Search This Blog

Monday, August 31, 2015

Mortgage Bond Market Analysis - West Side Story edition

Having grown up in Stamford, CT, I got the opportunity to see a number of Broadway plays.  One of my favorite plays was Westside Story.  Ultimately it's a love story but for me when I was young and just wanted to see some action, I liked it for the fight scenes between the two gangs, the Sharks and the Jets.  The Federal Open Market Committee (FOMC) reminds me a bit of that with the Hawks and the Doves.  The doves are the members of the Fed who are cautious about raising rates since they aren't sure the economy is strong enough to justify it.  The hawks, on the other hand, think the economy is showing plenty of strength and wants to raise the rates to stem inflation.

On Friday I wrote that there were some Fed members who said a rate increase in September is highly unlikely - the members who said this were doves and they said this on Thursday or before.  Friday afternoon, there were a couple of hawks (Mester and Bullard) who said that they believe a rate hike s justified in September - mostly because of the 2nd reading of the GDP which was much higher than expected at 3.7%.  These members are alternate members and don't vote.  It should also be noted that the voting members of the Fed currently lean much more toward the dove side than the hawk side.  

Sharks vs. Jets, Part Two.  The common belief is that mortgage rates will go up as soon as the Fed starts raising the Fed Funds Rate.  But that is not likely to happen, immediately anyway, and here's why.  The stock market as done really well over the last few years because of the various stimulus programs that have been in place including the Fed's Quantitative Easing programs and their policy of low rates.  This has made bonds unattractive as an investment because of their extremely low yields which has meant a lot more cash flowing into the stock market which has what pushed the market to record highs recently.  As the economy grows and more people are employed and have money to spend, business profit and the GDP grows along with inflation as the price of goods increase because there are more consumers who can afford to buy the goods.  When this happens, the Fed raises the Fed Funds Rate in an effort to slow down economic growth and keep it at a manageable pace.  As rates go up, bonds become more attractive to investors, especially when they think that stocks might be reaching a top.  Additionally, we saw the stock market take a plunge recently when the markets around the world started selling off, in part, due to the belief that the stimulus policies were done.

The People's Bank of China stepped in and took action to support China's falling stock market which helped our market recover a bit as well but we got a glimpse as to what could happen in the near term when investors think that low rates that support investments in the stock market will be going away:  stocks sell off and money flows into bonds driving bond prices up and interest rates / yields lower.    There's one other thing to consider.  Inflation erodes all returns (ROI) but especially the low yields of bonds.  For example, if inflation is at 3% and the bond you are invested in has a yield of 3%, you are keeping pace with inflation but your money isn't growing.  Until the yield on bonds (and yields between bonds - corporate, treasuries, municipals, mortgage and junk bonds - vary widely) is higher than inflation, stocks are typically more attractive to investors because there is opportunity for growth.  

This is a lot to keep in mind and if you don't have to because this is one of the things I am happy to do for you.  I'd love to get your thoughts on this subject in the comments section or in an email ( or you can call me at 702-812-1214 or 801-853-8720.  If you are a client are in need of a mortgage, I'd love to help with that and show what I can do in addition to the interest rate advice I provide.  

Should I lock or float?  I'd float with caution in the very short term.  Wednesday starts the various jobs reports for the week.  The FNMA benchmark bond closed up 9 basis points on Friday and is up 15 basis points this morning.  The Chicago PMI (Purchasing Manager's Index) came in at 54.4, just below expectations of 54.5 and below the previous reading of 54.7 but any reading over 50 is expansionary so this is good for the economy.  There is a lot of data between now and 9/16 which is when the Fed will meet to discuss a possible rate hike.  In the short term, I'd lock by tomorrow afternoon ahead the jobs reports and other data coming out on Wednesday.  Keep a close eye on the market if you decide to float and make it a great day. 

Friday, August 28, 2015

Mortgage Bond Market Analysis - TGIF

It's Friday after a completely crazy week.  The markets are a lot calmer this morning with the DJIA just down 33 points as of this writing.  The economic data all came in at or very near expectations.  Core Personal Consumption Expenditures came in at .1 vs. expectations and previous of .1.  Personal Spending came in at .3 vs. expectations of .4 and previous of .3.  Personal Income was .4 vs. estimates and previous of .4.  The largest various of the releases today was from the Michigan Consumer Sentiment Index which came in at 91.9 vs. estimates of 93 and previous of 92.9.

Later today we should get some information from the Fed with regard to the Jackson Hole Symposium - with Yellen and half of the Fed not in attendance that should help keep it on the tame side.  The only data that could justify a Fed rate hike in the near future is the 2nd reading of the 2nd quarter GDP which was 3.7%.  All other data doesn't justify a move anytime soon and the popular thought is that a rate hike won't come in September as some Fed hawks have been pushing for.  If you gambled and floated into today, you should be o.k.  Yesterday, the FNMA benchmark bond was up 3 basis points and this morning it is currently up 20 basis points - that could change if we get any surprise announcements from the Fed later today.

If you or your clients have a loan that is more than 15 days from closing, I would float through the weekend with no economic data being released on Monday.  The headwind for the FNMA bond is the 2nd resistance level which is only 7 basis points above the current price and the RSI is very close to overbought.  The 200 day moving average is about 10 basis points above the 2nd level of resistance and provides a bit more headwind.  It's not likely we'll see a lot of upside movement in the bond which would benefit interest rates, but there's also not a lot of reason to sell at this point with the stock market relatively calm and no data until Tuesday.  This assumes no major announcements from the Fed.

Jobs week next week.  The first week of every month is always a big week with the various jobs announcements.  Wednesday kicks of the first of the jobs data with ADP Private Payrolls followed on Thursday with the Jobless Claims numbers and Friday gives us the most anticipated of the data with Non-farm Payrolls and the Unemployment Rate.  There's other data mixed in as well like the ISM Manufacturing Index on Tuesday and the ISM Non-manufacturing (service) Index on Thursday.  I would say that it's a good idea to lock by Tuesday's close (at least from my perspective now - wild things could happen between now and then to warrant locking sooner or to possibly float).  If you have a loan that is closing within 15 days, I would lock now.

Finally, the Mets had a dramatic come-from-behind win in 14 innings yesterday to extend their winning streak to 7 games.  College football starts next week (Thursday night is the Utes against Michigan - Utah beat Michigan in The Big House last year.  This year it's at Utah and it's Harbaugh's debut).  The third week of preseason NFL is this weekend as well.  Have a great weekend and feel free to contact me (801-853-8720 or 702-812-1214) if I can help with a pre-approval or any other mortgage related items.  Make it a great day and a better weekend.

Thursday, August 27, 2015

Mortgage Bond Market Analysis - It would be crazy if it wasn't crazy

It's Jobless Claims Thursday but that's not really the focus.  There's really a lot going on so here's the nuts and bolts.  The FNMA benchmark bond finished down the last two days, 17 basis points and 33 basis points respectively; this translates into about a .125% higher interest rate.  From a technical perspective, at it's current price of 103.77 the benchmark bond is 12 basis points above the 1st level of resistance (which is acting more like a support level currently) of 103.65 and just below the 2nd level of resistance which is 103.79.  This resistance level is strong because it is both the 10 and 100 day moving averages while the support level is the 25 day moving average.  The RSI (Relative Strength Index) is quite close to being overbought but I'm thinking this is pretty much a non-factor with so much else that's going on.  My guess is that bonds will trade in a very narrow range today as traders await comments from the Fed's Jackson Hole Symposium which is going on today and tomorrow.

From a broader perspective, the stock market had a huge rebound yesterday after 6 straight losing sessions with the Dow (DJIA) closing up 611 points.  This was certainly a factor in the sell-off of bonds yesterday as the standard is that stocks go up when traders sell bonds and buy stocks - it doesn't always happen that way but it's pretty common (as is the reverse).  I think the sell-off in the bond markets were tempered a bit by comments from Larry Summers (former Treasury Secretary) who said that there is no good reason for the Fed to raise the Fed Funds Rate until next year unless one of three things happen:  1) new policies are implemented which encourages large public and private investments, 2) inflation sharply accelerates, or 3) euphoria in the markets break out.  It doesn't look like #1 is going to happen.  One big up day in the stock market after 6 large down days certainly doesn't qualify for euphoria in the market.  However, while inflation readings have been tame, this morning's 2nd iteration of 2nd quarter GDP came in at 3.7%, much hotter than the expected 3.2% and far above the initial reading of 2.3%.  This is negative for bonds and would normally mean a sell-off but like I said - it's a crazy market.  Since it is Jobless Claims Thursday I guess I better mention them.  Initial Claims came in at 271K, just below the estimates of 272K.  The 4-week moving average inched up from 271.5K to 272.5K.  Pending Home Sales were lower than expected at .5 vs. expectations of 1.0 but far better than the previous of -1.7.

I recommended locking in my post on Tuesday and reiterated that stance in yesterday's post.  With the new GDP numbers, we may hear a stronger call from the Fed to raise rates sooner rather than later and there comments tomorrow have the potential to impact bonds in a big way to the down side which would mean higher rates.  I'd be defensive and lock if you / your clients have not locked already.  As always, I would love to show you the great service I provide to all my clients by helping your next client.  There are a lot of things I do to add value to the clients as well as my Realtor partners and I would love to discuss these things with you unless you don't have any capacity to take on new business but I have yet to meet anyone who has told me they are maxed out  - if you are, congratulations.  I'd love to get your thoughts on the market and anything else real estate oriented either in the comments section or in an email to me -  Make it a great day.

Wednesday, August 26, 2015

Mortgage Bond Market Analysis - Did you lock? Craziness Runs Rampant

Happy Hump Day.  The financial markets continue to defy odds and normalcy.  Yesterday the stock market opened strong, though well off pre-market / futures high and slowly tailed off until the end of the day when it plummeted and finished the day down just over 200 points.  While the usual correlation between the stock and bond markets hasn't been as strong recently, yesterday the FNMA benchmark bond definitely benefited from the afternoon sell-off in the equities market by climbing off its lows for the day and closing down only 17 basis points vs. the 51 it was down.

This morning, the stock market opened higher again but the DJIA is currently 100+ points off its morning high which is helping the FNMA bond once again.  The benchmark bond was down as many as 35 basis points but with a bit of a sell-off in stocks, it has recovered a bit and is now only down 12 basis points.  The 103.75 basis point resistance level is acting more like a support level at this point.  Also providing support is the 100 day moving average.

On the economic data front, Durable Goods Orders came in at 2.0, well above expectations of -.8.  Durable Goods ex-Transportation came in at .6 vs. expectations of .4 - this is bad for interest rates as it SHOULD impact bonds negatively.  One thing that is helping bonds right now is comments from the Fed's William Dudley who said that a September rate hike looks "less compelling."

So where do we go from here?  That's a tricky question (kind of like "Will the Mets make the playoffs and how far will they go if they do?" - if you haven't figured it out yet, I'm a Mets fan, though baseball is my 4th favorite sport behind basketball, football and hockey - go Rangers).  There are some conflicting things that are muddying the waters.  First of all the benchmark bond is still very close to overbought according to the RSI which is a technical indicator that investors may have a inclination to sell, pushing rates higher.  Conversely, there is pretty strong support with the 100 day moving average and the first resistance level just below the current price as mentioned previously.  To make the situation even more difficult to try to figure out what direction the bond is likely to go is the fact that the stock market has been in a free fall with very little benefit for mortgage bonds and the volatility is very high.  China is adding to the confusion and...drum roll please...we have Jobless Claims Thursday tomorrow in addition to GDP and Pending Home Sales followed on Friday by Personal Income, Personal Consumption Expenditures, Personal Spending and Michigan's Consumer Sentiment Index.  But wait, there's more.  If you act now, I will throw in comments from the Fed's Jackson Hole Symposium (which happens every year at this time) which will likely have the biggest impact on mortgage bonds / interest rates.

So what in the heck should you do?  As you can see, there are some compelling reasons to lock as well as to float.  There would be no harm in floating as rates are great and you would protect yourself from what could be a big sell off depending on how tomorrow and Friday goes.  If it were me (I'm very conservative when it comes to things like this) I would lock before the comments from Jackson Hole are released at the very least.  If you are going to float, I would do so with extreme caution - make sure you watch the market very closely and be ready to lock quickly.  As always, please feel free to call me if I can help with anything mortgage related.  I would love to help your next client who needs a mortgage.  You can contact me at 801-853-8720, 702-812-1214 or  Make it a great day.

Tuesday, August 25, 2015

Mortgage Bond Market Analysis - WHAT HAPPENED?

The last three days have been crazy even if the benchmark bond hasn't moved with wild swings.  Let's start with yesterday.  At one point, the Dow Jones Industrial Average was down 1000 points (that's HUGE) and it fought back to being down only about 100 points and closed the day down 588 points.  These are some very wild swings.  The FNMA benchmark bond was up 50+ basis points in early morning trading but capitulated throughout the day (I received about 7 trend reversal alerts) and closed up 12 basis points closing at 104.20, just above the 2nd level of resistance (104.12). One would expect the benchmark bond to be up more than that with such a strong down day - in fact, one might expect an up day of 75 basis points or more but it didn't happen.  The only thing I can think of is that the power shifted from the bond market to the Mets as they hit a team record 8 home runs against the Phillies yesterday, led by David Wright who hit a home run in his first at bat after being on the disabled list for 133 days.  What a Monday.

Last Thursday in my blog I recommended floating with caution and Friday proved to be another good day for interest rates as the FNMA bond closed up 17 basis points after a 20 basis point up day on Thursday.  In all, the benchmark bond has added 75 basis points since Wednesday's open which has been a bit of a surprise based on the fact that some members of the FOMC really want to raise the Fed Funds rate but the tame inflation numbers and mixed economic data don't justify it.

Today is bringing us more craziness with the benchmark bond only down 10 basis points as of this writing which is amazing (another Mets reference) considering the fact that the DJIA is up 303 - well of the morning high of up 600 in morning futures trading.  There bond is trying to fight through strong resistance with the 2nd level of resistance at 104.12 (it has dropped below this level this morning) and the 200 day moving average also at roughly the same level.  Additionally, the RSI (Relative Strength Index) is approaching the overbought level.  I would be very cautious at this point about floating any more.  There is  lot of volatility in all of the markets with the VIX (Volatility index) breaking the 50 mark for a bit yesterday.  Between the volatility and the resistance, I would lock to take advantage of the recent gains and protect yourself or your clients from a sell off which would lead to higher interest rates.

On the economic data front, the Consumer Confidence Index came in at an amazing (yet another Mets reference) 101.5 vs. expectations of 92.6 (this will have a negative impact on pricing) and the Case-Shiller home price index came in at 5 vs. estimates of 5.1 (not a factor in pricing) and New Home Sales came in at a slightly disappointing 507 vs. estimates of 511.  The fact that the Mets have a winning record and are in 1st place in their division so late in the season may be a major contributor to all of the wild swings in the market.  Perhaps the beginning of college football season next week can help restore (some) order.  In the meantime, please feel free to contact me (801-853-8720, 702-812-1214 or if I can help with anything mortgage-related.  Make it a great day.

Thursday, August 20, 2015

Mortgage Bond Market Analysis - Jobless Claims Thursday Edition

It's Thursday morning and if you've been reading my blog for a while, you know that means Jobless Claims Thursday.  Let's first find out what happened yesterday and why.  The FNMA benchmark bond closed up 38 basis points yesterday which translates into just under .125% improvement to rates.  On Tuesday, I recommended locking ahead of yesterday because of the potential for sell-off and there was some big potential.  In fact, the sell-off had begun in the morning when the CPI was released - while it came in rather tame on the surface, up .1% in both the core and the headline numbers vs. expectations of .2% for both and the YOY came in at 1.8%, below the 2.0% target for the Fed even though that's not their true measure of inflation, there is a component of the CPI that caused concern for the Fed and led to an initial sell-off.  Real Average Earnings were up 2.2% from 1.8% previous and the Fed has been very clear that they are giving a lot of weight to wage inflation.

Comments from a Fed president followed by Fed minutes that were more dovish than hawkish led to bond traders buying bonds which, as you know if you read my posts, push prices higher and interest rates / yields lower.  With the solid gains, the RSI ticked up just above the half-way point ending slightly closer to overbought than oversold.  This morning the Weekly Jobless Claims came in at 277K vs. expectations of 272K and the more closely watched 4-week moving average is 271.5K vs. previous of 266K which is slightly beneficial for rates.  The Philly Fed Manufacturing Index came in at 8.3 vs. 7.0 and the employment component of that index was up strong at 5.3 vs. -.4 previous.  July leading economic indicators came in low at -.2% vs. estimates of .2%.

Overall this is some decent news and could put pressure on the bond.  That said, the FNMA benchmark bond is currently up 8 basis points at 103.91 - 8 basis points above the 1st level of resistance.  The 100 day moving average is also about where the 1st level of support is.  It is very important for the bond to close above the resistance level in order to have some more follow-through tomorrow.  If it closes close to or below the resistance level, we could be in for a bit of a pullback tomorrow.  I would float for the time being but, like always, I'd watch the market very closely so that if it turns, you can lock very quickly to preserve the current gains.  As always, please feel free to contact me if I can help with anything mortgage-related - 702-812-1214 or 801-853-8720.  Now it's off to get my daughter moved in to her dorm to start college at the University of Utah - my alma mater.  Go Utes and go Jordan.

Finally - not to get lost in the shuffle, it's our 21st anniversary for my wife and me.  Go us.  Make it a great day.

Tuesday, August 18, 2015

Mortgage Bond Market Analysis - Have you locked yet?

It's Tuesday and we have more data this morning with some really important releases tomorrow.  This morning, Building Permits came in at 1119, much lower than the expected 1257 or the previous of 1204.  The data that's hiding in that number, though is that the decline was in multi-family housing since SFR permits were up 12% so the number isn't really as bad is it looks on the surface.  Housing Starts came it at 1206, slightly above expectations of 1200 but far below last month's 1337.

In Friday's post as well as yesterday's, I said that I would lock by the end of business today.  If you haven't locked, now's the time.  I'll be locking one of my clients this morning with two things potentially being a big drag on bonds tomorrow with the CPI and Fed Minutes being released.  The FNMA benchmark bond is current down 9 basis points at 103.40 - just 7 basis points above the 1st level of support.  The RSI is right in the middle of being overbought and oversold so that is not a factor.

Please feel free to share your thoughts in the comment section and subscribe to the blog to be notified when I publish a post.  In the meantime, don't hesitate to contact me if I can help you with loan scenarios - we have a lot of niche products - as well as guideline and interest rate questions (702-812-1214 or 801-853-8720).  Make it a great day.

Monday, August 17, 2015

Mortgage Bond Market Analysis - Happy Monday

It's Monday and we've got two conflicting data points.  The National Association of Home Builders Housing Market Index came in as expected at 61 vs. previous of 60.  This is the highest reading in about 10 years and anything over 50 is expansionary.  Conversely, the NY Empire Manufacturing Index came in at -14.92 vs. expectations of +5.0 and previous of +3.86.  This is a big miss and is probably one of the reasons why the benchmark bond is up 19 basis points as I write this.

On Friday I recommended floating with caution.  The benchmark bond finished down 13 basis points - not a big deal but down nonetheless.  Tomorrow on the data front we have Building Permits and Housing Starts.  It's doubtful that these will have much impact on mortgage bonds or interest rates.  Wednesday, however, might be a very different story.  The CPI is released on Wednesday morning but the potentially big mover is the FOMC minutes.  I would lock by the close of business tomorrow afternoon as Wednesday could be quite volatile and we could see some sell-off in bonds (pushing rates higher) depending on the content of the message in the Fed minutes.

From a technical standpoint, the benchmark bond (103.54) is currently 11 basis points below the 1st level of resistance (103.65).  Should we have some sell-off, the first level of support is 21 basis points below the current level at 103.33.  The RSI is just above 50 which is just a tad closer to overbought than oversold.  Feel free to contact me if I can help with anything mortgage related (702-812-1214 or 801-853-8720).  Make it a great day.

Friday, August 14, 2015

Mortgage Bond Market Analysis - TGIF

It's Friday and we have four more data points to chew on - in addition to whatever grub you might eat in celebration of a weekend (and the first bit of football, preseason as it may be).  The Producer Price Index (PPI) came in higher than expected at .3 vs. .1 - while percentages tell you that it's 300% more than expectations, it's still only .2 higher than expectations and it's not inflationary so take it for what it's worth.  As the saying goes:  "There's lies, damn lies and there's statistics."  Industrial Production came in at .6 vs. .3 which shows some economic strength but nothing fantabulous (I know, that's not really a word, but it's my post and I like it).  Capacity Utilization came in at 78, just as expected.  At this level, there is a lot of headroom for more production.  Finally, the Michigan Consumer Sentiment Index came in low with a reading of 92.6 vs. expectations of 93.9.  While this is a bit of a miss, the sentiment is still strong - it's like when you are in the gym and work out so hard one day and push your max weights on the bench press and then with one day of rest you go back and while you're strong, you can't do what you did two days ago.  It's not like consumers have lost all confidence in the economy and the traders have been acting on that the later part of this week.

On Wednesday morning I noted that Tuesday we hit the 100 day moving average and that that was a pretty strong resistance level since it also coincided with the 2nd level of resistance.  Additionally, I noted that the 200 day moving average wasn't far above the 100 day level.  I recommended locking ahead of the data that was going to be released on Thursday and today.  Since that Wednesday morning recommendation, the FNMA benchmark bond sold off 26 basis points on Wednesday and 24 basis points yesterday - that's 50 basis points and on a $200,000 loan, that $1,000 in extra fees for a borrower.  This morning traders are continuing the selling but are coming up against a decently strong level of support with the 25 day moving average just below the 1st support line (103.33) and these two are trying hard to not allow the sell-off to break through any lower.  The RSI (Relative Strength Indicator) is moving closer to the oversold threshold which will also provide an impetus for traders to consider buying instead of selling.  That said, the FNMA benchmark bond is currently down 7 basis points at 103.41, 12 basis points above the morning low and 17 basis points off the high.

If you are wondering about locking, that's extra trick since if something happens to encourage more sell-off and the bond breaks through the aforementioned support levels, the 2nd level of support is 43 basis points below the 1st so there could be a bit of a free-fall.  However, there is relatively little data next week with only the NY Empire Manufacturing Index on Monday and nothing on Tuesday.  We get the CPI (Consumer Price Index) on Wednesday along with the FOMC minutes and Thursday we get Jobless Claims and the Phili Fed Manufacturing Survey.  It might pay to float at this point but there is a gamble in doing that as I mentioned above.  The 10 year Treasury, which is kind of a barometer of bias, is at 2.19% yield right now and that is in a good place - if you see that creep up to the 2.26% or higher - especially if it breaks back through 2.31%, then rates are going to take a hit (and probably already would have suffered a bit by then).  If I had a loan closing 15 days or more out, I would probably roll the dice and see what Monday brings.  I would also keep a close eye on the market and be ready to lock in a moments notice.  I can be the one to keep that close eye on it for you or your clients - feel free to contact me if I can help you with a mortgage (702-812-1214 or   Make it a great day and a better weekend.

Thursday, August 13, 2015

Mortgage Bond Market Analysis - Jobless Claims Thursday, and other data

In addition to the weekly jobless claims numbers, we also have three other data points.   All of the data came in very close to expectations with one minor exception.  Initial Jobless Claims came in at 274K vs. expectations of 273K and previous of 269K.  Import Price Index came in at -.9 vs. expectations of -1.0 and previous of -.1 - this is anti-inflationary and good for rates.  Retail Sales ex-Auto came in at .4 vs. expectations of .5 and previous of .4.  Finally, Business Inventories came in at .8 vs. expectations and previous of .3.  So how is the mortgage bond market reacting?

After finishing the yesterday down 26 basis points (33 basis points off it's high) the FNMA benchmark bond is down 17 basis points at 103.55 - its low for the day.  In my morning post yesterday, I noted two things:  1) a recommendation to lock with my standard warning that if you are going to float, keep a close eye on the bond market - when I wrote that post, the benchmark bond was unchanged and dropped 26 basis points from there; 2) I pointed out a rather wide disparity between the FNMA and GNMA benchmark bonds with the GNMA substantially higher than the FNMA.  It closed up 6 basis points yesterday which was a 32 basis point disparity in price movement.  This morning is a different story with the GNMA also down 17 basis points.

At its current level, the FNMA bond is down 43 basis points from yesterday's opening which is the exact amount that it was up on Tuesday.  Additionally, at the open yesterday it was 6 basis points above the 2nd level of resistance and has now fallen 10 basis points below the 1st level of resistance.  With this sell-off, the RSI has dipped below the neutral level (50) and is now a tad bit closer to oversold.  As I mentioned yesterday, there are four more data points tomorrow.  Rates are still very good so you may want to lock ahead of their release just to be safe.  As always, if the data comes in much weaker than expected we could see some buying in the bonds which would benefit rates but that hasn't been the trend lately.  I will reiterate that if you do decide to float through tomorrow's releases, watch the market closely and be ready to react FAST.

In the meantime, feel free to contact me (702-81-1214 or if I can help you with a pre-approval or if you have any mortgage-related questions including how the mortgage bond market works - I get lots of those so don't be bashful; I'm happy to help / explain.  Make it a great day.

Wednesday, August 12, 2015

Mortgage Bond Market Analysis - Hump Day!!

It is Hump Day and we have more weird stuff going on with regard to mortgage bonds.  The JOLTS report is the only data point out today.  This is a jobs report that provides the number of backlogged open jobs.  It came in at 5.249 vs. estimates of 5.3.  This means there are still a lot of jobs open but they may not be jobs that provide a "living" wage (if you want that, go to school or get some skills training) but they are jobs nonetheless.

Yesterday the FNMA benchmark bond finished the day up 43 basis points but was 10 points off its high for the day.  It still closed above the 2nd level of resistance by 6 points at 103.98.  Despite the great day, the RSI still remains below the overbought level.  So far this morning the FNMA benchmark bond has been down slightly to even - which is where it's at right now.  The GNMA bond (FHA and VA) on the other hand has been outperforming the FNMA by a wide margin as it is currently up 29 basis points.  It would be a great time to lock an FHA or VA loan.

The 200 day moving average is not much higher than where the FNMA bond is right now and with the RSI approaching overbought, I would float with extreme caution if you are going to float.  Personally, I'd take my chips off the table ahead of tomorrow's data which includes jobless claims, retail sales, import prices and business inventories.  If you float, watch the market closely so that you can act fast.  Friday brings another quad-point data day with PPI, industrial production, capacity utilization and Michigan Consumer Sentiment Index.

As always, please feel free to share your comments and to call me if I can help in any way - 702-812-1214.  Make it a great day.

Tuesday, August 11, 2015

Mortgage Bond Market Analysis - 2nd Chance Tuesday

Happy Tuesday morning which also happens to be 2nd Chance Tuesday.  Last Tuesday the benchmark bond was down 50 basis points, mostly on comments by one of the Fed Presidents that they want to start increasing the Fed Funds Rate sooner rather than later.  Wednesday started off down about 28 basis points or so but finished down only about 5 basis points.  The data we got from Wednesday through Friday really didn't provide support for the Fed president's comments - not that they couldn't still decide to act anyway.  Through the rest of last week, the market rebounded to finish down only slightly (I think 2 basis points) for the week.

We had no data yesterday and ended down 24 basis points mostly do to the equity markets having a strong day.  This Tuesday is definitely a different one from last week as we have some good data that WOULD support the Fed's desire (not sure why they just feel the need to raise the rate - it should be based on actual data but they are quasi-government so???) to raise rates and what happens?  If you guessed that investors / traders are buying bonds and pushing interest rates lower you would be right but that's not the way it's supposed to work.

Unit Labor Costs came in at .5 vs. expectations of .1 which is much stronger than expected but not nearly as strong as the previous reading of 6.7.  Non-farm Productivity came in at 1.3 vs. estimates of 1.4 and much better than the previous reading of -3.1.  This is a good thing because the more productive we are, the more efficient we are which means our cost per unit can be managed and kept low which helps explain the first statistic above.  The last big economic data point today is Wholesale Inventories which came in at .9 vs. expectations of .4 and previous of .8.  This shows growth which gives the Fed more ammunition to raise rates.  But here's why traders are buying instead of selling:  China.  This morning, the People's Bank of China (PBOC) devalued their currency by the most on record.  In an effort to jump-start their economy, they did this so that the price of their exports would be cheaper which means people in other countries (namely us / US) would buy more of their products because we can buy more for less.

On the technical side of things, the FNMA benchmark bond is as high as it's been since June 2nd.  It is up 52 basis points on the day at 104.07.  The 2nd level of resistance is 103.92 (which also happens to be the 100 day moving average).  The fact that these two things coincide makes that resistance strong so to have broken through means we might see some more upside.  The other side of that theory is the 200 day moving average is only a few basis points from where we are at now.  It's not likely that we will see big gains from here unless the data is week and we keep getting help from China and / or Greece or some other surprise country.  At this price, rates are fantastic and I would not be greedy.  I'd take my proverbial chips off the table and lock.  If you decide to roll the dice, as always, keep a watchful eye on the market so that you can act fast.  If you use me as your loan officer, you know that I do that already and would be able to act quickly for you.  While we do have great rates, getting a great rate is very much about when you lock and locking now is a good thing.  Feel free to call me at 702-812-1214 if I can help with anything mortgage-related.  Make it a great day.

Friday, August 7, 2015

Mortgage Bond Market Analysis - It's Friday and we are coming out of this week with only a few bumps and bruises.

It's Friday of Jobs week and we only are coming out of this week better than expected.  You may recall that we got hit pretty hard right square in the nose on Tuesday (down 50 basis points) after one of the Fed presidents talked about their desire to raise rates sooner rather than later.  Wednesday looked like more of the same but a weak ADP Private payrolls report helped stem the tide and we saw improvement throughout the day to finish that day only down 5 basis points.

Yesterday, Initial Jobless Claims came in at 270K, which was 1K less than expected and 3K more than the previous week.  The FNMA benchmark bond rebounded to close up 18 basis points probably on the thought that today's reports would be weaker than expected based on the ADP report on Wednesday even though there's been a disconnect between the two the last few months.  This morning, Non-farm Payrolls came in at 215K, slightly weaker than expected of 220K and also below last month's reading of 231K.  Average Hourly Earnings beat expectations with a reading of 2.1 vs. 2.0 expected.  All in all, this data didn't do anything to dis-spell the comments made by the Fed president (or the intent behind the comments) on Tuesday about raising the Fed Funds rate sooner rather than later yet we are seeing more gains again today with the FNMA benchmark bond up 19 basis points as of this writing.

With the improvements yesterday and today, you may consider locking, especially if you have a loan closing within 15 days.  If you have 15+ days, you might consider floating but as always, keep a close eye on the market so that you can be ready to lock quickly if the market moves against you like it did Tuesday afternoon.

For you football fans, both college and NFL training camps have begun and games are right around the corner - even if it feels like they are still a long ways off.  Who are your favorite college and NFL teams and how do you think they'll do this year?  My college team is the University of Utah (PAC12) and I think they will end the year ranked with a 9-3 or 8-4 record and hopefully be in the top 3 of the South Division with a trip to a good bowl game.  The Dallas Cowboys (I'm sure the haters will all come out now) are my favorite NFL team and I think that if their running backs can have a good year and (mostly) replace Demarco Murray's production and the receivers can be strong, they might possibly make it to the Super Bowl.  Their defense looks better than last year - especially starting week 5 when they get a couple of key players back from suspensions.  Feel free to share your thoughts in the comments section and remember that I'm always happy to help in any way I can - 702-812-1214 - I'll even help with your fantasy football draft.

Wednesday, August 5, 2015

Mortgage Bond Market Analysis - Hump Day Blues (if you didn't lock)

Happy Hump Day - that is if you locked on or before Monday per my recommendation.  Last Friday I recommended to lock based on a couple of things:  1) the bond market was severely overbought and 2) there was a lot of data coming out this week that could very well spur a sell-off.  On Monday, I again recommended to lock if you (your client) didn't lock on Friday.  Yesterday there was a big sell off with the FNMA benchmark bond retreating through the 2nd and 1st resistance levels respectively; because of this the RSI is now no longer overbought.  The main cause of the sell-off was due to comments from one of the Fed Presidents who said they want to raise rates (the Fed Funds Rate) sooner rather than later.

While the ADP Private Payrolls report was weaker than expected coming in at 185K vs. estimates of 220K and previous of 229K.  While you might think this would be a big positive for pricing, there has been a bit of a disconnect between this and the non-farm payrolls report we will get on Friday and traders put much more weight into that report.  The real killer today is the ISM Non-manufacturing Index (the services sector which is about 2/3s of our economy) which came in at 60.3 vs. estimates of 56.3 and previous of 56.  This supports the Fed president's comments about raising the rates yesterday.  The results for yesterday and thus far today was a 50 basis points sell off for the FNMA benchmark bond and it is currently down 28 basis points.  The total of these two days is approaching an increase in rates of about .25%.  We may have more to come depending on what the data shows tomorrow and Friday.

You know I try to add value anywhere I can and I do this with my free mortgage report as well as with some education and analysis via a couple of spreadsheets I developed (as well as some marketing strategies / and help for my Realtor partners).  I also add value by understanding the mortgage bond market and how the various data can impact the movements.  If your loan officer isn't doing these things for you, please consider calling me if you, a friend or client needs a mortgage.  If you have any questions, please feel free to call me at 702-812-1214.  Make it a great day.

Monday, August 3, 2015

Mortgage Bond Market Analysis and a feel-good story from Major League Baseball

It's Monday morning and we are starting of with some mixed data.  The benchmark bonds started the day off on a down note with Personal Spending coming in as expected at +.2 (down considerably from the previous reading of .9) and Personal Income slightly higher than expect at +.4 vs. .3 expected (previous was also .4).  Based on this news and the fact that the mortgage bond market is overbought (according to the RSI), the FNMA benchmark bond was down as much as 8 basis points and the GNMA was underperforming the FNMA as it was down 21 basis points (the GNMA out performed the FNMA on Friday as it was up 54 basis points vs. 39 for the FNMA).

At 10:00 a.m. EDT Construction Spending was released and it disappointed in a fairly big way coming in at .1 vs. estimates of .6 and previous of 1.8.  Additionally, the ISM Manufacturing Index came in at 52.7 vs. consensus estimates of 53.7 and previous of 53.5.  With this data, the market did an about-face and the FNMA is now up 16 basis points while the GNMA is even.

If you didn't lock on Friday, now would be a great time to lock, especially with lots of data being released this week and potential volatility based on that data.  As always, if you don't lock, keep a watchful eye on mortgage rates since they can move quickly - especially the first week of the month with so much jobs data and with the RSI being overbought.  Feel free to contact me if I can help with anything mortgage-related - 702-812-1214.

On a lighter note, if you are a sports fan or just like feel-good stories, you will enjoy the Wilmer Flores story that took place last week.  Flores is a SS / 2nd baseman for the Mets who appeared to be involved in a trade to the Milwaukee Brewers.  The fans at CitiField (the Met's stadium) found out about the trade during Thursday night's game via social media and Flores found out about it around the same time.  Flores is 23 and was signed by the Mets when he was 16.  He's from Venezuela and only really knew NYC.  The Met's fans gave him a standing ovation when he took the field in the 6th or 7th inning after they found out about the trade and he became very emotional and teared up.  The Met's GM announced after the game that the trade did not happen and will not happen.  Then next night, Wilmer Flores hit the game winning home run in the bottom of the 8th inning.  He has become a hero for Met's fans.  Make it a great day.