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Wednesday, September 28, 2016

Mortgage Bond Market Analysis - Economic Data and Janet Yellen

It's Hump Day.  In addition to it being the middle of the week, we also got some decently important data today.  Durable Goods Orders was released and the headline number came in better than expected at 0.0% - expectations were for -1.4%.  The other side of the cone is that last month they were up 3.6% so while we weren't negative today, there also wasn't any growth.  Perhaps more importantly, was the Ex-transportation number which came in at -.4% as expected.  This number is thought to be a more stable number and, thus, looked at a bit more closely and it wasn't good.

Yesterday the FNMA benchmark bond closed up  for the 6th day in a row.  It was up 5 basis points, 13 basis points off its high as the 2nd level of resistance (104.17) held strong with the bond closing at 104.12.  Today the bond is currently down 4 basis points after being up as high as +16 basis points on the day; it is 12 BP off the low.  The high levels of the day once again tested the 2nd resistance level and was once again pushed back.  The more times the bond tests the level and loses, the stronger that resistance becomes and the more likely we are to see a sell-off as the next big move.  In other words, we may have hit our high for this most recent run.

Janet Yellen is giving her prepared remarks to the House Financial Services Committee.  Her remarks that have been released don't address anything about a path of rate hikes.  She'll be speaking again tomorrow.  There are also a number of other Fed presidents / governors sharing their thoughts this week as well.

With the RSI still in the overbought range and the euphoria of the Fed leaving rates unchanged wearing off, in addition to the 2nd resistance level holding strong two days in a row, I will reiterate what I said on Monday:  Lock.  I think there is much more potential for a sell-off than for any meaningful bond buying.  Remember that rates / yields move inversely to price so that as bonds sell off and drop in price, rates go up.

I'm always happy to help in any way I can so feel free to contact me at 801-893-1737 or 702-812-1214.  As a reminder, I'm leaving Friday for a vacation (I will have no cell service to speak of) so my next post will come whenever I get back - I may be gone all of next week and I may be back as early as Monday.  Make it a great day and a better end of the week.

Monday, September 26, 2016

Mortgage Bond Market Analysis - Money Monday

Happy Monday.  My Utes had a great come-from-behind victory on Friday to beat USC with three great touchdown drives in a row to end the game and win 31-27.  They are looking sharp on offense but a few injuries are keeping them from playing their best on defense.  Hopefully we can play good enough to win the south division of the PAC-12 this year.  Cal is next on Saturday at Berkeley.

As for the mortgage bond market, last Wednesday I recommended floating and we've been getting some follow-through from the Fed interest rate decision where they left it unchanged.  Since then, traders have continued to buy the FNMA benchmark bond and rates have improved.  It was just a slight up day on Friday with the bond closing up 3 basis points at 103.89.    This morning New Home Sales came in a bit better than expected at 609 vs. 600 but below last month's reading of 659.  In spite of the decent data, traders continue to buy the bond as it is up 20 basis points to 104.09 - this is 28 basis points above the 2nd level of resistance of 103.81.  The five-day buying spree has pushed the RSI quite a bit beyond the overbought level.

There are a few key data points this week in addition to a number of talking heads from the Fed including an address from Fed Chair Janet Yellen on Thursday at 5:00 EDT.  OPEC is meeting once again to talk about limiting production to get oil prices higher - even if they agree to do it there's no guarantee that the countries will follow the agreement.  Oil is up in anticipation of the meeting.  Today's chart of the benchmark bond looks like it might continue to push a bit higher throughout the day.  My thoughts are that I'm not confident that the data will be all that great so traders might continue to buy throughout the week.  That said, there could be some profit taking with the recent run and considering the fact that the RSI is overbought.  The talking heads from the Feds will likely have a bit of an influence as well - especially if their message is different from what's expected.  My recommendation is to lock if you or a client has a loan that is closing within 15 days; take advantage of this most recent run.  If you have a longer time frame than that, you could float but do so with extreme caution and keep a close eye on the market so that if the market turns against you, you can react quickly to lock ahead of a potential price change.

I'm always happy to help in any way I can be it a pre-approval or a question about rates or mortgage guidelines.  Feel free to contact me at 801-893-1737 or 702-812-1214.  Make it a great day and a better week.

Thursday, September 22, 2016

Mortgage Bond Market Analysis - Follow Through

It's Jobless Claims Thursday which means more data to draw on.  I'm a big sports fan and I've coached a fair amount of basketball over the years.  I've also played a number of different sports either competitively or recreationally (though I'm always competitive).  In about every sport I can think of, follow-through is very important in one way or another whether it's your shot in basketball, your throwing motion in baseball or football, or your swing in golf and tennis.  If you don't have proper follow-through, you aren't going to have the success you want.  In the financial markets, one nice day is good, but if there's no follow-through the next day, there is no real direction and it's next to impossible to have an educated guess as to what the market will do, what the trend will be.

From July 29th through September 6th, the mortgage bond market traded in a very tight range and there was never more than two consecutive days of buying or selling during that period and there wasn't a single day of really decisive movement.  Since then, we still haven't had any HUGE days with the biggest day being a down day where the FNMA benchmark bond sold off 36 basis points on September 9th - the 3rd of three consecutive days of selling.  That day was followed by alternating days of buying and selling - one each which was followed by three consecutive days of buying with the third day being the smallest gainer - 1 basis point.  Monday ended that little "rally" with a sell-off of 19 basis points.  Our last three days have been gains of 11 and 16 basis points and we are currently up 27 basis points in our 3rd day.  We have blown through the new (higher) 1st level of resistance (103.65) and are currently 3 basis points above the 2nd level of resistance (103.81) at 103.84.  With this move, the RSI is inching toward the overbought threshold and would probably reach it tomorrow with another day of buying - possibly today if we close up 40+ basis points.

Mixed Data Today
The data was mixed today with Jobless Claims (both Initial and Continuing) coming in better than expected while Existing Home Sales and Leading Economic Indicators came in below expectations with the LEI coming in at -.2  showing more weakness in the economy.

There is no data tomorrow and with a Fed rate increase thought to be pushed back at least until December, I think there a decent chance that traders will continue buying tomorrow unless they decide to take some profits before the weekend.  July 29th also happened to be the last time we had a 4-day winning streak with the selling on July 30th ending that streak.  For now, I would continue to float, but do so with caution.  If you have a loan closing in 15 days or less, lock, otherwise keep an eye on the market so that you can react quickly should the market turn against you.  As always, I'm happy to help in anyway I can; feel free to contact me at 801-893-1737 or 702-812-1214.

Wednesday, September 21, 2016

Mortgage Bond Market Analysis - FOMC Meeting

The Fed interest rate decision has been released and it GOOD news for rates.  With all of the weak data that we've had since the last meeting, it looked for a while like the Fed would likely leave rates unchanged.  In spite of lots of talk immediately after the last meeting that there was a good chance of a rate increase at the September meeting, key economic data beginning the week before jobs week and extending through last week spelled doom for those (the Fed Hawks) who were hoping for a rate hike.

The latest probability from today is that there will be a rate hike in December.  Of course, the actuality of this is predicated on the data and possibly other things like who's elected president.  We'll be hearing from Janet Yellen and her remarks might influence the market a bit more but if what she says is similar to what she's said after recent FOMC meetings, I would expect her comments to have little impact on the market.  The FNMA benchmark bond was about even right before the announcement and is now up 15 basis points at 103.56 - 6 basis points above the 1st level of resistance.  The RSI is also ticking up a bit as you might expect and it is no above the oversold threshold.

I would float for now.  There are a few economic data points tomorrow but I don't think any of them will influence the bond that much.  I'm looking to see how we end the day and if we get any follow-through tomorrow.  Keep a close eye on the market if you float so that you can move quickly to lock if the market moves against you - you can do that with my app (buyerZapp - link in the upper right-hand corner of the blog) or you can always contact me for information - 702-812-1214 or 801-893-1737.  Make it a great day.

Monday, September 12, 2016

Mortgage Bond Market Analysis - Video Monday

Excuse the hair - I just walked in from outside and it was WINDY.  I've got another short video for you today and while there is no data, there is some capitulation going on.  Check out my thoughts and my lock / float recommendation.

Friday, September 9, 2016

Mortgage Bond Market Analysis - It's Friday and it's a video

Here's a quick video where I share my thoughts about what's happening in the mortgage bond market and whether you should lock or float.  Make it a great day and a better weekend.

Thursday, September 8, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday

Happy Thursday.  Both Initial and Continuing Jobless Claims came in better than expected.  Initial Claims came in at 259K beating estimates of 265K and previous of 263K.  Continuing Claims were 2,144K vs. estimates of 2,153K and previous of 2,151K.  The JOLTS report from yesterday was much better than expected, coming in at 5,871 vs. estimates of 5,643.  Both of these jobs reports are in contrast to the weak jobs data from last week.  Nevertheless, traders decided to sell the FNMA benchmark bond yesterday as it closed down 3 basis points after closing up 41 basis points on Tuesday.  Today the benchmark bond is down again, off 14 basis points at this point in time.

The RSI is just above the mid-point between oversold and overbought and is just a bit closer to the overbought threshold.  We are 13 days away from getting the Fed interest rate decision and with yesterday and today's data, I think traders are a bit more uncertain about what the Fed will do.  I personally don't think an increase is justified based on the recent data we have seen, but there may be enough Fed members who are chomping at the bit to raise the Fed Funds Rate that it gets done in spite of the data.  Of course, we still have a few more data points between now and then but for now, would recommend locking.  I think we are going to stay in the narrow range we have been in and if the Fed decides not to raise the rate, there's a good chance we will see a breakout to the upside with the mortgage bonds and this would be good for mortgage rates.  If the Fed decides to raise the rates, traders will likely decide to sell off, in the short-term anyway, which will be bad for rates.

Make it a great day.

Tuesday, September 6, 2016

Mortgage Bond Market Analysis - More Data for the Fed to Chew On

Happy Tuesday-Monday.  I love long weekends and short weeks.  College football started this last weekend and that was great watching that and seeing some early upsets.  I was also doing my fair share of honey-dos so a productive weekend overall.

On Friday we had weaker data than expected yet the FNMA benchmark bond sold off a bit and closed down 8 basis points at 103.64.  This morning, with more weak data that gives the Fed even more reason to punt (football pun intended) at the September meeting, I would recommend continuing to float.  The ISM Non-manufacturing index came in at 51.4, still expansionary but 4.3 points below the estimates and also somewhat substantially lower than recent months' readings.  Couple this with a weak Non-farm Payrolls number on Friday and the contractionary ISM Manufacturing Index number of Thursday and the data is piling up in support of the Fed leaving rates where they are.

At 103.90, the benchmark bond is currently 11 basis points above the 2nd level of resistance.  The RSI is trending higher and is just a bit above the midpoint in between oversold and overbought so it is not yet a factor.  As for economic data / news that might have an impact on mortgage rates, tomorrow we get the Fed Beige Book at 2:00 pm EDT.  Thursday will bring us the ECB Policy Statement which will give us more insight into Europe's economy and Friday we get Wholesale Inventories.  As I mentioned above, I would float for now but the bond continues to trade in the relatively tight range that it's been in since July 29th.  It needs to break out one way or another and the more data we get that supports the Fed not doing anything in September, the more likely it is that it will break to the upside which means lower rates.  As always, if you are floating, keep a close eye on the market.  You can do that by reading this blog but you can get updates throughout the day by getting my app - buyerZapp - which will provide you with real-time news that impacts rates and gives you a rate-trend meter.  You can get the app by clicking on the link in the upper right-hand corner of the blog.

Make it a great day and a better week.

Friday, September 2, 2016

Mortgage Bond Market Analysis - Friday Follies

Happy Friday.  Well the last of the jobs data came out today and it was a HUGE miss.  Non-farm Payrolls were expected to be 180K but came in at 151K.  This is quite the about-face from last month and from the ADP Private Payrolls on Wednesday.  Additionally, Average Hourly Earnings were only up .1% vs. estimates of .2% and July Factory Orders were up 1.9% vs. estimates of 2% and previous of -1.5%.  The Non-farm Payrolls number does not justify a rate hike this month.  We will have to see how the rest of the data plays out between now and September 21st but if it's anywhere near as tame as this morning's data, I don't see how the Fed could justify raising the Fed Funds Rate.  Let's not forget that the August ISM Manufacturing Index at 49.4 is contractionary which would also be an argument against a rate hike.

Next week we get the ISM Non-manufacturing Index (service sector) on Tuesday which is very important.  The Fed Beige Book is released on Wednesday and Wholesale Inventories is on Friday.  The following Thursday and Friday will give us the PPI and CPI respectively and the Michigan Consumer Sentiment Index.  We should have a really good idea at this point of what the Fed will do the following Wednesday.

Today, however, traders are reacting a bit funny in some ways only because with weak data like this you might think that they would be buying bonds because they could be fairly confident that the Fed is not going to raise rates.  The issue is that money is flowing into the equity markets pushing the stock indices higher and putting some pressure on bond prices with the FNMA benchmark bond now down 13 basis points at 103.59 after closing up 10 basis points yesterday at 103.72.  I would continue to float for now since we might see some buying next week, especially if the data continues to disappoint.  If you have a loan closing within 15 days, go ahead and lock since rates remain at extremely low levels.  Make it a great day and a better weekend.

Thursday, September 1, 2016

Mortgage Bond Market Analysis - Video failed me again

Happy Jobless Claims Thursday.  I recorded a video on my phone yesterday and it still hasn't finished uploading so until I get a good video camera where I can do video the right way, I'll stick to writing these posts - video will come, though, whether you like it or not.  Haha.

Here's a summary of what I recorded yesterday.  The FNMA benchmark bond closed down 16 basis points on Tuesday and another 7 basis points yesterday.  We got our first bit of Jobs data with ADP Private payrolls and it came in at 177K vs. expectations of 175K.  The previous month's numbers were revised upward from 179K to 194K.  This is a decent number but I think bond traders are waiting to see how that translates into non-farm payrolls on Friday.  Other data of note was the Chicago PMI which came in at 51.5 vs. expectations of 54.  On the one hand, that's a pretty big miss but on the other hand, it is still above 50 which is expansionary.  Finally, July Pending Home Sales blew away expectations with an increase of 1.6% vs. expectations of .6%.  As of yesterday, we were still in that tight trading range that we've been in since July 29th albeit toward the lower end of the range.

This morning is a bit of a mixed bag with 2nd quarter Unit Labor Costs rising 4.3% (inflationary) vs. expectations of 2.1%.  Non-farm productivity was down .6% as expected - there's a bit of a correlation here.  The higher the productivity, the more in check the costs of labor.  Here's the biggie for this morning:  August ISM Manufacturing Index came in at...49.4 vs. expectations of 52.  If you've studied economics or if you've read my blog very much, you know that a reading below 50 is contractionary which can hint at a recession and / or be one element that could indicate trouble.  Jobless Claims came in at 263K vs. estimates of 265K so no big news there.  Tomorrow we will get Non-farm Payrolls which are expected to have a much smaller number than last month, the Unemployment Rate, Factory Orders and Average Hourly Earnings.  The big data point for next week is the ISM Non-manufacturing Index on Tuesday but there are some other data points as well.

 The RSI (Relative Strength Index) is just above the midpoint between overbought and oversold.  This is a non-issue at this point.  The FNMA benchmark bond is 16 basis points off its low for the day and sits at 103.66 - up four points since the open.  The focus for traders is still on the FOMC meeting and the Fed Interest Rate Decision announcement on September 21st.  If we see any significant decline in the ISM Non-manufacturing number along with weakness in the jobs numbers on Friday, that might give the Fed pause to raise rates this month and traders might decide to do a bit of buying which would push rates a bit lower.  I'm going to change my stance and recommend floating.  That said, keep a close eye on the market (you can do that with my buyerZapp - link in the upper right corner of the blog) so that if we get data that is bad for rates you can lock quickly and hopefully beat a potential reprice for the worse.

Make it a great day.  College football starts tonight with my alma mater, the University of Utah, taking on SUU in what should be a warm-up game.  Game time can't get here fast enough.