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Monday, June 29, 2015

Mortgage Bond Market Analysis - Greece is (still) the word

Happy Monday.  I hope you had a fantastic weekend.  Last week I recommended locking and that was followed by some down days in the market which meant rates were rising.  Most experts thought that the EU would agree to a package that would give Greece about 5 months come up with a way to begin paying back their debt.  Several ideas were floated and all indications were that a deal was basically in place.  As of this morning it looks like Greece is going to default on their payment to the IMF tomorrow since their creditors have rejected Greece's proposals.  Greece's banks are closed this week and Greece is now considering a referendum vote on accepting creditors' proposals or to leave the EU.

Like always with geo-political instability, there has been a flight to quality this morning as investors are buying treasures and mortgage backed securities which is pushing prices higher and rates lower.  If you didn't lock last week, locking now would get you about the same pricing as when I recommended to lock.  There is a decent chance that rates will improve throughout the week as long is there is no resolution to the Greece debt problems so floating may be a good idea.  You may also want to lock now and if there is enough improvement throughout the week, you can float down.

A few other things to keep in mind is that the 1st resistance level is 102.68 and the benchmark bond is currently 19 basis points above that at 102.87 and is at it's high for the day.   Closing above this line, and better yet, above the 2nd level of resistance at 102.92 could set the week up for some nice gains - especially if there is no resolution for Greece.  I would float.  As always, watch the market closely so that you can move quickly if necessary.  Make it a great week and feel free to call me if I can help with anything mortgage-related:  702-812-1214.

Thursday, June 25, 2015

Mortgage Bond Market Analysis - Jobless Claims Thursday

It's Jobless Claims Thursday and the story isn't jobless claims.  The expectation was for 271K claims and that's exactly what we got.  The big news is in personal expenditures.  I've been saying for a while that the Consumer Confidence numbers were out of control and weren't translating into spending - the name "Consumer Confidence" has spending in it's name after all and CONSUMERS WEREN'T CONSUMING in spite of their amazingly high confidence levels.

I theorized that the confidence was coming from the improving jobs situation that still has a long way to go, especially when you take into account the real unemployment rate based on workforce participation - but that's a topic for another day.  Most consumers don't understand or aren't familiar with the work force participation rate so when they see the unemployment rate dropping and more jobs being created, they think the economy is back on track - and it is getting better.  The point is that Personal Spending came in at .9 vs. expectations of .7 - maybe consumers are starting to consume and I'm hoping it's not an anomaly.  Here's a look at how the mortgage bond market is reacting to this mornings data:

We know that about 2/3s of our economy is driven by consumer spending so if consumers buy homes and then buy stuff for their homes, it allows people who sell that stuff to make more money and hire more people so that their are more jobs and more people who have more money to spend and it's a great cycle.  Hopefully we are just at the beginning of something good but as the economy starts to get better, inflation starts to kick in which is why the Fed raises interest rates.  People who are getting mortgages want the lowest rate they can get and the lower the rate, the more they can afford.  From a societal point, however, rates are low when the economy is bad because it helps to stimulate the economy (businesses and consumers are more likely to borrower when rates are low) and when the economy is doing well, rates are typically in the 6 - 7% range - give or take.  If we want a strong economy, we need to be willing to accept those rates.

Currently, the benchmark bond is retracing its steps from yesterday and is down 20 basis points.  At it's present level, the 10 year treasury note has some room to the upside which could also mean more selling.  I'd be defensive and lock here and if rates get better, I'd float down - assuming the lender you are working with has this option.

Feel free to call me if I can help with anything mortgage related:  702-812-1214.  Make it a great day.

Tuesday, June 23, 2015

Mortgage Bond Market Analysis - Greece is the word!!

It's Tuesday and GREECE is the word as it has been often over the last several months.  Yesterday the benchmark bond sold off in a big way and it wasn't because existing home sales came in a bit better than expected.  Lately, everything has been about Greece; Greece is the word, "Greece is the time, is the place, is the motion."  This lyric from the 70s movie "Grease" is very true as the world is watching closely to see what the EU will do as Greece teeters on the brink of default.

The EU and Greece are trying to work out a deal that hopefully has more substance than glam so that they aren't just kicking the can down the road a bit more.  The deal includes higher taxes in some areas as well as increasing the retirement age - this would certainly help increase the revenues to pay the debt that Greece owes but the citizenry may not be all on board.

As for the benchmark bond, it was down 59 basis points after a nice move up last week.  Yesterday's losses erased most of last week's gains.  This morning brought us mixed data with Durable Goods orders (ex-transportation) coming in at .5 which was slightly below the consensus of .6.  New Home Sales came in at 546 vs. estimates of 525.  However, the big driver is Greece.  The benchmark bond started the day down and tested the 1st level of support at 102.58 but has since recovered a bit and is now only down 7 basis points after being down as much as 29 basis points.

Some experts are recommending floating - I think it's a bit tenuous.  If you do float, take extra caution and watch the bond market very closely because the 10 year treasury has some room to the upside and that could take rates higher in mortgages as well.  Feel free to contact me if I can help in any way - 702-812-1214.  Make it a great day.

Wednesday, June 17, 2015

Mortgage Bond Market Analysis - Hump Day edition (and Fed interest rate decision edition)

Happy Hump Day.  Yesterday I said we would have the Fed interest rate decision at 2:15 EDT - that's what I get for traveling and thinking yesterday was Wednesday. Happy Hump Day to me and everyone else - TODAY is the Fed's interest rate decision at 2:15 EDT. The market is already hedging it's bets a bit as the FNMA benchmark bond is down 25 basis points this morning after closing up 35 yesterday. It's having a hard time putting together a consistent run to the positive side after a big slide over the past few weeks. You may want to lock ahead of the decision but we may get luck and the Fed will say something that soothes the market and entices bond investors to get back in - don't count on it. I'm heading out on the road so it's just a short post this morning.  Make it a great day.

Tuesday, June 16, 2015

Mortgage Bond Market Analysis - Fed Day

There was mixed data released today and the benchmark bond is testing the 1st resistance level AGAIN.  However, the big news is likely to come from the FOMC meeting this morning.  Everyone is looking to get a hint as to when the Fed is going to start raising rates.  From all indications, when they do start, it will be very minimal and slow but the big question is when will they start.  Most experts, including myself, think that it won't happen today.  I think it will happen before the end of the year and it will depend on getting more consistent data that is showing real signs of recovery and growth.

The benchmark bond is currently up 17 basis points at 102.91 and is 5 basis points above the 1st resistance level.  This level has been tested each of the four days and it has held firm with the benchmark bond trading above the level but closing below it.  Each time it tries and closes below the resistance level, the level grows stronger and we are more likely to see a down trend barring any geo-political disasters or negative economic data that shows an about face in our economy.

The FOMC decision on rates will be released around 2:15 EDT.  You may want to lock ahead of the decision since traders could easily take whatever decision the Fed makes and justify selling which would mean higher rates.  My guess is that if we can get a more substantive idea about when they will start raising rates, we might see some buying in the bond market in the short term.  The RSI is approaching the midway point between overbought and oversold even though we closed down slightly yesterday after being up slightly most of the day.  Feel free to call me if I can help with anything mortgage related:  702-812-1214.  Make it a great day.

Monday, June 15, 2015

Mortgage Bond Market Analysis - Green Day

It's Monday and so far it's GREEN.  Over the last nine days with one exception, we have alternated between up days which are green (good for rates) and down days which are red (bad for rates).  Some of those down days had data that showed weakness in the economy and the bond market still sold off.  Of course on the good economic days the opposite wasn't necessarily the case all the time. That said, we had a great day on Friday in spite of some better than expected data including some inflationary PPI numbers.  The benchmark bond is up slightly this morning, currently up 9 basis points but is off it's high for the day by 17 basis points.

I would float with caution and be ready to lock should the market make a sudden move.  The RSI is slightly above oversold the first level of resistance at 102.86 is proving to be strong as the benchmark bond has tested it each of the last three days and lost.  It is currently 1 basis point above the resistance level.  Closing some decent amount above the resistance level would be a good thing and could be a good sign for the near term.  Closing below it might show that traders are looking for more reason to sell off and would do so with more positive data.

Please feel free to reach out to me via email ( or by cell (702-812-1214).  I'm happy to help however I can.  Make it a great day.

Friday, June 12, 2015

Mortgage Bond Market Analysis - TGIF

The bond market has been a bit backwards yesterday and today.  The economic data that came out yesterday and today was mostly positive and yet we had a fantastic day yesterday as far as the benchmark bond (FNMA) was concerned - up 69 basis points. The bond broke through the 1st resistance level and backed off a bit closing right at the the 1st resistance level - 102.86.  This morning, despite more good / better than expected data, the bong tested the 2nd level of resistance climbing as high as 103.1 (3 basis points below the 2nd level of resistance) and sold off.  The FNMA benchmark bond is currently up 8 basis points and the GNMA (FHA and VA) is down 4 basis points.  The RSI (Relative Strength Index is now slightly above the oversold line after yesterday's big move.  Here's a snapshot of the chart:

I always like to lock on a good up day or after a nice run if the bias is there.  In a situation like this where the data seems to be more positive than negative and we are seeing a bias toward selling, I would lock on any upward movements and float the rate down if the buying continues.  There's at least one bond analyst who thinks we could be in for more selling.  Matt Graham thinks that the recent sell-off since the first of May might only be the 1st half of the actual run which means we could see much more selling sooner rather than later.  If that's the case, locking now would be the absolute right thing to do.

Feel free to call me if I can help with anything mortgage-related - 702-812-1214.  Make it a great day and a better weekend.

Tuesday, June 9, 2015

Mortgage Bond Market Analysis - Make Up Your Mind!!

Like a roller-coaster, the bond market has capitulated wildly the last 4 days.  After recovering a bit yesterday, closing up 30 basis points, the benchmark bond is currently down 26 basis points.  There was some good economic news this morning, which is rarely good for bonds.  The JOLTS report which tells about the job openings came in higher than expected at 5.376mil vs. 5.038 expected.  The wholesale inventories grew which could mean that businesses expect to sell more product or that sales aren't keeping up with product.  Time will tell.  Finally, the NFIB Business Optimism Index came in at 98.3 vs. estimates of 97.2.  This typically doesn't have a huge impact on bond prices but it is a slight negative and the overall data is negative for pricing.

Rates are still great with FHA and VA loans in the low 4% range and paying some closing costs.  With a continually improving economy, I think rates are going to trend up.  We will have some opportunities to lock at lower points and when the Fed starts raising the Fed Funds rate, that may be one of those times.  Other times to lock will be when there's a big miss on economic data that impacts bond pricing such as most jobs-oriented reports.  Additionally, any major global incident like war will also be good as bonds are a safe-haven for investors.  With rates trending up, you may want to consider a long term lock if you are planning on buying in the next year - we can lock your loan for up to 1 year.  If you are in process, you may want to lock now to protect yourself from anymore downward movement in bond prices (higher rates) as long as you have the ability with your current lender to float the rate down if investors start buying bonds and pushing prices up.

The good news is that the benchmark bond is oversold AND the 2nd level of support (102.87) is holding relatively firm although the benchmark bond is currently 7 basis points below this support level and it is down 36 basis points on the day.  If it closes below the support level we may see some follow-through selling tomorrow, especially given the current level of the 10 year treasury bond which is at it's highest level (yield) in 8 months.  I would be safe and lock; if prices improve and rates go down, then float down or re-lock with another lender.  Feel free to contact me if I can help you with anything mortgage-related - 702-812-1214.  Make today great.

Monday, June 8, 2015

Mortgage Bond Market Analysis - What the heck just happened?

It's a Monday and in this case, that's a good thing.  Last week was a really downer, literally, for the benchmark bonds which means rates went up.  Between world events and some positive economic data, the FNMA benchmark bond sold off 167 basis points which means that rates went up about .375%.  The Labor Market Conditions Index came in at 1.3 vs. the expected 2.3 but this isn't a big deal as far as bond pricing is concerned.  There will be some more date released throughout the week that can have more of an impact on mortgage bonds.  The good news is that the benchmark bond is currently oversold so we could see some buying on that factor alone.  Here's a look at the chart:

We haven't closed that low since October 6th of last year and we were pretty close to that point on November 12th.  We are almost 7 months removed from November 12th and still seeing very mixed results in the economy.  I don't think we will see a continual rapid rise in rates.  There is too much ambiguity in the market.  Experts are still calling for a correction in the stock market of 10-15% which will impact bonds, most likely in a positive way since the money typically flows out of stocks into the safe haven of bonds in scenarios like a market correction.

Additionally, a Fed rate hike of any magnitude, and I don't know of any experts advocating rate hikes soon or that are big, will probably help interest rates as well as it will make investors in the stock market a bit uneasy which means more money will likely flow to the safe haven of bonds again.  At this time, I would float with caution.  We've had a big sell-off that doesn't appear likely to continue at this point and we may see some buying in the bond market as investors see this as an opportunity to buy bonds at a good price.  Be very judicious about watching the bond movement as they dictate rates.  Call me if I can help with anything mortgage related:  702-812-1214.