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Friday, January 29, 2016

Mortgage Bond Market Analysis - TGIF and BOJ

It's Friday and we've got more weak data and some craziness out of Japan.  Yesterday we had an anomaly in the market where both equities and bonds closed higher and this morning equities and bonds are both higher again.  The fact that oil has moved a bit higher is helping stocks while weak data and a surprise move from Japan to negative interest rates has caused a flight to safety with people moving money to bonds.  I can't imagine an investor who wants to pay for the privilege of owning Japanese bonds.  Negative interest rates erode wealth; in fact, wealth is eroded when the return on investment doesn't keep pace with inflation.  That said, the GDP reading from this morning shows there's not much to worry about on the inflation front with an annualized rate of .7% vs. estimates of .8%.

Chicago PMI:  In an absolute about face and huge surprise to the upside, the Chicago Purchasing Manager's Index which had severely disappointed as of late came in at 55.6 vs. estimates of 45 and previous of 42.6.  The FNMA benchmark bond is pairing back its gains on the news.  This is huge since a reading over 50 is expansionary and very good for the economy.  It's only one month so we will have to see what it does next month to see if the manufacturing sector might have some legs or if it was just an aberration.

The morning high for the FNMA bond had us above the most recent high of October 28th and was knocking on the door of October 2nd.  Currently, the benchmark bond is up 11 basis points which is 10 basis points above the 1st resistance level but nine basis points below the 2nd.  It is 19 basis points off its morning high and the RSI is showing overbought.  There is a fight going on between the huge beatdown from the Chicago PMI vs. the low oil prices and the negative interest rates from the BOJ.  I don't expect the bond to tumble anytime soon with that support but if we get other economic data that starts to show legitimate economic growth and the price of oil rises with any significance, then I would expect bond prices to erode and interest rates to rise.

Jobs Week:  Next week is the first week of February which means that we get the ADP Private Payroll Report on Wednesday, Jobless Claims on Thursday and Non-farm Payrolls and the Unemployment Rate on Friday.  There will be a fair amount of other data as well so keep on your toes if you or a client have a mortgage that isn't locked.  For now, I would float through the weekend since the BOJ thing and oil will likely support the current price at the very least and may push it higher if we get more weak data.  I would be leery about floating through the jobs reports; if you have a loan closing more than 15 days from now, I think it's save to float but as always, keep a close eye on the market.  If you have a loan closing within 15 days, I would lock.  I'd love to help with any mortgage clients you have and you can always feel free to contact me for the latest on the mortgage bond market and interest rates as well as loan program questions - 702-812-1214 or 801-853-8720 (  Make it a great day and a better weekend.

Thursday, January 28, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday and more weak data

It's that day of the weak (I did this on purpose) again - Jobless Claims Thursday.  We also have some other data that came in rather disappointing so let's take a look.  Initial Jobless Claims came in at 283K vs. estimates of 282K - while this is below the 300K threshold, it is high enough to indicate that jobs aren't being created nearly quick enough to really have a strong economy.  Continuing Claims were 2.268mil vs. expected of 2.217mil - much higher than expected.  The government would like us to focus on the unemployment rate which is down to 5% but considering the fact that that number is skewed based on the change in calculation from how it used to be figured in the early 80s since it doesn't report people who are no longer looking for work, I like to throw in a data point that doesn't get reported the way these other statistics do:  the labor force participation rate.  From the Bureau of Labor Statistics (I wonder how many people it takes to man this bureau), the reported rate for December is 62.6% which is basically at a 38 year low.

So we know there are nearly as many Americans employed as we need to have in order for the economy to be strong yet Tuesday we had a really strong Consumer Confidence number.  Consumer Confidence numbers usually prove themselves with good spending data.  We got a little bit of spending data this morning in the form of Durable Goods.  Expectations were for -.6% and last month's reading was 0; today's reading was...wait for it...-5.1%.  Well what about the ex-transportation figures since that's really the important number, you say?  Last month's reading was also 0, expectations were for -.1 and the actual number was -1.2%.  Consumers just aren't spending the way they need to for a good economic recovery.  Consumers don't spend when 1) they aren't employed, 2) aren't confident that their employment will continue or 3) aren't making enough discretionary income to be able to spend.

Maybe they aren't spending because they are buying bigger ticket items like homes.  There may be a wee bit of weight to this argument.  Last month's Pending Home Sales were weak with a reading of -1.1 (remember this is relative to the prior period and doesn't show the number of units sold - that's a different data point).  This month, expectations were for .8 - a nice increase over last month which showed a large decrease from the previous month which means that it would still be weak; the actual number was .1 which means we are a bit better but after such a poor reading last month it would be hard to be worse.  The bottom line is that if you have money burning a hole in your pocket, go buy something and help the economy.  If you really want to do your part, buy a new primary residence or if you already have one, buy an investment property - I can show you some great strategies to buy it right.  When you buy a home, you will get a fantastic rate - a crappy economy means great rates.  Additionally, the commissions earned by Realtors, the loan officer and the pay it generates for the others involved in the transaction allows them to buy stuff as well.  You can help even further by buying stuff to fix up your new home such as paint, flooring, cabinets and countertops and by hiring someone to do the work, the contractor and their crew now get money to spend (a good rehab loan can help finance the renovations and we have rehab loans for primary residences, 2nd homes and investment properties).  Your new home could probably use some new furniture, unless it's an investment property then the tenants can use their own.  Lest you think I should put my money where my mouth is, I bought a home in October and paid a flooring and paint crew to do a makeover of my entire house.  I also bought a bunch of new furniture from my friend at RC Willey.

Contact me to learn more about investment property loans and how investing in real estate can be a great way to prepare for retirement.  I'm also happy to share how the various rehab loans can help you buy fixer upper homes at great prices and ultimately get you the home you want.  I can be reached at 702-812-1214, 801-853-8720 or  For now, lock if you have a loan closing within 15 days and with oil being the driver for all of the markets, it's a toss-up about locking or floating for loans closing beyond 15 days.  I don't think you can go wrong by locking now but you may be able to get slightly better rates or pricing if you float.  As always, keep a close eye on mortgage bonds if you do float.  Make it a great day.

Wednesday, January 27, 2016

Mortgage Bond Market Analysis

It's Hump day and it's also Fed interest rate decision day.  I don't expect the Fed to raise rates today and would certainly be surprised if they did considering all the wealth we have lost in the sell-off of the stock market since they raised the rate in December.  The Dow was down as much as 179 points and is now up 33 points.  The NASDAQ and S & P were also down but are now up.  I have now doubt that this is in anticipation of some words that will be calming for the market.  There is at least one economist that thinks the Fed will be backed into a corner that requires them to implement another round of quantitative easing - #4.  Check out Dow 25,000.

Yesterday, January Consumer Confidence came in at 98.1 vs. estimates of 96.8 and previous of 96.5.  This is a very strong number and would normally be negative for pricing which means higher rates but with the Fed announcing today, traders weren't / aren't making any big moves.  The FNMA benchmark bond finished up 2 basis points yesterday and is currently down 11 basis points right now.  We will get the announcement from the Fed at 2:15 EST.  My guess is that we will hear comments that will push equities higher and it might very well be an anomaly day where we also see interest rates get better.  However, rates are probably a bit better than they should be due to expectations of a dovish tone from the Fed - you know how bad manufacturing numbers are if you read my blog on a regular basis and we'll get Chicago PMI on Friday which is expected to be very weak - so we may not see much improvement if all we get from the Fed is what's already been priced into the market and what's expected.  There's probably more risk to the downside as far as bond prices are concerned so to be safe, I would probably lock ahead of the Fed announcement.  It's rare that we lock, or buy stocks or houses, at the perfect time so don't be greedy; recognize a good thing when it's there and rates are very good.  If rates improve enough, you might be able to float down or renegotiate your rate if your lender offers that - I do.

Contact me if I can help in with anything mortgage related - 702-812-1214, 801-853-8720 or  Make it a great day.

Monday, January 25, 2016

Mortgage Bond Market Analysis - Fed Interest Rate Decision

Happy Monday.  I hope your weather is better than those on the East coast.  If you like football and you're a Bronco or Panther fan, you've got almost two weeks of build-up until these two play each other in the Super Bowl.  I'm looking forward to a good game and some entertaining commercials.  If you are just interested (pun intended) in rates, this is a big week with the Fed Interest Rate decision coming out on Wednesday afternoon (about 2:15 EST).

There is no data out today and with weakness in the stock market, the FNMA benchmark bond is seeing some support and is currently up 15 basis points after losing 13 on Friday.  I'm switching my recommendation to floating with caution.  Tomorrow's data includes Consumer Confidence, Richmond Fed Manufacturing Index and the Case-Schiller Home Price Indicies.  My guess is that none of these will show a lot of strength.  We also have a 2 year T-note auction tomorrow afternoon.  As the Fed discusses what they will do with regard to rates, I think they will recognize how much the stock market has sold off since they raised rates in December.  With the erosion of wealth that has taken place, the economy is adversely impacted and the Fed won't like this.  My bet is that the Fed won't do anything this Wednesday and they might even say things to try to calm the stock market.  If they do this, we could see a bit of a rally in equities with bonds getting the short end of the stick.  If this happens, you need to be ready to act VERY quickly with regards to locking so that you minimize your loss.  Locking ahead of the Fed interest rate decision wouldn't be a bad thing.

In addition to some relatively important economic data (Chicago PMI, GDP, New Home Sales, Jobless Claims, etc), there are two more bond auctions this week after tomorrow.  All of these things will definitely influence what rates do but the Fed decision on rates and what they say will probably have the biggest influence.  I can be reached at 702-812-1214, 801-853-8720 or if I can help you with a client, mortgage questions or interest rate questions.  Make it a great day.

Friday, January 22, 2016

Mortgage Bond Market Analysis - It's all about that oil

TGIF.  Oil is back above $30 per barrel and that is pressuring mortgage bonds.  Let me start by saying that on days when I don't write a blog post about the mortgage bond market and interest rates, you can always call me (702-812-1214 or 801-853-8720) or email me ( to see what the market is doing and get my thoughts on locking or floating.

The FNMA benchmark bond closed down 8 basis points - not too big of a deal - but there is follow-through this morning thanks to rising oil prices.  The bond is down 16 basis points so I am going to recommend locking to protect you / your clients to the down side.  The RSI is no longer overbought so we don't have that pressure from this technical indicator.  At a current price of 103.94, the bond is 12 basis points above the 1st support level.

As far as data is concerned, it was mixed with Existing Home Sales coming in strong at 5.46mil vs. expectations of 5.18mil and previous of 4.76.  On the other hand, Leading Economic Indicators came in at -.2 vs. expectations of -.1 and previous of .5 - big miss here.  Yesterday, Initial Jobless Claims came in at 293K, well above expectations of 280K and last week's reading of 284K and it's knocking on the 300K threshold - not good.  The Philly Fed Manufacturing Survey, while bad at -3.5, was not as bad as expected (-5) or the previous reading (-5.9).

On a happy note, I have a client who was working with another lender for two months before they ended up turning her down.  The listing agent asked her to contact me and two and a half weeks later we are signing loan documents today - this time frame includes getting a new appraisal and a holiday.  The appraisal wasn't the issue but we just wanted to give her the best chance of success so we went with a new appraisal.  Needless to say, the client is ecstatic and so are we.  Our average closing time under TRID is about 3-3.5 weeks.  We'd love to help you or someone you know who needs a mortgage.

Make it a great day and a better weekend.

Wednesday, January 20, 2016

Mortgage Bond Market Analysis - Hump Day

It's already mid-week and the equities market is getting hammered.  Don't they know that if you want to get sloppy drunk that you should save it for the weekend?  I mentioned yesterday that I felt like there would be continued weakness in oil and the global equities market as well as the likelihood for more weak economic data so I recommended floating.  Yesterday, the FNMA benchmark bond finished down 9 basis points which is about where it was when I wrote my post.  Today, we have some mixed data and more weakness in oil which is causing the stock market to sell off.  The Dow is down around 400 and the S & P is back to late 2014 levels.  The benchmark bond is up 30 basis points as I write this, 10 basis points off its morning high but it appears to be trending up.

One of the three main measures (PCE, PPI and CPI) the Fed uses to track inflation came out mixed today.  The Headline CPI MOM was down -.1% vs. estimates of 0%.  Core CPI MOM was also a bit lighter than expected at .1% vs. estimates of .2%.  The Core CPI YOY was 2.1% and met the estimates.  It looks like builders are ramping up for the spring with 1,232K new permits vs. expectations of 1,200K, although considerably lower than last month's reading of 1,289K.  Conversely, Housing Starts at 1,149K were lower than the estimates of 1,200K and last month's reading of 1,179K.  Tomorrow we get the ECB Policy Statement - expect Draghi's message to basically be one of continued weakness.  We also get Jobless claims - it's Thursday, what do you expect? - and the Philadelphia Fed Manufacturing Survey which is supposed to come in weak, just less weak than last month.

From a technical stand point, at 104.23, the benchmark bond is 11 basis points above the 1st level of resistance but 25 basis points below the 2nd level which is at 104.48.  The RSI is overbought but the bias has changed ever so slightly.  I expect traders to pay attention to Draghi's comments tomorrow to see if there is any improvement in Europe and I also expect oil and its impact on stocks to continue to dictate the flow of money which is currently into bonds.  Because of that, I recommend floating if you or your client is closing 15+ days out and locking if they are closing in 15 days or less.  Rates are great so it's a great time to buy.  If you have people that are on the fence, let them know that this is a great opportunity to lock in a great low rate that won't be around forever.

Contact me if I can help with anything mortgage-related - 702-812-1214 or 801-853-8720,  Make it a great day.

Tuesday, January 19, 2016

Mortgage Bond Market Analysis - Tuesday Monday edition

I hope you had a fantastic weekend - whatever that means for you.  The FNMA benchmark bond ended Friday up 30 basis points which, while solid, was 10 basis points below the 2nd resistance level and 18 basis points off its high for the day.  This morning, we are seeing a bit of selling as the benchmark bond is down 8 basis points with the stock market up (Dow +153).  The focus for traders is oil and global weakness which is causing the US stock market to sell off while we see a flight to safety from traders around the world to US bonds, including mortgage bonds.

If this weakness continues, I expect the Fed to either slow down the rate increase, as compared to what they had planned to do, or to pause it until the economies (especially ours) shows real signs of improvement.  In a blog post of mine a week or so ago, I mentioned that one of the Fed presidents talked about starting to whittle down the balance sheet of the bonds (including mortgage bonds) they had purchased when the quantitative easing plan was in play.  As the Fed sells off these assets, it could put significant downward pricing pressure on bonds which makes rates go up.  This compounds the fact that the Fed is also raising their short-term rates which has ripple effects on longer term mortgage rates.  Here's the secret sauce:  with global markets reeling and investors looking for safe havens (US treasuries are considered to be the safest investment with other high quality bonds, like mortgage backed securities, not far behind), the Fed could sell bonds and now at a decent price without too much of an adverse impact on rates since there are lots of buyers.

As for economic data, the NAHB Housing Market Index came in at 60 vs. the estimates and previous reading of 61.  Tomorrow we will get the CPI as well as Housing Starts and Building Permits.  CPI is the big one that would have the biggest impact on rates and I really don't see much threat of inflation at all in tomorrow's reading.  The estimates for Jobless Claims on Thursday are in the upper end of the range we've been in over the last several months so it doesn't look like there is any news there to squash our little run either.  From a technical standpoint, we are above all of the moving averages and we are 18 points below the 2nd resistance level.  The RSI continues to be overbought so from a technical standpoint there is a bit of headwind for the bond to move higher.  That said, there's really no reason for traders to sell either, so as long as oil stays low (and possibly moves lower) and the global weakness continues (we get an ECB policy statement on Thursday), there's a chance that bond prices could be pushed higher with rates going even lower.

What all of this means is that if I have a client whose loan closes in 15 days or less, I'm going to lock.  If the closing is 15+ days, I'm going to float - but as usual, I'm going to keep a close eye on the market so that I can lock quickly should the markets make a sharp move against me.  Please feel free to contact me if I can help with anything mortgage related - we are closing loans in 3-3.5 weeks and we will keep you (Realtor, client and listing agent) updated every step of the way.  I'd love to earn your business so give me a try and let me show you what we can do.  Make it a great day.

Friday, January 15, 2016

Mortgage Bond Market Analysis - Weak Data Friday

It's Friday and we have lots of data today.  The politicians and many talking heads as well as the Fed have been trying to get us to believe the economy is recovering.  I guess everything is relative since the economy probably isn't as bad as 2007 - 2010.  However, about every piece of data that is released is weak.  Sometimes it's better than expectations and sometimes it's not but in the grand scheme of things it's not about expectations, it's about what the data is vs. what it needs to be for the economy to be healthy and the disparity, unfortunately, is huge.

Here's a look at this morning's data.  January Preliminary Consumer Sentiment Index came in at 93.3 vs. estimates of 93.  This is a good number and the various consumer confidence numbers have been strong but the reason they are strong isn't what is going to help a recovery.  Usually when the economy is strong, consumers are confident and the confidence shows because they are buying stuff.  When consumers buy enough stuff, the demand for stuff pushes prices upward (just like the current demand for bonds is pushing prices up and rates down).  I believe that there are two reasons for the good consumer confidence numbers we've been seeing for the last year or so:  1) consumers believe the talking heads who are telling us that the economy is recovering and 2) more people (depending on what stat you look at) have jobs which means more consumers can pay their bills - but not necessarily buy more stuff.  More data:  Business Inventories -.2% vs. expectations of -.1%.  The inventory numbers have been bad, for the most part.  When the economy is humming along, businesses build up their inventories in anticipation of increasing demand for their products.  This isn't happening.

Industrial Production -.4% vs. expectations of -.2%.  Capacity Utilization was 76.5% vs. expectations of 76.8%.  This is a very weak number and shows that there is plenty of room for growth; Because consumers aren't buying, factories don't need to produce anywhere near their capacity which also means factories don't need as many employees and the current employees probably aren't working as much overtime which means they have less discretionary income to buy stuff.  With regard to buying stuff, December Retail Sales were -.1% vs. expectations of .0% and the more important ex-auto Retail Sales number was -.1% vs. expectations of +.2%.  Consumers aren't buying stuff the way we need them to for a solid economic recovery.  By the way, the meltdown began in 2007 so we are in the 9th year since we started trying to fix this thing.  A very important data point for the Fed is the PPI and the MOM number was -.2% just as expected while the Core PPI (MOM) was .1%, also as expected.  Neither of these numbers shows any threat to inflation and one has to wonder why the Fed would consider raising rates other than to make us think that maybe the economy really is recovering and it's a good time for us to start buying stuff because all is well and good.

Excuse my cynicism but I'm tired of hearing about our economic recovery when it's just not there.  I don't mean to be Douglas Downer (my first name is Douglas) but we should be much further along than we are.  I won't get political but I will say that on the positive side the continued week data provides great opportunities for those looking to buy a home or refinance their current mortgages as rates remain at near historically low levels.  On Wednesday I recommended floating and while the FNMA benchmark bond sold off 11 basis points yesterday (no big deal), it is up 40 basis points so far today at 104.12 which is also the current 2nd resistance level.  We have to go back to October 29th when we were last at this level.  If you or a client has a mortgage that is closing in the next 15 days I would happily lock and then party like it was 1999.  If the loan closing is beyond 15 days, I'd float but as you may know, when floating I always recommend to keep a sharp eye on the market so that you can act quickly.  I'd love to get your thoughts on the "recovery" either in the comments section below or in an email.  If I can help with a pre-approval or anything else mortgage-related, please contact me at 702-812-1214 or 801-853-8720.  My email is  Make it a great day and a better weekend.

Wednesday, January 13, 2016

Mortgage Bond Market Analysis - Hump Day Edition

Happy Hump Day.   As I mentioned in my post on Monday, Oil and China will drive the market for now.  Yesterday we saw a bit of a tipping point as oil dipped below $30 briefly though it closed at $30.56, down .85 on the day.  Some firms are calling for oil prices to go below $20 per barrel.  Commodities in general are down and some experts are thinking that deflation is more likely than inflation.  It could be a tug of war because as more people get jobs and start spending money, that will help inflation and obviously be good for the economy.

Europe has been a mess for a while as far as the economy and financial markets are concerned and with China having such big issues, equities are out of favor and the money is flowing from them into bonds in a big way.  Hence, the FNMA benchmark bond was up 40 basis points yesterday.  $21 billion of 10 year treasuries are being auctioned today; considering the appetite for bonds, my guess is that it will be well received.  That said, the bond is currently down 23 basis points, giving back more than half of yesterday's gains.  It's been hovering right around the 2nd resistance level of 103.72 which is strong because that's about where the 100 day moving average is.  The RSI is still overbought as well which provides even more impetus for the bond to sell off a bit with some profit taking.  While there is headwind, with the equities markets in shambles (the Royal Bank of Scotland - RBS - along with other firms stateside are advising clients to sell ahead of a major meltdown), investors are turning to bonds which may very well override the technical factors that usually play a big role in what traders do.  Further price declines in oil will also help push bond prices higher and rates lower.

I think it's safe to float for a bit with so much turmoil in the other markets.  With rates where they are, you can't go wrong by locking, especially if you have a loan closing in 15 days or less.  If you do float, as always, keep a close eye on the mortgage bond market so that you can act quickly if it moves against you.  I'm always available to help in anyway - 702-812-1214 or 801-853-8720 or  Make it a great day.

Monday, January 11, 2016

Mortgage Bond Market Analysis - No Data Monday

O.K.  So the title isn't 100% accurate.  The Labor Market Conditions Index came in at 2.9% vs. previous of 2.7% but this gets next to no coverage.  Tomorrow we get JOLTS which gets slightly more coverage and Wednesday we have a 10 year treasury auction and the Fed Beige Book; there are also 6 Fed presidents that will speak this week and traders will be listening intently to see if they can get any hints about the economy and Fed strategies from them.  I think trading will be non-dynamic at least until the auction unless there is something major in the international markets (China and oil prices will likely continue to dominate the headlines) or we have some big geo-political event.  The auction has the potential to influence bond prices one way or another depending on how well received it is.

The FNMA benchmark bond is 15 basis points off its high and 11 basis points off the day's low at 103.77 and is currently down 6 basis points.  The 2nd resistance level is 103.70 so it is still above that but hasn't really broken through with impunity yet - the 100 day moving average may now act as a support level.  Rates are great so locking now to protect yourself (or client) to the downside wouldn't be bad.  I don't know that there's much upside to floating since my guess is that the bond market will trade in a very narrow range until the auction.  Thursday and especially Friday will bring a fair number of data points including the PPI and some other important numbers.  If you decide to float, keep a close eye on the bond market so that you can act quickly if it moves against you.

I'm happy to help in any way.  Make it a great day and better week.  The college football national championship game is tonight:  Clemson vs. Alabama.  Who are you rooting for and who do you think will win?  I'm pulling for Clemson but I think Alabama will win.  I hope I'm wrong.  What do you think the score will be?  Comment on the blog or email ( me your entry - the person who guesses the right team and is closes in score wins lunch with me.

Friday, January 8, 2016

Mortgage Bond Market Analysis - Anomaly Friday

The mortgage bond market has every reason to sell off this morning but it's not doing it.  We are seeing a major anomaly this morning consider the fact that the Non-Farm Payroll numbers CRUSHED expectations coming in at 292K (which is a very strong number) vs. estimates of 200K.  November's numbers were revised from 211K to 252K - another strong reading.  Both of these are very negative for bond pricing.  The next part of the anomaly comes from the RSI being overbought, just like yesterday.  Finally, the stock market is up a bit - you would expect this after strong economic news like we got this morning not to mention the fact that the recent huge sell-off has provided some nice bargains for investors.

The FNMA benchmark bond has been up as much as 21 basis points on the day and is now only up 7.  Most of the move up happened after the numbers came out so it's not like the numbers caused the sell off like you would think.  To finish out the economic data for today, the unemployment rate came in at 5%, just like expected.  November Wholesale inventories came in at -3% vs. expectations of -.1%; this is a slight positive for pricing.  In addition to the RSI showing that the benchmark bond is overbought, the 2nd level of resistance is very strong at 103.70 since the 100 day moving average is also right around that point as well.  The bond is now only up 4 basis points for the day at 103.70 so it looks like the resistance level is holding strong.

If you didn't lock yesterday heading into todays big numbers, you got a reprieve and I would take advantage of the anomaly we have this morning and lock.  The fact that China's financial markets are in turmoil is probably the only thing that is supporting the current price.  Once that gets back on track, money will flow from the bond markets and back to the equity markets, especially with economic news like this.  In addition to this, remember that I shared Fed President Lacker's quote yesterday that said he thought the Fed should start selling the bonds in their portfolio - you may recall the quantitative easing program where the Fed was buying $45 billion a month in mortgage bonds to keep rates low, well now it's time to start selling them off, at least according to him.

Make it a great day and a better weekend.  I'll be available if you or a client is in need of a pre-approval or just have a general mortgage question - 702-812-1214 or 801-853-8720.

Thursday, January 7, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday

Happy Jobless Claims Thursday.  The data came in a bit worse than expected this morning.  We've got a number of things in play this morning regarding the mortgage bond market.  First of all, the extreme weakness in the stock market since the beginning of the year (Monday) has provided support for the bond market.  Initial Jobless claims came in slightly higher than the expected 275K at 277K while Continuing Claims came in 30K higher than expected at 2,223K.  While this is a slight positive for bonds which were up a bit this morning, traders have decided to sell off and take a bit of profit after a 34 basis point increase yesterday and a 5 day winning streak which got us back to our December 3rd pricing.  The RSI (Relative Strength Index) is well above the overbought threshold which is a technical indicator that would give traders reason to sell.  

With the uncertainty in China's financial market and the loss of wealth that it has brought, we could see some impact in our economy; it is certainly influencing the start to our year for the stock markets.  To further convolute thoughts on what's happening in the financial markets and what we should do (lock / float, buy / sell), Fed President Jeffery Lacker (a hawk) said some interesting things at a speech to a business group in Raleigh, North Carolina this morning.  On one hand, he said that when oil prices bottom out and the dollar reaches its peak, the Fed may need to raise rates more than the expected 4 times this year if inflation rapidly increases toward the Fed's 2% target.  Lacker believes that we will see strong consumer spending this year; I'm not so sure.  There is lots of mixed data that makes it too nebulous to call.  On the one hand, we haven't seen a lot in terms of consumer spending; most of the reports are missing the mark.  On the other hand, consumer confidence is high (if not backed up by the opening of the consumers' collective wallet) and the ISM non-manufacturing index has been strong which could lead to more service sector jobs which increases employment and hopefully spending on things other than core products like food and fuel.  Here's an interesting quote from this morning's speech: Lacker, who had pressed his Fed colleagues for a rate hike for much of 2015 when he had a vote on policy, expects strong consumer spending to drive the U.S. economy this year. He also said he would like the Fed to start whittling down its massive balance sheet of bond holdings "sooner than later."
Especially interesting is the last part of that quote where he says he would like to see the Fed whittle down its bond holdings.  This means he wants them to start selling the bonds in the secondary market which would put downward pressure on price and upward pressure on interest rates.  This is one more reason that you or your homebuying clients should buy sooner rather than later; as you know, higher interest rates erode homebuying power.

The FNMA benchmark bond is down 9 basis points to 103.57.  I would lock today in advance of the NFP (Non-farms Payroll report) and the unemployment numbers tomorrow just to be safe.  As always, I'm here to help in any way with anything mortgage related.  Please contact me at 702-812-1214 or 801-853-8720 or at  Make it a great day.

Wednesday, January 6, 2016

Mortgage Bond Market Analysis - ADP Private Payrolls Wednesday

With the first jobs report of jobs week, the ADP Private Payrolls report blew away expectations with a reading of 257K vs. expectations of 192K.  The FNMA benchmark bond that was up nicely this morning has paired back it's gains.  This has been the theme this week with Monday seeing the bond get as high as 103.53 and closing 28 basis points off the high at 103.25.  Yesterday it was as high as 11 basis points above the open for the day and closed up 7 basis points at 103.32 (not a big deal).  This morning the bond was up 29 basis points before the ADP report and sold off as many as 20 basis points before rebounding a bit - it is currently up 14 basis points at 103.46.  The ISM Non-manufacturing report comes out in about an hour (8:00 AM EST) and my guess based on these numbers is that it will be strong - at least a lot stronger than the manufacturing numbers we got on Monday.

ISM Non-Manufacturing numbers:  Expectations were for 56.4 but the actual reading came in at 55.3.  While this is a miss, the number is still very strong as anything above 50 is expansionary and this is solidly above 50.  Contrarily, Factory Orders were expected in at -.2% which is exactly what they came in at.  This is significantly below last month's reading of 1.5.  A weak stock market is really the impetus for the recent gains but I wouldn't bet on the continued buying of bonds, at least not through Friday's unemployment and non-farm payroll numbers.  Locking now is fine considering the recent gains but I would probably float with caution through tomorrow (though you are risking a surprise in the FOMC minutes this afternoon if you do that) and lock by tomorrow afternoon's close.  As always, when you are floating, watch the market closely so that you can be ready to act quickly in case the market moves against you.

I'm happy to help you however I can and I would really love to earn your business and help you with a mortgage (702-812-1214 or 801-853-8720).  I will be unavailable today until the later part of the afternoon.  In the meantime, make it a great day.

Monday, January 4, 2016

Mortgage Bond Market Analysis - First post of 2016 and first data of 2016...

Happy New Year.  It's time to get rolling in 2016.  The first two data points of the year are out and they are both disappointing.  The December ISM Manufacturing Index came in at 48.2 vs. expectations of 49 (which would have been a bad reading anyway).  November Construction Spending came in at -.4% vs. estimates of .5%.  Both readings are very bad and will provide support for our current pricing if not push it higher.  There is some headwind in the form of our 2nd resistance level which is currently at 103.45.  The 50 day moving average is another resistance level and is right around 103.5.  The FNMA benchmark bond is up 23 basis points for the day at 103.41 - 7 basis points off the daily high and 4 basis points below the 2nd level of resistance.

Last Thursday, the bond closed up 26 basis points; when I published my post, it was up 27 basis points and I wrote that I thought it would close right around that level.  I also wrote that it was a possibility for upward movement as traders returned from vacation and volume picked up with them trading on the recent disappointing data.  This has happened so far this morning.  Finally, I recommended locking before the employment data, especially Friday's unemployment rate and non-farm payroll data.  Data is very light tomorrow with Total Auto Sales coming out at 4:00 EST.  Wednesday we get some important data with the ISM non-manufacturing index, factory orders, FOMC Minutes and the first of our employment data with the ADP Private Payroll change.  I'm taking my daughter (she starts her 2nd semester of college next week) skiing on Wednesday so I probably won't have a post on Wednesday's news until Thursday which will also include Jobless Claims.

I'm always available to help with anything mortgage-related.  Feel free to contact me at 702-812-1214 or 801-853-8720 or by email at  Make it a great day and an awesome year.