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 (jed.wunderli@noblehomeloans.com). Make it a great day and a better weekend.
Friday, January 29, 2016
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 jed.wunderli@noblehomeloans.com. 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.
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 jed.wunderli@noblehomeloans.com. 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 jed.wunderli@noblehomeloans.com. Make it a great day.
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 jed.wunderli@noblehomeloans.com. 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 jed.wunderli@noblehomeloans.com if I can help you with a client, mortgage questions or interest rate questions. Make it a great day.
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 jed.wunderli@noblehomeloans.com 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 (jed.wunderli@noblehomeloans.com) 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.
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.
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