It's Friday and we've got data and some movement in the market. Three data points were released today with the Employment Cost Index coming in at .2 vs. expectations of .5 and previous of .7 - this shows that costs are contained, at least for this month, on the employment side which is good for inflation and may be a piece of the puzzle that causes Fed increases in the Fed Funds rate to be delayed. The Michigan Consumer Sentiment Index came in at 93.1 vs. expectations of 94. This is still a strong reading but it is also down slightly from the previous reading of 93.3. This will also add a bit to the impetus for traders to buy (good for interest rates). The bad news is that the Chicago Purchasing Manager's Index came in well above expectations at 54.7 vs. expectations of 50.5 and previous of 49.4 (anything over 50 is expansionary and means growth).
The most prevalent of the three data points is the Chicago PMI which should have caused the bond market to do an about face but apparently the traders thought enough of the other two data points along with the other things (China and Greece) and anything else to keep buying. The RSI is well overbought and the FNMA benchmark bond is up 28 basis points on the day at 103.7. This is 11 basis points off its morning high but 8 basis points above the 2nd level of resistance. Over the last 14 business / trading days, the benchmark bond has increased 136 basis points to its current level which is an improvement of almost .375% in interest rate. If it were me, I would lock now and take advantage of this great improvement.
Four pieces of data will be released on Monday - some not too important as far as mortgage rates are concerned. There is data throughout the week and it's JOBS week which means ADP Private Payrolls on Wednesday, Jobless Claims on Thursday and Non-Farm payrolls and unemployment rate on Friday. There is the potential for increased volatility. If you decide you want to roll the dice and float, keep an eagle eye on the market because with the data we are getting next week, things could change for the worse in a hurry. Make it a great day and a better weekend.
Friday, July 31, 2015
Thursday, July 30, 2015
Mortgage Bond Market Analysis - Jobless Claims Thursday
We've got more disappointing data, though not too bad and we still don't have any real direction in the market. The market improved slightly yesterday after the Fed's interest rate announcement; after being down 19 basis points or so, the benchmark bond closed down 8 basis points. This morning, GDP came in at 2.3% vs. consensus estimates of 2.5%. Jobless claims came in at 267K vs. estimates of 272K - better than expected but worse than last weeks numbers by 12K.
The FNMA benchmark bond is currently 22 basis points off it's low and 6 basis points down from its high for the day, it's up 5 basis points at 103.36 - 9 basis points above the 1st level of resistance. The RSI shows that the bond is still right at the overbought threshold but there still seems to be a positive bias in favor of bond buying considering weak economic data and the concerns regarding China's market and Greece. Like I have mentioned throughout the week, I would float and see if more gains can be on their way but, like always, keep a watchful eye on the market so that you can react fast in case of any sudden selling in the mortgage bond market.
Feel free to contact me if I can help with anything mortgage-related. Make it a great day.
The FNMA benchmark bond is currently 22 basis points off it's low and 6 basis points down from its high for the day, it's up 5 basis points at 103.36 - 9 basis points above the 1st level of resistance. The RSI shows that the bond is still right at the overbought threshold but there still seems to be a positive bias in favor of bond buying considering weak economic data and the concerns regarding China's market and Greece. Like I have mentioned throughout the week, I would float and see if more gains can be on their way but, like always, keep a watchful eye on the market so that you can react fast in case of any sudden selling in the mortgage bond market.
Feel free to contact me if I can help with anything mortgage-related. Make it a great day.
Wednesday, July 29, 2015
Mortgage Bond Market Analysis - Interest Rate Decision Hump Day
It's not just your average Hump Day when the Fed is set to announce their interest rate decision. Yesterday the Case-Schiller Home Price index came in lower than expected at 4.9% vs. 5.6% expected. This isn't a huge factor in bond pricing. The bigger factor yesterday was that traders were taking some chips off the table in advance of today's Fed Interest Rate Decision, especially since the RSI was extremely overbought.
This morning, Pending Home Sales came in at -1.8 vs. expectations of +1.0%. Here is one analyst's take on this: "The miss is due to very tight inventory and higher prices which is a good problem to have as it is not due to a pull back in demand." This statement is a bit funny to me because while inventory is tight, there is no data that tells us why it's tight: maybe people just don't want to move so there's no reason to sell their house or perhaps people see the market moving higher so they are waiting a bit to get more out of their house (which is another issue because they are just going to pay more for the house they will buy after they sell theirs - unless they have the ability to buy now AND hold on to their current home). The other part of this statement that is even more non-sensical is where he says it's due to higher prices and not necessarily a pullback in demand. I think that most of us understand the pricing cycle and that prices go up to a point where people are no longer willing to pay that price and they stop buying, or it slows significantly. This point is the tipping point. Have we reached it yet? who knows. If there were more inventory there would be more competition and prices would probably be a bit lower so that more people would probably be buying. It's simple economics. The point is that the higher prices might be the exact cause as to why pending home sales are down and there is a pull back in demand. If more inventory comes to market, we may see home prices decrease a bit and sales tick up.
Anyway, the big news for today going forward is the Fed Interest Rate Decision. No one expects the Fed to raise rates today but what everyone, especially bond traders, is looking for is a clue as to when they will raise rates. The popular belief among economists is that the Fed will probably start raising rates in September. It appears that an increasing number of bond investors are thinking it may not happen until later this year or possibly 2016. The Fed Raises rates to slow growth in the economy so that it doesn't get overheated and lead to high inflation. Commodity prices are extremely low and that means that the goods produced from these commodities will have a lower cost. Additionally, the cost of shipping these goods will also be lower with the low cost of oil. With low costs, inflation will remain low and the Fed won't have a reason to raise rates. The Fed also doesn't want to raise rates if economic growth is still tenuous. All of the angst and drama from the curiosity will end around 2:15 EDT this afternoon. For now, the FNMA benchmark bond is down 15 basis points after being down 9 basis points yesterday. The RSI is still overbought but it's right at the threshold instead of significantly above it like it was Monday afternoon and early yesterday morning. More significantly, the GNMA (FHA and VA) is down 31 basis points. You can lock before the Fed interest rate announcement if you want to be safe. My guess, and I could be totally wrong, is that we won't get a whole lot of meat on the bond from the announcement this afternoon and traders will still be guessing as to when they will raise rates and we'll probably see a bit of buying after the announcement which will push bond prices higher and rates a bit lower.
I'll try to post an update later this afternoon on my facebook page but it won't be until mid to late afternoon. If you want to see what happened with the decision, check out The Wunderli Team facebook page. For now, make it a great day and feel free to call me if I can help with anything mortgage-related - 702-812-1214.
This morning, Pending Home Sales came in at -1.8 vs. expectations of +1.0%. Here is one analyst's take on this: "The miss is due to very tight inventory and higher prices which is a good problem to have as it is not due to a pull back in demand." This statement is a bit funny to me because while inventory is tight, there is no data that tells us why it's tight: maybe people just don't want to move so there's no reason to sell their house or perhaps people see the market moving higher so they are waiting a bit to get more out of their house (which is another issue because they are just going to pay more for the house they will buy after they sell theirs - unless they have the ability to buy now AND hold on to their current home). The other part of this statement that is even more non-sensical is where he says it's due to higher prices and not necessarily a pullback in demand. I think that most of us understand the pricing cycle and that prices go up to a point where people are no longer willing to pay that price and they stop buying, or it slows significantly. This point is the tipping point. Have we reached it yet? who knows. If there were more inventory there would be more competition and prices would probably be a bit lower so that more people would probably be buying. It's simple economics. The point is that the higher prices might be the exact cause as to why pending home sales are down and there is a pull back in demand. If more inventory comes to market, we may see home prices decrease a bit and sales tick up.
Anyway, the big news for today going forward is the Fed Interest Rate Decision. No one expects the Fed to raise rates today but what everyone, especially bond traders, is looking for is a clue as to when they will raise rates. The popular belief among economists is that the Fed will probably start raising rates in September. It appears that an increasing number of bond investors are thinking it may not happen until later this year or possibly 2016. The Fed Raises rates to slow growth in the economy so that it doesn't get overheated and lead to high inflation. Commodity prices are extremely low and that means that the goods produced from these commodities will have a lower cost. Additionally, the cost of shipping these goods will also be lower with the low cost of oil. With low costs, inflation will remain low and the Fed won't have a reason to raise rates. The Fed also doesn't want to raise rates if economic growth is still tenuous. All of the angst and drama from the curiosity will end around 2:15 EDT this afternoon. For now, the FNMA benchmark bond is down 15 basis points after being down 9 basis points yesterday. The RSI is still overbought but it's right at the threshold instead of significantly above it like it was Monday afternoon and early yesterday morning. More significantly, the GNMA (FHA and VA) is down 31 basis points. You can lock before the Fed interest rate announcement if you want to be safe. My guess, and I could be totally wrong, is that we won't get a whole lot of meat on the bond from the announcement this afternoon and traders will still be guessing as to when they will raise rates and we'll probably see a bit of buying after the announcement which will push bond prices higher and rates a bit lower.
I'll try to post an update later this afternoon on my facebook page but it won't be until mid to late afternoon. If you want to see what happened with the decision, check out The Wunderli Team facebook page. For now, make it a great day and feel free to call me if I can help with anything mortgage-related - 702-812-1214.
Monday, July 27, 2015
Mortgage Bond Market Analysis - Maniac Monday and a SPECIAL video
Happy Monday - at least for those who aren't heavily invested in the Chinese stock market. The 8.5% decline in the Chinese stock market got things off to a good start for the mortgage bond market but when Durable Goods Orders came in at 3.4 vs. expectations of 3.0 and previous of -2.2 and the numbers ex-transportation were .8 vs. expectations of .5 and previous of -.1, the bond market did an about-face and sold off a bit. The FNMA benchmark bond is currently up 13 basis points which is 8 basis points off its high for the day. The RSI is greatly overbought so from a technical standpoint, traders may decide to sell off and take some profits. That said, there has been a lot of soft data recently, today's data not withstanding, along with some things around the world that are supporting higher bond prices - like China's sell-off.
Commodity prices are much lower since the last Fed meeting which would suggest that inflation probably won't be getting up to the 2.0% target anytime soon. When you couple this with mixed data and uncertainty in Greece (among other places in the world) then it will be hard for the Fed to spin the need to start increasing the Fed Funds rate sooner rather than later. We have the Case-Schiller Home Price Indices tomorrow and Pending Home Sales and Consumer Confidence on Wednesday which is capped off by the interest rate announcement from the Fed at about 2:15 EDT on Wednesday. I would probably float through the announcement because there is a fair chance that the bond market might find more reason to buy bonds, pushing prices up and rates lower. As I always say, if you are going to float, watch the market closely so that you can react quickly if there is a sudden move for the worse.
Completely off topic: While browsing through my newsfeed on facebook this morning, I came across this video. It's short, about 1:20ish, but it is very inspirational and just a great feel-good video. I hope you enjoy it and that it touches you the way it touched me: Kids sing song for teacher with breast cancer.
Make it a great day and feel free to call me if I can help with anything mortgage-related - 702-812-1214.
Commodity prices are much lower since the last Fed meeting which would suggest that inflation probably won't be getting up to the 2.0% target anytime soon. When you couple this with mixed data and uncertainty in Greece (among other places in the world) then it will be hard for the Fed to spin the need to start increasing the Fed Funds rate sooner rather than later. We have the Case-Schiller Home Price Indices tomorrow and Pending Home Sales and Consumer Confidence on Wednesday which is capped off by the interest rate announcement from the Fed at about 2:15 EDT on Wednesday. I would probably float through the announcement because there is a fair chance that the bond market might find more reason to buy bonds, pushing prices up and rates lower. As I always say, if you are going to float, watch the market closely so that you can react quickly if there is a sudden move for the worse.
Completely off topic: While browsing through my newsfeed on facebook this morning, I came across this video. It's short, about 1:20ish, but it is very inspirational and just a great feel-good video. I hope you enjoy it and that it touches you the way it touched me: Kids sing song for teacher with breast cancer.
Make it a great day and feel free to call me if I can help with anything mortgage-related - 702-812-1214.
Friday, July 24, 2015
Mortgage Bond Market Analysis - All (Relatively) Quiet on the Mortgage Bond Front
IT'S FRIDAY!! That's a good thing for those who have normal weekends. For Realtors and loan officers, work rarely stops. Yesterday there were two data points that came in above expectations and instead of selling off, investors bought bonds and rates improved. Today must be opposite day because New Home Sales, expected to come in at 550K, came in at 482K which was also down from last month's 546K and there is a slight sell-off in mortgage bonds which means rates are creeping up, if ever so slightly.
The FOMC meets on Tuesday so with no more data today I expect little to no volatility in the bond market until traders can get a better idea of what the Fed is thinking. The Greek Parliament approved the austerity measures that their prime minister worked out with creditors. This makes Greece eligible for loans from the IMF. The problem now is that the IMF will not put the other 187 member nations at risk until the Euro nations significantly ease the terms on Greece's existing loans. Germany has been against any debt relief to this point so while there is progress, there is still no resolution until more concessions are made.
There is potential for a breakout from our narrow trading range with either something substantive from the Fed after their FOMC meeting next week or a true resolution to the Greece debt issue. I wouldn't worry about locking until Monday sometime, probably even Tuesday. At the latest, you may want to lock by Wednesday morning - the Fed interest rate decision comes out at 11:15 a.m. PDT on Wednesday.
On the data docket for next week: We had four data points this week - very light. Monday starts off the data week with Durable Goods Orders - this could have some influence on mortgage bonds, but probably not too much. Tuesday is the Case-Schiller Home Price Index - influence factor on mortgage bonds is likely to be minimal. Wednesday brings Consumer Confidence, Pending Home Sales and the biggie - the Fed Interest Rate Decision. Thursday is Jobless Claims (as always) and Gross Domestic Purchase Price Index. Finally on Friday we will see the bi-weekly Michigan Consumer Sentiment Index and the Chicago Purchasing Managers' Index (this could definitely influence the mortgage bond market and interest rates). I should mention that the FNMA benchmark bond is currently down 3 basis points (no biggie) at 103.31 - 4 basis points above the 1st level of resistance.
I'm available today and over the weekend to provide pre-approvals if you need one. I would like to see the last two years of tax returns and W-2s / 1099s as well as the most recent 30 days of pay stubs and 2 months of bank statements (all pages) so that I can provide you with a legitimate approval. Feel free to call me at 702-812-1214 if I can help in any way. Make it a great day and a better weekend.
The FOMC meets on Tuesday so with no more data today I expect little to no volatility in the bond market until traders can get a better idea of what the Fed is thinking. The Greek Parliament approved the austerity measures that their prime minister worked out with creditors. This makes Greece eligible for loans from the IMF. The problem now is that the IMF will not put the other 187 member nations at risk until the Euro nations significantly ease the terms on Greece's existing loans. Germany has been against any debt relief to this point so while there is progress, there is still no resolution until more concessions are made.
There is potential for a breakout from our narrow trading range with either something substantive from the Fed after their FOMC meeting next week or a true resolution to the Greece debt issue. I wouldn't worry about locking until Monday sometime, probably even Tuesday. At the latest, you may want to lock by Wednesday morning - the Fed interest rate decision comes out at 11:15 a.m. PDT on Wednesday.
On the data docket for next week: We had four data points this week - very light. Monday starts off the data week with Durable Goods Orders - this could have some influence on mortgage bonds, but probably not too much. Tuesday is the Case-Schiller Home Price Index - influence factor on mortgage bonds is likely to be minimal. Wednesday brings Consumer Confidence, Pending Home Sales and the biggie - the Fed Interest Rate Decision. Thursday is Jobless Claims (as always) and Gross Domestic Purchase Price Index. Finally on Friday we will see the bi-weekly Michigan Consumer Sentiment Index and the Chicago Purchasing Managers' Index (this could definitely influence the mortgage bond market and interest rates). I should mention that the FNMA benchmark bond is currently down 3 basis points (no biggie) at 103.31 - 4 basis points above the 1st level of resistance.
I'm available today and over the weekend to provide pre-approvals if you need one. I would like to see the last two years of tax returns and W-2s / 1099s as well as the most recent 30 days of pay stubs and 2 months of bank statements (all pages) so that I can provide you with a legitimate approval. Feel free to call me at 702-812-1214 if I can help in any way. Make it a great day and a better weekend.
Thursday, July 23, 2015
Mortgage Bond Market Analysis - Jobless Claims Thursday
Good morning and happy 2nd to last day of the (traditional) work week. The two data points blew away expectations this morning like Wile E. Coyote used to do to himself on the Looney Tunes Saturday morning cartoons in his never ending pursuit of the Road Runner. With expectations of 278K, jobless claims came in much lower at 255K (this is one time where lower is good for the economy). Leading economic indicators were expected in at .2 and they tripled that, coming in at .6 (did I just state the obvious when I said that expectations of .2 were tripled?).
With this much-better-than-expected news, the benchmark bond is getting a proverbial butt-whooping, right? Did you look ahead at the pretty chart? If you did, you would see that the bond is down, but only by 3 basis points at the time I took the snapshot of the chart. I think traders are looking for bigger news (or they are all on vacation) to commit one way or the other. Over the last five days the FNMA benchmark bond is trading in a very narrow range of 45 basis points. Here's the chart (that you probably already looked at):
If you look at the bottom right corner you will notice that the last five days of trading is not very volatile which is why the range is so narrow. The one thing that has changed is that the RSI is now very close to oversold even though the benchmark bond is only 79 basis points above the recent low of 10 days ago. Here's a look at the RSI:
With this much-better-than-expected news, the benchmark bond is getting a proverbial butt-whooping, right? Did you look ahead at the pretty chart? If you did, you would see that the bond is down, but only by 3 basis points at the time I took the snapshot of the chart. I think traders are looking for bigger news (or they are all on vacation) to commit one way or the other. Over the last five days the FNMA benchmark bond is trading in a very narrow range of 45 basis points. Here's the chart (that you probably already looked at):
If you look at the bottom right corner you will notice that the last five days of trading is not very volatile which is why the range is so narrow. The one thing that has changed is that the RSI is now very close to oversold even though the benchmark bond is only 79 basis points above the recent low of 10 days ago. Here's a look at the RSI:
If you or a client has a loan closing 15+ days out, I would probably float (DISCLAIMER: keep a close eye on the bond market so that you can be ready to lock quickly if the market moves against you). The benchmark bond is also currently trading about in the middle of the resistance and support levels and with the good data this morning, I would expect that if it made a move, it would be down toward the support. That said, traders seem to be waiting for something bigger. Rates are great so locking now isn't a bad thing. Feel free to contact me if I can help in any way - 702-812-1214. Make it a great day.
Wednesday, July 22, 2015
Mortgage Bond Market Analysis - Happy Hump Day
It's Hump Day and it's also the first day of the week for any economic data. Existing Home Sales were released today and they came in slightly above expectations at 5.49 mil vs. 5.40. This isn't having much impact on mortgage bonds / interest rates, possibly because of the decline in tech stocks with somewhat disappointing earnings from Apple.
The benchmark bond has traded in a very narrow range throughout the week with nothing big happening to justify any large moves. The FNMA bond closed down 9 basis points on Monday and was up 23 basis points yesterday. It is currently up 12 basis points, 3 off the high for the day and 19 above the low. The 1st level of resistance is now at 103.27 with the current bond price at 103.25 and trying to break through.
Tomorrow we will get Jobless Claims, expectations of 278K vs. previous of 281K, and Leading Economic Indicators which are estimated to come in at .2 vs. previous of .7. I think it's safe to float into tomorrow with so little data and the expectations for it to be weak. As always, make sure you have your eye on the market and can be ready to act should there be any big sudden moves - especially if the bonds start to sell off, pushing rates higher. Thanks for reading - please share this with your friends and clients and subscribe. Feel free to contact me if I can help with anything mortgage-related - 702-812-1214. Make it a great day.
The benchmark bond has traded in a very narrow range throughout the week with nothing big happening to justify any large moves. The FNMA bond closed down 9 basis points on Monday and was up 23 basis points yesterday. It is currently up 12 basis points, 3 off the high for the day and 19 above the low. The 1st level of resistance is now at 103.27 with the current bond price at 103.25 and trying to break through.
Tomorrow we will get Jobless Claims, expectations of 278K vs. previous of 281K, and Leading Economic Indicators which are estimated to come in at .2 vs. previous of .7. I think it's safe to float into tomorrow with so little data and the expectations for it to be weak. As always, make sure you have your eye on the market and can be ready to act should there be any big sudden moves - especially if the bonds start to sell off, pushing rates higher. Thanks for reading - please share this with your friends and clients and subscribe. Feel free to contact me if I can help with anything mortgage-related - 702-812-1214. Make it a great day.
Tuesday, July 21, 2015
Mortgage Bond Market Analysis - No Data and Two-Chart Tuesday
It's Tuesday and it's the 2nd day in a row with no economic data. Not much is going on around the world either relative to moving bonds one way or the other. Yesterday, the benchmark bond finished down 9 basis points and this morning the bond has 28 basis points off its low to its current level of +14 basis points on the day - 2 basis points below the 1st resistance level.
There is a rather odd thing that's happened as far as technical analysis for the benchmark mortgage bond is concerned: the RSI has trended down over the last few days in spite of a little rally (except for yesterday). This isn't necessarily huge because this has happened over the last four days where the bond has been up 3 of the 4 days albeit a paltry 18 basis points. That said, the RSI has gone from a reading of about 55 (70 is overbought) to a reading of about 40. If this sticks, it would be an indication that traders may be looking buy more bonds. I wouldn't read too much into this because the move has been so small, but you may want to tuck this away in the back of your mind.
Here's a peek at the chart:
Here's a look at the chart with the RSI (Relative Strength Indicator):
There is a rather odd thing that's happened as far as technical analysis for the benchmark mortgage bond is concerned: the RSI has trended down over the last few days in spite of a little rally (except for yesterday). This isn't necessarily huge because this has happened over the last four days where the bond has been up 3 of the 4 days albeit a paltry 18 basis points. That said, the RSI has gone from a reading of about 55 (70 is overbought) to a reading of about 40. If this sticks, it would be an indication that traders may be looking buy more bonds. I wouldn't read too much into this because the move has been so small, but you may want to tuck this away in the back of your mind.
Here's a peek at the chart:
Here's a look at the chart with the RSI (Relative Strength Indicator):
Tomorrow brings us our first data point for the week in Existing Home Sales. Thursday is Jobless Claims and Leading Economic Indicators (which are expected to be weaker than last month). Friday we get New Home Sales. I would float right now if my loan wasn't closing for 15+ days. I would also watch the market very closely so that if things did turn, I could lock quickly, perhaps before a reprice. Feel free to call me if I can help with anything mortgage-related: 702-812-1214. Make it a great day.
Friday, July 17, 2015
Short Survey and Mortgage Bond Market Analysis
TGIF. It's that time of week (almost party time - at least for some). Before you get started let me provide you with a few bits of info regarding the data that was released this morning: The CPI, both headline and core, came in exactly as expected and shows a little inflation. Housing starts came in at 1174, somewhat above the expectations of 1123. The whopper with extra cheese is the Building Permits which was expected at 1150 but destroyed expectations by coming in at 1343, also substantially higher than last month's reading of 1250. The only disappointing reading was the Michigan Consumer Sentiment Index which was still strong at 93.3 but a fair amount below expectations of 96.5.
I would very much appreciate it if you would take a minute or two to complete this survey for me so that I can know how to serve you best. Thanks for your time and make it a great day and a better weekend.
https://docs.google.com/forms/d/1GDUaB6kTWNONPcepBVftMvH4ca0BZS4mCCXN5I9ozpE/viewform?usp=send_form
I would very much appreciate it if you would take a minute or two to complete this survey for me so that I can know how to serve you best. Thanks for your time and make it a great day and a better weekend.
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Thursday, July 16, 2015
Mortgage Bond Market Analysis - Jobless Claims Thursday
It's Jobless Claims Thursday but there is a whole lot more going on than just that. The Greek parliament voted to accept the austerity measurers which means a 3rd bailout is likely. There are a few minor hurdles to clear but Greece will likely get a bridge loan of about 7 billion euros which will allow them to make a 3.5 billion euro payment to the ECB and it will allow the Greek banks to re-open. The EU is working on safeguards to shield non euro nations from Greek bailout risk.
On the home front, SURPRISE, there is more mixed data. After a 16k increase in jobless claims last week, the expectations for 285k were beaten by 4k, coming in at 281k. This is still a pretty high number of claims but below the threshold of 300k which is considered a strong point between a "good" economy and a weak one. Of much more concern is the Philly Fed Manufacturing Survey which is about as bad as the Philadelphia 76ers, coming in at a dismal 5.7 vs. expectations of 12 (at least 76ers fans didn't expect too much out of there team) and previous of 15.2. This recovery still has a long way to go. On a side note, it's important not to be fooled by the unemployment numbers we see - the last reading was 5.3%. The reason why I say this is because the Workforce Participation Rate is extremely low at 62.9% which is a huge contributing factor to a lowering unemployment reading. A lot of people who have quit looking for jobs aren't included in the unemployment rate, which really should probably be somewhere between 10-12%. That said, perception is reality and as long as people are buying what they are being sold, rates will do what they do based on the traders who are buying or selling bonds according to the economic data (as well as the happenings around the world).
Here's a look at the chart:
On docket for tomorrow: Look for more resolution regarding the Greek situation although I don't expect that to have a huge impact on bond prices since the 3rd bailout is probably already all priced into the market. There are a number of data points coming out tomorrow and some will likely be mixed: on the one hand, look for housing starts to beat last month's numbers (who knows what it will do vs. expectations) but look for building permits to come in well below last month's. The CPI is also released tomorrow and it appears that it probably won't be quite as inflationary as the PPI but the PPI leads the CPI so that is to be expected. Finally, the University of Michigan's Consumer Confidence Index is expected to be slightly higher than the last reading resulting in a disconnect from the most recent consumer spending numbers that were weaker the last time around. I would probably play it safe and lock rates ahead of tomorrow's data and take advantage of the little run we have had over the last two days. Feel free to call me if I can help with anything mortgage-related - 702-812-1214. Make it a great day.
On the home front, SURPRISE, there is more mixed data. After a 16k increase in jobless claims last week, the expectations for 285k were beaten by 4k, coming in at 281k. This is still a pretty high number of claims but below the threshold of 300k which is considered a strong point between a "good" economy and a weak one. Of much more concern is the Philly Fed Manufacturing Survey which is about as bad as the Philadelphia 76ers, coming in at a dismal 5.7 vs. expectations of 12 (at least 76ers fans didn't expect too much out of there team) and previous of 15.2. This recovery still has a long way to go. On a side note, it's important not to be fooled by the unemployment numbers we see - the last reading was 5.3%. The reason why I say this is because the Workforce Participation Rate is extremely low at 62.9% which is a huge contributing factor to a lowering unemployment reading. A lot of people who have quit looking for jobs aren't included in the unemployment rate, which really should probably be somewhere between 10-12%. That said, perception is reality and as long as people are buying what they are being sold, rates will do what they do based on the traders who are buying or selling bonds according to the economic data (as well as the happenings around the world).
Here's a look at the chart:
On docket for tomorrow: Look for more resolution regarding the Greek situation although I don't expect that to have a huge impact on bond prices since the 3rd bailout is probably already all priced into the market. There are a number of data points coming out tomorrow and some will likely be mixed: on the one hand, look for housing starts to beat last month's numbers (who knows what it will do vs. expectations) but look for building permits to come in well below last month's. The CPI is also released tomorrow and it appears that it probably won't be quite as inflationary as the PPI but the PPI leads the CPI so that is to be expected. Finally, the University of Michigan's Consumer Confidence Index is expected to be slightly higher than the last reading resulting in a disconnect from the most recent consumer spending numbers that were weaker the last time around. I would probably play it safe and lock rates ahead of tomorrow's data and take advantage of the little run we have had over the last two days. Feel free to call me if I can help with anything mortgage-related - 702-812-1214. Make it a great day.
Wednesday, July 15, 2015
Mortgage Bond Market Analysis - Hump Day Edition
We made it!! We are virtually half way through the week (maybe more, depending on when you are reading this. Well the big news for today has yet to occur - the vote by the Greek parliament is expected later today and I believe the traders are waiting for that to make a definitive move.
This morning we got the June PPI numbers and they were higher than expected with the PPI ex-food and energy coming in at .3 vs. .1. Annualized, this number is higher than the Fed's target inflation rate of 2.0 (it's 3.6). This is typically negative for bonds and would usually cause a sell-off pushing rates higher but bond are actually up slightly this morning in spite of the fact that Industrial Production was also better than expected (.2) at .3 and the NY Manufacturing index beat expectations of 3.5, coming in at 3.86. In spite of all of the data that is negative for pricing, bonds are up a bit this morning and it's probably due to the remarks of Janet Yellen which were very tempered and soothing when she said “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal-funds rate target, thereby beginning to normalize the stance of monetary policy.”
Here's a look at the chart:
I would be safe and lock ahead of the Greek vote. Assuming your lender has a float-down option (like I do), then you can take advantage of it if rates improve. Feel free to contact me for anything mortgage-related: 702-812-1214. Make it a great day.
This morning we got the June PPI numbers and they were higher than expected with the PPI ex-food and energy coming in at .3 vs. .1. Annualized, this number is higher than the Fed's target inflation rate of 2.0 (it's 3.6). This is typically negative for bonds and would usually cause a sell-off pushing rates higher but bond are actually up slightly this morning in spite of the fact that Industrial Production was also better than expected (.2) at .3 and the NY Manufacturing index beat expectations of 3.5, coming in at 3.86. In spite of all of the data that is negative for pricing, bonds are up a bit this morning and it's probably due to the remarks of Janet Yellen which were very tempered and soothing when she said “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal-funds rate target, thereby beginning to normalize the stance of monetary policy.”
Here's a look at the chart:
I would be safe and lock ahead of the Greek vote. Assuming your lender has a float-down option (like I do), then you can take advantage of it if rates improve. Feel free to contact me for anything mortgage-related: 702-812-1214. Make it a great day.
Monday, July 13, 2015
Mortgage Bond Market Analysis - Monday Morning SLAM
I hope your weekend was better than what the bond market has been doing over the last three days. Beginning with an old-fashioned beat-down last Thursday, the market is in day three of a down-turn that has wiped out the gains of the previous 4 days. Over those 4 days we saw 120 basis points of which is a bit more than .25% in rate. The last 3 days has seen a sell-off of 127 basis point to our current level of 102.35. The silver lining in the dark cloud is that the FNMA benchmark bond is taking the brunt of the hit - down 42 basis points so far this morning - while the GNMA bond (thought to be a safer investment since it's backed by the government) is only down 1 basis point. Another small silver lining is that the FNMA bond is 23 basis points off its morning low. Here's a snapshot of the chart:
The FNMA benchmark bond is now below the 1st level of resistance (102.42) by 7 basis points at 102.35. Providing fuel to the fire is the fact that it looks like Greece is getting another bailout and making more promises to repay their debt. Over the weekend, EU leaders agreed to give (lend) Greece 86 billion euros ($96 billion) which is dependent upon Greece accepting an increase in austerity cuts which its citizens voted against last week. The other thing to keep in mind is that Greece is in a recession and more cuts may send it deeper into a recession.
This saga isn't over because they still need to vote and there's certainly no guarantee that they make any payments - they've defaulted so far. There are other geo-political things that could influence the markets including the Iran nuclear deal. Stateside, we continue to see mixed data and even though some of the more prominent data is looking better, data that's a bit less public like the workforce participation rate (a datapoint that I think is at least as important as the unemployment rate) shows that our economic recovery has a long way to go. As I said last wee before the down-turn, if you are going to float, do so with caution and be ready to lock at a moment's notice. With as much sell-off as we've had over the past few days (the RSI is getting close to oversold), we may see a respite so floating (cautiously) may be a good thing but if things continue to improve for Greece, you will need to lock quickly. Feel free to call me (702-812-1214) if I can help with anything mortgage-related. Make it a great day.
The FNMA benchmark bond is now below the 1st level of resistance (102.42) by 7 basis points at 102.35. Providing fuel to the fire is the fact that it looks like Greece is getting another bailout and making more promises to repay their debt. Over the weekend, EU leaders agreed to give (lend) Greece 86 billion euros ($96 billion) which is dependent upon Greece accepting an increase in austerity cuts which its citizens voted against last week. The other thing to keep in mind is that Greece is in a recession and more cuts may send it deeper into a recession.
This saga isn't over because they still need to vote and there's certainly no guarantee that they make any payments - they've defaulted so far. There are other geo-political things that could influence the markets including the Iran nuclear deal. Stateside, we continue to see mixed data and even though some of the more prominent data is looking better, data that's a bit less public like the workforce participation rate (a datapoint that I think is at least as important as the unemployment rate) shows that our economic recovery has a long way to go. As I said last wee before the down-turn, if you are going to float, do so with caution and be ready to lock at a moment's notice. With as much sell-off as we've had over the past few days (the RSI is getting close to oversold), we may see a respite so floating (cautiously) may be a good thing but if things continue to improve for Greece, you will need to lock quickly. Feel free to call me (702-812-1214) if I can help with anything mortgage-related. Make it a great day.
Wednesday, July 8, 2015
Mortgage Bond Market Analysis - Hump Day Edition
It's already Hump Day and the winning streak continues. For a 4th day in a row, the FNMA benchmark bond is up - not much and it's early so keep a close eye on it. Yesterday it was up 15 basis points (good) but closed 39 basis points off its high (bad). It broke through the 2nd resistance level briefly before getting beaten back badly. If you decide to float, be judicious in watching the benchmark bond. The Fed Minutes will be released this afternoon at 2:00 pm EDT. There is also a 10-year treasury auction at 1:00 pm EDT and depending on how well that is absorbed into the market, there could be some sell-off in bonds.
There are a couple of other things stateside to keep an eye on this week. Tomorrow brings the weekly jobless claims which can move the market if it's a big enough miss one way or the other and on Friday, Janet Yellen is speaking at 12:00 pm EDT (we also have wholesale inventories in the morning and that could impact mortgage bonds but the focus will be on what Ms. Yellen says). Here's a look at the chart:
The RSI is close to overbought and with the recent moves higher, bond traders may decide to sell and take some profits. The elephant in the room is Greece and China - we are still waiting to see what happens with Greece and with the big sell-off in China's stock market, I'm sure investors are curious about what the repercussions will be from one of the biggest investors in US bonds. If you float, do so with caution. After a move like we've had over the last 4 days, I'd probably be happy locking in the gains. Make today great.
There are a couple of other things stateside to keep an eye on this week. Tomorrow brings the weekly jobless claims which can move the market if it's a big enough miss one way or the other and on Friday, Janet Yellen is speaking at 12:00 pm EDT (we also have wholesale inventories in the morning and that could impact mortgage bonds but the focus will be on what Ms. Yellen says). Here's a look at the chart:
The RSI is close to overbought and with the recent moves higher, bond traders may decide to sell and take some profits. The elephant in the room is Greece and China - we are still waiting to see what happens with Greece and with the big sell-off in China's stock market, I'm sure investors are curious about what the repercussions will be from one of the biggest investors in US bonds. If you float, do so with caution. After a move like we've had over the last 4 days, I'd probably be happy locking in the gains. Make today great.
Tuesday, July 7, 2015
Mortgage Bond Market Analysis - China stealing the spotlight from Greece?
I've been away for a few days on a brief family vacation to celebrate my in-laws' 50th wedding anniversary. While I was gone, the bond market continued it's recovery yesterday and this morning with some more help from around the world. Greece continued to be the word last Thursday and yesterday after the Sunday vote showed the world that the citizens of Greece aren't long for paying their debt. Today is more about China's stock market's big sell-off of about 40% - where's that money going? You guessed: to the safe-haven of bonds, including mortgage backed securities.
The benchmark bond has sold off from this morning's highs and is currently 36 basis points off its intraday high. The RSI is approaching overbought but that may not matter if the bond can get a bit of traction and end the day with a rally since Greece and China are providing reasons for traders to seek the safe havens of bonds. Here's a look at the chart:
I would float with caution, but I would pay special attention to what the bond does to finish the day. I would also make sure to watch the market closely so that you can lock ahead of any re-prices should the market turn tomorrow if traders decide to consolidate some profits. Feel free to call me if I can help with anything mortgage-related: 702-812-1214. Make it a great day.
The benchmark bond has sold off from this morning's highs and is currently 36 basis points off its intraday high. The RSI is approaching overbought but that may not matter if the bond can get a bit of traction and end the day with a rally since Greece and China are providing reasons for traders to seek the safe havens of bonds. Here's a look at the chart:
I would float with caution, but I would pay special attention to what the bond does to finish the day. I would also make sure to watch the market closely so that you can lock ahead of any re-prices should the market turn tomorrow if traders decide to consolidate some profits. Feel free to call me if I can help with anything mortgage-related: 702-812-1214. Make it a great day.
Wednesday, July 1, 2015
Mortgage Bond Market Analysis - Jobs week
If you have followed my blog for very long, you know that the first week of the month brings a bevy of jobs data. The ADP private payrolls report came out today and it beat expectations by 17K coming in at 237K. Two other data points also came in stronger than expected with construction spending coming in at .8 vs. .3 expected and ISM Manufacturing coming in at 53.5 vs. 53.2 expected. These three data points are all putting pressure on the bond markets with traders selling and driving rates / yields higher.
The impetus that got things going this morning is...(drum roll, please)...wait for it...GREECE. In a letter to their creditors, Greece is showing signs of acquiescing by saying they are willing to make some concessions. This increases the hope for a resolution and stability and decreases the need for the "flight to quality / safety." Currently the benchmark mortgage bonds are down 39 basis points for the FNMA and 24 points for the GNMA (FHA and VA). The last couple of days, the FNMA benchmark bond tested the 2nd level of resistance of 102.92 and was stymied each time. At its current price of 102.53, it is now 15 basis points below the 1st level of resistance. The RSI is also getting close to being oversold but that matters much less than the situation in Greece and the economic data points. Here's a look at the chart:
Tomorrow will bring the unemployment rate (a day early because of the holiday) and weekly jobless claims. I'm guessing it will also bring non-farm payrolls (which would also be a day early) but I haven't yet confirmed that. Either way, these are more reports that could help continue today's sell-off. If you haven't locked, you may want to ahead of tomorrow's data. I will be on a short family vacation beginning tomorrow for my in-laws' 50th wedding anniversary so I won't be reporting on the data. Feel free to call me as I will have access to it in my travels - 702-812-1214. Make it a great day and a better holiday weekend. Have a happy and safe 4th of July / Independence Day.
The impetus that got things going this morning is...(drum roll, please)...wait for it...GREECE. In a letter to their creditors, Greece is showing signs of acquiescing by saying they are willing to make some concessions. This increases the hope for a resolution and stability and decreases the need for the "flight to quality / safety." Currently the benchmark mortgage bonds are down 39 basis points for the FNMA and 24 points for the GNMA (FHA and VA). The last couple of days, the FNMA benchmark bond tested the 2nd level of resistance of 102.92 and was stymied each time. At its current price of 102.53, it is now 15 basis points below the 1st level of resistance. The RSI is also getting close to being oversold but that matters much less than the situation in Greece and the economic data points. Here's a look at the chart:
Tomorrow will bring the unemployment rate (a day early because of the holiday) and weekly jobless claims. I'm guessing it will also bring non-farm payrolls (which would also be a day early) but I haven't yet confirmed that. Either way, these are more reports that could help continue today's sell-off. If you haven't locked, you may want to ahead of tomorrow's data. I will be on a short family vacation beginning tomorrow for my in-laws' 50th wedding anniversary so I won't be reporting on the data. Feel free to call me as I will have access to it in my travels - 702-812-1214. Make it a great day and a better holiday weekend. Have a happy and safe 4th of July / Independence Day.
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