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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

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