Search This Blog

Wednesday, September 30, 2015

Mortgage Bond Market Analysis - Mixed Data Hump Day

It's hump day which means we are just three days away from a weekend and lots of college and NFL football.  It's also the start of three consecutive days of the various jobs / employment reports.  This morning we got the ADP Private Payrolls report which is virtually always the least important of the three.  There is often a disconnect between this morning's report and the non-farm payroll report on Friday.  200K jobs were created per this morning's report, vs. estimates of 195K and previous of 186K.  The report that is probably going to get more publicity this morning is the Chicago Purchasing Managers Index which came in at a very disappointing 48.7 vs. estimates of 53.6.  Not only is this a big miss but it shows contraction in this sector; a reading below 50 is contraction and above 50 is growth.  It will be interesting to see what the jobless claims numbers are as well as the non-farm payrolls.  I personally don't give much heed to the unemployment rate (also released on Friday) since the rate can drop by people leaving the workforce which is why we need to pay more attention to the Labor Force Participation Rate which is currently at a 38 year low of 62.6%.

From a technical standpoint we had a nice up day yesterday with no data of much consequence for bond investors.  The Case-Shiller Home Price Index came in low at 4.96 vs. estimates of 5.2.  Consumer Confidence blew away estimates of 96 coming in at 103.  This probably helped offset the disappointing Case-Shiller numbers but since about half of the gains occurred in afternoon trading, it probably didn't have much impact on the bond price increase.  The FNMA bond closed above the 2nd resistance level and the 200 day moving average at 104.25.  This is the highest close since May 29th.  Now the trick will be to stay above the 2nd resistance level which was adjusted to 104.24.  The benchmark bond is currently down 7 basis points and is hovering just above the 200 day moving average and smack dab in the middle of the 1st and 2nd resistance levels.  The RSI is now below the overbought level about halfway between neutral and overbought so this is less of an issue now.  Based on the charts this morning, it looks like the benchmark bond could trade in a tight channel today unless something happens to break it out, but for now it is looking very tight and non-dynamic.  The fact that the DOW is up by triple digits (229 currently) is part of the reason why the bond isn't getting more traction from the weak Chicago PMI number.

The jobless claims numbers have had very little impact over the last few months and the non-farm payrolls have also had about as much impact as a Nerf hammer recently.  Since the bond broke through the resistance levels and 200 day moving average, I would probably float (with EXTREME caution) to see if it can get any traction.  Commodity prices are really low which will help keep inflation down.  If we don't see big jobs numbers, I would expect a rally in the bond market which would push bond prices even higher (and rates lower).  That said, we are barely above the moving average and we are now below the (new) 2nd level of resistance so the sellers may take over and push prices back down which is why it's important to keep a close eye on the market so that you can request a lock very quickly just in case massive selling occurs.

I'll be out of town tomorrow through Sunday and possibly Monday so there won't be any reports until Monday at the earliest as I will have no internet connection.  I look forward to updating you when I get back.  In my absence, if you need a pre-approval, please contact the owner of my company (Noble Home Loans), Brad Malkin, at 702-869-8790 and he can help with an approval as well as any mortgage questions.  Make it a great day and a better weekend.  

Monday, September 28, 2015

Mortgage Bond Market Analysis - Monday Morning Oregon Beatdown Edition

Happy Monday - at least for me and all University of Utah football fans who saw their team whoop up on the Oregon Ducks, 62-20.  The Utes were completely dominant in every phase of the game but unfortunately that doesn't help the mortgage bond market.  As far as the bond market is concerned, August Pending Home Sales were -1.4% vs. expectations of .5%.  This is mostly due to a lack of good inventory with the the YOY number at 6.1% which is good.  The Personal Income and Expenditures numbers came in about as expected and have little to no impact on the bond prices.

As far as the technicals are concerned, the resistance levels were lowered to 103..95 and 104.13 respectively after three small down days in a row followed by some modest buying today.  The 200 day moving average is right around 104.13 which makes that resistance level extra strong.  Additionally, the bias has appeared to change with the RSI now right at the overbought level which typically occurs when we've had a big run-up.  In a situation like this, it's a sign that the bias has changed or is changing so it's something to keep our eye on over the next few days to see if it holds.  All else being equal, if there is no major economic news or global events, this would be a major headwind for any bond price increases (rate decreases) and could lead to some selling (raising interest rates / borrowing costs).  Currently the FNMA benchmark bond is at its high for the day, up 20 basis points at 104.06.

On tap for this week is lots of big economic data with Case-Schiller Home Price Index, Chicago PMI, consumer confidence, ISM Manufacturing and the big ones are all of the jobs data / reports which include the ADP Private Payrolls reports on Wednesday, Jobless Claims on Thursday, and Non-farm Payrolls and Unemployment reports on Friday.  With what appears to be a change in bias in the bond market and lots of data that could influence traders and ultimately the interest rates, I would probably lock sooner rather than later.  While the data may not be earth shattering, if there truly is a bias change then any good economic news could be magnified and could possibly trigger a sell-off.  I will be out of town on Thursday and Friday with no internet and little to no phone service and my not be getting back until sometime Monday, depending on how things go, so after Wednesday, you may not hear from me until next Tuesday (feel free to miss me).  For now, I'm here and happy to help in whatever capacity you need my help.  Make it a great day and a better week.

Tuesday, September 22, 2015

Mortgage Bond Market Analysis - China's Impact

It's Tuesday morning and there's little data to influence rates.  After a 33 basis point sell-off yesterday, closing just above the 1st level of support and right at the 25 day moving average, the FNMA benchmark bond is up 27 basis points and is bumping its head on the 1st level of resistance which is at 104.08 as it's currently trading at 104.05.  The 200 day moving average, which is a strong resistance level, is around 104.15.  Like I said yesterday, the headwind for bond price appreciation is stronger than the support.  However, with a light data day and negative news regarding Chinese banks (which is the impetus for the sell-off in the stock market and the increase in the bond market), I would float with CAUTION today if you didn't lock on Friday or yesterday.  With the resistance level as strong as it is, I would be very surprised to see the bonds move much higher so it wouldn't be a bad thing to lock here and take back most of yesterday's losses - rates are truly great right now.

The Richmond Fed Manufacturing Index (not typically a big market mover) came in at -5 vs estimates of 4; its impact on pricing is nil but does show that in that region, economic growth isn't robust to say the least.  One last quick look at the benchmark bond shows it has given up some of its gains as it's now up 19 basis points at 103.97.  My guess is that we will see some capitulation throughout the day but the range will be quite narrow.  With an economy that isn't very dynamic right now, the bond market is taking its cues from global news and the stock market and trying to guess what going to happen with either of those things is worse odds than a crap shoot.  I'd lock on any gains and float on big sell-offs.  That's all for today.  Short and sweet.  I'm always available to help with anything mortgage-related - 702-812-1214 or 801-853-8720.  Make it a great day.

Monday, September 21, 2015

Mortgage Bond Market Analysis - The Monday Morning Blues

As a guitarist, I love the blues; the blues is the root of rock and country.  The blues is not a good sign for financial markets, however.  On Friday, I recommended locking since there was lots of headwind like riding a bike up a steep hill against the wind (I'm also a bike rider).  There was the 1st and 2nd resistance levels of 104.08 and 104.20 respectively in addition to the 200 day moving average of about 104.15.  By the end of the day, there was not enough momentum for the FNMA benchmark bond to close above these levels - closing at 104.11 it did close above the 1st resistance level but it was only up 16 basis points for the day, 20 basis points off its high.  This morning, we are seeing some sell-off with the bond down 21 basis points and starting to eat into the gains we made on Thursday after the Fed's announcement.

There's a bit of data throughout the week that could influence mortgage bond pricing and Janet Yellin (Fed Chair) is speaking on Thursday afternoon so that could also impact the market one way or another.  Greece is back in the news, though not at the headline level yet.  Their PM resigned at the end of August so they will be electing a new government.  For now, their bailout package has been put on hold since the creditors want to see who they are dealing with.  Depending on the outcome, this could either have no effect on bonds or it could have a positive impact.

Should you / your client lock or float?  This is always a good question and sometimes it's a lot trickier than others.  Speaking of tricks, check out this great magic trick by a Realtor friend of mine:

But I digress (hopefully this helped with the Monday morning blues).  I don't think you could go wrong by locking right now.  I recommended doing so on Friday because I thought there was more downside risk than upside potential and I still think that is the case and is especially true with Janet Yellin speaking Thursday afternoon.  If Greece becomes a factor, then it might be worth floating but we may not see any impact from Greece for several days so I would absolutely lock if I had a loan closing within 15 days and beyond that I would probably lock but if I floated - you know my mantra - do so with an eye fixed on the market so that if it moves you can lock quickly, and hopefully before a reprice for the worse.  I'm always watching the market so if you can't or your current loan officer doesn't, feel free to call me to get a quick market update - 702-812-1214 or 801-853-8720.  Make it a great day.

Friday, September 18, 2015

Mortgage Bond Market Analysis - TGIF and Celebration Time

Happy Friday and congratulations if you waited to lock until today - it paid off.  Yesterday was a great day for the mortgage bond market and interest rates as the FNMA benchmark bond closed up 67 basis points (an improvement of .125% to rates plus a little pricing enhancement) on the day.  The impetus was the Fed's decision to keep rates where they are.  With a 9-1 vote, the decision wasn't even close.  While they did point out that some economic activity was expanding moderately, sighting household spending and fixed investments by businesses as well as the improved housing sector, they pointed to weakness in the global economy as the main reason for standing pat.  Furthermore, net exports are soft - hampered by the global weakness - and the inflation rate isn't anywhere near the target of 2%.  The next FOMC meeting is October 27 - 28.

This morning the FNMA benchmark bond is 29 basis points off its morning high of 104.31 at 104.02, up 7 basis points on the day.  The GNMA (FHA and VA) is down 14 basis points.  There is a lot of headwind around the current levels which is why we have seen the push-back - in addition to some profit taking.  The new resistance levels are at 104.08 and 104.20 and the 200 day moving average is around 104.15 so it would take something big for the bond to break through those levels, especially after a big day yesterday which is bringing some profit-taking.  The RSI (Relative Strength Indicator) is midway between oversold and overbought so it's a non-factor right now.  The only data point for today came in on the soft side with August's Leading Economic Indicators at .1 vs. expectations of .2 - this hasn't been enough to elevate bonds to higher levels.

Should I lock or float?  This is almost always a great question.  With no more data being released today there's nothing to drive the market one way or the other except for the guesses of traders about what next week's data will bring.  There's not a ton of data next week but there are a few things that could influence mortgage bonds one way or the other so I would probably lock today since there is strong resistance and take advantage of yesterday's and this morning's gains.  If you do float, make sure you keep a close eye on the market so that you can act quickly should the market move against you.

Lots of  great college football on Saturday and NFL on Sunday.  Major league baseball is ramping up toward the playoffs and the NBA and NHL are getting ready for their seasons soon so all of the major sports are in play right now and it will only get better - assuming you like sports.  I'm available to help with a pre-approval or anything else mortgage related - 702-812-1214 or 801-853-8720.  Make it a great day and a better weekend.

Thursday, September 17, 2015

Mortgage Bond Market Analysis - Decision Day

We are just moments before the bond release and in spite of some better-than-expected economic data the FNMA benchmark bond is up 20 basis points.  It closed up 11 basis points yesterday and had been in a very tight range until the last hour when it broker to the upside.  This move tells me that traders are anticipating there won't be an increase to the Fed Funds rate.  We'll find out soon if they are right (I believe they are) and then we will probably see a spike followed by some volatility with a general trend upward for bonds which means improvements in interest rates.

The data this morning came in better than expected with Initial Jobless Claims coming in at 264K vs. expectations of 275K.  It was mixed for the housing data with Housing Starts at 1.126mil vs. 1.170 expected but Building Permits slightly beating expectations with a reading of 1.17mil vs. 1.16mil expected.  To further confuse matters, the Philly Business Outlook Survey hit -6.0 vs. estimates of 6.3 (a huge miss) but the internals of this survey had some big upside surprises with employment at 10.2 vs. the prior reading of 5.3.  We will have the Fed decision a few minutes and I will update this post then.

BREAKING NEWS:  Fed leaves rates as is citing global economic concerns (probably including some concerns about our economy if we are being honest).  The benchmark bond is up 22 basis points - 2 basis points off its high and 2 basis points above the current 1st level of resistance which is 103.48.  The RSI has ticked up a tad but is still much closer to oversold than overbought.  As I'm writing this the market just spiked up and the benchmark bond is now up 35 basis point.  As information trickles out and traders digest what was said, we'll see some capitulation and volatility but I think the trend will be up.  Like I said yesterday morning, I'd float but always do so with caution and an eye on the bond market so that you can lock quickly if it moves against you.  There is only the Leading Economic Indicators tomorrow so you may be able to float through the weekend as we may see some follow-through buying tomorrow.  The 2nd level of resistance is at 103.67, 5 basis points above the current price.  The 200 day moving average is at about 104.1 so if the bond breaks through the 2nd resistance level, it has a bit more room to run.  As always, feel free to call me if I can help with anything mortgage related - 702-812-1214 or 801-853-8720.

Wednesday, September 16, 2015

Mortgage Bond Market Analysis - Hump Day Edition

It's that day of the week again - the beloved Hump Day.  For those of you who want a quick smile or just can't get enough of the camel, enjoy.

Now for the bad news.  Yesterday, the FNMA benchmark bond closed down 55 basis points finishing the day at 103.17 - I did recommend locking ahead of this morning's CPI data and especially ahead of the release of the Fed's interest rate decision tomorrow.  I think the traders were feeling antsy about what the Fed might do and they took some chips off the table.  However, the CPI headline and core data both came in as expected at -.1% and .1% respectively and this data, like yesterday's and other recent data, do not support a Fed rate hike.  If the Fed decides not to raise the Fed Funds Rate then yesterday's sell-off will likely be unwarranted and with the RSI hovering right around the oversold mark, it's very possible that we could see some buying in the bond markets which would help rates.  Look for a lot of volatility for the 20-30 minutes after the release of the decision (it will be released tomorrow at around 2:00 - 2:15 EDT).  After traders have had a chance to digest the information then you can expect some stability in whatever direction the market may move.

The benchmark bond is currently up 3 basis points at 103.2 - 3 basis points above the new 1st level of support of 103.17.  Tomorrow is Jobless Claims Thursday and expectations are for 275K, just like last week.  We also get Housing Starts, which are expected to be 1160K vs. previous of 1206K while Building Permits are expected to be up to 1159K vs. the previous reading of 1119K.  In all, the data doesn't support a rate hike but that doesn't mean we won't get one.

At this juncture, I'm not sure it would be prudent to lock (listen to that sentence in your head with George H. Bush saying it - a little fun ahead of the presidential debate tonight).  With the 55 basis point sell-off yesterday and a decent likelihood of the Fed holding steady, I would probably take the gamble and float.  I doubt tomorrow morning's data will have much impact since the focus will be squarely on the Fed interest rate decision.  If they decide to raise the Fed Funds rate, the sell-off may not be too bad since we had a big one yesterday but if they hold steady, we could definitely see a bit of a recovery.  That said, if you do float, be ready to lock quickly in case the market moves against you.  Many times I've been able to lock ahead of a market reprice by acting quickly.  Don't hesitate to contact me if I can help with anything mortgage-related - 702-812-1214 or 801-853-8720.  Make it a great day.

Tuesday, September 15, 2015

Mortgage Bond Market Analysis - The Looming Interest Rate Decision

We get some data this morning and it is soft, regardless of expectations.  The Fed's two day FOMC meeting begins tomorrow with the interest rate decision being released on Thursday at around 2:00 - 2:15 EDT.  If you read my blog on a regular basis, you know that the data has been mixed at best (this is a healthy way to eat vegetables but doesn't show health in the economy) and weak in many key areas.  That said, of the voting members in the Fed, the hawks think that the data has been good enough to warrant an increase to the Fed Funds Rate (overnight rate they charge banks to borrow from them; the rate is quoted in annual terms).  The doves, on the other hand, think that if they start raising rates now, it could throw the economy back into a recession or, at the very least, severely prolong the return of a healthy economy.  

Capacity Utilization came in at 77.6 vs. estimates of 77.8 and previous of 78.  This means there's lots of capacity for production, which is also a factor in keeping inflation low (in addition to the productivity numbers we've been getting recently) - the main reason the Fed raises rates is to slow inflation and the current rate of about .9% is well below their target rate of 2%.  Industrial Production came in at -.4 vs. estimates of -.2 and previous of .9.  This is another measure that shows a slow / weak economy and is favorable for interest rates (even though mortgage bonds are down right now).  August Headline Retail Sales were .2 vs. estimates of .3 but July was revised from .6 to .7 so it's really a wash - the numbers are still weak and don't justify a rate hike.  

The Labor Force Participation Rate:  While the unemployment rate has been dropping recently, it doesn't even come close to telling the whole story.  The Labor Force Participation Rate is at it's lowest in 38 years with a reading of 62.6 - which is to say that 62.6% of everyone over 16 is either employed or actively looking for a job.  There were 5.4 million jobs available as of the end of May and recent JOLTS reports have the number continuing to hover around that mark.  As of June, there were about 94,000,000 who weren't employed and weren't looking for work.  There are a lot of reasons for this in addition to lots of philosophies as to why this is.  A number of these people have retired and don't need to work while many people have become frustrated with trying to find a job and have given up looking.  It's important to note that if you haven't been actively looking for a job for just four weeks, you are no longer counted in the unemployment rate which is one major reason why the unemployment rate has been decreasing.  There's lies, damn lies and statistics (this doesn't typically apply to sports).  The common question is why would someone who is unemployed stop looking for a job?  The follow-up question is:  With so many jobs available, how come the unemployed aren't becoming employed?  Those looking for a job want one with a living wage that is in their area of expertise; a lineman unemployed from a power company doesn't want a much lower paying job at a grocery store stocking shelves (nothing against this job - it was my first job, along with cashiering).  One of the possible answers to the 2nd question is that the available jobs may not be in the geographical location where the unemployed either live or want to move to (assuming that is even an option).  Regardless of the "why" there are so many people unemployed - factoring out those who are retired and have sufficient income to support themselves - the fact is that this is a drag on the economy and a major reason why we haven't seen a robust recovery.

Mortgage bonds and interest rates:  After closing down last Thursday and Friday, 21 and 9 basis points respectively, the 1st level of resistance shifted down 6 basis points to 103.77 with the 1st level of support at 103.66.  The FNMA benchmark bond closed up 8 basis points yesterday closing at 103.72 but has given up all of those gains and then some this morning as it is currently down 15 basis points at 103.57.  The trading range has been very narrow over the last couple of weeks as the traders have been waiting on the Fed decision this Thursday.  Rates are still great in spite of the recent minor pull-back.  I would absolutely lock ahead of the Fed decision (and tomorrow's CPI) and if the market rallies, I'd float the rate down.  As someone once said - you can't unring a bell or un-see a bad picture; if you (or your clients) don't lock and mortgage bonds sell off based on the Feds decision, you are stuck at the worse rates.  As always, feel free to contact me if I can help with anything mortgage-related (I also write and produce music so if you want to record a song or co-write something, that would be fun as well and I'm also always up for talking sports) - 702-812-1214 or 801-853-8720.  Make it a great day.

Thursday, September 10, 2015

Mortgage Bond Market Analysis - All Quiet on the Bond Front

It's Jobless Claims Thursday and the bond market is eerily quiet.  I'm a big Elton John fan and he has a great song "All Quiet on the Western Front" which is about WWII.  With mixed data leaning more toward a still-weak economy, it feels like we might have a battle on our hands next week between the hawks and the doves at the Fed about whether to start raising the Fed Funds rate (or not).  Yesterday the FNMA benchmark bond was down in the morning by about 10 basis points or so but as the stock market conditions deteriorated throughout the day, the bond market improved - they have had a strong link recently.  The benchmark bond closed up 10 basis points, closing at 103.94 - 11 basis points above the 1st resistance level but 6 basis points below the 2nd level.  The bond is trading in a very narrow channel which is indicative of traders waiting for some definitive news so they can make some big trades.  They don't want to gamble one way or the other until they have a better grasp of what's going on - and the big question is what is the Fed going to do next week at the FOMC meeting?

Recent data hasn't really been strong enough to warrant raising rates in my opinion (and the opinion of the doves who have made comments).  The stock market has tumbled fairly significantly every time a hawk talks and makes a strong argument for raising rates which gives justification to the doves to not raise rates since a big decline in the stock market would erode wealth and buying power and hurt the already-fragile economy.  As for the data, jobless claims came in as expected at 275K.  The Import Price Index was -11.4 vs. consensus estimates of -10.8 showing weakness in the global economy.  Also showing weakness is Wholesale Inventories of -1 vs. consensus estimates of .3 and previous of .9.  Several jobs reports have been somewhat strong (at least in the eyes of the hawks) but so many other key indicators do not warrant a rate increase.  One main reason the Fed wants to increase rates is to keep inflation in check but inflation is basically non-existent with the CPI well below a reading that would warrant an increase and commodity prices very low (helping to keep inflation down) as well.  I personally don't think the Fed will raise the Fed Funds rate next week and will be quite surprised if they do but until a decision is released, expect the trading in the bond markets to be very tight.  The benchmark bond is currently down 10 basis points, giving up all of yesterday's gains.

On docket tomorrow:  We get the PPI which is supposed to be weak as well and the Michigan Consumer Sentiment Index which is estimated to be lower than the last reading.  The RSI has had a bias change from approaching oversold to approaching overbought so you may want keep an eye on that.  With bonds unlikely to see much movement until next week's Fed decision is released, it's probably alright to float for a while and see if you can take advantage of any gains just in case the stock market deteriorates more.  As always, if you (or a client) is going to float, keep a watchful eye on the market so that you can act quickly if the bond market moves against you.  Feel free to contact me if I can help with anything mortgage-related (801-853-8720 or 702-812-1214).  Make it a great day - it is the beginning of the regular season in the NFL after all.

Tuesday, September 8, 2015

Mortgage Bond Market Analysis - The Tuesday / Monday edition

It's Tuesday morning after Labor Day weekend and bond traders are making things happen.  Part of the impetus is coming from the stock market which is up 295 points (DJIA) as I write this which means money is flowing from the bond market to the stock market.  From a technical standpoint, the FNMA benchmark bond closed above the 1st resistance level of 103.83 on Thursday and Friday but is being beat down this morning, currently down 19 basis points which isn't huge but enough to bring it back below the resistance level.

On the positive side, the RSI (Relative Strength Indicator / Index) is much closer to oversold than overbought which may entice traders to buy if we get some weak economic data this week.  If you've been reading my blog for long, you know that with bonds, rates / yields move inversely with bond prices so when investors buy bonds, pushing prices up, rates / yields drop.

This weeks economic data:  There are a couple of data points that could impact rates this week.  The Jobless Claims report is on Thursday like always but this hasn't been much of a factor over the last few months since the numbers have all been relatively close to expectations or offset by other data.  I don't expect anything different this week.  Wholesale Inventories is also released on Thursday and is expected to be down from last month which would show the economy isn't growing as fast as maybe it should be in order to justify a rate hike for the Fed.  The PPI is released on Friday and expectations are for lackluster numbers and while this will support those who don't want to raise rates in September, this measure is not as important as the CPI which is a much better measure of economic health since our economy is very much based on the consumer.  The Labor Market Conditions Index was released today and that came in at 2.1 vs. estimates of 1.3.  This is negative for pricing and will be one part of the argument by the hawks to increase the Fed Funds rate.

Loan Programs of the Week:  Last week I highlighted our jumbo loan programs that could go to 95% LTV to $2.5mil and the Fresh Start program that allows for financing one day out of BK, short-sale or foreclosure.  This week the loan programs I'm highlighting are the W-2 only program for government and conventional loans (this means we don't need tax returns which means any deductions from line 21 on schedule A won't come into play).  The other program doesn't require any equity to use rents when converting a primary residence to a rental property to buy a new primary.  These two programs address very common challenges when trying to get buyers to qualify.  If you have any buyers who could benefit from any of these programs or who have other unique circumstances, please call me to discuss how we can help (801-853-8720 or 702-812-1214).  Make it a great day and a great week.

Wednesday, September 2, 2015

Mortgage Bond Market Analysis - Hump Day and the beginning...of the jobs reports

It's Hump Day!!  We are half way through the week but we are at the beginning of three days of jobs reports.  Some interesting stuff is happening in the markets today but let's start with a recap of yesterday.  There was another huge sell-off in the stock market which was the main driver for the bond markets.  The FNMA benchmark mortgage bond closed up 25 basis points to erase Monday's losses.  I recommended locking by the end of business yesterday ahead of the jobs reports that are released today through Friday because of the potential for sell-off in the bond markets which push rates higher.  This morning, stock are recovering a bit with the DJIA currently up 186 points.  This is the main driver for why bonds have sold off a bit this morning with the benchmark bond currently down 12 basis points.

From a technical standpoint the 103.83 resistance level is proving to be strong as the chart shows the benchmark bond as been unable to break through that level with any strength over the last 4 days.  The longer that streak goes, the stronger that resistance gets and the more likely it is that there will be a sell-off from this point.  On the other hand, bonds are a bit closer to oversold than overbought, according to the RSI (Relative Strength Indicator).  Additionally, there is support at 103.66, though it hasn't been tested as much as the resistance level.

Fundamentally, the data this morning is good for bonds even if half of it is a bit on the old side.  The ADP Private Payrolls report came in at 190K vs. estimates of 201K and July was revised down from 185K to 177K.  This is slightly positive for pricing and is probably helping to offset the negativity of a rebounding stock market.  The final reading of Non-farm Productivity came in at 3.3% (being more productive means being able to keep costs, and inflation, down) vs. estimates of 2.8%.  The more closely watched Unit Labor Costs came in at -1.4% vs. estimates of -.9%.  Finally, July Factory Orders came in substantially lower than expected at .4% vs. expectations of .9%.  While this is all good news for interest rates, its also old news and so it won't have much of an impact.

What's on tap for tomorrow?  If you or your client are floating, I would recommend locking before the close of business today.  Tomorrow's data includes Jobless Claims and ISM Non-manufacturing index.  Friday is the big day with Non-farm Payrolls and the Unemployment Rate (maybe one day they'll start publicizing the Workforce Participation Rate since that tells a much better story of unemployment, but I digress).  Digressing even further, tomorrow is also a big day because it's the start of college football season with the University of Utah Utes (my alma mater) taking on the Michigan Wolverines (one of my favorite teams as a kid) at 6:30 MDT / 5:30 PDT on Fox Sports 1 - YES, I will be glued to the tv after having some yummy pre-game football food.

Don't ever hesitate to call me if I can help with anything mortgage-related (801-853-8720 or 702-812-1214).  As always, make it a great day.

Tuesday, September 1, 2015

Mortgage Bond Market Analysis - Lock or Float?

It's Tuesday and we have a bit of data ahead of three consecutive days of various jobs reports.  The ISM Manufacturing Index came in at 51.1 which was a fair amount below expectations of 52.6 and the previous reading of 52.7.  Anything over 50 is expansionary, which is good, but a lower reading like this will definitely help mortgage bonds get a bid and, in turn, help with lower interest rates.  Construction Spending, on the other hand, was .7, same as the previous month's number but better than expectations of .5.  This isn't as big of a deal as the ISM reading.

The FNMA benchmark bond closed down 23 basis points yesterday as it deteriorated throughout the day, closing 38 points of the morning high of 103.97 to end the day at 103.59.  The RSI (Relative Strength Index) is smack dab in between being overbought and oversold so that is a non-factor.  The benchmark bond is currently at 103.82 (up 23 basis points for the day) and 1 basis point below the 1st level of resistance of 103.83.  If it can break through the 1st resistance level, it has a bit of room to go up since the 2nd resistance level is at 104 and the 200 day moving average is above that.  However, I don't expect much more buying today since traders will probably be cautious ahead of the 3 days of jobs reports which begin tomorrow with the ADP Private Payrolls Report.  Tomorrow's data also includes Non-farm Productivity which is supposed to be up considerably vs. last month's number - this is good for bonds because it means we are producing more for the same amount of cost.  Another possible good number for bonds is the expected weak number for Factory Orders of .9 vs. previous of 1.8.  Since the ADP report isn't usually given much weight, it may be alright to float into tomorrow if you have a loan (or a client has a loan) that is closing 15 days or more out.  The DJIA is down about 315 points as of this writing and the benchmark bond isn't up as much as one would expect based on the size of the stock market sell-off so there appears to be a bit of a disconnect and my guess is that it's coming from the anticipation of the upcoming data.  More sell-offs could temper otherwise positive data.  If you or a client has a loan closing within 15 days, I'd take advantage of today's gains and lock.  As always, if you are going to float, keep a watchful eye on the mortgage bond market because things can change fast.

Thursday will bring us Weekly Initial Jobless Claims (and a few related numbers) as well as the ISM Non-Manufacturing (service) numbers which are also supposed to be down but much higher than the manufacturing numbers we got today.  Perhaps the most important thing we get on Thursday (at least for college football fans and especially those who are alums of the University of Utah) is the start of college football season with what looks to be a great game between the Utah Utes and the Michigan Wolverines on Fox Sports 1, but I digress.  On Friday we get Non-farm Payrolls and the Unemployment Rate along with a few other minor bits of data.  This could be very important as far as what the Fed does at their September FOMC meeting with regard to raising the Fed Funds rate or not.  A quick last look at the bond shows it's off the highs for the day and is now up just 16 basis points.

Loan Program(s) of the Week:  This week I have two loan programs that I want to feature:  1) The 2nd Chance Program which allows a borrower to get a mortgage one day out of bankruptcy, short sale or foreclosure with as little as 20% down and 2) a 95% jumbo loan to $2.5mil.  I can help you with great rates and service on all of the regular loans but I may also be able to help save some deals with some of our great niche programs like these and get you a paycheck sooner rather than later.  Feel free to share your thoughts about all of this as well as to contact me if I can help with anything mortgage-related.  Make it a great day.