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Friday, July 29, 2016

Mortgage Bond Market Analysis - More Disappointing Data

It's Friday morning, which doesn't mean much for Realtors and loan officers but we do have some economic data to talk about which might influence mortgage rates.  The 2nd quarter GDP came in much lower than expected at 1.2% vs. estimates in the 2.2% - 2.5% range.  On the other hand, the Chicago PMI, which had been weak throughout much of the year until the last couple of data releases, beat expectations with a 55.8 vs. expectations of 54. This will likely off-set any benefit in pricing we would have seen from the low GDP number.  It is also in contrast to the very weak Durable Goods numbers we saw at the beginning of the week which continues to make it difficult to get a reading on when the economy will really get going.  The FNMA benchmark bond is currently up 9 basis points which is 8 basis points off the morning high of 104.03.  The 2nd level of resistance is 103.98 so that held the first time the bond tried to break through.  From another technical standpoint, after closing up the last two days and being up this morning, the RSI (Relative Strength Index) is right at the overbought threshold which could signal traders to take some profits and sell the bond.

The only other data point left for this morning is the University of Michigan's Consumer Sentiment Index which I don't expect to influence pricing too much unless it's a huge miss one way or the other and even then I don't think it will be too big of an influence.  If you've been reading my blog for very long you know that next week is Jobs Week.  We get ADP Private Payrolls on Wednesday which is the first of the jobs data.  That is followed by Jobless Claims on Thursday and Non-farm Payrolls and the Unemployment Rate on Friday.  I will be on a fishing trip in Panguitch, Utah from Thursday through the weekend so I won't be making any posts but you can still get some information regarding mortgage bonds and interest rates by downloading buyerZapp with the link in the upper righthand corner of my blog.  This app will give you a rate trend tool as well as all of the latest news on the economy to help you know whether you or a client should lock or float.  For now, I would say it's o.k. to float BUT I'm really not sure that there's a lot of upside left to this little run unless jobs numbers are really weak nest week and as you may know, I'm not big on floating into that kind of data because if it goes against you, you can really miss out on great current rates.  Hence, locking now and taking advantage of recent gains would be great as you are unlikely to pick up much more benefit anyway.

Finally, the Consumer Sentiment index was just released and the final July reading was 90.0 vs. estimates of 90.5.  This is not a factor in pricing though a final check on the benchmark bond shows it up 15 basis points to 104.01.  Lock those loans and don't worry about anything over the weekend.  Make it a great day and a better weekend.  Contact me if I can help with anything:  702-812-1214, 801-893-1737 or

Wednesday, July 27, 2016

Mortgage Bond Market Analysis - FOMC Wednesday

Happy Hump Day.  I waited to write the post until after the FOMC announcement regarding the Fed Funds rate and it was just released and there were no surprises.  They left the rate right where it is and there was only one dissenting vote.

I wrote in my blog post on Monday that I thought they would leave the rate where it was at least until September's meeting.  Durable Goods Orders came in much weaker than expected at -4.0% vs. estimates of - 1.1%.  Ex-transportation, they were expected to be +.3% but were -.5%.  While we have had a few positives in manufacturing data lately, we have had a lot of negatives and this just adds to the list.  Jobs data also hasn't been nearly as strong as it should be if the economy were really having a strong recovery.  This recovery remains tenuous at best which is why the Fed left the rates as is.  In their comments they said the near-term risk has diminished and the economy is expanding at a moderate rate.

This news along with the weak durable goods numbers this morning is helping the FNMA benchmark bond to reverse course from the last two days.  It is currently up 20 basis points and is bumping up against the 1st level of resistance at 103.63.  No sooner did I write that last sentence but it bumped up another 9 basis points and is now that much above the resistance level at 103.72.  Rates are great so locking isn't a bad thing, especially if you or a client has a loan closing in the near future (15 days or sooner).  However, if the bond closes above the 1st level of resistance, we might get some follow through tomorrow so it might be worth it to float.  If you do float, keep your eye on the bond market - you can use buyerZapp to do this; the link is in the upper right hand corner of my blog - so that you can act quickly if the bond begins to sell off.

That's all for today.  Make it a great day.

Monday, July 25, 2016

Mortgage Bond Market Analysis - The Week Before Jobs Week

Happy Monday.  After spending lots of time in several different gyms watch my son play in two AAU basketball tournaments last week, it's back to a somewhat normal schedule.  The important things are the three things that could impact rates this week aside from any huge geo-political even like a major terrorist attack.  On a side note, it seems that the markets have been shrugging these off lately since they are becoming more normal, unfortunately.  It could be that investors would be selling bonds and pushing rates higher but are nervous about doing this because of the attacks.  At any rate, we have the Fed interest rate decision coming on Wednesday; no movement is expected but experts still believe that the Fed will raise rates at least once this year and some are thinking that September will be when it will begin.  While economic data stateside has been better for the most part, we are still seeing some weakness, especially in manufacturing.  We will get some more manufacturing data this week but the Fed will be watching the initial release of the 2nd quarter GDP which many expect to be over 2.5%.  A reading closer to 2% would leave traders with more questions about when the Fed will raise rates.  Secondary data points that will likely provide some insight as to what the primary data points might be are the Richmond Fed Manufacturing Index, the Chicago PMI, Consumer Confidence, Michigan's Consumer Sentiment, New Home Sales and Durable Goods numbers all come out this week.

The Bank of Japan will announce its interest rate decision on Thursday and it is widely expected that they will lower their rate.  That said, the markets have already been disappointed twice this month when neither the Bank of England or the European Central Bank reduced their rates.  Next week is Jobs Week when we get ADP Private Payrolls on Wednesday followed by Jobless Claims on Thursday and Non-farm Payrolls and the Unemployment Rate on Friday.  Last week the FNMA benchmark bond was down 9 basis points and has basically trended sideways for the last seven days although Friday and today have the bond down 18 basis points so it was up 9 basis points for the previous 5 days.  I think the tendency is for more selling and while I don't expect the Fed's policy statement to have much impact, I do think investors would be influenced to sell if the BOJ doesn't reduce their rates as expected.  The RSI remains oversold so we still have that going for us.  I think it's o.k. to float right now but do so with caution and make sure you have your phone handy and loaded with buyerZapp so that you can stay on top of the market (the link is in the upper right hand corner of my blog).  As always, feel free to call or email me if I can help in any way - 702-812-1214, 801-893-1737 or  Make it a great day and a better week.

Wednesday, July 20, 2016

Mortgage Bond Market Analysis - About Face

Happy Hump Day.  Since my birthday, July 5th, the FNMA benchmark bond has sold off 75 basis points which translates into an uptick in rates by about .125% in rate and .25 points in fee as an approximation.  Things are starting to normalize a bit and we got some good economic data last week.  With the sell-off, the RSI has fallen to below the over-sold threshold.  Tomorrow we get the ECB Policy Statement which should be interesting considering the recent Brexit.  This could be a market mover but my guess is that we will see very little in terms of dynamics and that the content will be more along the lines of how progress is being made and that England will remain a big part of Europe's economy and success - that's just my guess.  If this is what we hear then I expect the markets to trade in business-as-usual fashion.

If there is any concern in the ECB statement, then there would likely be a bit of a move to safe-haven investments (bonds) and we would then see bond prices increase (and rates decrease) as demand for bonds and the resultant buying pushes those prices higher.

Admittedly, I have been a bit absent from blogging lately as I have had a number of family activities that have kept me from it and there are a few more family travel plans that will keep me on the more inactive side of blogging.  That said, there are a couple of ways to stay on top of rates and to know whether you should lock or float:  1) download buyerZapp by clicking on the link in the upper right-hand corner of my blog, or 2) call or email me and I will be happy to give you my lock / float recommendation (702-812-1214, 801-893-1737 or  As for today, I recommend floating but staying close to the app in case any of tomorrow's data or the ECB statement causes investors to sell off.  I'm happy to help in any way I can.  Make today great. 

Thursday, July 7, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday and the First Jobs Data of the Week

Happy Thursday.  We got some jobs data today and the big jobs data points finish the week tomorrow.  Yesterday we got a very hot ISM Non-manufacturing (Service sector) report that came in at 56.5, well above expectations of 53.3 - a reading over 50 is expansionary.  This morning, Jobless Claims continued its run of a the 4-week moving average being below 270K and this week's reading was 254K, much lower than the estimates of 270K.  Additionally, the ADP Private Payroll data beat expectations as well coming in at 172K vs. estimates of 159K.  Tomorrow we look forward to Non-farm Payrolls (it was extremely weak last month) and the Unemployment Rate.

In spite of the strong data yesterday and today, the market hasn't reacted in a big way as it's probably waiting to see the numbers tomorrow along with Europe still helping to provide support.  Yesterday the FNMA benchmark bond was down 11 basis points, closing at 104.14.  This morning it is up 1 basis point at 104.15, 21 basis points of its low.  Rates are fantastic and I would feel very good about locking now.  My guess is that if tomorrow's jobs numbers are strong, we could see a decent sell-off in the bond market with traders taking some profits on more solid economic news.

I'll be back tomorrow with the news on Friday's data.  Until then, make it a great day.

Friday, July 1, 2016

Mortgage Bond Market Analysis - Long Weekend edition

Happy Friday and Happy Independence Day.  It's been a week since the Brexit vote and while the markets have returned to some normalcy, all of the data we got this week was from before the Brexit vote so traders are trying figure out how much weight to put on the data since things might be different with a major change in the EU.

After a nice follow-through day on Monday where the benchmark bond closed up 39 basis points, it was down slightly (2 basis points) on Tuesday.  Wednesday saw the bond retreat 15 basis points while yesterday the benchmark bond was up 31 basis points.  The economic data has been mixed all week and even data that came in as expected was often lower than the previous month's reading.  Today the bond is currently up 15 basis points but has had a few wild swings with it getting up as much as 30 basis points and then falling to down 5 basis points after the ISM Manufacturing Index came in hotter than expected at 53.2 vs. estimates of 51.4.  This is a solid follow-through from yesterday's Chicago PMI number that was also much hotter than expected at 56.8 vs. expectations of 50.8 and a previous month's contractionary reading of 49.3.  Shortly after the plunge, the bond recovered and was up about 28 basis points again before settling to our current level.

The day's trend overall looks to be sideways and there is a strong resistance at 104 which was tested a bit yesterday and again today and hasn't shown the conviction to break through.  The RSI is above the overbought threshold and is also providing some headwind there as well.  Since last Friday's open, the bond is up 122 basis points which means there is some nice profit available for bond traders who were in last Thursday and sell out today.  Truth be told, many bond traders are in and out of trades multiple times per day doing large volume trades on minimal movement.  As for locking / floating, We are at our highest levels in over a year with great rates - don't be greedy.  I'd lock.  Next week is Jobs Week with lots of important data - it's all pre-Brexit so it won't get as much weight as normal but it's still important.  If you do float, watch the market closely so that you can act quickly - my app (buyerZapp) can help with that.  It's FREE and you can get it by clicking on the link in the upper right-hand corner of my blog.

The bond market is closed on Monday for one of my favorite holidays - Jed's birthday eve.  Actually, Independence day is truly one of my favorite holidays as I have a deep love and respect for our country, the founding fathers and the constitution.  I love our freedoms and don't take them for granted and am very thankful to those who have served and those who do serve in the military to protect us and the freedoms we have.  Have a happy and safe Independence Day.