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Tuesday, January 31, 2012
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Mortgage Rates
Treasuries and MBS markets started flat this morning with stock indexes pointing to a better open at 9:30. At 8:30 Q4 employment cost index was right on, +0.4%, no reaction to it however. At 9:00 the Nov Case/Shiller 20 city home price index declined 0.7% frm Oct and -3.4% yr/yr as expected, no reaction to it.
In Europe the EU summit most countries in the European Union agreed to tighter budget controls. The EU completed a fiscal-discipline treaty that speeds sanctions on high-deficit states, requiring euro countries to anchor balanced-budget rules in national law. Eight countries outside the euro backed the pact, while Britain and the Czech Republic boycotted it. The meeting ended with German Chancellor Angela Merkel voicing frustration that Athens has failed to overhaul the Greek economy. “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”
Greece aims to complete debt-swap talks with bondholders this week. Prime Minister Lucas Papademos told reporters after the summit that he is “strongly committed” to reaching a deal. Meeting at the 16th summit in two years, they also agreed to bring the region’s permanent bailout fund, the European Stability Mechanism, into operation on July 1, a year ahead of schedule. As far as traders are concerned there was no progress on Greece and the EU summit just another summit where a lot of talk and no direct action; steps in the right direction but slower than a snail in molasses.
UK consumer confidence improved in Jan according to gauge of sentiment it added 4 points from December to minus 29, the strongest reading since June. The increase in confidence and the reaction to the EU summit improved equity markets in the UK and Europe adding some thrust to US markets early this morning.
At 9:30 the DJIA opened +55, the 10 yr -2/32 at 1.85% unch and MBS prices -2/32 (.06 bp).
Jan Chicago purchasing managers’ index, expected at 62.5 unchanged from Dec; as released the index was lower at 60.2. The new orders component at 63.6 frm 67.1. prices pd index at 62.4 frm 63.8 and the employment index at 54.7 frm 59.2. There was no initial reaction to the data in the bond and mortgage markets but the key stock indexes backed off from the better levels prior to the report, still holding gains but lost about half of the improvement.
The final data today, at 10:00 Jan consumer confidence index for Jan was expected to have increased to 67.0 frm 64.5 in Dec; it was weaker, at 61.1 frm revised 64.8 in Dec. Two economic releases that were less than expected pulled equity markets back and put support in the interest rate sector.
The 10 yr at a resistance level between 1.85 and 1.80%. Most of the momentum oscillators are weakening a little but the wider perspective remains positive.
Treasuries and MBS markets started flat this morning with stock indexes pointing to a better open at 9:30. At 8:30 Q4 employment cost index was right on, +0.4%, no reaction to it however. At 9:00 the Nov Case/Shiller 20 city home price index declined 0.7% frm Oct and -3.4% yr/yr as expected, no reaction to it.
In Europe the EU summit most countries in the European Union agreed to tighter budget controls. The EU completed a fiscal-discipline treaty that speeds sanctions on high-deficit states, requiring euro countries to anchor balanced-budget rules in national law. Eight countries outside the euro backed the pact, while Britain and the Czech Republic boycotted it. The meeting ended with German Chancellor Angela Merkel voicing frustration that Athens has failed to overhaul the Greek economy. “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”
Greece aims to complete debt-swap talks with bondholders this week. Prime Minister Lucas Papademos told reporters after the summit that he is “strongly committed” to reaching a deal. Meeting at the 16th summit in two years, they also agreed to bring the region’s permanent bailout fund, the European Stability Mechanism, into operation on July 1, a year ahead of schedule. As far as traders are concerned there was no progress on Greece and the EU summit just another summit where a lot of talk and no direct action; steps in the right direction but slower than a snail in molasses.
UK consumer confidence improved in Jan according to gauge of sentiment it added 4 points from December to minus 29, the strongest reading since June. The increase in confidence and the reaction to the EU summit improved equity markets in the UK and Europe adding some thrust to US markets early this morning.
At 9:30 the DJIA opened +55, the 10 yr -2/32 at 1.85% unch and MBS prices -2/32 (.06 bp).
Jan Chicago purchasing managers’ index, expected at 62.5 unchanged from Dec; as released the index was lower at 60.2. The new orders component at 63.6 frm 67.1. prices pd index at 62.4 frm 63.8 and the employment index at 54.7 frm 59.2. There was no initial reaction to the data in the bond and mortgage markets but the key stock indexes backed off from the better levels prior to the report, still holding gains but lost about half of the improvement.
The final data today, at 10:00 Jan consumer confidence index for Jan was expected to have increased to 67.0 frm 64.5 in Dec; it was weaker, at 61.1 frm revised 64.8 in Dec. Two economic releases that were less than expected pulled equity markets back and put support in the interest rate sector.
The 10 yr at a resistance level between 1.85 and 1.80%. Most of the momentum oscillators are weakening a little but the wider perspective remains positive.
Monday, January 30, 2012
Mortgage Rate Update
The rally in the bond and mortgage markets is continuing this morning, Europe stock markets weaker and US equity markets set to open lower at 9:30. Dec personal income and spending at 8:30 was in line with estimates; income up 0.5% against estimates of +0.4%. Dec spending unchanged against estimates of +0.1%; more evidence that holiday shopping didn’t meet those early lofty estimates. Spending stalled in December as Americans used a jump in incomes to restore depleted savings, indicating the biggest part of the economy will not be a driver of the expansion.
Last week Greek officials were “confident” that they could make a deal with creditors to fend off another debt default cliff. Nothing happened, not necessarily a surprise as we have been subjected to the continual uncertainty and lack of progress for two+ years now. Greece signaled opposition to economic oversight in exchange for aid, taking Italian interest rates higher this morning and driving equity markets lower. European Union leaders gather in Brussels today for their first summit of 2012 to put the finishing touches on a German-led deficit-control treaty and endorse a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said Saturday they expect to complete a deal in coming days after bondholders signaled they would accept a bigger cut in their debt holdings----it never ends.
The DJIA opened -100; 10 yr note +17/32 1.83% -7 bp and MBS 30 yr prices +6/32 (.18 bp).
This week’s elephant is the Jan employment report on Friday; current estimates are an increase of 160K non-farm jobs and private non-farm jobs +170K, the unemployment rate at 8.5%. The actual unemployment rate is closer to 16% however, that the “official” rate is at 8.5% is evidence that many have simply dropped out of looking for jobs. Until the Fed revised estimates for growth downward for 2012 and 2013 last week and Q4 GDP advance report was weaker than forecasts (+2.8% against +3.1% expected) there was an increasing belief the economy was gaining a little momentum. Now economic bulls are re-thinking that idea.
The bellwether 10 yr note is working on a key resistance level at 1.80% this morning. In early trade it dropped to 1.82% and at 10:00 sitting at 1.83%. The MBSs are pushing into new highs in prices not seen in over a year. The Fed’s decision to leave the FF rate at 0.0% for the next three years and with no inflation now or on the horizon, the long end of the curve is seeing buying as investors seek yield. The safety trade over Europe’s debt crisis has ebbed recently but still plays a role in the decline in rates.
The rally in the bond and mortgage markets is continuing this morning, Europe stock markets weaker and US equity markets set to open lower at 9:30. Dec personal income and spending at 8:30 was in line with estimates; income up 0.5% against estimates of +0.4%. Dec spending unchanged against estimates of +0.1%; more evidence that holiday shopping didn’t meet those early lofty estimates. Spending stalled in December as Americans used a jump in incomes to restore depleted savings, indicating the biggest part of the economy will not be a driver of the expansion.
Last week Greek officials were “confident” that they could make a deal with creditors to fend off another debt default cliff. Nothing happened, not necessarily a surprise as we have been subjected to the continual uncertainty and lack of progress for two+ years now. Greece signaled opposition to economic oversight in exchange for aid, taking Italian interest rates higher this morning and driving equity markets lower. European Union leaders gather in Brussels today for their first summit of 2012 to put the finishing touches on a German-led deficit-control treaty and endorse a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said Saturday they expect to complete a deal in coming days after bondholders signaled they would accept a bigger cut in their debt holdings----it never ends.
The DJIA opened -100; 10 yr note +17/32 1.83% -7 bp and MBS 30 yr prices +6/32 (.18 bp).
This week’s elephant is the Jan employment report on Friday; current estimates are an increase of 160K non-farm jobs and private non-farm jobs +170K, the unemployment rate at 8.5%. The actual unemployment rate is closer to 16% however, that the “official” rate is at 8.5% is evidence that many have simply dropped out of looking for jobs. Until the Fed revised estimates for growth downward for 2012 and 2013 last week and Q4 GDP advance report was weaker than forecasts (+2.8% against +3.1% expected) there was an increasing belief the economy was gaining a little momentum. Now economic bulls are re-thinking that idea.
The bellwether 10 yr note is working on a key resistance level at 1.80% this morning. In early trade it dropped to 1.82% and at 10:00 sitting at 1.83%. The MBSs are pushing into new highs in prices not seen in over a year. The Fed’s decision to leave the FF rate at 0.0% for the next three years and with no inflation now or on the horizon, the long end of the curve is seeing buying as investors seek yield. The safety trade over Europe’s debt crisis has ebbed recently but still plays a role in the decline in rates.
Sunday, January 29, 2012
Friday, January 27, 2012
Mortgage Rates
Before 8:30 treasury markets were trading slightly weaker and stock indexes a little better, it changed after the 8:30 release of Q4 GDP. Expected at a growth rate of 3.1%, as reported +2.8%; the 10 yr note bounced up a little and mortgage prices improved and stock indexes declined. The report is the first of three over the next three months and usually gets revised when the preliminary report hits next month; nevertheless after the Fed released its weaker forecasts for growth in 2012, and 2013 on Wednesday the softer Q4 growth is getting a lot of attention this morning. If inventory builds are removed GDP was up just 0.8%. For all of 2012 growth up 1.7% compared with +3.0% in 2010. Consumer spending in Q4 was up 2.0%, economists were projecting +2.4%, Q3 up 1.7%---holiday shopping was less than estimates. Q4 savings rate declined to +3.7%, the lowest in years.
The bond and mortgage markets rallied a little on the 8:30 weaker GDP data; MBS trading was volatile with prices swinging from +.22 bp to +.09 bp; at 9:15 +.09 bp with the 10 yr treasury +4/32 at 1.93% -1 bp. At 9:30 the DJIA opened -36, the 10 yr note +6/32 to 1.92% -2 bp and mortgage prices +3/32 (.09 bp).
The final data this week at 9:55; the U. of Michigan consumer sentiment index, expected at 74.0, as reported 75.0, up frm 69.9 at the end of Dec. Current conditions at 84.2, expectations at 69.1 frm 68.4 two weeks ago, 12 month outlook 82 frm 79 two weeks ago. The sentiment and current conditions the highest since Feb 2011. There was no reaction to the data in either stock indexes of the bond markets.
European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are “very close” to reaching an agreement on a private-sector involvement in a Greek debt swap this month. Greece and its creditors are haggling over the terms of an accord to reduce the country’s borrowings, three months after private bondholders agreed to a 50% cut in the face value of more than 200 billion euros ($263B) of debt by voluntarily swapping bonds for new securities. Earlier this week officials were saying a deal would be resolved by today, now the talk is “in the next three days”.
Technicals looking more bullish, the 10 yr note has more to go before it runs into resistance. The rest of the day the bond and mortgage markets will take their lead from the equity markets, stock indexes at 10:00 at their worst of the day so far.
Before 8:30 treasury markets were trading slightly weaker and stock indexes a little better, it changed after the 8:30 release of Q4 GDP. Expected at a growth rate of 3.1%, as reported +2.8%; the 10 yr note bounced up a little and mortgage prices improved and stock indexes declined. The report is the first of three over the next three months and usually gets revised when the preliminary report hits next month; nevertheless after the Fed released its weaker forecasts for growth in 2012, and 2013 on Wednesday the softer Q4 growth is getting a lot of attention this morning. If inventory builds are removed GDP was up just 0.8%. For all of 2012 growth up 1.7% compared with +3.0% in 2010. Consumer spending in Q4 was up 2.0%, economists were projecting +2.4%, Q3 up 1.7%---holiday shopping was less than estimates. Q4 savings rate declined to +3.7%, the lowest in years.
The bond and mortgage markets rallied a little on the 8:30 weaker GDP data; MBS trading was volatile with prices swinging from +.22 bp to +.09 bp; at 9:15 +.09 bp with the 10 yr treasury +4/32 at 1.93% -1 bp. At 9:30 the DJIA opened -36, the 10 yr note +6/32 to 1.92% -2 bp and mortgage prices +3/32 (.09 bp).
The final data this week at 9:55; the U. of Michigan consumer sentiment index, expected at 74.0, as reported 75.0, up frm 69.9 at the end of Dec. Current conditions at 84.2, expectations at 69.1 frm 68.4 two weeks ago, 12 month outlook 82 frm 79 two weeks ago. The sentiment and current conditions the highest since Feb 2011. There was no reaction to the data in either stock indexes of the bond markets.
European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are “very close” to reaching an agreement on a private-sector involvement in a Greek debt swap this month. Greece and its creditors are haggling over the terms of an accord to reduce the country’s borrowings, three months after private bondholders agreed to a 50% cut in the face value of more than 200 billion euros ($263B) of debt by voluntarily swapping bonds for new securities. Earlier this week officials were saying a deal would be resolved by today, now the talk is “in the next three days”.
Technicals looking more bullish, the 10 yr note has more to go before it runs into resistance. The rest of the day the bond and mortgage markets will take their lead from the equity markets, stock indexes at 10:00 at their worst of the day so far.
Thursday, January 26, 2012
Mortgage Rates
The bond and mortgage markets opened better this morning, still reacting to the Fed’s surprise yesterday saying the FF rate would stay at 0.00% to 0.25% clear out to the end of 2014. Prior to yesterday the Fed was saying mid-2013. The motivation from the Fed is that the central bank has lowered its forecasts for US growth this year and next. Bernanke apparently is more concerned about growth that he was six weeks ago. The recovery seen so far he considers anemic with unemployment to remain high for another two years, the housing sector showing little in the way of stabilizing let alone improving much, and he is very likely believing Europe will decline into another recession and that there will be defaults on a lot of the debt piled up.
The reaction to yesterday’s FOMC statement and Bernanke’s press conference was swift; US treasuries that were looking weak rallied taking the 120 yr note to 2.00% -6 bp yesterday on the close, but at 1.92% on the initial reaction. MBS prices spiked initially then backed off but still a very nice close, +16/32 (.50 bp). This morning treasuries are better as are MBS prices; at 9:00 the 10 yr note at 1.98% -2 bp and MBS prices +8/32 (.25 bp). US stock indexes at 9:00, DJIA +65; all major equity markets in Europe rallying on the Fed’s rate surprise. At 9:30 the DJIA opened +44, the 10 yr +12/32 to 1.96% -4 bp and MBSs +10/32 (.31 bp).
At 8:30 weekly jobless claims were in line with forecasts, +21K to 377K; continuing claims +88K to 3.554 mil. Dec durable goods orders were much stronger than estimates, expectations were for an increase of 2.2%, as reported up 3.0%. The more significant ex transportation orders were expected up 0.7%, as reported up 2.1%. Nov orders were revised higher, frm 3.8% to +4.3%, ex transportation frm 0.3% to +05%. The two reports added a little more strength to the stock indexes in the futures markets.
More data at 10:00; Dec new home sales were expected to increase 1.5% to 320K annualized units, as released sales declined 2.2% to 307K; based on sales there is a 6.1 month supply, for all of 2011 sales were down 6.2%. Dec leading economic indicators were expected to be up 0.7%, as reported +0.4%, Nov revised to +0.2% frm +0.5%. No immediate reaction to the data.
This afternoon at 1:00 Treasury will complete its auctions with $29B of 7 yr notes; yesterday’ 5 yr auction met with solid demand.
The slightly bearish bias in the bond and MBS markets turned quickly yesterday on the Fed’s announcement. Prior to the Fed we were thinking the 10 yr would climb to 2.15% but go no further, the highest it got was 2.09% on Tuesday. Now the obvious question we are tackling is, how low will the 10 yr yield go based primarily on the Fed holding the FF rate at current lows until the end of 2014; and how low will mortgage rates go now? It is unlikely US interest rates will decline to new lows, at this point we expect the wider trading range will continue with the possible low on the 10 at 1.80% and mortgage rates tied to a 25 basis point range in rates. The Fed is worried about the US recovery and that Europe will continue to decline with eventual debt defaults in Greece and other EU countries. Until there is another Europe shock it is unlikely that US rates will push to new low rates. It will take a few days for traders and investors to assess the message sent yesterday from the Fed when the Committee made such an unusual move.
The bond and mortgage markets opened better this morning, still reacting to the Fed’s surprise yesterday saying the FF rate would stay at 0.00% to 0.25% clear out to the end of 2014. Prior to yesterday the Fed was saying mid-2013. The motivation from the Fed is that the central bank has lowered its forecasts for US growth this year and next. Bernanke apparently is more concerned about growth that he was six weeks ago. The recovery seen so far he considers anemic with unemployment to remain high for another two years, the housing sector showing little in the way of stabilizing let alone improving much, and he is very likely believing Europe will decline into another recession and that there will be defaults on a lot of the debt piled up.
The reaction to yesterday’s FOMC statement and Bernanke’s press conference was swift; US treasuries that were looking weak rallied taking the 120 yr note to 2.00% -6 bp yesterday on the close, but at 1.92% on the initial reaction. MBS prices spiked initially then backed off but still a very nice close, +16/32 (.50 bp). This morning treasuries are better as are MBS prices; at 9:00 the 10 yr note at 1.98% -2 bp and MBS prices +8/32 (.25 bp). US stock indexes at 9:00, DJIA +65; all major equity markets in Europe rallying on the Fed’s rate surprise. At 9:30 the DJIA opened +44, the 10 yr +12/32 to 1.96% -4 bp and MBSs +10/32 (.31 bp).
At 8:30 weekly jobless claims were in line with forecasts, +21K to 377K; continuing claims +88K to 3.554 mil. Dec durable goods orders were much stronger than estimates, expectations were for an increase of 2.2%, as reported up 3.0%. The more significant ex transportation orders were expected up 0.7%, as reported up 2.1%. Nov orders were revised higher, frm 3.8% to +4.3%, ex transportation frm 0.3% to +05%. The two reports added a little more strength to the stock indexes in the futures markets.
More data at 10:00; Dec new home sales were expected to increase 1.5% to 320K annualized units, as released sales declined 2.2% to 307K; based on sales there is a 6.1 month supply, for all of 2011 sales were down 6.2%. Dec leading economic indicators were expected to be up 0.7%, as reported +0.4%, Nov revised to +0.2% frm +0.5%. No immediate reaction to the data.
This afternoon at 1:00 Treasury will complete its auctions with $29B of 7 yr notes; yesterday’ 5 yr auction met with solid demand.
The slightly bearish bias in the bond and MBS markets turned quickly yesterday on the Fed’s announcement. Prior to the Fed we were thinking the 10 yr would climb to 2.15% but go no further, the highest it got was 2.09% on Tuesday. Now the obvious question we are tackling is, how low will the 10 yr yield go based primarily on the Fed holding the FF rate at current lows until the end of 2014; and how low will mortgage rates go now? It is unlikely US interest rates will decline to new lows, at this point we expect the wider trading range will continue with the possible low on the 10 at 1.80% and mortgage rates tied to a 25 basis point range in rates. The Fed is worried about the US recovery and that Europe will continue to decline with eventual debt defaults in Greece and other EU countries. Until there is another Europe shock it is unlikely that US rates will push to new low rates. It will take a few days for traders and investors to assess the message sent yesterday from the Fed when the Committee made such an unusual move.
Wednesday, January 25, 2012
Mortgage Rates
Generally quiet early this morning with treasuries and mortgage markets flat and stock indexes mixed at 9:00. US financial markets will not see much change this morning ahead of the 2:00 FOMC policy statement and Bernanke’s press conference. The NASDAQ is the only index trading higher this morning, driven by the rally in Apple.
No changes or improvements over Europe’s debt mess. Greece is on the front burner now; on Monday there was widespread belief the Greece and its creditors would make a deal and avoid defaults. Yesterday the optimism waned as private investors (banks) refused to take the losses necessary to save the country. Today the ECB said it would not participate in any writedowns on the Greek bonds it holds, saying the central bank isn’t an investor, it bought the debt to aid Greece in an attempt to avoid default. Summing; nothing is being accomplished with Greece. International Monetary Fund Managing Director Christine Lagarde said today that European governments and other public holders of Greek debt may have to increase support if private creditors don’t go far enough. Investors and European finance ministers remain at odds over how much private investors should shoulder in the Greek bailout.
The US bond and equity markets have largely become desensitized about momentary events and comments out of Europe. There is a slowly increasing belief in US markets that eventually Europe will save itself and its currency; likely driven by the view that anything short of some acceptable plan would be a catastrophe to Europe and rest of the global economies. Safety moves into US treasuries have ebbed, at the moment there is little motivation to move into treasuries, yet so far there is not much reason the dump fixed rate treasuries. The 10 yr note yield has increased from 1.85% on 1/13 to 2.06% yesterday, mostly traders reducing exposure; MBSs also have increased in rate. Although rates have increased some as we noted they would, at the same time we do not expect interest rates to move much higher; our target for the bellwether 10 yr note is 2.15% and no higher, worse case for mortgage rates, another 10 basis points in rates on 30s.
Working against the bond market, less concern over Europe and improved US economic outlook. Most all key economic reports in the past three months have beaten estimates. On Friday Commerce will release the advance Q4 GDP, consensus is+3.1%, up frm +1.8% in Q3. While the fed will continue to keep short rates low as it has said repeatedly, the long end of the curve (10 yr) has seen its lows. There is an idea out there that the Fed may decide to increase its purchases on MBSs in an attempt to keep mortgage rates low, but if treasuries increase about all that can be expected is the yield spread between MBSs and treasuries will narrow. It is not likely that treasury rates would increase while mortgage rates fall.
At 10:00a few minutes ago; Dec pending home sales (contracts signed but not closed) was expected down 1.0%, sales fell 3.5% with about a third of sales are not going to the closing table; yr/yr pending sales up 5.6%. Nov FHFA housing price index expected -0.1%, jumped 1.0%; yr/yr -1.8%. There was no market reaction to the two housing reports.
US rate markets will likely stay quiet through the morning and early afternoon ahead of the FOMC statement and Bernanke’s press conference this afternoon. At 9:30 the DJIA opened -45, the 10 yr unch and mortgage prices also unchanged to slightly lower.
Generally quiet early this morning with treasuries and mortgage markets flat and stock indexes mixed at 9:00. US financial markets will not see much change this morning ahead of the 2:00 FOMC policy statement and Bernanke’s press conference. The NASDAQ is the only index trading higher this morning, driven by the rally in Apple.
No changes or improvements over Europe’s debt mess. Greece is on the front burner now; on Monday there was widespread belief the Greece and its creditors would make a deal and avoid defaults. Yesterday the optimism waned as private investors (banks) refused to take the losses necessary to save the country. Today the ECB said it would not participate in any writedowns on the Greek bonds it holds, saying the central bank isn’t an investor, it bought the debt to aid Greece in an attempt to avoid default. Summing; nothing is being accomplished with Greece. International Monetary Fund Managing Director Christine Lagarde said today that European governments and other public holders of Greek debt may have to increase support if private creditors don’t go far enough. Investors and European finance ministers remain at odds over how much private investors should shoulder in the Greek bailout.
The US bond and equity markets have largely become desensitized about momentary events and comments out of Europe. There is a slowly increasing belief in US markets that eventually Europe will save itself and its currency; likely driven by the view that anything short of some acceptable plan would be a catastrophe to Europe and rest of the global economies. Safety moves into US treasuries have ebbed, at the moment there is little motivation to move into treasuries, yet so far there is not much reason the dump fixed rate treasuries. The 10 yr note yield has increased from 1.85% on 1/13 to 2.06% yesterday, mostly traders reducing exposure; MBSs also have increased in rate. Although rates have increased some as we noted they would, at the same time we do not expect interest rates to move much higher; our target for the bellwether 10 yr note is 2.15% and no higher, worse case for mortgage rates, another 10 basis points in rates on 30s.
Working against the bond market, less concern over Europe and improved US economic outlook. Most all key economic reports in the past three months have beaten estimates. On Friday Commerce will release the advance Q4 GDP, consensus is+3.1%, up frm +1.8% in Q3. While the fed will continue to keep short rates low as it has said repeatedly, the long end of the curve (10 yr) has seen its lows. There is an idea out there that the Fed may decide to increase its purchases on MBSs in an attempt to keep mortgage rates low, but if treasuries increase about all that can be expected is the yield spread between MBSs and treasuries will narrow. It is not likely that treasury rates would increase while mortgage rates fall.
At 10:00a few minutes ago; Dec pending home sales (contracts signed but not closed) was expected down 1.0%, sales fell 3.5% with about a third of sales are not going to the closing table; yr/yr pending sales up 5.6%. Nov FHFA housing price index expected -0.1%, jumped 1.0%; yr/yr -1.8%. There was no market reaction to the two housing reports.
US rate markets will likely stay quiet through the morning and early afternoon ahead of the FOMC statement and Bernanke’s press conference this afternoon. At 9:30 the DJIA opened -45, the 10 yr unch and mortgage prices also unchanged to slightly lower.
Tuesday, January 24, 2012
Mortgage Rates
Treasuries and MBSs opened a little better this morning, ending days of price declines. The equity markets were trading lower early, implying a weak open. There are no economic reports today, just the $35B 2 yr note auction. Last month’s 2, 5 and 7 yr auctions were well bid, however the 3.10, and 30 yr auctions were didn’t get the demand traders were expecting; now with rates a little higher demand will likely be better. The 2 yr note has been unchanged for the last few weeks at 0.24%, that is likely where the bid will be this afternoon at 1:00.
This evening the President will deliver his State of the Union address; being an election year the address will carry political overtones and not likely to generate much interest in the financial markets. He will lay out what he calls a “blueprint” for revitalizing the economy, emphasizing a rebirth for U.S. manufacturing, bolstering domestic energy production and training workers. The FOMC meeting begins today, concluding tomorrow with the policy statement and Bernanke’s press conference after the meeting. Some talk that the Fed will launch another quantative easing move, every time the FOMC meets the idea surfaces. With the Q4 GDP expected up 3.1% on Friday, almost doubling the growth in Q3, there isn’t much rationale for another easing unless it is targeted to purchasing more MBSs to keep mortgage rates from increasing.
In the never-ending soap opera known as Europe’s debt problems, yesterday markets were buoyed by reports out of Greece that talks were going well to arrive at a plan to forestall a Greek default. Today, not so optimistic; a stalemate between regional policy makers and Greek bondholders over how to resolve the nation’s debt crisis, bond holders are not willing to take the huge haircut demanded. European finance ministers balked at putting up more public money for Greece, calling on bondholders to provide greater debt relief. Europe’s equity markets are weaker today, leading the US market lower this morning. The saga continues. On the positive side; Spain’s two-year note fell five basis points to 3.12% as the government sold 2.51 billion euros ($3.3B of three- and six-month bills, meeting the maximum target for the sale.
At 9:30 the DJIA opened -67, 10 yr at 2.05% unch but MBS prices +6/32 (.18 bp). Prior to 9:30 the 10 yr held a 5/32 gain with its yield at 2.04%.
Although the mortgage market is trading better this morning, the bellwether 10 yr note is still struggling. Even with equity markets weaker the 10 yr is not moving up in price; technically the 10 yr is slightly bearish on the near term outlook. While we continue our outlook that rates won’t increase much; equally, unless there is renewed safety buying on news out of Europe, there isn’t any motivation to drive rates back down. Given two years of fumbling and meetings in Europe to resolve debt issues, US markets will remain vulnerable to any significant news from the region. Presently markets are not as fearful of defaults or bank failures alleviating the need to park money in US treasuries; the key word is “presently”.
Treasuries and MBSs opened a little better this morning, ending days of price declines. The equity markets were trading lower early, implying a weak open. There are no economic reports today, just the $35B 2 yr note auction. Last month’s 2, 5 and 7 yr auctions were well bid, however the 3.10, and 30 yr auctions were didn’t get the demand traders were expecting; now with rates a little higher demand will likely be better. The 2 yr note has been unchanged for the last few weeks at 0.24%, that is likely where the bid will be this afternoon at 1:00.
This evening the President will deliver his State of the Union address; being an election year the address will carry political overtones and not likely to generate much interest in the financial markets. He will lay out what he calls a “blueprint” for revitalizing the economy, emphasizing a rebirth for U.S. manufacturing, bolstering domestic energy production and training workers. The FOMC meeting begins today, concluding tomorrow with the policy statement and Bernanke’s press conference after the meeting. Some talk that the Fed will launch another quantative easing move, every time the FOMC meets the idea surfaces. With the Q4 GDP expected up 3.1% on Friday, almost doubling the growth in Q3, there isn’t much rationale for another easing unless it is targeted to purchasing more MBSs to keep mortgage rates from increasing.
In the never-ending soap opera known as Europe’s debt problems, yesterday markets were buoyed by reports out of Greece that talks were going well to arrive at a plan to forestall a Greek default. Today, not so optimistic; a stalemate between regional policy makers and Greek bondholders over how to resolve the nation’s debt crisis, bond holders are not willing to take the huge haircut demanded. European finance ministers balked at putting up more public money for Greece, calling on bondholders to provide greater debt relief. Europe’s equity markets are weaker today, leading the US market lower this morning. The saga continues. On the positive side; Spain’s two-year note fell five basis points to 3.12% as the government sold 2.51 billion euros ($3.3B of three- and six-month bills, meeting the maximum target for the sale.
At 9:30 the DJIA opened -67, 10 yr at 2.05% unch but MBS prices +6/32 (.18 bp). Prior to 9:30 the 10 yr held a 5/32 gain with its yield at 2.04%.
Although the mortgage market is trading better this morning, the bellwether 10 yr note is still struggling. Even with equity markets weaker the 10 yr is not moving up in price; technically the 10 yr is slightly bearish on the near term outlook. While we continue our outlook that rates won’t increase much; equally, unless there is renewed safety buying on news out of Europe, there isn’t any motivation to drive rates back down. Given two years of fumbling and meetings in Europe to resolve debt issues, US markets will remain vulnerable to any significant news from the region. Presently markets are not as fearful of defaults or bank failures alleviating the need to park money in US treasuries; the key word is “presently”.
Monday, January 23, 2012
Mortgage Rates
It wasn’t a good week last week in the bond and mortgage markets; interest rates increased on increasing optimism the US economy can improve even in the face of Europe’s slide, and reduced need for safety in US treasuries. The 10 yr note yield increased 15 bps last week, mortgage rates up 8 basis points; this morning early prices continue to fall as early activity pointed to a better open in the equity market. At 8:30 the 10 at 2.06%, up 3 bp frm Friday’s close, MBS prices at 8:30 -5/32 (.15 bp). At 9:30 the DJIA was expected to pen a little better, it opened down a fraction (-8), the 10 yr note traded at 2.07% +4 bp -14/32; mortgage prices at 9:30 -8/32 (.25 bp).
There are no economic releases this week until Wednesday. The week is focused on the FOMC meeting that starts tomorrow and ends Wednesday with the policy statement. Treasury will auction its monthly ration of $99B in 2 yr, 5 yr and 7 yr notes. The Eurozone of course is always in play these days, any significant comments from leaders of the EU, ECB and IMF will get traders’ attention. Technically, the bond and mortgage markets, after last week’s selling, are now slightly bearish. We talked about how the rate markets were losing momentum for the past two weeks, the break came last week.
How high will interest rates climb is the question now facing investors and traders. We don’t believe rates will increase much, at worst the 10 yr could increase to 2.15% but should hold. On the opposite side, it is very likely that the lows in rates have been put in place. As long as the US economic outlook is imp[roving, and there are no actual defaults in any Euro debt there is little reason to justify the 10 yr under 2.00% and mortgage rates at their lows of a few weeks ago.
Europe’s finance ministers are meeting today in Brussels, trying to advance plans to craft a long-term plan to tackle the region’s debt crisis, as banking and government negotiators continue trying to reach an agreement that will lighten Greece’s debt burden. There has been progress over the past couple of weeks, Greece and private bondholders said they had made progress in talks over the weekend in Athens. Finance Minister Evangelos Venizelos said before today’s meeting that Greece is prepared to wrap up the private-sector debt swap on schedule. “We have a very constructive cooperation with the private sector,” Venizelos told reporters in Brussels. “We are ready to finalize the procedure on time.”
This Week’s Economic calendar:
Tuesday;
1:00 pm $35b 2 yr note auction
Wednesday;
7:00 am MBA mortgage applications
10:00 am Dec pending home sales (-1.0%)
Nov FHFA housing price index (-0.1%)
1:00 pm $35B 5 yr note auction
2:15 pm FOMC policy statement
Thursday;
8:30 am weekly jobless claims (+23K back to 375K)
Dec durable goods orders (+2.2%, ex auto sales +0.7%)
10:00 am Dec new home sales (+1.5% to 320K units (annualized)
Dec leading economic indicators (+0.7%)
1:00 pm $29B 7 yr not auction
Friday;
8:30 am Q4 advance GDP (+3.1%)
9:55 am U. of Michigan consumer sentiment index (74.2 frm 74.0)
The bond and mortgage markets have been losing strength for two weeks as we have indicated in past commentaries. The 10 yr note won’t find much support until it hits 2.15%, now at 2.09%; not much momentary concerns to hold treasuries against Europe. US economic outlook is improving, removing another support for rates. There is some talk that the Fed may announce it will increase purchases of MBSs to keep mortgage rates low, but as long as treasury rates increase the best we can expect is mortgage rates won’t increase as much but will increase. All that said, while we do not expect rates will fall again to the recent lows we are equally not expecting rates to move radically higher.
It wasn’t a good week last week in the bond and mortgage markets; interest rates increased on increasing optimism the US economy can improve even in the face of Europe’s slide, and reduced need for safety in US treasuries. The 10 yr note yield increased 15 bps last week, mortgage rates up 8 basis points; this morning early prices continue to fall as early activity pointed to a better open in the equity market. At 8:30 the 10 at 2.06%, up 3 bp frm Friday’s close, MBS prices at 8:30 -5/32 (.15 bp). At 9:30 the DJIA was expected to pen a little better, it opened down a fraction (-8), the 10 yr note traded at 2.07% +4 bp -14/32; mortgage prices at 9:30 -8/32 (.25 bp).
There are no economic releases this week until Wednesday. The week is focused on the FOMC meeting that starts tomorrow and ends Wednesday with the policy statement. Treasury will auction its monthly ration of $99B in 2 yr, 5 yr and 7 yr notes. The Eurozone of course is always in play these days, any significant comments from leaders of the EU, ECB and IMF will get traders’ attention. Technically, the bond and mortgage markets, after last week’s selling, are now slightly bearish. We talked about how the rate markets were losing momentum for the past two weeks, the break came last week.
How high will interest rates climb is the question now facing investors and traders. We don’t believe rates will increase much, at worst the 10 yr could increase to 2.15% but should hold. On the opposite side, it is very likely that the lows in rates have been put in place. As long as the US economic outlook is imp[roving, and there are no actual defaults in any Euro debt there is little reason to justify the 10 yr under 2.00% and mortgage rates at their lows of a few weeks ago.
Europe’s finance ministers are meeting today in Brussels, trying to advance plans to craft a long-term plan to tackle the region’s debt crisis, as banking and government negotiators continue trying to reach an agreement that will lighten Greece’s debt burden. There has been progress over the past couple of weeks, Greece and private bondholders said they had made progress in talks over the weekend in Athens. Finance Minister Evangelos Venizelos said before today’s meeting that Greece is prepared to wrap up the private-sector debt swap on schedule. “We have a very constructive cooperation with the private sector,” Venizelos told reporters in Brussels. “We are ready to finalize the procedure on time.”
This Week’s Economic calendar:
Tuesday;
1:00 pm $35b 2 yr note auction
Wednesday;
7:00 am MBA mortgage applications
10:00 am Dec pending home sales (-1.0%)
Nov FHFA housing price index (-0.1%)
1:00 pm $35B 5 yr note auction
2:15 pm FOMC policy statement
Thursday;
8:30 am weekly jobless claims (+23K back to 375K)
Dec durable goods orders (+2.2%, ex auto sales +0.7%)
10:00 am Dec new home sales (+1.5% to 320K units (annualized)
Dec leading economic indicators (+0.7%)
1:00 pm $29B 7 yr not auction
Friday;
8:30 am Q4 advance GDP (+3.1%)
9:55 am U. of Michigan consumer sentiment index (74.2 frm 74.0)
The bond and mortgage markets have been losing strength for two weeks as we have indicated in past commentaries. The 10 yr note won’t find much support until it hits 2.15%, now at 2.09%; not much momentary concerns to hold treasuries against Europe. US economic outlook is improving, removing another support for rates. There is some talk that the Fed may announce it will increase purchases of MBSs to keep mortgage rates low, but as long as treasury rates increase the best we can expect is mortgage rates won’t increase as much but will increase. All that said, while we do not expect rates will fall again to the recent lows we are equally not expecting rates to move radically higher.
Friday, January 20, 2012
Market Weakness Threatens All-Time Low Mortgage Rates
Rates are as low as they've ever been. How long will this continue? There's no way to know for sure, but we generally advocate a conservative approach with rates at all time lows. "Conservative" in this sense simply means that history has shown us how quickly record-low rates can disappear. While we certainly wouldn't rule out the possibility that rates can improve, we've already been experiencing the fact that further gains are hard-fought and take more time than gains seen in the middle of the range.
If you happened to read that, taken in conjunction with several days of weakness, you may be wondering if these are the days that mark the turning point away from all time low rates. The great thing about such a concern is this: rates are still at all time lows! If you're worried that current weakness could mark the turning point, the sacrifice of slightly higher closing costs vs yesterday seems minimal compared to the loss of the opportunity altogether.
If losing the opportunity doesn't bother you much, just be sure to clearly define an acceptable level of loss from current rates. Set yourself a "stop," of sorts, by deciding on a rate slightly higher than what you're currently being quoted, at which you'd lock at a loss if the market moves against you. Locking in such a scenario can prove exceedingly frustrating more often than not as the higher probability eventuality has been for rates to return lower, but this pales in comparison to the potential frustration of rates NOT returning lower.
Today's BEST-EXECUTION Rates
30YR FIXED - 3.875%, 3.75% as close as it's been
FHA/VA -3.75%
15 YEAR FIXED - 3.375% / 3.25%
5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
Rates and costs continue to operate near all time best levels
Current levels have experienced increasing resistance in improving much from here
There are technical reasons for that as well as fundamental reasons
Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.
While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
Rates are as low as they've ever been. How long will this continue? There's no way to know for sure, but we generally advocate a conservative approach with rates at all time lows. "Conservative" in this sense simply means that history has shown us how quickly record-low rates can disappear. While we certainly wouldn't rule out the possibility that rates can improve, we've already been experiencing the fact that further gains are hard-fought and take more time than gains seen in the middle of the range.
If you happened to read that, taken in conjunction with several days of weakness, you may be wondering if these are the days that mark the turning point away from all time low rates. The great thing about such a concern is this: rates are still at all time lows! If you're worried that current weakness could mark the turning point, the sacrifice of slightly higher closing costs vs yesterday seems minimal compared to the loss of the opportunity altogether.
If losing the opportunity doesn't bother you much, just be sure to clearly define an acceptable level of loss from current rates. Set yourself a "stop," of sorts, by deciding on a rate slightly higher than what you're currently being quoted, at which you'd lock at a loss if the market moves against you. Locking in such a scenario can prove exceedingly frustrating more often than not as the higher probability eventuality has been for rates to return lower, but this pales in comparison to the potential frustration of rates NOT returning lower.
Today's BEST-EXECUTION Rates
30YR FIXED - 3.875%, 3.75% as close as it's been
FHA/VA -3.75%
15 YEAR FIXED - 3.375% / 3.25%
5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
Rates and costs continue to operate near all time best levels
Current levels have experienced increasing resistance in improving much from here
There are technical reasons for that as well as fundamental reasons
Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.
While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
Thursday, January 19, 2012
Mortgage Rates Steady While Borrowing Costs Rise Slightly
Mortgage Rates continue to ebb and flow in the same pattern that has persisted for over a month. The average Best-Execution interest rate for a 30yr fixed loan has remained at 3.875% during that time and the closing costs associated withtthat rate have been gently rising and falling, with increasing regularity. We've rarely strung together 3 days in a row with movements in the same direction (i.e. borrowing costs rise very slightly 3 days in a row, while Best-Ex stays at 3.875%), and the actual difference in those costs day over day continues to be fairly minimal.
Those borrowing costs rose very slightly today, a reasonable conclusion to the previous two sessions offering all time low rate/fee combinations. This means that whereas 3.75% was "as close as it's ever been to sharing equal recognition with 3.875% as a viable choice for Best-Execution," that's no longer the case today, but it should be noted that the buydown schedule (amount of additional closing costs required to move down in rate) at some lenders allows for scenarios with even lower rates to make sense depending on your preferences and qualifications.
Whatever your disposition toward locking vs floating, it makes sense to set yourself a "stop," of sorts, by deciding on a rate slightly higher than what you're currently being quoted, at which you'd lock at a loss if the market moves against you. Locking in such a scenario can prove exceedingly frustrating more often than not as the higher probability eventuality has been for rates to return lower, but this pales in comparison to the potential frustration of rates NOT returning lower.
Today's BEST-EXECUTION Rates
30YR FIXED - 3.875%, 3.75% as close as it's been
FHA/VA -3.75%
15 YEAR FIXED - 3.375% / 3.25%
5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
Rates and costs continue to operate near all time best levels
Current levels have experienced increasing resistance in improving much from here
There are technical reasons for that as well as fundamental reasons
Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.
While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
Mortgage Rates continue to ebb and flow in the same pattern that has persisted for over a month. The average Best-Execution interest rate for a 30yr fixed loan has remained at 3.875% during that time and the closing costs associated withtthat rate have been gently rising and falling, with increasing regularity. We've rarely strung together 3 days in a row with movements in the same direction (i.e. borrowing costs rise very slightly 3 days in a row, while Best-Ex stays at 3.875%), and the actual difference in those costs day over day continues to be fairly minimal.
Those borrowing costs rose very slightly today, a reasonable conclusion to the previous two sessions offering all time low rate/fee combinations. This means that whereas 3.75% was "as close as it's ever been to sharing equal recognition with 3.875% as a viable choice for Best-Execution," that's no longer the case today, but it should be noted that the buydown schedule (amount of additional closing costs required to move down in rate) at some lenders allows for scenarios with even lower rates to make sense depending on your preferences and qualifications.
Whatever your disposition toward locking vs floating, it makes sense to set yourself a "stop," of sorts, by deciding on a rate slightly higher than what you're currently being quoted, at which you'd lock at a loss if the market moves against you. Locking in such a scenario can prove exceedingly frustrating more often than not as the higher probability eventuality has been for rates to return lower, but this pales in comparison to the potential frustration of rates NOT returning lower.
Today's BEST-EXECUTION Rates
30YR FIXED - 3.875%, 3.75% as close as it's been
FHA/VA -3.75%
15 YEAR FIXED - 3.375% / 3.25%
5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
Rates and costs continue to operate near all time best levels
Current levels have experienced increasing resistance in improving much from here
There are technical reasons for that as well as fundamental reasons
Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.
While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
Wednesday, January 18, 2012
Tuesday, January 17, 2012
Friday, January 13, 2012
Mortgage Rates
Treasuries started better this morning, then got a little additional boost at 8:30 on the release of Dec import and export prices. Import prices declined 0.1% and export prices -0.5%; the declines will have a slight negative impact on Q4 GDP. Yr/yr import prices +8.5%, yr/yr export prices +3.6%. Also at 8:30 Nov US international trade deficit was expected -$44.3B, as reported -$47.8B.Stok indexes were trading lower prior to 8:30 then fell a little more on the data.
The U.S. import bill was driven by demand for higher-priced crude oil at the same time American companies tempered orders for consumer goods on concern household spending will cool early this year. Exports from the U.S. declined to a four-month low, depressed by a drop in shipments to Europe. The U.S. trade deficit widened more than forecast in November as American exports declined and companies stepped up imports of crude oil and automobiles. The gap expanded 10.4 percent to $47.8 billion, the widest since June, from a $43.3 billion shortfall in October, Commerce Department figures showed today in Washington. The deficit was larger than any of the estimates.
At 9:00 30 yr MBSs were +6/32 (.18 bp), stock indexes pointing to a weaker open. At 9:30 the DJIA opened -100, the 10 yr note +17/32 at 1.86% and mortgage prices +7/32 (.22 bp) on 30s and +4/32 (.12 bp) on 15s.
About 9:00 this morning some of the wires were reporting S&P is about to lower the credit rating for countries in Europe. While not unexpected, if the reports are true the downgrades are coming sooner than what many were expecting. The news added additional pressure to stock indexes already weaker.
At 9:55 the U. of Michigan consumer sentiment index was expected at 71.5 frm 69.9 at the end of Dec; the index jumped to 74.0; current conditions increased to 82.6 frm 79.6, expectations increased to 68.4 frm 63.6, and the 12 month out index increased to 79.0 frm 70.0. It is the mid-month survey and although stronger than expected there has been no reaction to the report.
Trade today will likely be more defensive with markets closed on Monday for MLK. Generally a three day weekend with other global economies open increases safety, likely the bond and mortgage markets will hold strong with investors and traders increasing long positions. US equity markets will be under pressure, also due to the long weekend.
The improvement in the 10 yr note this morning, breaking below 1.90% increases the bullish technical bias somewhat. Until this morning the bond market, while bullish was losing momentum, that it pushed below 1.90% projects a possible test of the recent low at 1.80% achieved on Dec 19th. There is always a caveat however, the strength today may be somewhat exaggerated due to the long weekend. In the mortgage world, be careful with your lenders as they begin to add in the increases in rates that Congress dictated to the agencies to finance the 2.0% social security cut extension. Many lenders have put on time tables, others it’s a crap shoot as to what day the hammer will fall. Even with treasuries doing well, mortgage interest rates will increase with the increased G fees mandated.
Treasuries started better this morning, then got a little additional boost at 8:30 on the release of Dec import and export prices. Import prices declined 0.1% and export prices -0.5%; the declines will have a slight negative impact on Q4 GDP. Yr/yr import prices +8.5%, yr/yr export prices +3.6%. Also at 8:30 Nov US international trade deficit was expected -$44.3B, as reported -$47.8B.Stok indexes were trading lower prior to 8:30 then fell a little more on the data.
The U.S. import bill was driven by demand for higher-priced crude oil at the same time American companies tempered orders for consumer goods on concern household spending will cool early this year. Exports from the U.S. declined to a four-month low, depressed by a drop in shipments to Europe. The U.S. trade deficit widened more than forecast in November as American exports declined and companies stepped up imports of crude oil and automobiles. The gap expanded 10.4 percent to $47.8 billion, the widest since June, from a $43.3 billion shortfall in October, Commerce Department figures showed today in Washington. The deficit was larger than any of the estimates.
At 9:00 30 yr MBSs were +6/32 (.18 bp), stock indexes pointing to a weaker open. At 9:30 the DJIA opened -100, the 10 yr note +17/32 at 1.86% and mortgage prices +7/32 (.22 bp) on 30s and +4/32 (.12 bp) on 15s.
About 9:00 this morning some of the wires were reporting S&P is about to lower the credit rating for countries in Europe. While not unexpected, if the reports are true the downgrades are coming sooner than what many were expecting. The news added additional pressure to stock indexes already weaker.
At 9:55 the U. of Michigan consumer sentiment index was expected at 71.5 frm 69.9 at the end of Dec; the index jumped to 74.0; current conditions increased to 82.6 frm 79.6, expectations increased to 68.4 frm 63.6, and the 12 month out index increased to 79.0 frm 70.0. It is the mid-month survey and although stronger than expected there has been no reaction to the report.
Trade today will likely be more defensive with markets closed on Monday for MLK. Generally a three day weekend with other global economies open increases safety, likely the bond and mortgage markets will hold strong with investors and traders increasing long positions. US equity markets will be under pressure, also due to the long weekend.
The improvement in the 10 yr note this morning, breaking below 1.90% increases the bullish technical bias somewhat. Until this morning the bond market, while bullish was losing momentum, that it pushed below 1.90% projects a possible test of the recent low at 1.80% achieved on Dec 19th. There is always a caveat however, the strength today may be somewhat exaggerated due to the long weekend. In the mortgage world, be careful with your lenders as they begin to add in the increases in rates that Congress dictated to the agencies to finance the 2.0% social security cut extension. Many lenders have put on time tables, others it’s a crap shoot as to what day the hammer will fall. Even with treasuries doing well, mortgage interest rates will increase with the increased G fees mandated.
Thursday, January 12, 2012
Mortgage Rates
Rate markets started early this morning a little weaker; at 8:30 two data points brought the treasury and mortgage markets back to unchanged. Weekly jobless claims were expected up 3K to 375K, as reported claims jumped 24K to 399K; continuing claims up 19K, the 4 wk average at 381,750 frm 374K last week. Dec retail sales were expected up 0.3%, as reported +0.1%, ex autos and trucks expected up 0.4%, as reported down 0.2%. Retail sales the weakest since last May. Two reports that should dampen the outlook for increased growth of the economy; they didn’t have the impact we would have thought. Prior to the 8:30 reports the DJIA futures were trading +70, at 9:15 +22; the 10 yr note prior to 8:30 down 7/32, at 9:15 +1/32. Mortgage prices unchanged at 9:15.
At 9:30 the DJIA opened +15, the 10 yr note slipped to -1/32 at 1.91% unch and MBS prices unchanged. The US markets are ignoring the weak retail sales and increase in unemployment claims in favor of the constant and inconsistent news out of Europe. Yesterday there were reports that Germany’s economic outlook was worsening with manufacturing slowing, talk that Europe would fall back into recession. This morning European Central Bank President Mario Draghi said there are some signs the euro-area economy is stabilizing even as the sovereign debt crisis poses risks to the outlook. “According to some recent survey indicators, there are tentative signs of stabilization of economic activity at low levels,” Draghi said at a press conference in Frankfurt today after the ECB kept its benchmark interest rate at 1 percent following two straight reductions. “The economic outlook remains subject to high uncertainty and substantial downside risks,” he added.
Spain and Italy successfully sold notes this morning. Spain auctioned 9.98 billion euros ($12.7 billion) of bonds maturing in 2015 and 2016, including a new three-year benchmark security, twice the maximum target of 5 billion euros set for the sale. The yield on the three-year notes was 3.384 percent, compared with 5.187 percent when the nation sold similar notes in December. Italy sold 12 billion euros of Treasury bills, meeting its target, and its borrowing costs plunged. The Rome-based Treasury sold 8.5 billion euros one-year bills at a rate of 2.735 percent, down from 5.952 percent at the last auction. The auctions were stronger than expected providing a razor thin idea that Europe’s debt issues may be waning; an idea completely wrong, Europe is headed for default and in our view another recession, the second in the last three years. That said, there isn’t any strong conviction regardless of ones outlook for Europe.
At 10:00, Nov business inventories, expected up 0.4%, were up 0.3%; sales up 0.3%; the inventory to sales ratio unchanged from Oct at 1.27 months. No reaction to the report.
Next up today; at 1:00 Treasury will auction $13B of 30 yr bonds, re-opening the 30 yr issued in Nov. The 10 yesterday and the 3 yr auction Tuesday saw good demand, likely the 30 yr will also.
At 2:00 Treasury will report the Dec deficit expected -$79.0B.
Will interest rates continue to fall? Hard to handicap the outlook given the mess in Europe; so far the technical are holding but losing a lot of momentum with investors and to some extent with traders. On recent rallies the 10yr has not declined to its previous lows, on selling it hasn’t increased more than previous selling bouts. A coiling spring with the trading range narrowing each day suggests a breakout is coming, the direction yet to be determined. The outlook for the US economy is being ratcheted up, there hasn’t been any new shocks out of Europe’s banking and credit crisis, keeping the bond and mortgage markets in narrow ranges. Safety trades into treasuries is waning, however traders and investors are reluctant to sell US treasuries.
Rate markets started early this morning a little weaker; at 8:30 two data points brought the treasury and mortgage markets back to unchanged. Weekly jobless claims were expected up 3K to 375K, as reported claims jumped 24K to 399K; continuing claims up 19K, the 4 wk average at 381,750 frm 374K last week. Dec retail sales were expected up 0.3%, as reported +0.1%, ex autos and trucks expected up 0.4%, as reported down 0.2%. Retail sales the weakest since last May. Two reports that should dampen the outlook for increased growth of the economy; they didn’t have the impact we would have thought. Prior to the 8:30 reports the DJIA futures were trading +70, at 9:15 +22; the 10 yr note prior to 8:30 down 7/32, at 9:15 +1/32. Mortgage prices unchanged at 9:15.
At 9:30 the DJIA opened +15, the 10 yr note slipped to -1/32 at 1.91% unch and MBS prices unchanged. The US markets are ignoring the weak retail sales and increase in unemployment claims in favor of the constant and inconsistent news out of Europe. Yesterday there were reports that Germany’s economic outlook was worsening with manufacturing slowing, talk that Europe would fall back into recession. This morning European Central Bank President Mario Draghi said there are some signs the euro-area economy is stabilizing even as the sovereign debt crisis poses risks to the outlook. “According to some recent survey indicators, there are tentative signs of stabilization of economic activity at low levels,” Draghi said at a press conference in Frankfurt today after the ECB kept its benchmark interest rate at 1 percent following two straight reductions. “The economic outlook remains subject to high uncertainty and substantial downside risks,” he added.
Spain and Italy successfully sold notes this morning. Spain auctioned 9.98 billion euros ($12.7 billion) of bonds maturing in 2015 and 2016, including a new three-year benchmark security, twice the maximum target of 5 billion euros set for the sale. The yield on the three-year notes was 3.384 percent, compared with 5.187 percent when the nation sold similar notes in December. Italy sold 12 billion euros of Treasury bills, meeting its target, and its borrowing costs plunged. The Rome-based Treasury sold 8.5 billion euros one-year bills at a rate of 2.735 percent, down from 5.952 percent at the last auction. The auctions were stronger than expected providing a razor thin idea that Europe’s debt issues may be waning; an idea completely wrong, Europe is headed for default and in our view another recession, the second in the last three years. That said, there isn’t any strong conviction regardless of ones outlook for Europe.
At 10:00, Nov business inventories, expected up 0.4%, were up 0.3%; sales up 0.3%; the inventory to sales ratio unchanged from Oct at 1.27 months. No reaction to the report.
Next up today; at 1:00 Treasury will auction $13B of 30 yr bonds, re-opening the 30 yr issued in Nov. The 10 yesterday and the 3 yr auction Tuesday saw good demand, likely the 30 yr will also.
At 2:00 Treasury will report the Dec deficit expected -$79.0B.
Will interest rates continue to fall? Hard to handicap the outlook given the mess in Europe; so far the technical are holding but losing a lot of momentum with investors and to some extent with traders. On recent rallies the 10yr has not declined to its previous lows, on selling it hasn’t increased more than previous selling bouts. A coiling spring with the trading range narrowing each day suggests a breakout is coming, the direction yet to be determined. The outlook for the US economy is being ratcheted up, there hasn’t been any new shocks out of Europe’s banking and credit crisis, keeping the bond and mortgage markets in narrow ranges. Safety trades into treasuries is waning, however traders and investors are reluctant to sell US treasuries.
Wednesday, January 11, 2012
Mortgage Rates
A little better at the start today; at 8:30 the 10 yr note +7/32 at 1.94% -2 bp frm yesterday’s close. The 10 yr once again tested and held the key 2.00% level yesterday; yesterday based on closes there was no movement in the bond market and MBSs were also relatively unchanged. Equity markets in Europe are weaker this morning, in the US the indexes prior to the open were slightly weaker. US interest rates have been generally unchanged for over a week now; Europe’s debt problems keeping a minor bid in US treasuries while improved economic outlooks are weighing on the markets. A balance between the two forces has stabilized rates for the moment.
There is no economic data this morning; later this afternoon (2:00) the Fed will release its Beige Book; at 1:00 Treasury will auction $21B of 10 yr notes, yesterday’s 3 yr auction went well with decent demand. Chicago Fed President Charles Evans on CNBC this morning saying the economic outlook is brightening but is still soft enough to need central bank support; he said the data recently isn’t strong enough or uniform enough to assert momentum is increasing. Evens is a hawk and one of the most vocal Fed officials calling for aggressive stimulus actions. Evans isn’t concerned about inflation and wants the Fed to tolerate increased inflation, possibly as high as 3.0%. Inflation fears are way over done in terms of concern, there is no pricing power and it won’t be surfacing for quite a while.
News out of Europe this morning; Germany’s economy may be faltering. German Stocks slipped after a report showed that the debt crisis caused the economy to contract 0.25 percent in the fourth quarter from the third. Growth slowed to 3 percent in 2011, the Federal Statistics Office in Wiesbaden said in an unofficial estimate. Economists including Christian Schulz at Berenberg Bank expect gross domestic product to contract again in the current quarter. A recession is defined as two consecutive quarters of declining GDP. After yesterday’s biggest rally in a week, as the report showed that Europe’s largest economy contracted in the final quarter of 2011, indicating it may be headed for a recession. Confusion and uncertainty continue to dominate; one day a strong rally, the next talk of recession in Germany’s future----it is no wonder that markets are essentially frozen with interday volatility with not much change when viewed over a longer period.
At 9:30 the DJIA opened down 50, the 10 yr note +7/32 at 1.94 -2 bp and MBS prices +1/32 (.03 bp).
Mortgage applications increased 4.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 6, 2012. The results include an adjustment to account for the New Year’s Day holiday. The Market Composite Index, a measure of mortgage loan application volume, increased 4.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 34.4 percent compared with the previous week. The Refinance Index increased 3.3 percent from the previous week. The seasonally adjusted Purchase Index increased 8.1 percent from one week earlier. The unadjusted Purchase Index increased 41.9 percent compared with the previous week and was 17.9 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 80.8 percent of total applications from last week’s survey high of 81.9 percent. The adjustable-rate mortgage (ARM) share of activity increased to 5.4 percent from 4.7 percent of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.11 percent from 4.07 percent, with points decreasing to 0.41 from 0.53 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.34 percent from 4.41 percent, with points increasing to 0.47 from 0.44 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also decreased from last week. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.96 percent, with points increasing to 0.72 from 0.71 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also remained unchanged from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.40 percent from 3.37 percent, with points decreasing to 0.37 from 0.50 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last week. The average contract interest rate for 5/1 ARMs decreased to 2.90 percent from 2.91 percent, with points increasing to 0.49 from 0.48 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also decreased from last week. (Mortgage Bankers Assoc)
The euro weakened for the first time in three days against the dollar and the yen as Fitch Ratings added to concern the region’s debt crisis will spread. The euro slid versus 14 of its 16 most-traded counterparts after Fitch’s head of sovereign ratings, David Riley, said the European Central Bank should boost bond purchases to avert a collapse of the shared currency. The bank meets tomorrow. German data showed the region’s largest economy may be on the brink of recession. The rating agencies these days don’t just rate debt, they now are saying what banks and central banks should od; everyone in the pool. Rating agencies screwed up the sub-prime mess and were instrumental in sending the global economy into a long term slowdown.
A little better at the start today; at 8:30 the 10 yr note +7/32 at 1.94% -2 bp frm yesterday’s close. The 10 yr once again tested and held the key 2.00% level yesterday; yesterday based on closes there was no movement in the bond market and MBSs were also relatively unchanged. Equity markets in Europe are weaker this morning, in the US the indexes prior to the open were slightly weaker. US interest rates have been generally unchanged for over a week now; Europe’s debt problems keeping a minor bid in US treasuries while improved economic outlooks are weighing on the markets. A balance between the two forces has stabilized rates for the moment.
There is no economic data this morning; later this afternoon (2:00) the Fed will release its Beige Book; at 1:00 Treasury will auction $21B of 10 yr notes, yesterday’s 3 yr auction went well with decent demand. Chicago Fed President Charles Evans on CNBC this morning saying the economic outlook is brightening but is still soft enough to need central bank support; he said the data recently isn’t strong enough or uniform enough to assert momentum is increasing. Evens is a hawk and one of the most vocal Fed officials calling for aggressive stimulus actions. Evans isn’t concerned about inflation and wants the Fed to tolerate increased inflation, possibly as high as 3.0%. Inflation fears are way over done in terms of concern, there is no pricing power and it won’t be surfacing for quite a while.
News out of Europe this morning; Germany’s economy may be faltering. German Stocks slipped after a report showed that the debt crisis caused the economy to contract 0.25 percent in the fourth quarter from the third. Growth slowed to 3 percent in 2011, the Federal Statistics Office in Wiesbaden said in an unofficial estimate. Economists including Christian Schulz at Berenberg Bank expect gross domestic product to contract again in the current quarter. A recession is defined as two consecutive quarters of declining GDP. After yesterday’s biggest rally in a week, as the report showed that Europe’s largest economy contracted in the final quarter of 2011, indicating it may be headed for a recession. Confusion and uncertainty continue to dominate; one day a strong rally, the next talk of recession in Germany’s future----it is no wonder that markets are essentially frozen with interday volatility with not much change when viewed over a longer period.
At 9:30 the DJIA opened down 50, the 10 yr note +7/32 at 1.94 -2 bp and MBS prices +1/32 (.03 bp).
Mortgage applications increased 4.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 6, 2012. The results include an adjustment to account for the New Year’s Day holiday. The Market Composite Index, a measure of mortgage loan application volume, increased 4.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 34.4 percent compared with the previous week. The Refinance Index increased 3.3 percent from the previous week. The seasonally adjusted Purchase Index increased 8.1 percent from one week earlier. The unadjusted Purchase Index increased 41.9 percent compared with the previous week and was 17.9 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 80.8 percent of total applications from last week’s survey high of 81.9 percent. The adjustable-rate mortgage (ARM) share of activity increased to 5.4 percent from 4.7 percent of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.11 percent from 4.07 percent, with points decreasing to 0.41 from 0.53 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.34 percent from 4.41 percent, with points increasing to 0.47 from 0.44 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also decreased from last week. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.96 percent, with points increasing to 0.72 from 0.71 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also remained unchanged from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.40 percent from 3.37 percent, with points decreasing to 0.37 from 0.50 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last week. The average contract interest rate for 5/1 ARMs decreased to 2.90 percent from 2.91 percent, with points increasing to 0.49 from 0.48 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also decreased from last week. (Mortgage Bankers Assoc)
The euro weakened for the first time in three days against the dollar and the yen as Fitch Ratings added to concern the region’s debt crisis will spread. The euro slid versus 14 of its 16 most-traded counterparts after Fitch’s head of sovereign ratings, David Riley, said the European Central Bank should boost bond purchases to avert a collapse of the shared currency. The bank meets tomorrow. German data showed the region’s largest economy may be on the brink of recession. The rating agencies these days don’t just rate debt, they now are saying what banks and central banks should od; everyone in the pool. Rating agencies screwed up the sub-prime mess and were instrumental in sending the global economy into a long term slowdown.
Tuesday, January 10, 2012
Mortgage Rates
US treasury rates increased this morning taking the 10 yr note to its key technical and psychological level 2.00% at 8:00 this morning. Stock indexes were higher indicating a strong open after equity markets in Europe improved. The MBS market a little weaker but continues to hold steady against treasuries. Treasury begins this week’s auctions today at 1:00 with $32B of 3 yr notes, tomorrow $21b of 10s and Thursday $13B of 30s. Two weeks ago Treasury sold $99B of 2s, 5s and 7s; none of the auctions met with the strong bidding that had been the case for the past few months.
Europe still has major influence in US markets, however for the present the worries over defaults and safe haven moves into US treasuries has waned somewhat. The 10 yr German bund underperformed all their euro-area peers as European stocks rose, curbing demand for the safest fixed-income assets. Angela Merkel said yesterday that euro-area nations are considering accelerating capital contributions to the region’s bailout fund. French bonds rose after Fitch Ratings said the nation will probably retain its credit grade unless the European debt crisis worsens. Merkel will meet IMFs Lagarde today after discussions with French President Nicolas Sarkozy yesterday. The leaders said they plan to drive forward their agenda for stricter budget rules as they seek to craft a master plan for rescuing the euro.
French business confidence climbed from a two-year low last month and industrial output increased in November, indicating the threat of a recession in the euro-region’s second-biggest economy is easing. The numbers suggest that France may be able to skirt a deep recession as European leaders impose austerity measures to contain the region’s sovereign-debt crisis. The confidence reading suggests French gross domestic product will stall and not shrink in the fourth quarter, the Bank of France said today.
At 9:30 the DJIA opened +110, the 10 yr note sat at 2.00% and mortgage prices were down 3/32 (.09 bp).
The only data today; Nov wholesale inventories expected +0.5%, as reported up 0.1%, sales up 0.6% with a 1.15 month inventory to sale ratio. No reaction to the data.
This morning the 10 at 2.00%, in previous moves to 2.00% the 10 has managed to hold and not push above it. Although many analysts and Wall Street firms are improving their forecasts for the US economy this year, and some are actually recommending moving out of fixed income treasuries, the bond and mortgage markets have so far been able to resist moving higher in rates. As noted yesterday, the technical momentum oscillators are weakening; the 20 day average today at 1.99% and so far holding. The bond market is losing momentum, if the 10 breaks and holds above 2.00% it will likely test 2.04%; as long as that level holds the outlook will continue to project lower rates. A move over 2.04% will signal the end to the move projecting the 10 yr back to 2.25%. Europe plays a significant role as does the US equity market.
US treasury rates increased this morning taking the 10 yr note to its key technical and psychological level 2.00% at 8:00 this morning. Stock indexes were higher indicating a strong open after equity markets in Europe improved. The MBS market a little weaker but continues to hold steady against treasuries. Treasury begins this week’s auctions today at 1:00 with $32B of 3 yr notes, tomorrow $21b of 10s and Thursday $13B of 30s. Two weeks ago Treasury sold $99B of 2s, 5s and 7s; none of the auctions met with the strong bidding that had been the case for the past few months.
Europe still has major influence in US markets, however for the present the worries over defaults and safe haven moves into US treasuries has waned somewhat. The 10 yr German bund underperformed all their euro-area peers as European stocks rose, curbing demand for the safest fixed-income assets. Angela Merkel said yesterday that euro-area nations are considering accelerating capital contributions to the region’s bailout fund. French bonds rose after Fitch Ratings said the nation will probably retain its credit grade unless the European debt crisis worsens. Merkel will meet IMFs Lagarde today after discussions with French President Nicolas Sarkozy yesterday. The leaders said they plan to drive forward their agenda for stricter budget rules as they seek to craft a master plan for rescuing the euro.
French business confidence climbed from a two-year low last month and industrial output increased in November, indicating the threat of a recession in the euro-region’s second-biggest economy is easing. The numbers suggest that France may be able to skirt a deep recession as European leaders impose austerity measures to contain the region’s sovereign-debt crisis. The confidence reading suggests French gross domestic product will stall and not shrink in the fourth quarter, the Bank of France said today.
At 9:30 the DJIA opened +110, the 10 yr note sat at 2.00% and mortgage prices were down 3/32 (.09 bp).
The only data today; Nov wholesale inventories expected +0.5%, as reported up 0.1%, sales up 0.6% with a 1.15 month inventory to sale ratio. No reaction to the data.
This morning the 10 at 2.00%, in previous moves to 2.00% the 10 has managed to hold and not push above it. Although many analysts and Wall Street firms are improving their forecasts for the US economy this year, and some are actually recommending moving out of fixed income treasuries, the bond and mortgage markets have so far been able to resist moving higher in rates. As noted yesterday, the technical momentum oscillators are weakening; the 20 day average today at 1.99% and so far holding. The bond market is losing momentum, if the 10 breaks and holds above 2.00% it will likely test 2.04%; as long as that level holds the outlook will continue to project lower rates. A move over 2.04% will signal the end to the move projecting the 10 yr back to 2.25%. Europe plays a significant role as does the US equity market.
Monday, January 9, 2012
Mortgage Rates
Quiet this morning but a little soft on prices; the stock market indexes a little better. Germany’s Merkel and France’s Sarkozy meeting today; nothing but talk however. The talks are centered on how to save the euro currency from declining further. This morning the euro slightly better this morning. Greece’s struggle to contain its debt is a “special case “and no country must leave the euro, German Chancellor Angela Merkel told reporters after meeting with French President Sarkozy in Berlin. Additional meetings are planned before the next summit scheduled on Jan 30th in Brussels. The two leaders have sponsored a plan to draw up new fiscal guidelines by March to resolve a crisis that began in Greece more than two years ago. As the contagion moves to the euro-area’s core, policy makers are struggling to persuade investors they can contain the risk and assure the single currency’s survival.
There are no economic releases scheduled today; trade will be driven by how the US stock market acts. In Europe the various stock markets not moving much. This week is light on data, most coming later in the week. Treasury will auction $66B in notes and bonds beginning tomorrow. The Obama Administration is preparing a plan to try and unload foreclosed properties held by Fannie, Freddie and FHA; the plan calls for packaging bundles of REOs with the goal of selling blocks of homes to private investors as income properties (rentals). It is a plan that has been kicked around for a while but until now, only talk. Every key agency frm the Fed to FHFA appears to be involved with the plan. Rental income is up, prices for homes still falling; if the prices are right maybe some of the REOs can be sold---depends mostly on how much the agencies are willing to give up when prices are set. There is little reason to expect the plan will be successful, but is worth a try; what lender will step up to finance a huge pool of foreclosed houses without a huge infusion of up-front cash?
Today begins Q4 earnings reports with Alcoa leading the way as usual. Traders are expecting somewhat more positive guidance from key companies. Equity markets this week will be driven by the data as well as Europe’s travails.
This Week’s Economic calendar:
Monday;
3:00 pm Nov consumer credit (+$7.0B)
Tuesday;
10:00 am Nov wholesale inventories (+0.5%)
1:00 pm $32B 3 yr note auction
Wednesday,
7:00 am Weekly MBA mortgage applications
1:00 pm $21B 10 yr note auction
2:00 pm Fed beige Book
Thursday;
8:30 am weekly jobless claims (+3K to 375K)
Dec retail sales (+0.4%; ex auto sales +0.4%)
1:00 pm $13B 30 yr bond auction
2:00 pm Dec Treasury budget (-$79.0B)
Friday;
8:30 am Nov trade balance (-$44.3B)
Dec export and import prices (N/A)
9:55 am U. of Michigan consumer sentiment index (71.0 frm 69.9)
At 9:30 the DJIA opened +11; the 10 yr note -2/32 at 1.96% and mortgage prices at 9:30 +1/32 (.03 bp).
The charts continue to hold a positive bias; however there has been no real changes in interest rates for weeks, prices are tied to a tight range awaiting more substantial news from Europe. The US economic outlook has improved based on various economic releases over the last couple of months. US markets wrestling with whether the US can grow much with Europe headed for a deeper recession. Trade today will be no different than we have seen over the last couple of months, if stock indexes decline rate markets should hold and improve, a rally in equities will pressure rate markets. Either way, we are not expecting much change by the end of the day.
Quiet this morning but a little soft on prices; the stock market indexes a little better. Germany’s Merkel and France’s Sarkozy meeting today; nothing but talk however. The talks are centered on how to save the euro currency from declining further. This morning the euro slightly better this morning. Greece’s struggle to contain its debt is a “special case “and no country must leave the euro, German Chancellor Angela Merkel told reporters after meeting with French President Sarkozy in Berlin. Additional meetings are planned before the next summit scheduled on Jan 30th in Brussels. The two leaders have sponsored a plan to draw up new fiscal guidelines by March to resolve a crisis that began in Greece more than two years ago. As the contagion moves to the euro-area’s core, policy makers are struggling to persuade investors they can contain the risk and assure the single currency’s survival.
There are no economic releases scheduled today; trade will be driven by how the US stock market acts. In Europe the various stock markets not moving much. This week is light on data, most coming later in the week. Treasury will auction $66B in notes and bonds beginning tomorrow. The Obama Administration is preparing a plan to try and unload foreclosed properties held by Fannie, Freddie and FHA; the plan calls for packaging bundles of REOs with the goal of selling blocks of homes to private investors as income properties (rentals). It is a plan that has been kicked around for a while but until now, only talk. Every key agency frm the Fed to FHFA appears to be involved with the plan. Rental income is up, prices for homes still falling; if the prices are right maybe some of the REOs can be sold---depends mostly on how much the agencies are willing to give up when prices are set. There is little reason to expect the plan will be successful, but is worth a try; what lender will step up to finance a huge pool of foreclosed houses without a huge infusion of up-front cash?
Today begins Q4 earnings reports with Alcoa leading the way as usual. Traders are expecting somewhat more positive guidance from key companies. Equity markets this week will be driven by the data as well as Europe’s travails.
This Week’s Economic calendar:
Monday;
3:00 pm Nov consumer credit (+$7.0B)
Tuesday;
10:00 am Nov wholesale inventories (+0.5%)
1:00 pm $32B 3 yr note auction
Wednesday,
7:00 am Weekly MBA mortgage applications
1:00 pm $21B 10 yr note auction
2:00 pm Fed beige Book
Thursday;
8:30 am weekly jobless claims (+3K to 375K)
Dec retail sales (+0.4%; ex auto sales +0.4%)
1:00 pm $13B 30 yr bond auction
2:00 pm Dec Treasury budget (-$79.0B)
Friday;
8:30 am Nov trade balance (-$44.3B)
Dec export and import prices (N/A)
9:55 am U. of Michigan consumer sentiment index (71.0 frm 69.9)
At 9:30 the DJIA opened +11; the 10 yr note -2/32 at 1.96% and mortgage prices at 9:30 +1/32 (.03 bp).
The charts continue to hold a positive bias; however there has been no real changes in interest rates for weeks, prices are tied to a tight range awaiting more substantial news from Europe. The US economic outlook has improved based on various economic releases over the last couple of months. US markets wrestling with whether the US can grow much with Europe headed for a deeper recession. Trade today will be no different than we have seen over the last couple of months, if stock indexes decline rate markets should hold and improve, a rally in equities will pressure rate markets. Either way, we are not expecting much change by the end of the day.
Friday, January 6, 2012
Mortgage Rates
The Dec employment report at 8:30 this morning was stronger than consensus estimates. Dec unemployment expected at 8.7% fell to 8.5%, the lowest level since Feb 2009 when it was 8.3%. Non-farm jobs expected +155K, jumped to 200K; non-farm private jobs thought to be 160K increased 212K. Yesterday ADP reported 325K private jobs. Dec average hourly earnings, as usual, up 0.2%. The initial reaction sent the 10 yr note to 2.03% and mortgage prices fell 8/32 (.25 bp); stock indexes rallied and stocks in Europe were boosted. At 9:00 the DJIA futures were +37, the 10 yr back to 1.98% -1 bp and mortgage prices +1/32 (.03 bp). Employers added 1.64 million workers in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009. Annual benchmark revisions to the household survey showed the unemployment rate averaged 8.9 percent in 2011, down from 9.6 percent and 9.3 percent in the previous two years. It still marked the worst three-year period since 1939 to 1941.
The reaction to the stronger employment report sent the 10 yr to 2.03%, above its 20 and 40 day averages; it lasted about five minutes before it moved back to unchanged then turned positive. Mortgages also held nicely on the data. Stock indexes didn’t show much enthusiasm either, after a knee jerk improvement the key indexes fell back to pre-employment levels. The same scenario in Europe’s markets; a bounce on the data, then retreating to earlier levels.
At 9:30 the stock market opened generally unchanged, losing all the initial gains on the employment report. The 10 yr note held a 4/32 price improvement at 1.98% -1 bp frm yesterday’s close; MBS prices +1/32 (.03 bp). While the employment data was better than expected, there was weaker data out of Germany. Europe’s confidence in the economic outlook fell to the lowest in more than two years and German factory orders plunged as the euro area’s leaders struggled to contain a worsening fiscal crisis and global demand weakened.
The take away this morning on the reaction to the better than expected employment in the stock and bond market is that Europe remains the critical focus for traders. With no inflation fears as the US job market improves, and the Fed on record to keep rates low for the next year or so; Europe’s debt problems and the economic outlook worsening is still the dominant force in the financial markets.
The Fed’s New York President William Dudley also added to the strength in the bond market this morning; saying more monetary accommodation is appropriate even after a report showed the economy added more jobs than forecast last month. “Implementing such policies would improve the economic outlook and make monetary accommodation more effective,” Dudley said today in a speech to bankers in Iselin, New Jersey. At the same time, it’s “appropriate” for the Fed to consider steps to ease monetary policy, he said.
Technically; the 10 yr once again held near term bullish levels. Given the markets ignored the better jobs data, the decline in the stock market today; the rest of the day should hold well and possibly improve more if equity markets continue to fall as they have been doing since the open at 9:30. That said, we don’t expect any significant improvement in interest rates; next week Treasury will be back auctioning $66B in 3 yr, 10 yr, and 30 yr notes and bond.
The Dec employment report at 8:30 this morning was stronger than consensus estimates. Dec unemployment expected at 8.7% fell to 8.5%, the lowest level since Feb 2009 when it was 8.3%. Non-farm jobs expected +155K, jumped to 200K; non-farm private jobs thought to be 160K increased 212K. Yesterday ADP reported 325K private jobs. Dec average hourly earnings, as usual, up 0.2%. The initial reaction sent the 10 yr note to 2.03% and mortgage prices fell 8/32 (.25 bp); stock indexes rallied and stocks in Europe were boosted. At 9:00 the DJIA futures were +37, the 10 yr back to 1.98% -1 bp and mortgage prices +1/32 (.03 bp). Employers added 1.64 million workers in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009. Annual benchmark revisions to the household survey showed the unemployment rate averaged 8.9 percent in 2011, down from 9.6 percent and 9.3 percent in the previous two years. It still marked the worst three-year period since 1939 to 1941.
The reaction to the stronger employment report sent the 10 yr to 2.03%, above its 20 and 40 day averages; it lasted about five minutes before it moved back to unchanged then turned positive. Mortgages also held nicely on the data. Stock indexes didn’t show much enthusiasm either, after a knee jerk improvement the key indexes fell back to pre-employment levels. The same scenario in Europe’s markets; a bounce on the data, then retreating to earlier levels.
At 9:30 the stock market opened generally unchanged, losing all the initial gains on the employment report. The 10 yr note held a 4/32 price improvement at 1.98% -1 bp frm yesterday’s close; MBS prices +1/32 (.03 bp). While the employment data was better than expected, there was weaker data out of Germany. Europe’s confidence in the economic outlook fell to the lowest in more than two years and German factory orders plunged as the euro area’s leaders struggled to contain a worsening fiscal crisis and global demand weakened.
The take away this morning on the reaction to the better than expected employment in the stock and bond market is that Europe remains the critical focus for traders. With no inflation fears as the US job market improves, and the Fed on record to keep rates low for the next year or so; Europe’s debt problems and the economic outlook worsening is still the dominant force in the financial markets.
The Fed’s New York President William Dudley also added to the strength in the bond market this morning; saying more monetary accommodation is appropriate even after a report showed the economy added more jobs than forecast last month. “Implementing such policies would improve the economic outlook and make monetary accommodation more effective,” Dudley said today in a speech to bankers in Iselin, New Jersey. At the same time, it’s “appropriate” for the Fed to consider steps to ease monetary policy, he said.
Technically; the 10 yr once again held near term bullish levels. Given the markets ignored the better jobs data, the decline in the stock market today; the rest of the day should hold well and possibly improve more if equity markets continue to fall as they have been doing since the open at 9:30. That said, we don’t expect any significant improvement in interest rates; next week Treasury will be back auctioning $66B in 3 yr, 10 yr, and 30 yr notes and bond.
Thursday, January 5, 2012
Mortgage Rates
Two early reports this morning that should have dealt a blow to the bond and mortgage markets didn’t happen. At 8:15 ADP reported their count on private sector jobs, estimates were for ADP to report an increase of 180K; according the payroll people private jobs increased a huge 325K in Dec. The reaction was somewhat surprising, the 10 yr note price4 fell just 5/32, its yield increased briefly to 2.00% then backed off to unchanged, mortgage prices were unchanged. At 8:30 weekly jobless claims expected -6K, fell 15K to 372K, last week’s claims were revised higher, to 387K frm 381K. Continuing claims fell 22K to 3.595 mil; the smoothing 4 wk. average fell to 373,250 frm 376,500, the lowest since June of 2008.
The ADP report didn’t get the reaction the headline might have suggested, the December number may have reflected the so-called purge effect. Workers, regardless of when they are dismissed or quit, sometimes remain on company records until December, when businesses update, or purge, their figures with ADP. They attempt to estimate the change when adjusting the data for seasonal variations, because there were fewer firings at the end of 2011 than in previous years, ADP may find it more difficult to formulate a projection. Traders took that into account in not reacting too strongly to the strong increase.
Prior to the 8:15 ADP data, the Challenger jobs data somewhat countered the strong ADP data; job cuts announced by employers rose in December from a year earlier, according to Challenger, Gray & Christmas Inc. Planned firings climbed 31% to 41,785 last month from 32,004 in December 2010, which was the lowest monthly total in 10 years. Normally the Challenger data is seen as a footnote but in this case it tempers the ADP data somewhat.
At 9:30 the DJIA opened -45, the 10 yr -1/32 at 1.99% unch and mortgage prices generally unchanged on 30s and +.12 bp on 15s. Stock indexes continued to fall after the open, by 9:45 mortgage prices were +4/32 (.12 bp) on the day. (see below for 10:10 prices that reflect the ISM services sector report that hit at 10:00)
At 10:00 Dec ISM services sector index, expected at 53.0 frm 52.0 in Nov, was at 52.6. The sub components; new orders 53.2 frm 53.0, employment 49.4 from 48.9 and prices pd 61.2 frm 62.5. Overall it wasn’t much of support for the ADP jobs numbers earlier; the reaction sent stock indexes lower, increased the gains in MBSs and treasuries. At 9:30 when most prices were set in the mortgage market MBS 30s were +2/32, at 10:05 +5/32, a gain of .09 bp; the 10 yr yield fell tom 1.95%.
Europe’s problems continue to trump much of the better data coming from the US; today’s ADP and weekly claims took a back seat to comments out of Greece. Greek Prime Minister Lucas Papademos warned his country may face economic collapse as soon as March. France sold 7.96 billion euros ($10.2B) of debt, with borrowing costs rising in its first bond auction of the year as credit companies threaten to cut the nation’s AAA rating.
US interest rates still hold a slight bullish technical bias, today’s reaction to the stronger employment data has been pushed aside, it’s still all about Europe. The 10 yr note, bellwether for US long term rates briefly rose above 2.00% on the ADP and claims data but it once again found support from the news out of Europe. As long as investors and traders are fearful of debt defaults that may seriously damage Europe’s fragile banks, safety in treasuries remains the preferred strategy. That said, US interest rates have not moved much over the past two weeks; safety is still the way to go however the movement into treasuries has slowed. No reason to bail on treasuries but not much solid reason to make huge moves to away.
Two early reports this morning that should have dealt a blow to the bond and mortgage markets didn’t happen. At 8:15 ADP reported their count on private sector jobs, estimates were for ADP to report an increase of 180K; according the payroll people private jobs increased a huge 325K in Dec. The reaction was somewhat surprising, the 10 yr note price4 fell just 5/32, its yield increased briefly to 2.00% then backed off to unchanged, mortgage prices were unchanged. At 8:30 weekly jobless claims expected -6K, fell 15K to 372K, last week’s claims were revised higher, to 387K frm 381K. Continuing claims fell 22K to 3.595 mil; the smoothing 4 wk. average fell to 373,250 frm 376,500, the lowest since June of 2008.
The ADP report didn’t get the reaction the headline might have suggested, the December number may have reflected the so-called purge effect. Workers, regardless of when they are dismissed or quit, sometimes remain on company records until December, when businesses update, or purge, their figures with ADP. They attempt to estimate the change when adjusting the data for seasonal variations, because there were fewer firings at the end of 2011 than in previous years, ADP may find it more difficult to formulate a projection. Traders took that into account in not reacting too strongly to the strong increase.
Prior to the 8:15 ADP data, the Challenger jobs data somewhat countered the strong ADP data; job cuts announced by employers rose in December from a year earlier, according to Challenger, Gray & Christmas Inc. Planned firings climbed 31% to 41,785 last month from 32,004 in December 2010, which was the lowest monthly total in 10 years. Normally the Challenger data is seen as a footnote but in this case it tempers the ADP data somewhat.
At 9:30 the DJIA opened -45, the 10 yr -1/32 at 1.99% unch and mortgage prices generally unchanged on 30s and +.12 bp on 15s. Stock indexes continued to fall after the open, by 9:45 mortgage prices were +4/32 (.12 bp) on the day. (see below for 10:10 prices that reflect the ISM services sector report that hit at 10:00)
At 10:00 Dec ISM services sector index, expected at 53.0 frm 52.0 in Nov, was at 52.6. The sub components; new orders 53.2 frm 53.0, employment 49.4 from 48.9 and prices pd 61.2 frm 62.5. Overall it wasn’t much of support for the ADP jobs numbers earlier; the reaction sent stock indexes lower, increased the gains in MBSs and treasuries. At 9:30 when most prices were set in the mortgage market MBS 30s were +2/32, at 10:05 +5/32, a gain of .09 bp; the 10 yr yield fell tom 1.95%.
Europe’s problems continue to trump much of the better data coming from the US; today’s ADP and weekly claims took a back seat to comments out of Greece. Greek Prime Minister Lucas Papademos warned his country may face economic collapse as soon as March. France sold 7.96 billion euros ($10.2B) of debt, with borrowing costs rising in its first bond auction of the year as credit companies threaten to cut the nation’s AAA rating.
US interest rates still hold a slight bullish technical bias, today’s reaction to the stronger employment data has been pushed aside, it’s still all about Europe. The 10 yr note, bellwether for US long term rates briefly rose above 2.00% on the ADP and claims data but it once again found support from the news out of Europe. As long as investors and traders are fearful of debt defaults that may seriously damage Europe’s fragile banks, safety in treasuries remains the preferred strategy. That said, US interest rates have not moved much over the past two weeks; safety is still the way to go however the movement into treasuries has slowed. No reason to bail on treasuries but not much solid reason to make huge moves to away.
Wednesday, January 4, 2012
Mortgage Rates
Treasuries started a little better this morning, mortgage prices generally unchanged early. Yesterday Europe’s markets rallied as they did the US indexes rallied, better manufacturing readings out of Germany and the US ISM data overrode the debt problems still facing Europe and to an extent global markets. This morning its back to debt concerns that banks will need to raise more capital to weather the debt crisis. Countries in Europe are borrowing these days setting up a question of whether the single euro currency will survive. Germany and Portugal sold bonds today, kicking off a competition for finance. The offers will be followed by auctions from Greece, Italy and Spain later in the month as common-currency members commence sales that may reach 262 billion euros in the first quarter and 865 billion euros in 2012, according to Deutsche Bank AG forecasts.
The weeks may have been short and the seasonal adjustment difficult but mortgage application activity definitely declined during the two weeks ended December 30 (December 23 week included due to holiday). This is the conclusion of the Mortgage Bankers Association whose purchase index over the two week period fell a very steep 9.7%. The drop interrupts what had been a steady stream of good news out of the housing sector. Down 1.9% in refinancing which makes up the great bulk of mortgage activity, at 82% for the highest share of 2011. Homeowners are increasingly refinancing their mortgages as rates sink. For the lowest rate of 2011, the average 30-year conforming mortgage ($417,500 or less) was 4.07% in the period.
At 9:30 the DJIA opened -30, 10 yr -2/32 at 1.96% +1 bp and mortgage prices +2/32 (.06 bp).
The US rate markets are not improving nor are they worsening, just hanging in a narrow range awaiting any solid news out of Europe while focusing on what appears to be at the moment a better economic outlook.
After two hours the bond and mortgage markets are not doing much, it looks like a quiet session. Yesterday’s strong equity market rally has so far shown no follow-through. The bond and mortgage markets relatively unchanged for the past few hours.
Treasuries started a little better this morning, mortgage prices generally unchanged early. Yesterday Europe’s markets rallied as they did the US indexes rallied, better manufacturing readings out of Germany and the US ISM data overrode the debt problems still facing Europe and to an extent global markets. This morning its back to debt concerns that banks will need to raise more capital to weather the debt crisis. Countries in Europe are borrowing these days setting up a question of whether the single euro currency will survive. Germany and Portugal sold bonds today, kicking off a competition for finance. The offers will be followed by auctions from Greece, Italy and Spain later in the month as common-currency members commence sales that may reach 262 billion euros in the first quarter and 865 billion euros in 2012, according to Deutsche Bank AG forecasts.
The weeks may have been short and the seasonal adjustment difficult but mortgage application activity definitely declined during the two weeks ended December 30 (December 23 week included due to holiday). This is the conclusion of the Mortgage Bankers Association whose purchase index over the two week period fell a very steep 9.7%. The drop interrupts what had been a steady stream of good news out of the housing sector. Down 1.9% in refinancing which makes up the great bulk of mortgage activity, at 82% for the highest share of 2011. Homeowners are increasingly refinancing their mortgages as rates sink. For the lowest rate of 2011, the average 30-year conforming mortgage ($417,500 or less) was 4.07% in the period.
At 9:30 the DJIA opened -30, 10 yr -2/32 at 1.96% +1 bp and mortgage prices +2/32 (.06 bp).
The US rate markets are not improving nor are they worsening, just hanging in a narrow range awaiting any solid news out of Europe while focusing on what appears to be at the moment a better economic outlook.
After two hours the bond and mortgage markets are not doing much, it looks like a quiet session. Yesterday’s strong equity market rally has so far shown no follow-through. The bond and mortgage markets relatively unchanged for the past few hours.
Tuesday, January 3, 2012
Mortgage Rates
Happy New Year! Not a good start to the year in the bond and mortgage markets this morning. The rate markets being pressured by better than expected employment data in Germany. Europe's stock markets higher today, US stock indexes in early traded this morning indicating the DJIA at 9:30 would open 185 points higher. The number of people out of work in Germany fell a seasonally adjusted 22,000 to 2.89 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, the median of 20 estimates. With the exception of a 6,000 increase in October, German unemployment has now fallen in every month since June 2009. The average jobless total in unadjusted terms for 2011 squeezed below the 3 million mark at 2.97 million, the lowest since 1991.
Most of 2011 it was Europe's debt problems that drove volatile market moves. While there isn't anything that has changed in Europe, markets seem to be believing the debt mess won't be as significant to economic growth that had been widely expected. Most of the recent US data reports have been better than forecasts, in Europe somewhat the same picture. A momentary thing based largely on the lack of any real actual defaults or bank failures, or a turning point in thinking? Germany's unemployment rate declined to 6.8% frm 6.9%. In the UK its manufacturing index, similar to the US ISM index, fell unexpectedly. The Chartered Institute of Purchasing and Supply rose to 49.6 from a revised 47.7 in November; the consensus forecast was for a drop to 47.3 from an initially reported 47.6 in November. A level below 50 indicates contraction.
While data from Europe is supporting and adding to the improvement in US equities this morning, there hasn't been much change yet in the sentiment that Europe's debt issues have been alleviated in the least. The potential change in some of the thinking is that global economies won't be hurt as badly has had been believed based on recent reports in the US and a few counties in Europe. Presently markets are somewhat less fearful, but it is a fragile belief that doesn't have a lot of substance yet.
At 9:30 the DJIA opened +140, the 10 yr note -21/32 at 1.95% +6 bp and mortgage prices -8/32 (.25 bp).
At 10:00 Dec ISM manufacturing index expected at 53.4 frm 52.7 in Nov; as reported the index hit at 53.9. The components; new orders 57.6 frm 56.7, prices pd at 47.5 frm 45.0 and employment at 55.1 frm 51.8. Any index over 50 is considered expansion. The initial reaction added a little to the already strong stock market.
Also at 10:00 Nov construction spending expected up 0.5%, jumped 1.2%. Nov construction spending originally reported up 0.8% was revised to -0.2%.
Later this afternoon at 2:00 the minutes from the Dec 13 FOMC meeting will be released.
Regardless of the various momentary influences on US markets, particularly the bond and mortgage markets, the 10 yr note continues to find resistance when it falls below 2.00%, this morning at 1.95% it is holding. Most technicals remain bullish, however it won't last much longer unless the yield continues to decline.
Happy New Year! Not a good start to the year in the bond and mortgage markets this morning. The rate markets being pressured by better than expected employment data in Germany. Europe's stock markets higher today, US stock indexes in early traded this morning indicating the DJIA at 9:30 would open 185 points higher. The number of people out of work in Germany fell a seasonally adjusted 22,000 to 2.89 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, the median of 20 estimates. With the exception of a 6,000 increase in October, German unemployment has now fallen in every month since June 2009. The average jobless total in unadjusted terms for 2011 squeezed below the 3 million mark at 2.97 million, the lowest since 1991.
Most of 2011 it was Europe's debt problems that drove volatile market moves. While there isn't anything that has changed in Europe, markets seem to be believing the debt mess won't be as significant to economic growth that had been widely expected. Most of the recent US data reports have been better than forecasts, in Europe somewhat the same picture. A momentary thing based largely on the lack of any real actual defaults or bank failures, or a turning point in thinking? Germany's unemployment rate declined to 6.8% frm 6.9%. In the UK its manufacturing index, similar to the US ISM index, fell unexpectedly. The Chartered Institute of Purchasing and Supply rose to 49.6 from a revised 47.7 in November; the consensus forecast was for a drop to 47.3 from an initially reported 47.6 in November. A level below 50 indicates contraction.
While data from Europe is supporting and adding to the improvement in US equities this morning, there hasn't been much change yet in the sentiment that Europe's debt issues have been alleviated in the least. The potential change in some of the thinking is that global economies won't be hurt as badly has had been believed based on recent reports in the US and a few counties in Europe. Presently markets are somewhat less fearful, but it is a fragile belief that doesn't have a lot of substance yet.
At 9:30 the DJIA opened +140, the 10 yr note -21/32 at 1.95% +6 bp and mortgage prices -8/32 (.25 bp).
At 10:00 Dec ISM manufacturing index expected at 53.4 frm 52.7 in Nov; as reported the index hit at 53.9. The components; new orders 57.6 frm 56.7, prices pd at 47.5 frm 45.0 and employment at 55.1 frm 51.8. Any index over 50 is considered expansion. The initial reaction added a little to the already strong stock market.
Also at 10:00 Nov construction spending expected up 0.5%, jumped 1.2%. Nov construction spending originally reported up 0.8% was revised to -0.2%.
Later this afternoon at 2:00 the minutes from the Dec 13 FOMC meeting will be released.
Regardless of the various momentary influences on US markets, particularly the bond and mortgage markets, the 10 yr note continues to find resistance when it falls below 2.00%, this morning at 1.95% it is holding. Most technicals remain bullish, however it won't last much longer unless the yield continues to decline.
Monday, January 2, 2012
Mortgage Rates have been operating in the 3.875% best-execution range for several weeks now with the only day-to-day variations being seen in the area of closing costs. That continues to be the case today and in fact, at many lenders closing costs associated with the 3.875% best-execution levels have fallen in line with their lowest levels ever--truly a fitting end to 2011.
Today's BEST-EXECUTION Rates
30YR FIXED - 3.875%, glimpses of 3.75% at the top few lenders.
FHA/VA -3.75%
15 YEAR FIXED - 3.375%
5 YEAR ARMS - 2.625-3.25% depending on the lender
Lock/Float Considerations
This is "it." In a few minutes, bond markets will be closed for 2011 and won't begin trading again until next TUESDAY
The lock/float considerations are essentially the same as they have been.
Rates and costs continue to operate near all time best levels
Current levels have experienced increasing resistance in improving much from here
There are technical reasons for that as well as fundamental reasons
Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.
Trading sentiment in early 2012 could vary from the low-volume positivity seen here at the end of 2011.
While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
From the Equity Investment Capital Family to yours, we thank you for a great 2011 and wish you a merry and prosperous 2012. Happy New Year!
Today's BEST-EXECUTION Rates
30YR FIXED - 3.875%, glimpses of 3.75% at the top few lenders.
FHA/VA -3.75%
15 YEAR FIXED - 3.375%
5 YEAR ARMS - 2.625-3.25% depending on the lender
Lock/Float Considerations
This is "it." In a few minutes, bond markets will be closed for 2011 and won't begin trading again until next TUESDAY
The lock/float considerations are essentially the same as they have been.
Rates and costs continue to operate near all time best levels
Current levels have experienced increasing resistance in improving much from here
There are technical reasons for that as well as fundamental reasons
Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.
Trading sentiment in early 2012 could vary from the low-volume positivity seen here at the end of 2011.
While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
From the Equity Investment Capital Family to yours, we thank you for a great 2011 and wish you a merry and prosperous 2012. Happy New Year!
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