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.