Mortgage Bond Market Analysis - Non-Farm Payroll AND TGIF edition

Well there you have it.  I cautioned on Tuesday that we could be in for some bond selling which would push rates higher.  Yesterday we rebounded in the afternoon a bit but Wednesday and today are combining for a pretty decent sell-off.  Today there are three factors driving rates:  1) German manufacturing orders were up significantly more than expected at 4.2 vs. 1.5 - this is important because a big reason why rates have remained low is because of the weak European economy; 2) Non-farm payrolls came in at 257K which is well above expectations of 235K but below last month's reading of 329K; and 3) Average hourly earnings were up .5 vs. expectations of .3 and previous month's of -.2 - if people are making more, they can spend more.

The FNMA benchmark bond has been trending down this morning.  Since Tuesday's opening at 103.42, the benchmark bond has lost 102 basis points which is about .25% in rate.  Here's a look at the chart:

Since I took the snapshot if this chart, the bond has sold off a bit further and is now down 57 basis points for the FNMA benchmark and 38 basis points for the GNMA.  At 102.36, the FNMA benchmark bond is 25 basis points below the 1st level of support; the next support level is at 102.05 - 31 basis points below where it's at now.  Hopefully it doesn't drop that far.

What's on tap for next week?  There are no data releases on Monday and just a couple of minor things on Tuesday.  The Treasury budget is released on Wednesday and then Thursday and Friday give us a few things that can impact the market.  With the FNMA benchmark bond currently down 65 basis points, you can either lock now or see if we get a little bit of a rebound early next week.

Call me if I can help with anything mortgage-related.  Make it a great day and a better weekend.

Mortgage Bond Market Analysis - Jobless Claims Edition

It's Thursday which means the Weekly Jobless Claims report is out.  Expectations were for 290K and actual claims came in better than expected at 278K which is worse than last week's reading of 267K.  Overall, this is negative for pricing.  Adding to that negativity is a sharp increase in Unit Labor Costs which came in at 2.7 vs. expectations of 1.2 and previous of -2.3.  Additionally, non-farm productivity was down 1.8 while expectations were for +.5 vs. previous of +3.7; this is a big reason why the labor costs rose.

There is definitely some volatility this morning, though the swings aren't huge.  Here an early morning snapshot of the mortgage bond chart:

As you can see, the FNMA benchmark bond was down 26 basis points at this time.  The RSI (Relative Strength Indicator) is also down, hovering just above 50.  This means that investors aren't likely to sell based on the technicals - the data will drive the buying and selling (it always does but if the market is overbought or oversold, that can drive it too.).

Economic data for tomorrow:  Tomorrow is the first Friday of the month which can only mean one thing:  non-farm payrolls and the unemployment rate.  These numbers are always watched closely and can have a big influence on the direction of both the stock and bond markets.  The expectation is for non-farm payrolls to come in at 235K which is less than last month's reading of 252K.  The unemployment rate is expected to remain steady at 5.6%.  It's always your call, but if I had to lock, I'd play it safe and lock ahead of tomorrow's report.  Check to see if your lender has a float down option - we do.  Make it a great day and contact me if I can help you with a mortgage - 702-812-1214.

Mortgage Bond Market Analysis - National Letter of Intent Signing Day edition

It's a big day for us college football fans as high school and junior college football players from around the country fax in their letters of intent to play for the college of their choice.  It's a big reward for their hard work to be able to attend college with a full-ride scholarship and learn lots of things, on and off the field, that will prepare them to go pro - usually in fields other than football.

Today is also a big day for the mortgage bond market as it's the first of three straight days that has some type of employment report.  The ADP Private Payroll Report is the first report of the three days and it came in at 213K vs. expectations of 225K and previous of 253K.  This would typically be good for rates but it's still above 200K and that's kind of a weak line of demarcation.  The ISM Non-manufacturing index came in at 56.7 which was .2 above the expected number of 56.5 which was the same as the previous month's reading.  Remember that anything over 50 shows growth / expansion.  Here is a snapshot of the chart:

There's a couple of things to keep in mind.  First, at current levels, the benchmark bond (FNMA) is just slightly above the 1st level of support with the 2nd level 56 basis points below that.  Secondly, the RSI is no longer reading overbought which is a good thing from a technical standpoint.

Tomorrow's schedule:  There are a few economic data points scheduled for release tomorrow but the big one is the weekly initial jobless claims.  It's expected that they will come in at 290K vs. previous of 265K.  A reading of 290K or higher might help put an end to our current losing streak - of course the equities market along with other geo-political events will have a say in the matter as well.  Yesterday I recommended that you lock and since that recommendation the market has gotten worse by about .125% in rate.  If it were me, I'd still lock today ahead of tomorrow's data just to be safe.  Please feel free to contact me if I can help with anything mortgage-related - 702-812-1214.  Make it a great day.

Mortgage Bond Market Analysis - What's Going On?

Investors are taking a "glass half full" approach this morning with regard to economic data.  Factory orders came in much lower than expected, down 3.4 vs. expectations of -2.2 and previous of -1.7 but investors on both sides of the court (bond and stock traders) are taking the cue from oils rise since last Thursday.  The stock market is up marginally and the FNMA benchmark bond is down 21 basis points.  The RSI is still overbought and the current price of the benchmark bond is 20 basis points above the 1st level of support with a 55 basis point drop below that to the 2nd level of support which means that if traders get good news regarding ADP payrolls tomorrow and jobless claims on Thursday followed by non-farm payrolls on Friday, we could be in for a big drop.

On the flip side, with the big surprise we got from the jobless claims numbers last week, we might not see much in the way of a surprise but even a solidifying strong number could show consistency and traders might take that as a cue to keep selling bonds.  Either way, I think there is more risk of a sell-off than there is of investors jumping in and pushing bond prices much higher (with rates going lower as a result).  Here's the chart from this morning:

A bigger downside risk means...I would lock.  Tomorrow's ADP Private Payroll report doesn't typically have as big of an impact as Thursday's Jobless Claims which typically isn't as influential as Friday's Non-farm Payroll report and Unemployment Rate number.  Nonetheless, they can all move the market and if the numbers support each other, they could move it in a bad way - if you are looking to lock an interest rate any time soon.  I would recommend taking advantage of current prices and locking today.  If worse comes to worse you can float down or have me do your loan if your current lender doesn't offer a float-down option.

On docket tomorrow:  As previously mentioned, the ADP Private Payroll report comes out and expectations are for lower numbers than the January report (this would be good for rates).  The ISM non-manufacturing report is expected to come in at 56.5 - same as last month.  For those of us avid college football fans, tomorrow is NLOI signing day - National Letter of Intent signing day - which is when we get to find out who is going to be joining our college teams to help them compete for a national championship.

Feel free to share your thoughts in the comments section.  Like The Wunderli Team facebook page for intraday updates and other mortgage news and call me - 702-812-1214 - if I can help you or a friend / client with a mortgage.

Mortgage Bond Market Analysis - Punxsutawney Phil edition

Six more weeks of winter and more mixed data is our news to begin February.  Phil saw his shadow - I think he should have turned around and looked the other way and he wouldn't have seen it - BAM, we don't have six more weeks of winter if he just knows which way to look.  I know it doesn't really work that way; Phil knows he has to look the way he does in order for his predictions to be accurate.  As if...

On the more credible side of things, the economic data came in mixed...AGAIN.  It rose .3 vs. expectations of .2 so people are making more but they aren't spending it and putting it back into the economy.  Personal Spending was down .3 (-.3) vs. expectations of -.2.  ISM Manufacturing came in at 53.5 vs. expectations of 54.5 and previous of 55.5.  A reading over 50 is good but it's moving in the wrong direction.  How solid is this recovery?  Consumers are saying that they aren't believers yet since they aren't spending their increased earnings.  Here's a look at the chart:

In spite of the lower consumer spending, investors are selling the FNMA benchmark bond - along with equities.  The RSI is right at the overbought threshold.  With bond prices where they are, rates are great and it's a fine time to lock at this point.

What's on tap for the week?  The first week of every month is big.  Tomorrow brings factory orders and economic optimism and Wednesday we get ADP Private payrolls.  Jobless claims are on Thursday like always and Friday we get the always anticipated unemployment rate and non-farm payrolls.  There is the potential for lots of volatility and major swings in rates depending on the results.  I definitely recommend locking before Thursday's jobless claims and maybe before the ADP numbers on Wednesday.  If the numbers disappoint and rates get significantly better, most lenders (like us) offer free float-down options.

If you don't want to miss this fantastically exciting reports, please either subscribe to my blog and / or like The Wunderli Team facebook page.  I'm available for pre-approvals if you have a client who wants to purchase a home and I can also help you with past clients to see if they can benefit from a refinance with these great low rates and the reduction by FHA to their annual mortgage insurance rate - what a great way to add value to your clients.