Mortgage Bond Market Analysis - Big, Bad Day

The Good news is that it's Friday...the bad news is that if you didn't lock prior to today (and locking last week would have been best), your rate will be higher by about .125%.  For those who read my posts on a regular basis you know that the first week of the month has all of the important employment reports and today we got non-farm payrolls at 295K vs. expectations of...240K.  NFP crushed expectation and investors are selling off because of it.  The unemployment rate is at 5.5% vs. expectations of 5.6%.  Finally, average hourly earnings came in at .1% vs. expectations of .2%.

The NFP number is BIG and I think investors anticipated this which is why they have sold off all this week (except for a small blip up on Wednesday).  In total, the benchmark FNMA bond is down 98 basis points which is about .25% in rate.  My advice has always been to lock before these kind of reports because of things like this.  The chart looks like it's trending down which means we could see some more sell off throughout the day.

If you have a loan closing in the next 15 days, I would recommend locking now to avert any worse pricing.  The RSI is getting close to oversold but the danger is that the bias may change to where these (and higher) rates are expected.  For the short term, I expect more selling and the only things that will turn this trend around is some bad economic news which doesn't look likely, or some geopolitical events that send investors fleeing to the safety of bonds (vs. stocks).  The other thing that could help is if a stock market correction took place - experts have been calling for a 10-15% correction about 10-15% ago.  Corrections happen but it's anybody's guess as to when the next one will happen.  I think that it's possible rates could be a fair amount higher before it actually happens so if you're closing a loan in the near future, it probably won't help it all unless the correction comes VERY soon.

Please feel free to contact me if I can help with anything mortgage-related.  Make it a great day and a great weekend.

Mortgage Bond Market Analysis - Mixed-up edition

It's Thursday and that means Initial Jobless Claims, among other things.  Initial Jobless Claims surprised to the negative side again, coming in at 320K vs expectations of 295K.  This is a decent sized miss.  Additionally, Mario Draghi of the ECB announced that their quantitative easing program will begin tomorrow and is scheduled to end in August of 2016.  On the bad side (for the bond markets anyway) of things, Unit Labor Costs were 4.1 vs. estimates of 2.9 and previous of 2.7.  Factory Orders came in at .2 which equaled expectations.  Non-farm Productivity was a mixed bag coming in at -2.2 which was better than the expected -2.3 but worse than last month's -1.8.

Tomorrow's another big day in the data world.  Today's data is causing a bit of a sell-off with the FNMA benchmark bond currently down 6 basis points, 15 basis points off the high and 8 basis points above the morning low.  This is a very narrow range and no real trend has been established yet.  If anything, there is a slight down trend but I wouldn't panic by any means.  Tomorrow should be interesting.  Make it a great day.

Mortgage Bond Market Analysis - ADP Private Payrolls edition

It's hump day but we might as well call it "More Mixed Data Day."  If you follow my blog you know that we have had lots of mixed data and the focus is on different things on different days for investors.  Today, the ISM non-manufacturing (it's really about services) index beat expectations slightly with a reading of 56.9 vs. expected of 56.5.  ADP Private Payrolls came in at 212K vs. estimates of 220K.  This is giving a bit of a bid to bonds but of the four employment-oriented data releases this week, this one is the weakest.  There's no fancy charts this morning since I'm travelling and only have my small laptop which doesn't allow me to take big enough screen shots.

The FNMA benchmark bond is 20 basis points off its morning lows and 19 basis points below the morning highs with an uptrend over the last 2 hours and 10 minutes.  Tomorrow brings us initial jobless claims along with a few other data points and the ECB (European Central Bank) policy statement.  Friday brings the non-farm payrolls, unemployment rate and a couple of other things.  Make today great.

Mortgage Bond Market Analysis

Down again after losing 38 basis points yesterday, I think the investors are positioning themselves for good economic news on Wednesday through Friday - at the very least, they are hedging their bets.  As I mentioned in my post yesterday, the market was trending down and could possibly continue that trend throughout the day - which it did.  This morning, the FNMA benchmark bond is 16 basis points off the morning low and is capitulating in a relatively narrow range but is still down 6 basis points as of the time I took the snapshot of the bond chart.

We have some big data points Wednesday through Friday, just like we do the first week of every month.  If the data is economically positive, it will be rate-negative.  We've seen a lot of mixed data recently and last Thursday we got a good surprise, as far as rates are concerned, when initial jobless claims came in quite a bit higher than expected.  Unfortunately, the market closed down 26 basis points that day when investors chose to focus on other data or to believe that this was just an anomaly.  We've got four very important job-oriented releases this week with ADP private payrolls tomorrow, Initial Jobless Claims on Thursday, and non-farm payrolls and the unemployment rate on Friday.  There is other data as well and it will be interesting to see how it all plays out.  Here's the snapshot of the chart this morning:

As it stands right now, the current bond price is about right in the middle of the 1st levels of support and resistance and the RSI is at about the 50 mark, also right in between overbought and oversold.  It's all about the data at this point.  What's your strategy?  Are you going to hedge and lock now or are you going to roll the dice and see if you can get some big gains in the form of bad economic data that leads to investors buying bonds and pushing rates lower?

I'll be in Utah the next couple of days for a seminar so my coverage won't be quite the same but I will try to have some commentary on the data releases and their impact on rates.  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 - Happy Monday

Another day, another mixed bag of economic data.  So why is the "positive" data winning the day?  First of all, lets review the results.  Core PCE was up .1% vs. expectations of .2% - a slight miss but up nonetheless.  Personal spending was -.2% vs. expectations of -.1% - another slight miss.  January personal income was up .3% vs. expectations of .4% - yet another slight miss but also still up.  January construction spending was up .3% vs. expectations of .2%.  The biggie, The ISM manufacturing index came in at 52.9 vs. expectations of 53 - a slight miss but it still shows growth vs. the previous month (any reading over 50 is growth).  The focus for the traders is on the ISM and when that reading came out, the traders began selling a bit and pushing the benchmark bond past the previous morning low.

After a decent gain last Monday, we've been in a relatively tight channel since then and I don't think we are going to break out of it today unless the investors decide that they want to sell off ahead of more potentially damning news - we have some very important data releases this week remember.  Here's a snapshot of the chart I took right after it started selling off a bit:

 
If you look at the daily chart in the top right corner you will notice the trend is down and that the current price is below the previous low.  This could mean a downward trend for the day; the first level of support is 27 points below the current price on this chart so it could potentially drop a bit and break us out of the channel we are in - this, of course, would not be good.

The rest of the week brings a lot more data, just like the first week of every month does.  The key points to keep an eye on are the ADP private payroll report on Wednesday (which also brings the ISM non-manufacturing index), initial jobless claims are Thursday - just like every week, and Friday we get non-farm payrolls and the unemployment rate.  These are all important and each of them could impact the mortgage bond market for better or for worse.  If you are going to float your interest rate into any of these reports, keep a close eye on the release so that you can act quickly if necessary.

If you want the occasional intraday updates that I provide on my facebook page, please like The Wunderli Team page.  Please contact me if I can help you with a mortgage or if you have questions about the mortgage bond market / interest rates - 702-812-1214.  Make it a great day and a better week.