Mortgage Bond Market Analysis - TGIF and last business day of the month edition

Well TGIF - I love my weekends.  Well surprise, surprise.  We have more conflicting economic data.  I've personally been amazed at how there are so many data points that either contradict each other or just flat out show no consistency with regard to economic growth.  Yesterday we had an about face with the jobless claims numbers coming in very low which means people are getting jobs (or not filing claims for some reason) yet retail sales numbers and the CPI have been low in spite of lower unemployment - you would think that more people with jobs would mean more people with money which would mean more people buying more stuff.  The various consumer confidence / sentiment numbers have all been off the charts lately and you would think that would mean they feel like spending but it's all about the jobs.  If people aren't spending, why are companies hiring?

This morning, GDP was reported at 2.6 - SLOW growth - vs. estimates of 3 and previous of 5.  The Fed will have no reason to raise rates anytime in the near future with the GDP that low and absolutely no signs of inflation.  If people aren't buying, there won't be inflation, hence the low CPI numbers.  The Chicago PMI came in at 59.4 vs. estimates of 58 and previous of 58.3 - that's a strong number but we aren't seeing this translate down the line with the consumers.  Somewhere the train is getting derailed.  My theory is that many consumers aren't consuming, or are only consuming the things they need, because as they get their new jobs, they are just trying to get caught up on bills and they may want to make sure they have some longevity on their job with some savings before they become more liberal with their wallet - or at least the contents thereof.  Here's a snapshot of the mortgage bond market this morning:

The RSI shot up today and is now at an overbought reading.  The FNMA benchmark mortgage bond is currently 4 basis points below the 2nd level of resistance.  Rates are great for people who got an FHA mortgage last year to refinance since they will also benefit from the 50 basis point reduction in the annual mortgage insurance rate.  If you have a loan in process and you are floating, why not take advantage of the recent gains in the bond market and lock in this low rates?

On Tap for Monday:  ISM manufacturing along with personal income and personal spending will be released.  None of these are typically important as far as driving interest rates.

Make it a great weekend.  Who are you rooting for in the Superbowl?  I don't care a heck of a lot either way, I just hope the commercials are good; I know the food's going to be delicious.  Feel free to call me if I can help with a refinance or a purchase mortgage:  702-812-1214.

Mortgage Bond Market Analysis - Holy Jobless Claims, Batman!!

We received quite the surprise on the jobless claims front this morning.  After two consecutive weeks with readings up over 300K and expectations for 301K jobless claims this week, those who are hoping for economic growth (as opposed to lower interest rates) got a pleasant surprise when claims came in much lower than expected at 265K.  Initially it knocked bonds off their perch but not as much as one might have thought; the initial drop was only about 20 basis points.  This positive surprise was tempered by the disappointing pending home sales numbers that were expected to come in at +.5% and missed the target in a big way with the actual number at -3.7%.

As of this writing (different from the chart you'll see), the FNMA benchmark bond is right in the middle of the day's trading range at 102.98 - 10 basis points off both the high and the low and 2 basis points below the 1st level of resistance.  From a technical perspective, the RSI is a bit closer to oversold than overbought which is good for those hoping for lower rates.  Here's a snapshot of the chart:

A little different perspective:  I haven't written about this in a while so with good jobless claims numbers this morning and the economy seemingly on a slow uptrend, I feel like now is a good time to give a little perspective about interest rates in general.  For those who are looking to refinance their current mortgage or are thinking about buying a home, the lower the interest rates the better.  The problem with that is that typically we see low interest rates when the economy is bad.  When the economy is healthy and the unemployment rate is generally where it should be along with the GDP, CPI and PPI, interest rates are typically in the 6-7ish percent range.  For those that have salaried jobs, it may not be as important how the economy is doing and lower rates - at least while they are buying or refinancing - is the goal.  For those who are in the real estate and mortgage industries, we should want the economy humming along so that more people could have jobs that allow them to qualify to buy homes.

As the impact on our economy, and more importantly the impact on investors' decisions, becomes more influenced by the global economy and world events, it is possible to have a decent local (national) economy and have relatively low interest rates.  However, our exports aren't as strong as they could be if the rest of the world's economy is in the crapper.  As far as I'm concerned, I'm hoping for growth in jobs which means more people can buy more stuff which means the GDP improves along with all of the other related data - especially things like pending home sales - but it also means that rates will likely rise as the investors will switch to equity investments from bonds to try to keep pace with inflation.

What's for dinner tomorrow?  As an appetizer we will get the GDP with Chicago PMI for the main course and for desert there is the Reuter's University of Michigan Consumer Sentiment Index - which caused the huge drop in bond prices and a big bump to rates two weeks ago.  You may want to lock ahead of this data release - just to be safe.  Please call me if I can help with a refinance or a purchase mortgage:  702-812-1214.  Make it a great day.

Mortgage Bond Market Analysis - No Data Hump Day edition

Happy Hump Day!!  There is no economic data this morning although we will get the Fed Funds rate decision at about 11:15 PST.  I expect this rate decision itself to be a non-factor.  The more important information will come in any comments by any of the Fed big wigs regarding their bias and when they may possibly begin raising rates.  I think the consensus is for sometime later this year although there is a Fed president or two who thinks that they should wait until next year to start raising rates.

Yesterday was an anomaly for rates with bonds selling off in spite of some mostly disappointing data and a sharp down day in the stock market due to disappointing earnings.  The benchmark bond a some capitulations yesterday as it mostly trended down from the morning highs, closing at -1 basis point on the day for the FNMA benchmark bond.  This morning, the equity markets are off their morning highs and are hovering right around even for the day.  Here's the morning's snapshot of the benchmark bond:

The RSI is around 50 which means that there is no innate buy or sell pressure from a technical perspective.  The FNMA benchmark bond is just below the 1st level of resistance and I think investors are being a bit cautious ahead of tomorrow's jobless claims numbers.  The expectations are for 301K initial claims (it would be the 3rd consecutive week above 300K after about 12 weeks below that level).  Pending home sales numbers are also released tomorrow at 7:00 a.m. PST and they are also expected to come in lower than last month.  If the claims numbers come in higher and home sales come in lower, that would be good for rates.  Roll the dice and float if you want but I always like to be safe in advance of announcements like this and lock.

FHA's annual mortgage insurance lowered by 50 basis points (.50%) - As of Monday, January 26th, FHA lowered their annual mortgage insurance rate from 1.35% to .85% on FHA loans above 95% loan to value.  If you or someone you know has an FHA loan with the old mortgage insurance rate, please have them call me to how much money they can save by refinancing - 702-812-1214.

If you want to make sure you get this information everyday (or at least every day I write this report - which is typically at least 3 days per week) then subscribe to my blog or like my business facebook page - The Wunderli Team.  Feel free to contact me if I can help with a purchase or refinance mortgage - 702-812-1214.

Mortgage Bond Market Analysis - I'm Back

My internet has been restored which means the excitement of the gory details of the bond market can be uncovered in my posts.  Like your favorite sport or tv show when it comes back in season - my post is back and you can rest easy - even if the bond market isn't.  This morning we have another disconnect in the market:  the Conference Board's Consumer confidence reading blew away expectations of 95 with a 102.9 vs. previous month's of 92.6 so you would think that CONSUMERS with all of this confidence they have would CONSUME.  But you would be wrong!!  Here's the disconnect:  Durable Goods orders came in at -3.4 vs. expectations of +.5 and previous of -2.1.  If you take transportation out of the equation, it came in -.8 vs. expectations of +.6 and previous of -1.3.  This is madness, madness I say.  Where is all of the consumption?  How can consumers say they are so confident and then not consume?

My answer to this question is that I think they are confident that jobs are coming back (the last two weeks of jobless claims came in north of the 300 threshold so whatever) and the new jobs will then translate into better durable goods numbers and CPI, etc.  On January 16th when the FNMA benchmark bond tumbled 92 basis points, it was driven by the Michigan Consumer Sentiment Index that came in 4.6 points above expectations at 98.2 yet today's consumer confidence reading isn't having nearly the same impact.  Maybe it's the "Fool me once, shame on you, fool me twice shame on me" phenomena that is at play here.  At any rate, the benchmark bond, while 10 basis points off the morning high, is up 22 basis points this morning.  Here's a snapshot of the chart:

You know what tomorrow is.  Most importantly, it's hump day - YEAH!!  It is also the day we get the Fed interest rate decision.  I don't expect anything to happen with this.  Based on previous comments from various Fed talking heads, they won't start raising rates until much later in the year and there are a few that don't think they should raise rates until 2016.  Keep in mind that the Fed Funds rate is an overnight (extremely short-term) rate and doesn't move mortgage rates in and of itself.  What an increase to this rate does do is signify to investors that the economy is improving and there may be inflation on the horizon - bonds aren't good when inflation is present because it eats away at the return here as stocks typically go along for the ride.  Investors typically sell of bonds which drives prices down and interest rates up, right along with the Fed Funds rate.  It's like magic.

As always, I'm here to help in anyway I can, even if it's only to provide a ray of sunshine to your morning.  If you want to provide a ray of sunshine to my morning, feel free to refer your next client who needs a mortgage to me; I can be reached at 702-812-1214.  For now, I'd float with caution and, as always, be judicious in watching the market (which translates into - if your not using me for your client's mortgage, you need to hope the loan officer who is handling the transaction follows the mortgage bond market like I do) and be ready to lock quickly if things change.  Make it a great day.

Mortgage Bond Market Analysis - Another Chartless Edition

Happy Thursday morning and I must apologize for being chartless again - I know it's not a pretty sight but such is the case when all I have is my small laptop screen to work with which doesn't allow me to take a proper snapshot of that beautiful chartless babe which is the mortgage bond market (TIC).  Hopefully I'll have a hot sexy graph for you tomorrow - assuming I'm alive after going flying in my buddy's new airplane.

As far as economic data is concerned, the weekly jobless claims were weak, coming in at 307K vs. expectations of 300K.  The bigger story is what is coming out of Europe where the ECB (European Central Bank) kept rates the same but announced an expanded asset purchase program including the purchase (investment) of up to 60 billion euros per month in order to stimulate growth and counter deflationary pressures.  This is 10 billion more than originally thought.

The benchmark FNMA bond was at 102.05 (it's low for the day and down 35 basis points on the day) when Draghi (president of the ECB) made the announcement.  Over the next 45 minutes the bond climbed 52 basis points to reach its high for the day at 102.57.  It has since sold off a bit and is now at even (102.40).

On tap for tomorrow we have leading economic indicators and existing home sales.  Should you / your clients lock?  It is a great day to lock and rates are still great even though we have seen a drop in bond prices of 102 basis points since 1/16 which equates to about .25% in rate over the last 6 days.  Please feel free to contact me at 702-812-1214 if I can help you with anything mortgage-related.  Make today great.