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Friday, May 15, 2015

Mortgage Bond Market Analysis - TGIF edition (again)

It's been quite the WILD ride this week.  The bond markets have been crazy this week with a major sell-off on Monday where the FNMA benchmark bond lost 87 basis points on no data whatsoever.  It was all about improvements in Europe and how their quantitative easing program is improving the economy with traders selling the German bund and pushing yields up about 70 basis points in just two weeks.  In order to stay competitive, our yields have to increase as well which was the reason for the sell-off.  Monday's move completely erased the gains we had on Thursday and Friday of last week but was followed up with a minor up day on Tuesday of 5 basis points which was 50 basis points off the low so the market showed some resiliency.  Tuesday's trading was based on very little data and it was slightly negative.

Wednesday brought us some fairly week data yet the market acted opposite of what you might expect by selling off; the benchmark bond finished down 21 basis points.  Retail Sales numbers were very disappointing and import prices were down as were business inventories.  Yesterday initial jobless claims were lower than expected which is bad for interest rates but the Produce Price Index numbers, which is a measure of inflation, came in lower than expected which traders acted on by buying bonds.  Finally, today the NY Empire Manufacturing index came in a fair amount lower than expected as did industrial production but the really big miss was Michigan's Consumer Sentiment index which came in at 88.6 vs. estimates of 96.  The benchmark bond is currently up 52 basis points after a 47 basis point increase yesterday.

If it were me, I'd lock or recommend that my clients lock.  I locked a loan for a client this morning and his pricing was much better today than it was on Wednesday.  That's all for now.  Please call me if I can help with anything mortgage-related - 702-812-1214.  Make it a great day and a better weekend.

Friday, May 8, 2015

Mortgage Bond Market Analysis - TGIF and employment report edition

Would you expect to have anything other than mixed data?  Well we got mixed data, AGAIN.  Non-farm payrolls came in at 223K vs. expectations of 218K.  The prior month's reading was revised downward SHARPLY to 85K from 126K initial reading.  The unemployment rate is 5.4%, just as expected and down from 5.5%.  The good news for the bond market is that average hourly earnings were only up .1% vs. expectations of .2%.  This is good news because it means the Fed will likely wait longer before raising the Fed Funds rate since this is not inflationary.

Yesterday I recommended floating into today's data since our up day would be a hedge against a possible sell-off today.  I also said that it would be o.k. to lock yesterday and take advantage of the gain.  For those who waited to lock until today, you were rewarded.  The benchmark bond is up 43 basis points and with yesterday's gains, it has rebounded a total of 79 basis points.  At 101.54, the FNMA benchmark bond is currently 16 basis points off the high for the day and is 10 basis points above the 1st level of resistance and 25 basis points below the 2nd level.  The RSI has just creeped above the oversold threshold but with some more weak economic news, traders could push bond prices even higher which means better rates.  Here's a snapshot of this morning's chart:

If you need to lock today, you've benefited nicely from the last two trading days.  If you have a bit of time, I would probably float.  There is no data being released on Monday and very little on Tuesday.  Traders might continue to push the bond higher as long as the rest of the economic world plays nice.  As always, feel free to call me if I can help with anything mortgage related - 702-812-1214.  If you want to make sure you don't miss any of my posts, please either subscribe to my blog or "Like" The Wunderli Team facebook page.  Make it a great day and a better weekend.

Thursday, May 7, 2015

Mortgage Bond Market Analysis - The Market Wants to Be Up

Happy Initial Jobless Claims Thursday.  Yesterday we saw week data from the ADP report and bonds sold off thanks to some minor inflationary data release on unit labor costs and lower efficiency.  In spite of fewer private payrolls as reported by ADP yesterday, initial weekly jobless claims came in at 265 vs. expectations of 280 and previous of 262.  The bond market was up from the open but sold off as soon as this data was released and has since rebound and is currently up 19 basis points.  the RSI is quite oversold so a nice bounce is possible unless it's squashed by tomorrow's non-farm payroll reading and the unemployment number.  I wouldn't expect a huge rally today since we had decent numbers this morning and the headwind from tomorrow's impending release.  Here's the chart:

Floating coming into today made sense with so much selling the prior 8 days but with a jobs report that's expected to be strong tomorrow, I'd play it safe and lock today.  If rates get better over the next week, you may be able to float down, depending on your lender's policies.  Make it a great day and feel free to contact me if I can help with anything mortgage related - 702-812-1214.

Wednesday, May 6, 2015

Mortgage Bond Market Analysis - Jobs Data, part 1

Surprise, surprise.  We have more selling - AND THE DATA IS WEAK, and a bit conflicting.  Are traders using the much weaker-than-expected ADP Private Payrolls report as an excuse to jump back into the market or are they looking ahead to tomorrow and Friday in anticipation of what's expected to be much stronger data as reason to sell?  Here's what happened this morning.  ADP private payrolls came in at 169,000 vs. estimates of 200,000 and previous of 175,000.  This is weak but it's also not as accurate as the non-farm payrolls report on Friday and not as broad-based.

More concerning is the non-farm productivity which came in at -1.9 vs. expectations of -1.8 - still better than the previous month of -2.2.  Weak productivity means a lack of efficiency which shows up in higher unit labor costs which was also released today:  the 5.0 reading was higher than the expected number of 4.5 and the previous reading of 4.1.  This is inflationary and higher interest rates help stem inflation which is the reason for the sell-off this morning.  As far as today's data is concerned, the weak ADP numbers should have helped the benchmark bond get a big while the inflationary unit labor costs are what the traders are focusing on and the reason for the selling.  Did you lock yesterday like I recommended?  Here's a look at the morning's chart:

In addition to having some support at 100.66, the RSI is oversold.  It's very possible that traders could be looking for a reason to jump back into the market.  If we get some truly weak data tomorrow (the "inflation" data more than offset the weak ADP numbers this morning), we could very well see some improvement.  If you didn't lock yesterday, it might be worth waiting until tomorrow or even Friday - the gamble with Friday is that the non-farm payroll numbers are expected to be strong and even a near miss might still prompt traders to sell.  I'd probably float through tomorrow and if we get some good improvement you could either lock and be happy with it or you could float with a hedged bet against Friday's data.

I'd love to earn your business but I want to add value to everyone I can.  I hope this information helps you in your decision to lock or float - it's rarely an easy decision to make.  Please feel free to call me at 702-812-1214 if I can help with anything mortgage-related.

Tuesday, May 5, 2015

Mortgage Bond Market Analysis - Double Nickel Edition

It's Cinco de Mayo and for us Mexican food fans, it's another excuse to have some yummy Mexican food.  For those of you who didn't lock last week (or before), it may be a reason to drown your sorrows in Tequila (I don't drink and I didn't miss locking a rate) since the benchmark bond continues to sell off, driving rates higher.

Yesterday, the FNMA benchmark bond closed down 29 basis points (133 basis point drop over the last 6 trading days) and well below YESTERDAYS 2nd level of support.  This morning, we got some good news regarding the ISM non-manufacturing index; it came in at 57.8 vs. expectations of 56.4 and previous of 56.5.  This means the economy is growing - specifically the service sector (anything above 50 is expansion).  The other side of this coin is that it's bad news for interest rates.  We had a bit of a sell off with the benchmark bond being down as much as 23 basis points from the open (yesterday's close) which was 11 basis points below the new 2nd support level of 101.  It has rallied a bit since then and is currently 4 points above the 2nd support level at 101.04.  Here's a snapshot of the chart:

Along with a few other bits of data, the big releases over the next three days are all employment related with the ADP Private Payroll report tomorrow, Initial Jobless Claims on Thursday (just like every week) and the Non-Farm Payrolls report and Unemployment Rate on Friday.  Friday's numbers are supposed to be MUCH better than last months and if they come in anywhere close to expectations, rates could continue to get worse.  On the positive side, the RSI (Relative Strength Indicator) has a reading of oversold but that may not save us since the benchmark bond is knocking on the door of the 2nd support level and the next level of support after it breaks through is the 200 day moving average which is about 30 basis points below the 2nd level of support.  If it were me, I'd lock today to be safe and if rates improve over the coming weeks, float down to take advantage of that improvement.  I'd love to earn your business and hopefully providing information like this is one way I can do that. Please feel free to call me at 702-812-1214 if I can help you with anything mortgage-related.  Make it a great day.

Monday, May 4, 2015

Mortgage Bond Market Analysis - Monday after a bad week edition

I didn't post anything last week because I was getting my new computer up and running.  During this time, the mortgage bond market was sputtering and sliding amidst weak economic data.  As you will see from this morning's snapshot of the MBS chart, last week the benchmark bond sold off 104 basis points which is equivalent to an increase of about .25% in interest rate.

This morning, factory orders came in at 2.1% which was as expected - this is old data, though so not a big market mover.  We are currently 7 basis points below our 2nd level of support but 10 basis points off the low for the day.  Finishing above the 2nd level of support would be a good thing.  Tomorrow brings ISM non-manufacturing index and the trade balance numbers (not a big market mover).  It is the first week of the month so we get the big employment numbers starting Wednesday with ADP private payrolls.  Thursday, like always, brings the initial jobless claims (where were better than expected last week) and Friday will give us the all important non-farms payroll numbers and the unemployment rate.  All of these reports have the ability to impact rates.  Pay strict attention to the mortgage bond market so that you can lock quickly if you decide to float.  Here's a snapshot of this morning's chart - check out the excitement from last week:

For regular updates throughout the week regarding the mortgage bond market and what interest rates are doing, be sure to "Like" the Wunderli Team facebook page.  If I can help with anything mortgage-related, please feel free to call me at 702-812-1214.  Make it a great day.