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Friday, December 11, 2015

Mortgage Bond Market Analysis - Merry Christmas and Happy Chanukah edition

It's a great day all around.  It's Friday - for what that's worth, which may mean a weekend for some and more work for others.  It's also a day with a market anomaly.  Today we got some relatively important data that will factor into the Fed's decision next week.  Here's a look at all of the data.  November Retail Sales came in at .2%, a tad bit below estimates of .3%.  Ex-auto, the number was better at .4% vs. .3% estimates.  The PPI came in at .3%, much better (at least as far as percentages are concerned) than the .1% expected.  Core PPI (YOY) was also much stronger than expected at .5% vs. .2% estimated.  What we make of this is that consumers are starting to act on their sentiments by opening up their wallets.  Additionally, inflation is ticking up at the producer level but it is still quite a bit below the 2% target level of the Fed; the CPI, which comes out on the 15th, is really the number the Fed will be watching as far as inflation is concerned, though.  October Business Inventories were .0% vs. estimates of .1% and the Michigan Consumer Sentiment Index came in at 91.8 vs. estimates of 92 and previous of 93.1.  This is still a strong number.

Here's where the anomaly comes in:  we had better-than-expected data for the points that the Fed is going to be watching more closely and yet the FNMA benchmark bond is up quite strong.  It is 14 basis points of its morning high but still up 22 basis points on the day after losing 20 basis points yesterday.  This might be a sign that traders are starting to believe that the data doesn't support a Fed rate hike.  If for any reason your rate wasn't locked, today would be a good day to lock.  There's no data on Monday so my guess is trading will be relatively quiet ahead of the CPI number on Tuesday which is the last important piece of data for the Fed to consider before they announce their interest rate decision on Wednesday, the 16th.

As always, I'm happy to help in anyway I can - hopefully my blog provides you with at least some of the information you need to make decisions on locking / floating.  If you appreciate the information I provide, I would appreciate referrals for mortgages.  My company offers low rates, a wide variety of mortgage programs, and great service with our average closing time being around 3-3.5 weeks.  Contact me at 801-853-8720 or 702-812-1214 if I can help with anything.  Make it a great day and a better weekend.

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