expect to happen.

Tomorrow is another decent data day with GDP, Chicago Purchasing Managers's Index, Consumer Sentiment and Pending Home Sales.  The market could move again with any surprises but with what it has done so far this morning, I would watch the market like a hawk if you are going to float.  Make it a great day and feel free to contact me if I can help with a mortgage - 702-812-1214.

Mortgage Bond Market Analysis - Hump Day edition

Happy Hump Day.  After a strong finish yesterday thanks to investor's read on Yellin's comments, the benchmark bonds are trying to figure out which way to go this morning.  With stronger-than-expected new home sales numbers (though still not really strong) the benchmark bond sold off 24 basis points from its morning highs and has since reversed course a bit from when I took the snapshot of the bond market and is now up 11 basis points on the day - 10 basis point higher than when I took this shot:

From a technical standpoint the relative strength indicator has shot up and is now closer to overbought than the mid-point.  The FNMA bond is bumping its had on the first level of resistance and breaking through that would only mean that it has to fight with the second level of resistance which is just 26 basis points higher than the first.  

Tomorrow's Thursday.  If you have read my posts on a regular basis you know that that means one thing:  it's...Jobless Claims Thursday.  It's also a 2nd thing...my son's 14th birthday, but I digress.  We also have a few data pieces on Friday so you may want to take advantage of our recent improvements and lock or you can risk it for what's behind door number 1 - Jobless Claims numbers and / or door number 2 - jobless claims numbers and Friday's data (Chicago Purchasing Manager's Index, GDP, U of M Consumer Sentiment Index and Pending Home Sales).  What will it be?

At any rate (of course it's a pun), a final check of the benchmark bond shows it has slid back a bit and is now only up 2 basis points on the day.  Make it a great day and feel free to call me if I can help with anything mortgage related:  702-812-1214.

Mortgage Bond Market Analysis

It's Tuesday and weaker-than-expected data along with apparently friendly comments from Janet Yellen have given the benchmark bond impetus to reverse course from being down this morning to now being up 18 basis points - 2 basis points above the 1st level of support which has been acting as a resistance level more recently.  Across the pond, Greece followed through on its promises so there's no exciting news for the bond market out of Europe and ECB president Mario Draghi.

Consumer confidence came in at 96.4 vs. estimates of 99.6 and previous of 102.9.  The Case-Schiller index came in a bit above expectations (4.3) at 4.5.  Here's the chart:

Just this short post today because I'm very tight on time but keep a close watch on the mortgage bond market if you intend to float.  Make it a great day and call me if I can help with anything mortgage related:  702-812-1214.

Mortgage Bond Market Analysis - Monday morning edition

It's Monday morning and even though the weather's a bit overcast, the sun is shining on the mortgage bond market this morning.  It's not real bright or anything but we did get some disappointing numbers when existing home sales came in -4.9% from the previous month at 4.82 vs. expectations of 4.95 and previous of 5.07.  The experts are explaining away some of the drop to limited inventory - which probably has some merit since lower inventory means fewer choices for home buyers.

The RSI (Relative Strength Index) is just above oversold and the price of the benchmark bond is just a bit below the 1st level of support - which is really acting like a resistance level at this point.  All else being equal, we are probably a bit more likely to see improvement in the bond market (good for rates) than deterioration.  Here's the chart:

Contrary to what the economic calendar said last week, tomorrow we have a number of items that may impact the financial markets.  Data includes, Case-Schiller, Richmond Fed Manufacturing Index, and Consumer Confidence.  Perhaps even more important than these data points is what Mario Draghi (ECB President) and Janet Yellin (Fed President) will say.  The amount we are up this morning is roughly offsetting the amount the bond market lost from Friday morning's highs.  We continue to channel in a relatively narrow range while investors look for some definitive direction at which point we'll either get the benefit of some good bond buying or we'll get smacked with another sell-off.  Feel free to contact me if I can help with anything mortgage-related.  Make it a great day.

Mortgage Bond Market Analysis - Jobless Claims edition

It's Jobless Claims Thursday and...surprise, surprise, we have mixed data.  Initial jobless claims came in lower than expected at 283K vs. expectations of 295K and previous of 304K.  However, continuing jobless claims came in higher than expected at 2,425K vs. expectations of 2,375K and previous of 2,367K.  The Philly Fed Manufacturing Survey came in much lower than expected at 5.2 vs. expectations of 9.3 and previous of 6.3.  Finally, Leading Economic Indicators also came in below expectations at .2 vs. .3 expected and previous of .4.

After the last two items were released, the benchmark bond made a move higher but has since pulled back.  The RSI is still oversold but the benchmark bumped its head on the 1st support level (which acted like a resistance level in this case) and has sold off to current levels - down 4 basis points on the day.  If you look at the chart, it looks like we are starting to channel, which means one of two things, the market is either about to change directions and go up OR investors have no idea what to do right now and are looking for more solid direction from the economy as to whether they should buy or sell.  Take a look:

The channel isn't strong but if you look at the last six trading days, the tendency is to gravitate to a price somewhere between 101.3 to 101.5.  Economic data has mostly missed over the last month or so and there are disconnects in the data.  It's easy to justify being conservative and locking now just to be safe since rates are very good.  However, with virtually no data on tap for tomorrow (Markit PMI Composite - no, that's not a typo), and no data until next Thursday according to my calendar, I'd strongly consider floating as well.  If you do decide to float, make sure you (and especially your loan officer) watch the market very closely so that you can act quickly if the market moves against you.  Please feel free to contact me if I can help with anything mortgage related.

Sometimes I provide updates throughout the day on my facebook page.  Please like The Wunderli Team's facebook page if you want access to these intraday updates.  Make it a great day.

Mortgage Bond Market Analysis - THIHD edition

Well it's Hump Day (TGIHD) and in spite of economic data that missed the mark we aren't getting much love from the mortgage bond market.  After taking a beating yesterday (FNMA 3.0 benchmark bond finished down 63 basis points which is over .125% in rate increase) the bond is up 10 basis points this morning.  Every single data point was a miss vs. expectations this morning:

1. Building permits:  1050 vs. 1068 expected and 1060 previous
2. Producer Price Index:  -.8 vs. estimates of -.4 and previous of -.3
3. Housing Starts:  1065 vs. 1070 expected and 1087 previous
4. Industrial Production:  .2 vs. .3 expected and -03 previous
5. Capacity Utilization:  79.4 vs. 79.9 expected and 79.4 previous.

These numbers aren't horrible but they are misses and in some cases they are worse than the previous month's reading as well.  The GNMA benchmark bond which hasn't been hit as hard as the FNMA is selling off this morning and is down 31 basis points.  I just checked rates on a couple of FHA loans I'm working on and at 3.75% I'm still able to pay some closing costs for my client - I haven't locked yet because the loan isn't submitted - still waiting on the borrower for some things before we can submit.    Here's a snapshot of the chart from this morning:

What now?  I think that investors are looking to see the message in the FOMC minutes that will be released this afternoon.  The right message could encourage them to get back into the market and push rates down; of course, the opposite could happen as well.  Tomorrow, like every Thursday, we get initial jobless claims and jobs numbers of any type can always have an impact on what traders do regarding bonds and equities - of course our main concern is about mortgage bonds.  Tomorrow we will also get the Philly Fed Manufacturing Survey as well as the Leading Economic Indicators.  

I say it more often than not:  rates are still great.  They really are.  If you lock now, it's not a bad thing.  You may miss out on rate improvements tomorrow if the jobless claims warrant an improvement in the market - BUT - you may also protect yourself from higher rates if jobless claims come in lower than expected.  More importantly, you may protect yourself from any sell-off that may occur later this morning when the Fed minutes (FOMC minutes) are released which happens at around 11:00 a.m. PST.  Please let me know if I can help you in any way - 702-812-1214.  Make it a great day.

Mortgage Bond Market Analysis - Tuesday Morning edition

After a long weekend, the bond market is back in action.  The sell-off continues, slight as it is this morning.  The FNMA benchmark bond is currently down 9 basis points to 101.5.  Since February 2nd, it is down 194 basis points which translates into about .5% in rate.  There have been 2 days since the 2nd that the bond has increased in price.  The economic news, for the most part, has been mixed but has been strong enough, in conjunction with other things like stabilizing oil prices and good earnings numbers which have led to record numbers for the stock market that have been the catalyst for this recent sell-off.

The NY Empire Manufacturing Index came in at 7.8 which was below expectations of 8.5 and previous of 9.95.  The NAHB also disappointed with a reading of 55 vs. expectations of 58 and previous of 57 but anything over 50 shows growth.  In spite of disappointing numbers on the economic front, the market continues to struggle.  Here's a snapshot of the mortgage bond market chart from this morning:

On tap for tomorrow:  At some point in time with this kind of a sell-off and the RSI showing oversold, you would think that investors will look at the price and think it's a buying opportunity.  Tomorrow may provide some more direction with a number of economic data points being released:  building permits, PPI, industrial production and capacity utilization.  Tomorrow afternoon is also the release of the FOMC minutes - traders will look at this closely to try to get a read on what the Fed thinks about the economy and when they might start raising rates.  Might this current sell-off only be a blip in the longer term trend of decreasing rates or is this the beginning of the end for LOW rates?  Personally, I don't think we are quite there yet - though I'll be anxiously awaiting the Fed minutes tomorrow as well for more intel.  I think traders will start buying again, sooner rather than later but I'm not fully confident that they will push rates lower than we saw them a few weeks ago.  There's too many variables to try to guess that.  Rates are great and with the various news items coming out tomorrow, it may be a good idea to lock ahead of those items, just to be safe.

Make it a great day and a better week and feel free to contact me if I can help with anything mortgage-related - 702-812-1214.

Mortgage Bond Market Analysis - Jobless Claims edition

It's Thursday which means...Initial Jobless Claims, just like every Thursday.  The week started off with three relatively small down days for the FNMA benchmark bond - it was down 13 basis points yesterday.  This morning, it is up 13 basis points based on some weaker-than-expected news in jobless claims with an actual reading of 304K vs. expected of 285K and previous of 279K.  This is good for pricing, as you might imagine.  Retail sales (MoM) was a mixed bag with the overall numbers coming in low at -.8 vs. expectations of -.5 and previous of -.9.  However, the numbers ex-auto were up .2 vs. expectations of -.5 and previous of -.8.  Overall, all of this news is positive for pricing and it may give us a break from the selling we've had over the last 8 days or so.

On a technical level the benchmark bond is quite oversold; this could entice investors to get back in as well.  We have a holiday weekend coming up so expect investors to hedge their bets tomorrow.  Also driving rates tomorrow will be the Import Price Index and Reuter's University of Michigan Consumer Sentiment Index.  Next week is a light week for data with the market closed on Monday and a data-less day on Tuesday.  Wednesday brings us the first bit of economic news with the PPI and the FOMC minutes.

I'll be in SLC on business tomorrow so I may not have a post tomorrow.  Make it a great day.

Mortgage Bond Market Analysis - Monday Morning edition

Just a quick post this morning to let you know that the FNMA benchmark bond is rebound a bit - just like I thought it might.  It sold off fairly strong from Tuesday through Friday and with no data this morning, investors might see this lower price as a buying opportunity.  The bond is currently up 21 basis points.

A few tips about the interest rates and what drives them
The biggest drivers of interest rates are economic data and geopolitical events.  It's important to remember that bonds are considered safe havens so when there is bad economic news or scary things happening in the world, investors usually sell out of stocks and put their money in bonds.  Bond prices and rates move inversely to one another so when traders / investors are buying bonds that pushes the prices up which moves rates / yields lower.

As we slog through this economic recovery, investors are looking at the various economic data releases to try to get as much information as possible about the direction of the economy and whether they should get aggressive, pull out of bonds and buy stocks or be safe and buy bonds.  The other side of the coin is that the stock market has had a nice run-up and many analysts are calling for a 10-15% correction which would mean that many equity investors may decide to sell stocks and buy bonds which would be great for rates and sometimes these things become self-fulfilling prophecies without any real economic data driving it.

There's a lot that could happen this year with rates and even if we end up in the low 5% ballpark, they would still be very good.  That said, any increase in interest rates decreases buying power which means less home for potential buyers.  The time to buy is now - let's make it happen.

It's also a great time to refinance!!  I can help with either of these things.

Mortgage Bond Market Analysis - Non-Farm Payroll AND TGIF edition

Well there you have it.  I cautioned on Tuesday that we could be in for some bond selling which would push rates higher.  Yesterday we rebounded in the afternoon a bit but Wednesday and today are combining for a pretty decent sell-off.  Today there are three factors driving rates:  1) German manufacturing orders were up significantly more than expected at 4.2 vs. 1.5 - this is important because a big reason why rates have remained low is because of the weak European economy; 2) Non-farm payrolls came in at 257K which is well above expectations of 235K but below last month's reading of 329K; and 3) Average hourly earnings were up .5 vs. expectations of .3 and previous month's of -.2 - if people are making more, they can spend more.

The FNMA benchmark bond has been trending down this morning.  Since Tuesday's opening at 103.42, the benchmark bond has lost 102 basis points which is about .25% in rate.  Here's a look at the chart:

Since I took the snapshot if this chart, the bond has sold off a bit further and is now down 57 basis points for the FNMA benchmark and 38 basis points for the GNMA.  At 102.36, the FNMA benchmark bond is 25 basis points below the 1st level of support; the next support level is at 102.05 - 31 basis points below where it's at now.  Hopefully it doesn't drop that far.

What's on tap for next week?  There are no data releases on Monday and just a couple of minor things on Tuesday.  The Treasury budget is released on Wednesday and then Thursday and Friday give us a few things that can impact the market.  With the FNMA benchmark bond currently down 65 basis points, you can either lock now or see if we get a little bit of a rebound early next week.

Call me if I can help with anything mortgage-related.  Make it a great day and a better weekend.

Mortgage Bond Market Analysis - Jobless Claims Edition

It's Thursday which means the Weekly Jobless Claims report is out.  Expectations were for 290K and actual claims came in better than expected at 278K which is worse than last week's reading of 267K.  Overall, this is negative for pricing.  Adding to that negativity is a sharp increase in Unit Labor Costs which came in at 2.7 vs. expectations of 1.2 and previous of -2.3.  Additionally, non-farm productivity was down 1.8 while expectations were for +.5 vs. previous of +3.7; this is a big reason why the labor costs rose.

There is definitely some volatility this morning, though the swings aren't huge.  Here an early morning snapshot of the mortgage bond chart:

As you can see, the FNMA benchmark bond was down 26 basis points at this time.  The RSI (Relative Strength Indicator) is also down, hovering just above 50.  This means that investors aren't likely to sell based on the technicals - the data will drive the buying and selling (it always does but if the market is overbought or oversold, that can drive it too.).

Economic data for tomorrow:  Tomorrow is the first Friday of the month which can only mean one thing:  non-farm payrolls and the unemployment rate.  These numbers are always watched closely and can have a big influence on the direction of both the stock and bond markets.  The expectation is for non-farm payrolls to come in at 235K which is less than last month's reading of 252K.  The unemployment rate is expected to remain steady at 5.6%.  It's always your call, but if I had to lock, I'd play it safe and lock ahead of tomorrow's report.  Check to see if your lender has a float down option - we do.  Make it a great day and contact me if I can help you with a mortgage - 702-812-1214.

Mortgage Bond Market Analysis - National Letter of Intent Signing Day edition

It's a big day for us college football fans as high school and junior college football players from around the country fax in their letters of intent to play for the college of their choice.  It's a big reward for their hard work to be able to attend college with a full-ride scholarship and learn lots of things, on and off the field, that will prepare them to go pro - usually in fields other than football.

Today is also a big day for the mortgage bond market as it's the first of three straight days that has some type of employment report.  The ADP Private Payroll Report is the first report of the three days and it came in at 213K vs. expectations of 225K and previous of 253K.  This would typically be good for rates but it's still above 200K and that's kind of a weak line of demarcation.  The ISM Non-manufacturing index came in at 56.7 which was .2 above the expected number of 56.5 which was the same as the previous month's reading.  Remember that anything over 50 shows growth / expansion.  Here is a snapshot of the chart:

There's a couple of things to keep in mind.  First, at current levels, the benchmark bond (FNMA) is just slightly above the 1st level of support with the 2nd level 56 basis points below that.  Secondly, the RSI is no longer reading overbought which is a good thing from a technical standpoint.

Tomorrow's schedule:  There are a few economic data points scheduled for release tomorrow but the big one is the weekly initial jobless claims.  It's expected that they will come in at 290K vs. previous of 265K.  A reading of 290K or higher might help put an end to our current losing streak - of course the equities market along with other geo-political events will have a say in the matter as well.  Yesterday I recommended that you lock and since that recommendation the market has gotten worse by about .125% in rate.  If it were me, I'd still lock today ahead of tomorrow's data just to be safe.  Please feel free to contact me if I can help with anything mortgage-related - 702-812-1214.  Make it a great day.

Mortgage Bond Market Analysis - What's Going On?

Investors are taking a "glass half full" approach this morning with regard to economic data.  Factory orders came in much lower than expected, down 3.4 vs. expectations of -2.2 and previous of -1.7 but investors on both sides of the court (bond and stock traders) are taking the cue from oils rise since last Thursday.  The stock market is up marginally and the FNMA benchmark bond is down 21 basis points.  The RSI is still overbought and the current price of the benchmark bond is 20 basis points above the 1st level of support with a 55 basis point drop below that to the 2nd level of support which means that if traders get good news regarding ADP payrolls tomorrow and jobless claims on Thursday followed by non-farm payrolls on Friday, we could be in for a big drop.

On the flip side, with the big surprise we got from the jobless claims numbers last week, we might not see much in the way of a surprise but even a solidifying strong number could show consistency and traders might take that as a cue to keep selling bonds.  Either way, I think there is more risk of a sell-off than there is of investors jumping in and pushing bond prices much higher (with rates going lower as a result).  Here's the chart from this morning:

A bigger downside risk means...I would lock.  Tomorrow's ADP Private Payroll report doesn't typically have as big of an impact as Thursday's Jobless Claims which typically isn't as influential as Friday's Non-farm Payroll report and Unemployment Rate number.  Nonetheless, they can all move the market and if the numbers support each other, they could move it in a bad way - if you are looking to lock an interest rate any time soon.  I would recommend taking advantage of current prices and locking today.  If worse comes to worse you can float down or have me do your loan if your current lender doesn't offer a float-down option.

On docket tomorrow:  As previously mentioned, the ADP Private Payroll report comes out and expectations are for lower numbers than the January report (this would be good for rates).  The ISM non-manufacturing report is expected to come in at 56.5 - same as last month.  For those of us avid college football fans, tomorrow is NLOI signing day - National Letter of Intent signing day - which is when we get to find out who is going to be joining our college teams to help them compete for a national championship.

Feel free to share your thoughts in the comments section.  Like The Wunderli Team facebook page for intraday updates and other mortgage news and call me - 702-812-1214 - if I can help you or a friend / client with a mortgage.

Mortgage Bond Market Analysis - Punxsutawney Phil edition

Six more weeks of winter and more mixed data is our news to begin February.  Phil saw his shadow - I think he should have turned around and looked the other way and he wouldn't have seen it - BAM, we don't have six more weeks of winter if he just knows which way to look.  I know it doesn't really work that way; Phil knows he has to look the way he does in order for his predictions to be accurate.  As if...

On the more credible side of things, the economic data came in mixed...AGAIN.  It rose .3 vs. expectations of .2 so people are making more but they aren't spending it and putting it back into the economy.  Personal Spending was down .3 (-.3) vs. expectations of -.2.  ISM Manufacturing came in at 53.5 vs. expectations of 54.5 and previous of 55.5.  A reading over 50 is good but it's moving in the wrong direction.  How solid is this recovery?  Consumers are saying that they aren't believers yet since they aren't spending their increased earnings.  Here's a look at the chart:

In spite of the lower consumer spending, investors are selling the FNMA benchmark bond - along with equities.  The RSI is right at the overbought threshold.  With bond prices where they are, rates are great and it's a fine time to lock at this point.

What's on tap for the week?  The first week of every month is big.  Tomorrow brings factory orders and economic optimism and Wednesday we get ADP Private payrolls.  Jobless claims are on Thursday like always and Friday we get the always anticipated unemployment rate and non-farm payrolls.  There is the potential for lots of volatility and major swings in rates depending on the results.  I definitely recommend locking before Thursday's jobless claims and maybe before the ADP numbers on Wednesday.  If the numbers disappoint and rates get significantly better, most lenders (like us) offer free float-down options.

If you don't want to miss this fantastically exciting reports, please either subscribe to my blog and / or like The Wunderli Team facebook page.  I'm available for pre-approvals if you have a client who wants to purchase a home and I can also help you with past clients to see if they can benefit from a refinance with these great low rates and the reduction by FHA to their annual mortgage insurance rate - what a great way to add value to your clients.