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Monday, February 2, 2015

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.

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