Search This Blog

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.

No comments: