It's Hump day and the data from yesterday didn't help rates. Oil is off just a bit this morning but not enough to be much help to bond traders who continue to sell into the release of the FOMC minutes today after stronger data yesterday. At the current price of 102.25, the FNMA benchmark bond has fallen 50 basis points over the last 3 days. With oils fast rise, one might think there would be some profit taking at the very least but so far there hasn't been any sign of that. There has been some disruption in the oil supply chain even though the major oil producers are ramping up production.
Yesterday's data was stronger than expected, for the most part, with April Industrial Production coming in at .7%, more than twice the expected .3%. Capacity Utilization was also stronger than expected at 75.4% vs. estimates of 75%. Core CPI (YOY) was 2.1% which met expectations and will give reason for the Fed to consider a rate hike at their June meeting. Building Permits came in at 1.116mil which was weaker than the expected 1.130mil while Housing Starts came in hot at 1.172mil vs. estimates of 1.127mil. The April CPI (MOM) was .4% vs. expectations of .3% which adds fuel to the rate increase fire for the June Fed meeting.
The RSI is below the oversold level and there are a few things, as mentioned earlier, that may allow the bond to recover a bit from its current price but I'd lean toward locking just in case, especially if your lender has a float-down option (we do) - a float down on a locked rate is rare because there are a number of stipulations that need to be met but I still think locking today is a good way to go. In addition to Jobless Claims, tomorrow brings the Philadelphia Fed Manufacturing Survey along with the Leading Economic Indicators. Make it a great day.
Wednesday, May 18, 2016
Monday, May 16, 2016
Mortgage Bond Market Analysis - Oil, NY Empire Manufacturing Index and NAHB Housing Market Index
Happy Monday. We've got three things that are impacting the market and two of the three are impacting the FNMA benchmark bond in a negative way. Oil continues it's run in spite of increasing supplies and this is having a negative impact. Conversely, the New York Empire Manufacturing Index missed expectations in a HUGE way, coming in at -9.02 vs. estimates of +6.5 and previous of +9.56. This is providing a bit of support for the bond while the NAHB Housing Market Index missed its estimates of 59 with a reading of 58 which is the same as last month and still a strong number. With two of the three things being strong, the benchmark bond is down 12 basis points after being up 16 basis points on Friday.
At 102.60, it is 14 points below the 1st level of resistance and 16 points above the 1st level of support. The RSI has been very sensitive the last couple of days and is currently hovering just above the midway point between overbought and oversold. Tomorrow we get Building Permits, Housing Starts and the all important CPI which is expected to be hotter than last month's reading in all four number but one - the YOY ex-Food and Energy - the most important. Expectations for this are 2.1 vs. previous of 2.2. Wednesday brings us Capacity Utilization, Industrial Production and the highly important FOMC Minutes where bond traders will be looking for any details that might provide them with a hint of what the Fed might do at the next meeting. Thursday brings us Jobless Claims, the Philadelphia Fed Manufacturing Survey and Leading Economic Indicators and Friday we get Existing Home Sales. For now, I'd float with extreme caution - keep an eye on buyerZapp so that you can lock quickly if the market makes a decisive move in the wrong direction. You can get buyerZapp by clicking on the icon in the upper right corner of my blog.
Based on the news I'm reading regarding oil, I have to believe it is at or near a top. When traders decide to sell off, this will help rates get even better and they are VERY good right now. If oil gets back into the $30s, look for a nice improvement in rates, assuming the Fed isn't raising the Fed Funds rate around that same time or that there isn't a lot of other economic data to offset the falling oil prices. I'm always happy to help with any mortgage-related questions or with a pre-approval. Make it a great day.
At 102.60, it is 14 points below the 1st level of resistance and 16 points above the 1st level of support. The RSI has been very sensitive the last couple of days and is currently hovering just above the midway point between overbought and oversold. Tomorrow we get Building Permits, Housing Starts and the all important CPI which is expected to be hotter than last month's reading in all four number but one - the YOY ex-Food and Energy - the most important. Expectations for this are 2.1 vs. previous of 2.2. Wednesday brings us Capacity Utilization, Industrial Production and the highly important FOMC Minutes where bond traders will be looking for any details that might provide them with a hint of what the Fed might do at the next meeting. Thursday brings us Jobless Claims, the Philadelphia Fed Manufacturing Survey and Leading Economic Indicators and Friday we get Existing Home Sales. For now, I'd float with extreme caution - keep an eye on buyerZapp so that you can lock quickly if the market makes a decisive move in the wrong direction. You can get buyerZapp by clicking on the icon in the upper right corner of my blog.
Based on the news I'm reading regarding oil, I have to believe it is at or near a top. When traders decide to sell off, this will help rates get even better and they are VERY good right now. If oil gets back into the $30s, look for a nice improvement in rates, assuming the Fed isn't raising the Fed Funds rate around that same time or that there isn't a lot of other economic data to offset the falling oil prices. I'm always happy to help with any mortgage-related questions or with a pre-approval. Make it a great day.
Wednesday, May 11, 2016
Mortgage Bond Market Analysis - No Data Hump Day
The good news is that it's Hump day. There isn't really any bad news but the fact that we have been in a really tight trading range over the last four days shows that traders are tentative to make a move and are looking for some direction. Friday the FNMA benchmark bond was down 9 basis points. Monday it was up five. Tuesday, it was down six and today, so far, it's up 9 basis points. It looks like we may be establishing a top to our recent run although, with some luck, it could be a bottom to a new run. We get a little more data tomorrow and Friday so with a bit of luck, maybe we'll see some decisive moves from the bond traders - the hope would be that they BUY bonds pushing prices up and rates down.
Yesterday's data was stronger than expected with the JOLTS numbers coming in at 5.757mil vs 5.431 expected. This was a bit of a surprise with a number of companies recently announcing some pretty major layoffs and last week's jobs numbers being much weaker than expected. Wholesale Inventories came in at .1% vs. expectations of -.1%. This data is on the expansionary side and is a bit negative for pricing. With no data this morning, the benchmark bond has recovered yesterday's minor losses in spite of the fact that oil is up somewhat strongly for the 2nd day in a row.
Tomorrow we get Jobless Claims (it is Thursday, after all) and the Import Price Index. Friday brings us the Producer Price Index, Retail Sales, Business Inventories and the University of Michigan Consumer Sentiment Index. I will continue with my recommendation to float with my caveat - pay close attention to my app on your smartphone (buyerZapp) - if you don't have it, you can download it by clicking on the link in the upper right corner of my blog. You will want to be ready to act quickly should the market turn against you. Contact me if I can help you with a mortgage or any questions regarding mortgages / underwriting guidelines - 702-812-1214 or 801-853-8720. Make it a great day.
Yesterday's data was stronger than expected with the JOLTS numbers coming in at 5.757mil vs 5.431 expected. This was a bit of a surprise with a number of companies recently announcing some pretty major layoffs and last week's jobs numbers being much weaker than expected. Wholesale Inventories came in at .1% vs. expectations of -.1%. This data is on the expansionary side and is a bit negative for pricing. With no data this morning, the benchmark bond has recovered yesterday's minor losses in spite of the fact that oil is up somewhat strongly for the 2nd day in a row.
Tomorrow we get Jobless Claims (it is Thursday, after all) and the Import Price Index. Friday brings us the Producer Price Index, Retail Sales, Business Inventories and the University of Michigan Consumer Sentiment Index. I will continue with my recommendation to float with my caveat - pay close attention to my app on your smartphone (buyerZapp) - if you don't have it, you can download it by clicking on the link in the upper right corner of my blog. You will want to be ready to act quickly should the market turn against you. Contact me if I can help you with a mortgage or any questions regarding mortgages / underwriting guidelines - 702-812-1214 or 801-853-8720. Make it a great day.
Monday, May 9, 2016
Mortgage Bond Market Analysis - Monday Morning / No Data Edition
It's Monday and we are off to a positive start in the bond market this morning. There are a number of things that are in play as far as bond traders are concerned. First of all, the jobs numbers were disappointing last week for the first time this year. It shouldn't have really surprised anyone considering the fact that a number of big companies recently announced some pretty hefty layoffs. Maybe the job market and the economy in general isn't improving as much as we hoped. The other side of that coin is that some of the recent data has shown signs of inflation - this is the main thing the Fed is looking for and it will give them reason to push for an interest rate increase in June. A soft job market is good for rates and inflation pressures are bad for rates.
Let's add in the element of oil that looks like it might have topped out. An increase in production is leading analysts to predict oil to fall back into the mid-30s per barrel - it's currently around $44 per barrel right now. Falling oil prices are good for rates as well. Then you have the technical side of bond trading where the RSI is above the overbought threshold (bad for rates) and the current bond price of 102.89 is 16 basis points below the 2nd level of resistance but is there an impetus to prices to go higher with the bond already overbought according to the RSI?
Depending on global economic data and, perhaps more importantly, how a softening jobs market impacts the inflation data (this could take a while to trickle through the system), there may be reason for traders to continue buying bonds but the reason may not be very compelling for the near future due to the time it may take for the jobs data to show up in the inflation data. At the current price, the FNMA benchmark bond is 9 basis points below the closing price of April 11th which was the high close since February 2, 2015 - over a year ago.
I expect Jobless Claims (Thursday) to be higher this week than it has been in recent weeks. Friday brings us Retail Sales, U of M Consumer Sentiment Index and the Producer Price Index (the start of the inflation data). Next Tuesday we get CPI - the Fed will be looking closely at this. There is a fair amount of other important data coming out next week including Housing Starts and Building Permits in addition to Philly Fed Manufacturing Survey, Leading Economic Indicators and Existing Home Sales and we also get the FOMC Minutes on Wednesday. I would float for now but I'm not sure I would expect much improvement. If oil sells off, this could help rates but I'm not sure that any of the data points will help much at least until later next week and maybe not until after that. There's always the peril of a surprise from global news as well. If you do float, make sure you keep your phone (and my app - buyerZapp) close so that you can act quickly should the market turn against you and you need to lock. Make it a great day.
Let's add in the element of oil that looks like it might have topped out. An increase in production is leading analysts to predict oil to fall back into the mid-30s per barrel - it's currently around $44 per barrel right now. Falling oil prices are good for rates as well. Then you have the technical side of bond trading where the RSI is above the overbought threshold (bad for rates) and the current bond price of 102.89 is 16 basis points below the 2nd level of resistance but is there an impetus to prices to go higher with the bond already overbought according to the RSI?
Depending on global economic data and, perhaps more importantly, how a softening jobs market impacts the inflation data (this could take a while to trickle through the system), there may be reason for traders to continue buying bonds but the reason may not be very compelling for the near future due to the time it may take for the jobs data to show up in the inflation data. At the current price, the FNMA benchmark bond is 9 basis points below the closing price of April 11th which was the high close since February 2, 2015 - over a year ago.
I expect Jobless Claims (Thursday) to be higher this week than it has been in recent weeks. Friday brings us Retail Sales, U of M Consumer Sentiment Index and the Producer Price Index (the start of the inflation data). Next Tuesday we get CPI - the Fed will be looking closely at this. There is a fair amount of other important data coming out next week including Housing Starts and Building Permits in addition to Philly Fed Manufacturing Survey, Leading Economic Indicators and Existing Home Sales and we also get the FOMC Minutes on Wednesday. I would float for now but I'm not sure I would expect much improvement. If oil sells off, this could help rates but I'm not sure that any of the data points will help much at least until later next week and maybe not until after that. There's always the peril of a surprise from global news as well. If you do float, make sure you keep your phone (and my app - buyerZapp) close so that you can act quickly should the market turn against you and you need to lock. Make it a great day.
Friday, May 6, 2016
Mortgage Bond Market Analysis - the last of the jobs reports
It's Friday of Jobs Week which means Non-farm Payrolls. We got the NFP data today and as has been the case for the first four months of the year, the ADP Private Payrolls Report on Wednesday was a good indicator of the NFP report today. At 160K, the NFP were much weaker than the expected 200K. This is helping to support bonds a bit considering the fact that wages were up 3% (as expected) month over month and they are up 2.5% YOY which is a pretty hot reading. Add to this the fact that oil is up this morning and it's a good thing that the FNMA benchmark bond is only down 5 basis points.
Yesterday oil was also up but the benchmark bond deviated from the recent patter of selling off when oil is up by closing the day up 31 basis points, 14 points above the 1st level of resistance. The RSI is well above the overbought threshold so there could be some profit-taking on the horizon unless other factors mitigate that desire. Next week is light on data until Thursday and Friday. Traders will be looking for direction from oil and the global economy at least until Thursday. With the recent run over the last week and a half, the benchmark bond is challenging he high point set on April 11th. Considering the recently released data points that have shown signs of inflation, I wouldn't be too keen on floating. I'd take advantage of the great rates we have (FHA rates below 3.5%) and not be greedy. No real trend has been established today so my expectation is that the bond will close somewhere around the current price of 102.86 - currently down 2 basis points.
Bonus Real Estate Investing Strategy: Since I always like to add value to clients and Realtor partners whenever I can, I have provided some real estate investing strategies in my blog posts this week. Today I will give you the final tip in this series. Keep in mind that there is much more to what I teach than just what I have written about and to invest right requires a team of professionals which includes a CPA to help maximize the tax benefits and an estate planning attorney to set up a trust and the proper business structures like an LLC or Series LLC, depending on your state laws. In an individual meeting, I can go over the financial part with my spreadsheet so that a client can see how leverage works and when it's the right time to sell an investment property to do a 1031 exchange and buy more property in order to maximize the return on investment.
For now, here's the final strategy. Purchasing an investment property requires a down payment of 20%. Or does it? If you want to buy a move up home, you can do so with as little as 5% down (3.5% if you buy it with an FHA loan but that's not always likely and in most cases a conventional loan is better) and then keep your current home as an investment property. We may need to get an income property appraisal on the property you keep so that you can get credit for the proper amount of rent. The 2-in-5 home sale gain exclusion rule may also provide some benefit to people who employ this strategy as long as you've lived in the home for two of the previous five years which means you have to sell the house within three years of moving out. Contact me to see how all of this works (702-812-1214 or 801-853-8720). In the meantime - make it a great day and a better weekend.
Yesterday oil was also up but the benchmark bond deviated from the recent patter of selling off when oil is up by closing the day up 31 basis points, 14 points above the 1st level of resistance. The RSI is well above the overbought threshold so there could be some profit-taking on the horizon unless other factors mitigate that desire. Next week is light on data until Thursday and Friday. Traders will be looking for direction from oil and the global economy at least until Thursday. With the recent run over the last week and a half, the benchmark bond is challenging he high point set on April 11th. Considering the recently released data points that have shown signs of inflation, I wouldn't be too keen on floating. I'd take advantage of the great rates we have (FHA rates below 3.5%) and not be greedy. No real trend has been established today so my expectation is that the bond will close somewhere around the current price of 102.86 - currently down 2 basis points.
Bonus Real Estate Investing Strategy: Since I always like to add value to clients and Realtor partners whenever I can, I have provided some real estate investing strategies in my blog posts this week. Today I will give you the final tip in this series. Keep in mind that there is much more to what I teach than just what I have written about and to invest right requires a team of professionals which includes a CPA to help maximize the tax benefits and an estate planning attorney to set up a trust and the proper business structures like an LLC or Series LLC, depending on your state laws. In an individual meeting, I can go over the financial part with my spreadsheet so that a client can see how leverage works and when it's the right time to sell an investment property to do a 1031 exchange and buy more property in order to maximize the return on investment.
For now, here's the final strategy. Purchasing an investment property requires a down payment of 20%. Or does it? If you want to buy a move up home, you can do so with as little as 5% down (3.5% if you buy it with an FHA loan but that's not always likely and in most cases a conventional loan is better) and then keep your current home as an investment property. We may need to get an income property appraisal on the property you keep so that you can get credit for the proper amount of rent. The 2-in-5 home sale gain exclusion rule may also provide some benefit to people who employ this strategy as long as you've lived in the home for two of the previous five years which means you have to sell the house within three years of moving out. Contact me to see how all of this works (702-812-1214 or 801-853-8720). In the meantime - make it a great day and a better weekend.
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