After Trump's victory on Tuesday, the stock markets have surged and while the gains this morning aren't nearly as big as they were last Wednesday through Friday, the sell-off in the mortgage bond market is about as big as last Wednesday. In my last post I recommended locking but did think that there was a possibility of traders buying since the RSI was oversold then. It remains oversold and even if the Fed decides to raise rates in December, at the current price of 100.19 the FNMA benchmark bond is oversold since it is down 264 basis points since the open at 102.83 on Wednesday (I should note that about 32 basis points of this was due to the monthly bond roll-over). This translates into an increase in rate of about .5-.625%. This is massive and is oversold by probably 150 basis points or more...unless they think the Fed might increase rates by more than .25% but that is not warranted based on the economic data.
While nobody has a crystal ball and it's hard to tell if bonds will continue to sell off, logic says that traders will see a buying opportunity sooner rather than later. My recommendation would be to float - you may have to be patient which means you may need some time. If you are closing within 15 days, you may not have the time. Based on the prognostications of what the Fed has hinted at, the math says the market is oversold. Contact me if I can help in any way, including current updates to how mortgage bonds are doing: 801-893-1737, 702-812-1214 or jed.wunderli@noblehomeloans.com. I'd love to help you or a client / friend with a mortgage for a purchase of your home or any other mortgage need. Keep a close eye on the mortgage bond market so that you can lock at a good time if traders start buying again.
Monday, November 14, 2016
Wednesday, November 9, 2016
The financial markets are acting oddly after Trump's victory
Happy Hump day. Here's the thing - financial markets HATE uncertainty. As I was watching the election show last night they talked about the Dow futures a couple of times and how much they were down when they started thinking that Trump was going to win. They talked about how Trump is an unknown as far as how he'll govern and that the markets are reacting to this uncertainty. As you now know, Trump won and the stock markets are loving it for the time being as they are all up somewhat nicely. Usually, when there is uncertainty in the world, stocks sell off and money moves to the safe-haven investments of bonds which is what it was looking like last night but this morning is a completely different story. The stock market indices are all up somewhat significantly while bonds are selling off. In the case of the FNMA benchmark bond, it is down which is a bit over a .125% increase in rate.
While the media chose to focus on Trump as an unknown from a political perspective, I look at him as a known commodity in terms of a businessman. To me, it makes perfect sense that a businessman would implement policies that are friendly to business which means an opportunity for growth. This is what the financial markets are keying on this morning and with growth comes inflation and that means higher interest rates. While people who are getting mortgages may not like the prospect of higher interest rates, growth also means more jobs with more opportunities and higher wages for more people. Higher rates are a sign of a strong economy and rates have been low for so long because the economy has been week for so long. Maybe the "new norm" of low interest rates won't be the norm for long and that's not necessarily a bad thing from a bigger perspective. I would, however, recommend locking and cutting your losses. I'll be locking a client today (it's the first day he was eligible to lock or I would have locked before the elections). If your lender has a float-down option, you might be able to take advantage of it if the bond market turns after such a drastic reduction but I wouldn't count on it.
As always, feel free to contact me if I can help with anything mortgage-related. 801-893-1737 or 702-812-1214. jed.wunderli@noblehomeloans.com. If you do float, keep a close eye on the bond market.
UPDATE: As of 3:07 EST, I am thinking the bond has fallen far enough (down 97 basis points) that if you haven't locked, you may want to float. I can't help but think there will be some rebound off of what I think is an over-reaction. As always, keep a close eye on the market.
While the media chose to focus on Trump as an unknown from a political perspective, I look at him as a known commodity in terms of a businessman. To me, it makes perfect sense that a businessman would implement policies that are friendly to business which means an opportunity for growth. This is what the financial markets are keying on this morning and with growth comes inflation and that means higher interest rates. While people who are getting mortgages may not like the prospect of higher interest rates, growth also means more jobs with more opportunities and higher wages for more people. Higher rates are a sign of a strong economy and rates have been low for so long because the economy has been week for so long. Maybe the "new norm" of low interest rates won't be the norm for long and that's not necessarily a bad thing from a bigger perspective. I would, however, recommend locking and cutting your losses. I'll be locking a client today (it's the first day he was eligible to lock or I would have locked before the elections). If your lender has a float-down option, you might be able to take advantage of it if the bond market turns after such a drastic reduction but I wouldn't count on it.
As always, feel free to contact me if I can help with anything mortgage-related. 801-893-1737 or 702-812-1214. jed.wunderli@noblehomeloans.com. If you do float, keep a close eye on the bond market.
UPDATE: As of 3:07 EST, I am thinking the bond has fallen far enough (down 97 basis points) that if you haven't locked, you may want to float. I can't help but think there will be some rebound off of what I think is an over-reaction. As always, keep a close eye on the market.
Wednesday, November 2, 2016
The calm before the storm? FOMC interest rate decision looms as does more data...
The benchmark bond rebounded yesterday and closed up just a tad (8 basis points). This morning it is down two basis points and likely won’t have much activity ahead of the Fed interest rate announcement which is likely to be a non-factor since everyone is expecting the Fed to leave rates unchanged but all of the experts are hoping for some guidance relative to the December FOMC meeting. Additionally, the ADP private payroll report was released this morning and missed big to the downside which is a slight positive for rates – it’s only slight because the report is not typically that accurate as it compares to the Non-farm Payrolls report on Friday. However, most of the ADP reports over the last handful of months have been somewhat of an indicator as to the NFP reports that followed. Hence, if a correlation exists this time, I would expect the NFP report to also be weak which would help bonds as well.
The bond is currently 10 basis points above the new 1st support level and if it breaks through the 200-day moving average it would have some room to run as long as it can also break through the 1st level of resistance at 103.19 (21 basis points above where it is now). Currently, the 2nd resistance level is at 103.51 and the other moving averages are about 10ish points above that. With a solemn report from the FOMC today and weak news tomorrow and especially in Friday's NFP report, it's possible we could see a bit of buying from the traders which would help interest rates. I'm going to switch my stance to floating with EXTREME caution which means that you should keep a sharp eye on the bond market either by downloading my app (buyerZapp - upper right-hand corner of my blog) or by contacting me if you want to know how these things are impacting rates if I don't write about it: 702-812-1214 or 801-893-1737.
Tuesday, November 1, 2016
It's Jobs Week and the FNMA Benchmark Bond Continues Its Slide
It's Tuesday of Jobs Week and the FNMA benchmark bond continues its slide with the October ISM Manufacturing Index coming in a bit hotter than expected at 51.9 vs. 51.7 - anything over 50 is expansionary so this is good for the country, not so good for interest rates if you are getting a mortgage and haven't locked yet. Tomorrow we get our first jobs report with ADP Private Payrolls. We also get the Fed Interest Rate decision but nobody expects the Fed to make any move tomorrow. We are hoping for some type of guidance with regard to the December meeting which is when many experts think they could make their next move with another increase; it is not a sure thing by any means as the Fed will be looking to see how the economy does between now and then as well as looking to see how the financial markets react to the elections.
Thursday we get Jobless Claims along with the ISM Non-manufacturing index (service sector) which has been strong even when the manufacturing side has been weak. Friday we get Non-farm Payrolls and the Unemployment Rate along with a couple of less important data points. The 10-year Treasury is above a key level and that isn't helping mortgage bonds but the one good thing is the RSI (Relative Strength Index) is below the oversold threshold. another good thing is that so far this morning, the 2nd level of support has held up when the bond tried to break through. One more good thing is that the bond is currently at the lowest level it's been at since June 24th - that's over 4 months. These things could indicate that bond traders might take a risk and start buying bonds thinking that there could be a little run. The other side of that philosophy is that at the current price, the benchmark bond is at a very tenuous point with not much support other than what I mentioned above; all of the moving average support levels are above the current price and would act as resistance to the bond moving progressively higher. Here's a look at the current chart:
In my post on 10/18, I recommended locking. Since then, the bond has sold off 49 basis points based on its current price and with all that's going on right now I will continue with my lock recommendation if you (or a client or friend) are in a position to lock; if you have to float or decide to float, keep a close eye on the market by installing my app (buyerZapp) with the link in the upper right-hand corner of my blog or you can always contact me for current information regarding bond prices and interest rates: 801-893-1737 or 702-812-1214.
Thursday we get Jobless Claims along with the ISM Non-manufacturing index (service sector) which has been strong even when the manufacturing side has been weak. Friday we get Non-farm Payrolls and the Unemployment Rate along with a couple of less important data points. The 10-year Treasury is above a key level and that isn't helping mortgage bonds but the one good thing is the RSI (Relative Strength Index) is below the oversold threshold. another good thing is that so far this morning, the 2nd level of support has held up when the bond tried to break through. One more good thing is that the bond is currently at the lowest level it's been at since June 24th - that's over 4 months. These things could indicate that bond traders might take a risk and start buying bonds thinking that there could be a little run. The other side of that philosophy is that at the current price, the benchmark bond is at a very tenuous point with not much support other than what I mentioned above; all of the moving average support levels are above the current price and would act as resistance to the bond moving progressively higher. Here's a look at the current chart:
In my post on 10/18, I recommended locking. Since then, the bond has sold off 49 basis points based on its current price and with all that's going on right now I will continue with my lock recommendation if you (or a client or friend) are in a position to lock; if you have to float or decide to float, keep a close eye on the market by installing my app (buyerZapp) with the link in the upper right-hand corner of my blog or you can always contact me for current information regarding bond prices and interest rates: 801-893-1737 or 702-812-1214.
Tuesday, October 18, 2016
Mortgage Bond Market Analysis - No Data Surprises
It's Tuesday and we are on track for another positive day in the bond market. On Friday, the FNMA benchmark bond closed down 29 basis points. Yesterday, with no economic data released, the bond recovered a bit, closing up 15 basis points. Today's data came in as expected, for the most part, and the bond continues its recovery as it is up 12 basis points. The RSI has risen just above the oversold threshold and the bond tested the 1st support level of 103.30 which is really acting more like a resistance level because it is below the threshold at 103.25 but actually got to 103.33 before selling off a bit.
Economic Data: The September MOM CPI came in as expected at .3% - a fairly strong reading. The core reading came in a bit lower than expected at .1% vs. expectations of .2% - this is a good showing for inflation. The core YOY came in at 2.2% vs. expectations of 2.3%. The NAHB Housing Market Index came in as expected at 63 which is very strong since any reading over 50 shows growth.
The benchmark bond may have bottomed out for now. It is currently up 18 basis points and 1 basis point above the 1st level of support, 5 basis points below the 1st level of resistance. Not sure how much higher the bond will go since the data was as expected today. Tomorrow we get housing starts, building permits and the Fed Beige Book. Thursday brings us the Philadelphia Fed Manufacturing Index, existing home sales, leading economic indicators along with jobless claims.
As of this moment, the bond is up 14 basis points. There is a lot of resistance as it tries to move higher with the 1st support level right above the current price and the first resistance level six points above that. Then you have the moving averages beginning with the 100-day that's at about 103.48, then the 50-day at about 103.58 and finally, the 25-day at about 103.68 and then you have the 2nd resistance level at 103.72. With all of this resistance, I continue my recommendation to lock on any up days. We've had a couple in a row now so if you haven't locked, this would be a great time to lock. If you do float, keep a close eye on the market.
Economic Data: The September MOM CPI came in as expected at .3% - a fairly strong reading. The core reading came in a bit lower than expected at .1% vs. expectations of .2% - this is a good showing for inflation. The core YOY came in at 2.2% vs. expectations of 2.3%. The NAHB Housing Market Index came in as expected at 63 which is very strong since any reading over 50 shows growth.
The benchmark bond may have bottomed out for now. It is currently up 18 basis points and 1 basis point above the 1st level of support, 5 basis points below the 1st level of resistance. Not sure how much higher the bond will go since the data was as expected today. Tomorrow we get housing starts, building permits and the Fed Beige Book. Thursday brings us the Philadelphia Fed Manufacturing Index, existing home sales, leading economic indicators along with jobless claims.
As of this moment, the bond is up 14 basis points. There is a lot of resistance as it tries to move higher with the 1st support level right above the current price and the first resistance level six points above that. Then you have the moving averages beginning with the 100-day that's at about 103.48, then the 50-day at about 103.58 and finally, the 25-day at about 103.68 and then you have the 2nd resistance level at 103.72. With all of this resistance, I continue my recommendation to lock on any up days. We've had a couple in a row now so if you haven't locked, this would be a great time to lock. If you do float, keep a close eye on the market.
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