Mortgage Rate Update
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Wednesday, February 29, 2012
Tuesday, February 28, 2012
Monday, February 27, 2012
Mortgage Rates
A very nice start to the week; the 10 yr note yield early this morning down to 1.93% -5 bp frm Friday’s close and breaking some technical barriers. Stock indexes weaker is driving the bond market as has been the case for many months; at 9:00 the DJIA index -50 after unable to break above 13K last week. All key equity markets in Europe also soft this morning. Crude and gold weaker following the stock market.
The Group of 20 nations met over the weekend and nixed calls from the euro area to boost international lending resources. A major reason for weakness in equity markets this morning. The G-20 told Europe to come up with more financial firepower before they will consider lending outside support. The world economy is “not out of the danger zone” amid fragile financial systems, high public and private debt and rising oil prices, International Monetary Fund Managing Director Christine Lagarde said. The decision by G-20 finance ministers to deny more assistance pending an increase in the euro-area backstop puts the monkey on Germany, the biggest contributor to bailouts, to overcome its resistance to doing more. A parliamentary vote on a second Greek aid package looming in Berlin today, and there is a EU summit on Thursday and Friday.
This week has a number of key economic releases; durable goods orders for Jan, the second look at Q1 GDP (expected unchanged frm the advance report last month at +2.8%), the Chicago and ISM manufacturing index, Jan personal income and spending including the Fed’s favorite inflation reading, the personal consumption expenditures included in the income and spending data, the Fed beige Book, and weekly claims are all headliners that can move sentiment quickly in this uncertain climate.
The DJIA opened -55, the 10 yr note yield at 1.92% -6 bp and MBS prices +9/32 (.28 bp) for 30 yr mortgages.
At 10:00, the only data today, Jan pending home sales from NAR, expected up 1.5%, as reported up 2.0%, the highest index since April 2010; Dec sales revised to -1.9% frm -3.5% originally reported. Yr/yr pending sales +8.0%. Pending home sales are contracts signed but not closed,. There wasn’t much reaction to the report.
Mortgage interest rates and US treasuries continue to trade in narrow ranges; the improvement this morning in the 10 yr treasury note has its yield now under its 40 day average and the relative strength slightly under 50 (47.5). We have resistance on the 10 yr at 1.90%.
A very nice start to the week; the 10 yr note yield early this morning down to 1.93% -5 bp frm Friday’s close and breaking some technical barriers. Stock indexes weaker is driving the bond market as has been the case for many months; at 9:00 the DJIA index -50 after unable to break above 13K last week. All key equity markets in Europe also soft this morning. Crude and gold weaker following the stock market.
The Group of 20 nations met over the weekend and nixed calls from the euro area to boost international lending resources. A major reason for weakness in equity markets this morning. The G-20 told Europe to come up with more financial firepower before they will consider lending outside support. The world economy is “not out of the danger zone” amid fragile financial systems, high public and private debt and rising oil prices, International Monetary Fund Managing Director Christine Lagarde said. The decision by G-20 finance ministers to deny more assistance pending an increase in the euro-area backstop puts the monkey on Germany, the biggest contributor to bailouts, to overcome its resistance to doing more. A parliamentary vote on a second Greek aid package looming in Berlin today, and there is a EU summit on Thursday and Friday.
This week has a number of key economic releases; durable goods orders for Jan, the second look at Q1 GDP (expected unchanged frm the advance report last month at +2.8%), the Chicago and ISM manufacturing index, Jan personal income and spending including the Fed’s favorite inflation reading, the personal consumption expenditures included in the income and spending data, the Fed beige Book, and weekly claims are all headliners that can move sentiment quickly in this uncertain climate.
The DJIA opened -55, the 10 yr note yield at 1.92% -6 bp and MBS prices +9/32 (.28 bp) for 30 yr mortgages.
At 10:00, the only data today, Jan pending home sales from NAR, expected up 1.5%, as reported up 2.0%, the highest index since April 2010; Dec sales revised to -1.9% frm -3.5% originally reported. Yr/yr pending sales +8.0%. Pending home sales are contracts signed but not closed,. There wasn’t much reaction to the report.
Mortgage interest rates and US treasuries continue to trade in narrow ranges; the improvement this morning in the 10 yr treasury note has its yield now under its 40 day average and the relative strength slightly under 50 (47.5). We have resistance on the 10 yr at 1.90%.
Friday, February 24, 2012
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Mortgage Rates
Early this morning the bond market and mortgages started a little better, US stock indexes also slightly better prior to the open at 9:30. Crude oil continues its increase, at 9:00 over $108.00/barrel. Traders pushing stock indexes higher on belief that Jan new home sales would be up 2.5%, see below for the 10:00 release.
In Europe the UK reported Q4 growth slowed as companies scaled back investment, underscoring the risks to a recovery. Gross domestic product dropped 0.2% from the third quarter, no change from the previous report as had been expected. German gross domestic product fell 0.2% in the fourth quarter as the sovereign debt crisis damped demand across the euro region and curtailed exports. Greece’s debt issues appear to be resolved for the moment, it will get the necessary bailout funds to avoid default next month, the over-riding longer outlook is focused on whether Greece can actually live up to its austerity pledges. Europeans are scared, which makes them willing to do things they would not normally do -- such as implementing austerity and ratifying treaties they dislike. Agreeing to sacrifice sovereignty in principle to maintain the European economic system is about all the weakest EU countries (large debts) can do at this time. This year won’t bring any of it to a head, but next year there will be a huge debate in political circles about whether giving up sovereign identity to a wider control by the overlaying EU and ECB. The next two years for the survival of the EU will be contentious to say the least. Right this minute though, those issues are being ignored while focus is on putting out fires that will continue to erupt.
At 9:30, and head of two key data points at 10:00, the DJIA opened +16, the 10 yr +4/32 at 1.98% -1 bp; MBS prices on 30s +3/32 (.09 bp) frm yesterday’s closes.
The recent increase in oil prices and the rise in gasoline prices are not impacting markets as in the past----at least so far. Crude today up over $10.00/barrel over the last three weeks will have an impact on consumer spending and the GD{P growth in Q1 unless oil reverses quickly and gas prices fall back. Most of the increase due to Iran saber rattling and cutting sales of its oil to Europe. A temporary event appears to the take markets have adopted. Tim Geithner this morning agreed that Iran is causing oil to increase, but he also pointed to global economic improvement that is increasing demand. Geithner also saying the economic problems in Europe is not likely to “de-rail” the US economy.
At 9:55 the U. of Michigan final Feb consumer sentiment index was expected at 73.5, as reported it jumped to 75.3 the highest sentiment reading since Fed 2011. The 12 month sentiment at 82 was unchanged; the current conditions index at 83.0 frm 79.6 on the preliminary at mid-month. No reaction to it with Jan new home sales at 10:00.
At 10:00 Jan new home sales were expected +2.4% were down 0.9%, however Dec new home sales saw a big upward revision to +1.9% frm -2.2% previously reported. Taken together sales totals were a little better, expected at 315K annualized, sales were at 321K. Once again after the two reports in five minutes there has been little reaction to the data kin either stocks or rate markets.
Early this morning the bond market and mortgages started a little better, US stock indexes also slightly better prior to the open at 9:30. Crude oil continues its increase, at 9:00 over $108.00/barrel. Traders pushing stock indexes higher on belief that Jan new home sales would be up 2.5%, see below for the 10:00 release.
In Europe the UK reported Q4 growth slowed as companies scaled back investment, underscoring the risks to a recovery. Gross domestic product dropped 0.2% from the third quarter, no change from the previous report as had been expected. German gross domestic product fell 0.2% in the fourth quarter as the sovereign debt crisis damped demand across the euro region and curtailed exports. Greece’s debt issues appear to be resolved for the moment, it will get the necessary bailout funds to avoid default next month, the over-riding longer outlook is focused on whether Greece can actually live up to its austerity pledges. Europeans are scared, which makes them willing to do things they would not normally do -- such as implementing austerity and ratifying treaties they dislike. Agreeing to sacrifice sovereignty in principle to maintain the European economic system is about all the weakest EU countries (large debts) can do at this time. This year won’t bring any of it to a head, but next year there will be a huge debate in political circles about whether giving up sovereign identity to a wider control by the overlaying EU and ECB. The next two years for the survival of the EU will be contentious to say the least. Right this minute though, those issues are being ignored while focus is on putting out fires that will continue to erupt.
At 9:30, and head of two key data points at 10:00, the DJIA opened +16, the 10 yr +4/32 at 1.98% -1 bp; MBS prices on 30s +3/32 (.09 bp) frm yesterday’s closes.
The recent increase in oil prices and the rise in gasoline prices are not impacting markets as in the past----at least so far. Crude today up over $10.00/barrel over the last three weeks will have an impact on consumer spending and the GD{P growth in Q1 unless oil reverses quickly and gas prices fall back. Most of the increase due to Iran saber rattling and cutting sales of its oil to Europe. A temporary event appears to the take markets have adopted. Tim Geithner this morning agreed that Iran is causing oil to increase, but he also pointed to global economic improvement that is increasing demand. Geithner also saying the economic problems in Europe is not likely to “de-rail” the US economy.
At 9:55 the U. of Michigan final Feb consumer sentiment index was expected at 73.5, as reported it jumped to 75.3 the highest sentiment reading since Fed 2011. The 12 month sentiment at 82 was unchanged; the current conditions index at 83.0 frm 79.6 on the preliminary at mid-month. No reaction to it with Jan new home sales at 10:00.
At 10:00 Jan new home sales were expected +2.4% were down 0.9%, however Dec new home sales saw a big upward revision to +1.9% frm -2.2% previously reported. Taken together sales totals were a little better, expected at 315K annualized, sales were at 321K. Once again after the two reports in five minutes there has been little reaction to the data kin either stocks or rate markets.
Thursday, February 23, 2012
Mortgage Rates---
Prior to weekly jobless claims at 8:30 the 10 yr note was trading -7/32 at 2.04% and mortgage prices were off 5/32 (.15 bp). Weekly claims were expected to be up 7K to 355K; as reported claims were unchanged from last week, last week’s claims were revised from 348K to 3.51K. Continuing claims declined 52K to 3.392 mil. The response in the bond market took the 10 yr down from -7/32 to -12/32 the yield increased to 2.04%. Stock index futures increased a little on the claims, from +15 to +20 on the DJIA. Claims at a four year low, going back to August 2008.
Yesterday Europe’s stock markets declined on weaker than expected manufacturing and services data. Today German business confidence rose more than economists forecast to a seven-month high in February as progress in taming Europe’s debt crisis tempered the risk of a recession. Italian consumer confidence also rose more than forecast. That Greece is going to get the money to avoid default has some believing Europe will not fall back into recession, but the EU is now saying Spain and Italy will both fall back into recession as the two countries work on more austerity plans to fend off their own debt crises. Why focus on Europe so much? Because Europe these days is integral to global growth while it teeters on the edge of breaking up and a cascade of sovereign debt defaults. US equity markets start each day on how Europe’s markets are trading. According to the European Commission the euro economy will contract 0.3% in 2012, abandoning a November forecast of 0.5% growth. The downgrade was mainly due to projected contractions of 1.3% in Italy and 1.0% in Spain.
At 9:00 this morning, after a soft opening in the mortgage markets, the 30 yr FNMA coupon managed to climb back to unchanged while the 10 still weaker, was slightly better than at 8:30. Treasury rates are still confined in narrow ranges, most all of the technical models remain a little bearish, not getting worse but not improving either. The Fed’s desire to keep short rates low for many more months caps the long end of the curve keeping the 10 yr note and mortgage rates from increasing. Although an increasingly bullish economic outlook prevails now, the future of the economy remains questionable even with the most optimistic investors.
At 9:30 the equity markets were expected to open better but it didn’t occur; the DJIA opened -24, the 10 yr note at 9:30 -3/32 at 2.02% while MBS prices +2/32 (.06 bp).
At 10:00 the Dec FHFA housing price index was expected up 0.2%; as reported prices increased 0.7%; yr/yr prices down 0.8%. The report stabilized stock indexes and pushed treasury prices down 2/32---not much initial reaction.
Crude oil is fractionally lower today, Iran’s refusal to allow the International Atomic Energy Agency into two sites where there is speculation the country is working on nukes adds to the fear factor that supplies will be impaired. The Saudis are saying the world has ample supplies at the moment, that hasn’t mattered to oil speculator though as prices continue to increase. The momentary consensus is that gasoline prices will move above $4.00/gal as Spring approaches, obviously that will take discretionary spending lower.
At 1:00 this afternoon Treasury will conclude this week’s borrowing with $29B of 7 yr notes. Yesterday’s 5 yr auction was in line with demand over the past 12 months, not quite as strong as traders were expecting. Strong demand this afternoon will bolster the rate markets.
Two days ago the DJIA failed at 13K, yesterday the index closed a little weaker (-27), this morning the index opened -24 and has continued lower into 10:00. Interest rates a little higher early but now with stocks falling the 10 yr is once again working on 2.00%, a level that continues to give traders pause. We don’t expect much lower rates, nor do we expect interest rates to increase much. At around 2.00% for the 10 yr is a recent comfort level, to work much lower the economic outlook has to change from present optimism to a more pessimistic view.
Prior to weekly jobless claims at 8:30 the 10 yr note was trading -7/32 at 2.04% and mortgage prices were off 5/32 (.15 bp). Weekly claims were expected to be up 7K to 355K; as reported claims were unchanged from last week, last week’s claims were revised from 348K to 3.51K. Continuing claims declined 52K to 3.392 mil. The response in the bond market took the 10 yr down from -7/32 to -12/32 the yield increased to 2.04%. Stock index futures increased a little on the claims, from +15 to +20 on the DJIA. Claims at a four year low, going back to August 2008.
Yesterday Europe’s stock markets declined on weaker than expected manufacturing and services data. Today German business confidence rose more than economists forecast to a seven-month high in February as progress in taming Europe’s debt crisis tempered the risk of a recession. Italian consumer confidence also rose more than forecast. That Greece is going to get the money to avoid default has some believing Europe will not fall back into recession, but the EU is now saying Spain and Italy will both fall back into recession as the two countries work on more austerity plans to fend off their own debt crises. Why focus on Europe so much? Because Europe these days is integral to global growth while it teeters on the edge of breaking up and a cascade of sovereign debt defaults. US equity markets start each day on how Europe’s markets are trading. According to the European Commission the euro economy will contract 0.3% in 2012, abandoning a November forecast of 0.5% growth. The downgrade was mainly due to projected contractions of 1.3% in Italy and 1.0% in Spain.
At 9:00 this morning, after a soft opening in the mortgage markets, the 30 yr FNMA coupon managed to climb back to unchanged while the 10 still weaker, was slightly better than at 8:30. Treasury rates are still confined in narrow ranges, most all of the technical models remain a little bearish, not getting worse but not improving either. The Fed’s desire to keep short rates low for many more months caps the long end of the curve keeping the 10 yr note and mortgage rates from increasing. Although an increasingly bullish economic outlook prevails now, the future of the economy remains questionable even with the most optimistic investors.
At 9:30 the equity markets were expected to open better but it didn’t occur; the DJIA opened -24, the 10 yr note at 9:30 -3/32 at 2.02% while MBS prices +2/32 (.06 bp).
At 10:00 the Dec FHFA housing price index was expected up 0.2%; as reported prices increased 0.7%; yr/yr prices down 0.8%. The report stabilized stock indexes and pushed treasury prices down 2/32---not much initial reaction.
Crude oil is fractionally lower today, Iran’s refusal to allow the International Atomic Energy Agency into two sites where there is speculation the country is working on nukes adds to the fear factor that supplies will be impaired. The Saudis are saying the world has ample supplies at the moment, that hasn’t mattered to oil speculator though as prices continue to increase. The momentary consensus is that gasoline prices will move above $4.00/gal as Spring approaches, obviously that will take discretionary spending lower.
At 1:00 this afternoon Treasury will conclude this week’s borrowing with $29B of 7 yr notes. Yesterday’s 5 yr auction was in line with demand over the past 12 months, not quite as strong as traders were expecting. Strong demand this afternoon will bolster the rate markets.
Two days ago the DJIA failed at 13K, yesterday the index closed a little weaker (-27), this morning the index opened -24 and has continued lower into 10:00. Interest rates a little higher early but now with stocks falling the 10 yr is once again working on 2.00%, a level that continues to give traders pause. We don’t expect much lower rates, nor do we expect interest rates to increase much. At around 2.00% for the 10 yr is a recent comfort level, to work much lower the economic outlook has to change from present optimism to a more pessimistic view.
Wednesday, February 22, 2012
Mortgage Rates
Interest rate markets started a little better this morning with stock indexes in the US weaker and selling in the Europe stock markets. Europe’s purchasing mgrs. Data out in Europe was weaker than estimates and still concerns that Greece’s austerity agreement is so severe its economy will continue to decline and in time the country will not be able to achieve the goals set out in the agreement with the IMF, the EU and the ECB. European stocks retreated for a second day after a report showed services and manufacturing output in the euro area unexpectedly contracted in February. The composite index based on a survey of purchasing managers in both industries dropped to 49.7 from 50.4 in January; estimates were for the index to come at 50.5. A separate report showed German services and manufacturing expansion unexpectedly slowed in February amid declining orders at factories.
Fitch lowered the rating of Greek debt to C from CCC, saying Greece is highly likely to default on its debt. US treasuries are also betting that Greece will default, as a reaction the US bond market will continue to be well supported on sell-offs. Pulling the other direction, investors are increasing concerns on inflation to six month highs in trading of Treasury Inflation Protected securities. Inflation fears won’t dissipate with interest rates at these low levels, however we see little pricing pressure in labor costs or commodities like crude oil. Crude has jumped over $6.00/barrel in the last couple of weeks, mostly on Iranian fears, when global equity markets increase crude follows but higher energy prices will very likely curb discretionary consumer spending and dampen the optimistic economic outlook.
A couple of technical levels tested and held yesterday; the 10 yr note yield increased to 2.06% where we have support at 2.08% area, the DJIA tested 13K yet backed away into the close (12,996). Prior to 9:30 the DJIA traded down just 4 points while the 10 yr note at 2.05%; not much change from yesterday’s closes (MBS prices at 9:00 +1/32 (.03 bp).
At 9:30 the DJIA opened -11, 10 yr +6/32 at 2.04% -2 bp and MBS prices +5/32 (.15 bp). MBS prices were generally unchanged until 9:20 so early pricing doesn’t likely reflect the better levels at 9:30.
At 10:00 Jan existing home sales increased 4.3% frm Dec against forecasts of +1.6%. Dec sales however were revised to -0.5% frm +5.0%. According to NAR there is a 6.1 month supply of homes; -0.4% to 2.31 mil the lowest level since March 2005. Distressed sales accounted for 35% of all sales com[pared to 32% in Dec. There was little initial reaction to the report.
At 1:00 Treasury will auction $35B of 5 yr notes, yesterday’s 2 yr note auction met with OK demand but not as strong as traders were expecting.
Mortgage applications decreased 4.5% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending February 17, 2012. The Refinance Index decreased 4.8% from the previous week. The seasonally adjusted Purchase Index decreased 2.9% from one week earlier. The unadjusted Purchase Index increased 1.4 percent compared with the previous week and was 9.2 percent lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 0.30%. The four week moving average is down 3.21% for the seasonally adjusted Purchase Index, while this average is up 0.33% for the Refinance Index. The refinance share of mortgage activity decreased to 80.1% of total applications from 81.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3% from 5.4% of total applications from the previous week.
In January 2012, among refinance borrowers, 57.2% of applications were for fixed-rate 30-year loans, 24.4% for 15-year fixed loans, and 5.5% for ARMs. The share of refinance applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 12.9% of all refinance applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.09% from 4.08%, with points increasing to 0.53 from 0.51 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.32% from 4.30%, with points decreasing to 0.42 from 0.44 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.87%, with points decreasing to 0.41 from 0.78 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.38% from 3.33%, with points decreasing to 0.37 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.94% from 2.93%, with points increasing to 0.44 from 0.42 (including the origination fee) for 80% loans.
Interest rate markets started a little better this morning with stock indexes in the US weaker and selling in the Europe stock markets. Europe’s purchasing mgrs. Data out in Europe was weaker than estimates and still concerns that Greece’s austerity agreement is so severe its economy will continue to decline and in time the country will not be able to achieve the goals set out in the agreement with the IMF, the EU and the ECB. European stocks retreated for a second day after a report showed services and manufacturing output in the euro area unexpectedly contracted in February. The composite index based on a survey of purchasing managers in both industries dropped to 49.7 from 50.4 in January; estimates were for the index to come at 50.5. A separate report showed German services and manufacturing expansion unexpectedly slowed in February amid declining orders at factories.
Fitch lowered the rating of Greek debt to C from CCC, saying Greece is highly likely to default on its debt. US treasuries are also betting that Greece will default, as a reaction the US bond market will continue to be well supported on sell-offs. Pulling the other direction, investors are increasing concerns on inflation to six month highs in trading of Treasury Inflation Protected securities. Inflation fears won’t dissipate with interest rates at these low levels, however we see little pricing pressure in labor costs or commodities like crude oil. Crude has jumped over $6.00/barrel in the last couple of weeks, mostly on Iranian fears, when global equity markets increase crude follows but higher energy prices will very likely curb discretionary consumer spending and dampen the optimistic economic outlook.
A couple of technical levels tested and held yesterday; the 10 yr note yield increased to 2.06% where we have support at 2.08% area, the DJIA tested 13K yet backed away into the close (12,996). Prior to 9:30 the DJIA traded down just 4 points while the 10 yr note at 2.05%; not much change from yesterday’s closes (MBS prices at 9:00 +1/32 (.03 bp).
At 9:30 the DJIA opened -11, 10 yr +6/32 at 2.04% -2 bp and MBS prices +5/32 (.15 bp). MBS prices were generally unchanged until 9:20 so early pricing doesn’t likely reflect the better levels at 9:30.
At 10:00 Jan existing home sales increased 4.3% frm Dec against forecasts of +1.6%. Dec sales however were revised to -0.5% frm +5.0%. According to NAR there is a 6.1 month supply of homes; -0.4% to 2.31 mil the lowest level since March 2005. Distressed sales accounted for 35% of all sales com[pared to 32% in Dec. There was little initial reaction to the report.
At 1:00 Treasury will auction $35B of 5 yr notes, yesterday’s 2 yr note auction met with OK demand but not as strong as traders were expecting.
Mortgage applications decreased 4.5% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending February 17, 2012. The Refinance Index decreased 4.8% from the previous week. The seasonally adjusted Purchase Index decreased 2.9% from one week earlier. The unadjusted Purchase Index increased 1.4 percent compared with the previous week and was 9.2 percent lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 0.30%. The four week moving average is down 3.21% for the seasonally adjusted Purchase Index, while this average is up 0.33% for the Refinance Index. The refinance share of mortgage activity decreased to 80.1% of total applications from 81.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3% from 5.4% of total applications from the previous week.
In January 2012, among refinance borrowers, 57.2% of applications were for fixed-rate 30-year loans, 24.4% for 15-year fixed loans, and 5.5% for ARMs. The share of refinance applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 12.9% of all refinance applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.09% from 4.08%, with points increasing to 0.53 from 0.51 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.32% from 4.30%, with points decreasing to 0.42 from 0.44 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.87%, with points decreasing to 0.41 from 0.78 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.38% from 3.33%, with points decreasing to 0.37 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.94% from 2.93%, with points increasing to 0.44 from 0.42 (including the origination fee) for 80% loans.
Tuesday, February 21, 2012
Mortgage Rates
Greece got its bailout money early this morning, yesterday Europe’s markets rallied on the news, today Europe’s equity markets are weaker. Finance ministers awarded 130 billion euros ($173 billion) in aid, engineered a central-bank profits transfer and coaxed investors into providing more debt relief in an exchange meant to tide Greece past a March bond repayment. Stocks fell and the euro fluctuated as investors speculated the deal won’t fix Greece’s long-term challenges. The assistance brings to at least 386 billion euros the sums spent or committed to save Greece, Ireland and Portugal from bankruptcy. A step in the right direction, but still some hurdles remain. Greece has to enact the prescribed austerity and economic reforms that could prove too much to deliver amid a fifth year of recession, and risk falling foul of social unrest and upcoming elections. Greece met a key condition for aid by spelling out 325 million euros in additional spending cuts. The International Monetary Fund must now decide how much it is willing to contribute to the package. While a euro-zone statement spoke of a “significant contribution” from the IMF to the three-year loan package, it was unclear whether the fund would stick to its practice of delivering a third of the aid money. Greece isn’t going to be left all alone dealing with their budgets; a European Commission task force will be put in place in Greece in an “an enhanced and permanent presence on the ground” to improve the workings of the Greek bureaucracy, according to the statement.
For the moment Greece has stepped back from the cliff; while there is a certain amount of relief around the world that Greece won’t default for now, the longer outlook isn’t that rosy. Greece is unlikely to avoid defaulting on its debt, the austerity and spending cuts achieved by EU leaders and Greek politicians is so draconian that in the end Greek citizens and politicians will not be able to carry lout the demands placed on the conditions to get the bailout. Likely not news to Europe’s leaders but they did manage to plug the dike for while the Union wrestles with Portugal and Ireland. That Greece will eventually fail isn’t a concern now; in a year or two it will not be able to abide the rules set down unless the rules are relaxed; markets will worry about it later.
US interest rates a little higher on the Greek news; the 10 yr note at 7:00 am -10/32 at 2.04%. More lifting of the safety hedges that have been in place for months on concerns Greece would be forced into default, unable to meet the demands from the EU and ECB. US stock indexes a little better but not much; both markets still assessing the details from the Brussels summit. Although treasuries are starting soft the MBS markets are improved this morning from Friday’s closes. Recently the mortgage markets has held well in the face of a little weakness in treasury markets.
There are no data points today; this week’s economic calendar has Jan existing and new home sales and $99B of Treasury auctions as main scheduled drives. Although Greece has dodged default there are still some key elements to be resolved; how much will private creditors have to swallow, and how much will the IMF contribute? Those questions will be answered positively but still some concerns remain.
At 9:30 the DJIA opened +28, the 10 yr note -12/32 at 2.04% +4 bp, but mortgage prices continue to hold well, up 5/32 (.15 bp). MBSs are seeing increased demand since the HARP 2 plan was announced, investors seeking yield less fearful of MBSs as they begin to realize that the new MBS coupons have good loans instead of the bad loans that made up pools a few years ago. The yield differential between the bellwether 10 yr treasury and 30 yr mortgages is narrowing. By 10:00 the DJIA fell back to unch.
Crude oil is up over $104.00/barrel this morning on increasing concerns over Iran and its sanctions; Iran saying it won’t sell oil to Britain and France. The two countries don’t purchase much oil from Iran however it is the fear factor of further disruptions that is propelling oil prices higher, in the last eight days crude has jumped $5.00/barrel.
Greece got its bailout money early this morning, yesterday Europe’s markets rallied on the news, today Europe’s equity markets are weaker. Finance ministers awarded 130 billion euros ($173 billion) in aid, engineered a central-bank profits transfer and coaxed investors into providing more debt relief in an exchange meant to tide Greece past a March bond repayment. Stocks fell and the euro fluctuated as investors speculated the deal won’t fix Greece’s long-term challenges. The assistance brings to at least 386 billion euros the sums spent or committed to save Greece, Ireland and Portugal from bankruptcy. A step in the right direction, but still some hurdles remain. Greece has to enact the prescribed austerity and economic reforms that could prove too much to deliver amid a fifth year of recession, and risk falling foul of social unrest and upcoming elections. Greece met a key condition for aid by spelling out 325 million euros in additional spending cuts. The International Monetary Fund must now decide how much it is willing to contribute to the package. While a euro-zone statement spoke of a “significant contribution” from the IMF to the three-year loan package, it was unclear whether the fund would stick to its practice of delivering a third of the aid money. Greece isn’t going to be left all alone dealing with their budgets; a European Commission task force will be put in place in Greece in an “an enhanced and permanent presence on the ground” to improve the workings of the Greek bureaucracy, according to the statement.
For the moment Greece has stepped back from the cliff; while there is a certain amount of relief around the world that Greece won’t default for now, the longer outlook isn’t that rosy. Greece is unlikely to avoid defaulting on its debt, the austerity and spending cuts achieved by EU leaders and Greek politicians is so draconian that in the end Greek citizens and politicians will not be able to carry lout the demands placed on the conditions to get the bailout. Likely not news to Europe’s leaders but they did manage to plug the dike for while the Union wrestles with Portugal and Ireland. That Greece will eventually fail isn’t a concern now; in a year or two it will not be able to abide the rules set down unless the rules are relaxed; markets will worry about it later.
US interest rates a little higher on the Greek news; the 10 yr note at 7:00 am -10/32 at 2.04%. More lifting of the safety hedges that have been in place for months on concerns Greece would be forced into default, unable to meet the demands from the EU and ECB. US stock indexes a little better but not much; both markets still assessing the details from the Brussels summit. Although treasuries are starting soft the MBS markets are improved this morning from Friday’s closes. Recently the mortgage markets has held well in the face of a little weakness in treasury markets.
There are no data points today; this week’s economic calendar has Jan existing and new home sales and $99B of Treasury auctions as main scheduled drives. Although Greece has dodged default there are still some key elements to be resolved; how much will private creditors have to swallow, and how much will the IMF contribute? Those questions will be answered positively but still some concerns remain.
At 9:30 the DJIA opened +28, the 10 yr note -12/32 at 2.04% +4 bp, but mortgage prices continue to hold well, up 5/32 (.15 bp). MBSs are seeing increased demand since the HARP 2 plan was announced, investors seeking yield less fearful of MBSs as they begin to realize that the new MBS coupons have good loans instead of the bad loans that made up pools a few years ago. The yield differential between the bellwether 10 yr treasury and 30 yr mortgages is narrowing. By 10:00 the DJIA fell back to unch.
Crude oil is up over $104.00/barrel this morning on increasing concerns over Iran and its sanctions; Iran saying it won’t sell oil to Britain and France. The two countries don’t purchase much oil from Iran however it is the fear factor of further disruptions that is propelling oil prices higher, in the last eight days crude has jumped $5.00/barrel.
Monday, February 20, 2012
Mortgage Rates
This Week; On Monday Europe will hold another summit meeting in Brussels in another attempt to get a plan worked out and approved to provide Greece with funds necessary to avoid defaulting on its debt on Mach 20th. According to people in the region, if the summit fails once again, the next meeting is on March 1st. Based on history with Greece it is unlikely they will get a deal this time around; this is going right to the wire similar to how the US dealt with the budget debt extension. The key data this week are existing and new home sales. Treasury will conduct the monthly auctions of 2 yrs, 5 yrs and 7 yr notes; starting Tuesday with the 2 for a total of $99B, the same amount as in the past five months.
Increasing economic bullishness is driving stock markets higher, if a Greek deal is accomplished this week equity markets will take it as a positive and add additional selling in the bond and mortgage markets. Technically the 10 yr treasury is slightly bearish now, however on selling it has managed to hold the first support at 2.05%, if that fails the next stop will likely be 2.15%. MBS markets follow but with not as much increases in mortgage rates. As long as equity markets continue to improve the bond and mortgage markets won’t have much to hang onto, but we still don’t think rates will increase much.
This Week; On Monday Europe will hold another summit meeting in Brussels in another attempt to get a plan worked out and approved to provide Greece with funds necessary to avoid defaulting on its debt on Mach 20th. According to people in the region, if the summit fails once again, the next meeting is on March 1st. Based on history with Greece it is unlikely they will get a deal this time around; this is going right to the wire similar to how the US dealt with the budget debt extension. The key data this week are existing and new home sales. Treasury will conduct the monthly auctions of 2 yrs, 5 yrs and 7 yr notes; starting Tuesday with the 2 for a total of $99B, the same amount as in the past five months.
Increasing economic bullishness is driving stock markets higher, if a Greek deal is accomplished this week equity markets will take it as a positive and add additional selling in the bond and mortgage markets. Technically the 10 yr treasury is slightly bearish now, however on selling it has managed to hold the first support at 2.05%, if that fails the next stop will likely be 2.15%. MBS markets follow but with not as much increases in mortgage rates. As long as equity markets continue to improve the bond and mortgage markets won’t have much to hang onto, but we still don’t think rates will increase much.
Sunday, February 19, 2012
Mortgage Rates Continue Higher Ahead of High-Risk Weekend
Mortgages Rates are higher for the 2nd day in a row. Unlike the movement we normally see, which limits itself to affecting closing costs as opposed to the quoted rates themselves, today's deterioration leaves 4.0% looking like the better deal for enough lenders that we'd make a note of it's increasing prevalence, although the average across all lenders in our survey is still closer to 3.875%.
Additional reading: A previous post with more detailed discussion about Best-Execution calculations.
Weakness aside, today was fairly quiet for the MBS market (MBS = mortgage-backed securities, which most directly influence the rates offered by mortgage lenders) as well as Treasuries. Most of the activity was seen in the early morning after the European Central Bank said that it might allow the central banks from various Euro countries to write-down their Greek holdings, effectively improving Greece's chances of getting their 2nd bailout approved on Monday.
Events and headlines surrounding this bailout have been the market's focus for a few weeks now, overshadowing most domestic economic reports and other traditionally important market movers. While it's true that we've come to expect negotiations over Greek bailouts to not come without surprises and alterations, markets are still burdened with the need to prepare for the "if's." In such cases, traditional metaphors apply, such as waiting for shoes to drop or knives to fall. In short, no one wants to commit too strongly to either side of the spectrum of possibilities.
Because of this, we are left with markets (both capital markets and Mortgage Rate Markets) that are in a sort of neutral position with respect to broader trends. Take 10yr Treasuries at 2.03% for example. Since the broader rally began in late summer 2011, this is the mid-point between the absolute highs and lows. In similar fashion, mortgage rates are on a fence between 3.875% and 4.0% Best-Execution levels. Because of that, floating over the weekend continues to be a risky proposition considering that rates could just as easily shift into 4.0% territory as they could bounce back down into 3.875%'s. We don't think that's any more likely to happen than anything else, simply that risks of movement in either direction are elevated.
Mortgages Rates are higher for the 2nd day in a row. Unlike the movement we normally see, which limits itself to affecting closing costs as opposed to the quoted rates themselves, today's deterioration leaves 4.0% looking like the better deal for enough lenders that we'd make a note of it's increasing prevalence, although the average across all lenders in our survey is still closer to 3.875%.
Additional reading: A previous post with more detailed discussion about Best-Execution calculations.
Weakness aside, today was fairly quiet for the MBS market (MBS = mortgage-backed securities, which most directly influence the rates offered by mortgage lenders) as well as Treasuries. Most of the activity was seen in the early morning after the European Central Bank said that it might allow the central banks from various Euro countries to write-down their Greek holdings, effectively improving Greece's chances of getting their 2nd bailout approved on Monday.
Events and headlines surrounding this bailout have been the market's focus for a few weeks now, overshadowing most domestic economic reports and other traditionally important market movers. While it's true that we've come to expect negotiations over Greek bailouts to not come without surprises and alterations, markets are still burdened with the need to prepare for the "if's." In such cases, traditional metaphors apply, such as waiting for shoes to drop or knives to fall. In short, no one wants to commit too strongly to either side of the spectrum of possibilities.
Because of this, we are left with markets (both capital markets and Mortgage Rate Markets) that are in a sort of neutral position with respect to broader trends. Take 10yr Treasuries at 2.03% for example. Since the broader rally began in late summer 2011, this is the mid-point between the absolute highs and lows. In similar fashion, mortgage rates are on a fence between 3.875% and 4.0% Best-Execution levels. Because of that, floating over the weekend continues to be a risky proposition considering that rates could just as easily shift into 4.0% territory as they could bounce back down into 3.875%'s. We don't think that's any more likely to happen than anything else, simply that risks of movement in either direction are elevated.
Friday, February 17, 2012
Mortgage Rates
Interest rate markets opened weak this morning with stock indexes better. Europe’s equity markets better on increasing belief Greece and Europe’s officials will actually get a deal completed at the summit meeting on Monday. Very early today the 10 yr note yield hit 2.04% (+6 bp) and MBS prices were off 8/32 (.25 bp) frm yesterday’s closes; by 9:00 some support was seen, the 10 yr moved back down to 2.02% and stock indexes backed off a little. 8:30 this morning Jan consumer price index data, the overall CPI increased 0.2% while the core (ex food and energy) also increased 0.2%, both in line with estimates. Yr/yr over CPI +2.9%, the core +2.3%; the yr/yr increase is somewhat troublesome with the core now +2.3% and at least pushing the Fed’s target level. As noted yesterday, the Fed prefers the personal consumption expenditures as its inflation gauge rather than total focus on CPI, nevertheless with oil prices climbing higher never-ending concerns over inflation was heightened on the data.
Will Greece get its money to avoid default? That question has been dominating markets since last July, on again-off again for six months with no resolution. The clock is ticking now, Greece has until March 20th to find the funds needed to pay for maturing debt (actual default would occur on March 27th). With all the comments coming from every official in Europe it is very difficult and sometimes confusing trying to follow the events as they unfold, however we believe Greece will get its bailout this go-round, what happens when the next maturities occur another bailout is unlikely. Presently markets in Europe and the US are betting on a deal being completed. Italian Prime Minister Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed optimism that an agreement on Greece can be reached at a Feb. 20 meeting of euro-area finance ministers.
At 9:30 the DJIA opened +35, NASDAQ -3; 10 yr note at 2.03% +5 bp and MBS prices -5/32 (.15 bp) frm yesterday’s closes.
The last data this week hit at 10:00; Jan leading economic indicators were expected up 0.5%, as reported up 0.4%; no reaction to the report.
Crude oil continues to increase; this morning over $103.00/barrel. Crude higher on concerns about Iran threats to close the straits of Hormuz and belief a deal will get done with Greece. US stock indexes improving also implies an increase in demand. So far markets haven’t been concerned that rising gasoline prices will negatively impact economic improvement.
After the weak start in the bond market this morning, since 8:30 there has been little movement or change in either stocks or bonds. Monday US markets will be closed for President’s Day, the day that Europe is expected to hold its summit in Brussels to accept the austerity plan in Greece and approve the bailout. With our markets closed traders are positioning ahead of time; right now it appears Greece will get the money, but we have been here before only to see Europe’s officials back away. Will this time be different? Likely it will because the clock is ticking down, not a lot more time to fiddle anymore; talk is over.
The 10 yr is softening, now well above its 40 day average on the yield and its relative strength bearish. There is a little support at 2.08% but major long term support is at 2.12%, the highest level since early Dec. We still don’t believe rates will increase in any significant way as long as the Fed is intent on keeping short term rates low. That said, we also believe the lows in US rates have been achieved; unless Greece defaults or the economic outlook reverses from the positive outlook that is driving stocks higher interest rates will not fall much.
Interest rate markets opened weak this morning with stock indexes better. Europe’s equity markets better on increasing belief Greece and Europe’s officials will actually get a deal completed at the summit meeting on Monday. Very early today the 10 yr note yield hit 2.04% (+6 bp) and MBS prices were off 8/32 (.25 bp) frm yesterday’s closes; by 9:00 some support was seen, the 10 yr moved back down to 2.02% and stock indexes backed off a little. 8:30 this morning Jan consumer price index data, the overall CPI increased 0.2% while the core (ex food and energy) also increased 0.2%, both in line with estimates. Yr/yr over CPI +2.9%, the core +2.3%; the yr/yr increase is somewhat troublesome with the core now +2.3% and at least pushing the Fed’s target level. As noted yesterday, the Fed prefers the personal consumption expenditures as its inflation gauge rather than total focus on CPI, nevertheless with oil prices climbing higher never-ending concerns over inflation was heightened on the data.
Will Greece get its money to avoid default? That question has been dominating markets since last July, on again-off again for six months with no resolution. The clock is ticking now, Greece has until March 20th to find the funds needed to pay for maturing debt (actual default would occur on March 27th). With all the comments coming from every official in Europe it is very difficult and sometimes confusing trying to follow the events as they unfold, however we believe Greece will get its bailout this go-round, what happens when the next maturities occur another bailout is unlikely. Presently markets in Europe and the US are betting on a deal being completed. Italian Prime Minister Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed optimism that an agreement on Greece can be reached at a Feb. 20 meeting of euro-area finance ministers.
At 9:30 the DJIA opened +35, NASDAQ -3; 10 yr note at 2.03% +5 bp and MBS prices -5/32 (.15 bp) frm yesterday’s closes.
The last data this week hit at 10:00; Jan leading economic indicators were expected up 0.5%, as reported up 0.4%; no reaction to the report.
Crude oil continues to increase; this morning over $103.00/barrel. Crude higher on concerns about Iran threats to close the straits of Hormuz and belief a deal will get done with Greece. US stock indexes improving also implies an increase in demand. So far markets haven’t been concerned that rising gasoline prices will negatively impact economic improvement.
After the weak start in the bond market this morning, since 8:30 there has been little movement or change in either stocks or bonds. Monday US markets will be closed for President’s Day, the day that Europe is expected to hold its summit in Brussels to accept the austerity plan in Greece and approve the bailout. With our markets closed traders are positioning ahead of time; right now it appears Greece will get the money, but we have been here before only to see Europe’s officials back away. Will this time be different? Likely it will because the clock is ticking down, not a lot more time to fiddle anymore; talk is over.
The 10 yr is softening, now well above its 40 day average on the yield and its relative strength bearish. There is a little support at 2.08% but major long term support is at 2.12%, the highest level since early Dec. We still don’t believe rates will increase in any significant way as long as the Fed is intent on keeping short term rates low. That said, we also believe the lows in US rates have been achieved; unless Greece defaults or the economic outlook reverses from the positive outlook that is driving stocks higher interest rates will not fall much.
Thursday, February 16, 2012
Mortgage Rates
8:30 economic releases took the small improvements out of the bond market this morning and improved the weak stock index futures which were trading lower. Weekly jobless claims were thought to be up 7K, as reported claims fell again by 13K to 348K, the lowest level in four years; continuing claims declined to 3.426 mil frm 3.526 mil last week. Jan housing starts were in line, up 1.5% to 699K annualized units; single family starts though fell 1.0%. Jan building permits were expected down 0.6% but actually increased 0.7%. Jan producer price index expected up 0.3% up just 0.1%, however the more important core (ex food and energy) surprisingly increased 0.4%. Inflation, the constant fear for fixed income investors, based on the Jan data is increasing a little. Treasuries slipped on the data taking mortgage prices lower. Fortunately for the bond market the Fed has made it clear the inflation data it focuses on isn’t CPI but the personal consumption expenditures that accompanies the monthly personal income and spending data. On a yr/yr basis the overall PPI up 4.1% and the core up 3.0%.
Three data points at 8:30 turned the 10 yr note from +5/32 in price to -9/32 at 9:00, the yield prior to 8:30 1.92%, at 9:00 1.97%. MBS prices up 3/32 (.09 bp) prior to 8:30, at 9:00 -7/32 (.22 bp). DJIA futures prior to 8:30 -50, at 9:00 +7, not getting the bounce traders were expecting on the better claims and housing data.
At 9:30 the DJIA opened +18, the 10 yr note -8/32 at 1.96% +3 bp and MBS prices -6/32 (.18 bp).
Nothing new out of Europe last night about Greece. Yesterday there were rather harsh comments from Greece officials toward Germany’s finance minister complaining that Germany wants Greece out of the EU. Greek politicians continue to add more cuts in order to achieve the needed funds to avoid defaulting in March, frustration increasing as each time Greece believes it has met the criteria set out by the EU, IMF and ECB it seems it comes up less than what is demanded. Greek citizens rioting and unsettling officials of the troika leading to more details and further austerity.
The final data today at 10:00; the Feb Philadelphia Fed business index expected at 10.0 frm 7.3 in Jan, right in line at 10.2. Interior components; new orders index 11.7 frm 6.9, employment 1.1 frm 11.6 in Jan and prices pd at 38.7 frm 31.8. Any index under zero is considered contractions, the higher the index the better the outlook. Employment at close to zero and a big decline from Jan provides another perspective on the stronger decline in weekly claims earlier this morning. There was no market reaction to the data in either stocks or bond markets.
Longer term interest rates continue to trade within a very tight range; essentially neutral, not bearish but not bullish either. Safety into treasuries over the Europe debt issues continues but with less than in the past. The 10 yr note, driver for 30 yr mtgs is finding resistance at 1.90% and support at the 2.00% level. MBSs in even a tighter yield range. The remainder of the day rate markets will track equity indexes and whatever any news out of Europe.
8:30 economic releases took the small improvements out of the bond market this morning and improved the weak stock index futures which were trading lower. Weekly jobless claims were thought to be up 7K, as reported claims fell again by 13K to 348K, the lowest level in four years; continuing claims declined to 3.426 mil frm 3.526 mil last week. Jan housing starts were in line, up 1.5% to 699K annualized units; single family starts though fell 1.0%. Jan building permits were expected down 0.6% but actually increased 0.7%. Jan producer price index expected up 0.3% up just 0.1%, however the more important core (ex food and energy) surprisingly increased 0.4%. Inflation, the constant fear for fixed income investors, based on the Jan data is increasing a little. Treasuries slipped on the data taking mortgage prices lower. Fortunately for the bond market the Fed has made it clear the inflation data it focuses on isn’t CPI but the personal consumption expenditures that accompanies the monthly personal income and spending data. On a yr/yr basis the overall PPI up 4.1% and the core up 3.0%.
Three data points at 8:30 turned the 10 yr note from +5/32 in price to -9/32 at 9:00, the yield prior to 8:30 1.92%, at 9:00 1.97%. MBS prices up 3/32 (.09 bp) prior to 8:30, at 9:00 -7/32 (.22 bp). DJIA futures prior to 8:30 -50, at 9:00 +7, not getting the bounce traders were expecting on the better claims and housing data.
At 9:30 the DJIA opened +18, the 10 yr note -8/32 at 1.96% +3 bp and MBS prices -6/32 (.18 bp).
Nothing new out of Europe last night about Greece. Yesterday there were rather harsh comments from Greece officials toward Germany’s finance minister complaining that Germany wants Greece out of the EU. Greek politicians continue to add more cuts in order to achieve the needed funds to avoid defaulting in March, frustration increasing as each time Greece believes it has met the criteria set out by the EU, IMF and ECB it seems it comes up less than what is demanded. Greek citizens rioting and unsettling officials of the troika leading to more details and further austerity.
The final data today at 10:00; the Feb Philadelphia Fed business index expected at 10.0 frm 7.3 in Jan, right in line at 10.2. Interior components; new orders index 11.7 frm 6.9, employment 1.1 frm 11.6 in Jan and prices pd at 38.7 frm 31.8. Any index under zero is considered contractions, the higher the index the better the outlook. Employment at close to zero and a big decline from Jan provides another perspective on the stronger decline in weekly claims earlier this morning. There was no market reaction to the data in either stocks or bond markets.
Longer term interest rates continue to trade within a very tight range; essentially neutral, not bearish but not bullish either. Safety into treasuries over the Europe debt issues continues but with less than in the past. The 10 yr note, driver for 30 yr mtgs is finding resistance at 1.90% and support at the 2.00% level. MBSs in even a tighter yield range. The remainder of the day rate markets will track equity indexes and whatever any news out of Europe.
Wednesday, February 15, 2012
Mortgage Rates
Interest rate markets started unchanged this morning. At 8:30 the NY Empire State manufacturing index, expected at 15 frm 13.5 in Jan, jumped to 19.5; however the components were not that strong. The new orders index at 9.7 frm 12.1, employment at 11.8 frm 13.7 and prices pd at 25.9 frm 26.4. Stock market key indexes were stronger at 8:30 than at 9:00 with the DJIA +40. At 9:00 ahead of two more data points the 10 yr unchanged as were mortgage prices.
At 9:15 Jan industrial production was unchanged against forecasts of an increase of 0.6%; Dec production however was revised from +0.4% to +1.0%. Jan capacity utilization at 78.5%, about In line with estimates but Dec was revised from 78.1% to 78.6%. Reaction was mute, no change in the bond market or in the stock indexes prior to the 9:30 open.
At 9:30 the DJIA opened +16, the 10 yr unchanged and MBS prices on 30s -2/32 (.06 bp).
At 10:00 Feb NAHB housing market index was expected at 26 from 25 in Jan, increased to 29; single family sales at 30 frm 25 in Jan, six month out sales index at 34 frm 29 in Jan. A better report but no reaction to it in financial markets.
The markets quiet this morning and likely will stay that way until at least 2:00 when the minutes from 1/25 FOMC meeting will be released. How much, if any, talk took place about the possibility of another easing move from the Fed; and the discussions on how long to keep rates low. The Fed’s outlook for the economic recovery isn’t as optimistic as in the private sector.
Greece was dealt another blow in its efforts to get financial aid to avoid default next month. Euro area finance officials are investigating delaying parts or all of the second bailout while still avoiding a disorderly default, Reuters reported, citing several European Union sources. A decision slated for tonight on aid totaling 130 billion euros ($171 billion) was postponed until Feb. 20 at the earliest. Greek Finance Minister Evangelos Venizelos said Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the 17-nation euro area as talks over a second aid program ran into new obstacles. Europe’s finance ministers canceled a Brussels meeting slated for today on concern about the lack of assurances from Greek leaders to stick to spending cuts. They will hold a teleconference instead. Meanwhile China said it will get more involved in Europe’s bailout effort. China, which holds the world’s largest currency reserves, can provide help through avenues including the central bank and its sovereign wealth fund, said a People’s Bank of China governor. In the past China has said it would help, but not likely unless Greece gets its bailout funds that continue to allude it.
Mortgage applications decreased 1.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 10, 2012. The Refinance Index increased 0.8% from the previous week to its highest level since August 8, 2011. The seasonally adjusted Purchase Index decreased 8.4% from one week earlier. The refinance share of mortgage activity increased to 81.1% of total applications from 80.5% the previous week. This is the highest refinance share since January 20, 2012. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4% from 6.0% of total applications from the previous week. The average loan size in the United States in January 2012 was $226,000. Average loan size has been increasing in recent months, up from $225,000 in December 2011 and up from $207,000 in January 2011. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.08% from 4.05%, with points increasing to 0.51 from 0.44 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.30% from 4.29%, with points increasing to 0.44 from 0.43 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% from 3.89%, with points remaining unchanged at 0.78 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.33%, with points increasing to 0.40 from 0.37 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.93% from 2.91%, with points increasing to 0.42 from 0.40 (including the origination fee) for 80% loans.
Interest rate markets started unchanged this morning. At 8:30 the NY Empire State manufacturing index, expected at 15 frm 13.5 in Jan, jumped to 19.5; however the components were not that strong. The new orders index at 9.7 frm 12.1, employment at 11.8 frm 13.7 and prices pd at 25.9 frm 26.4. Stock market key indexes were stronger at 8:30 than at 9:00 with the DJIA +40. At 9:00 ahead of two more data points the 10 yr unchanged as were mortgage prices.
At 9:15 Jan industrial production was unchanged against forecasts of an increase of 0.6%; Dec production however was revised from +0.4% to +1.0%. Jan capacity utilization at 78.5%, about In line with estimates but Dec was revised from 78.1% to 78.6%. Reaction was mute, no change in the bond market or in the stock indexes prior to the 9:30 open.
At 9:30 the DJIA opened +16, the 10 yr unchanged and MBS prices on 30s -2/32 (.06 bp).
At 10:00 Feb NAHB housing market index was expected at 26 from 25 in Jan, increased to 29; single family sales at 30 frm 25 in Jan, six month out sales index at 34 frm 29 in Jan. A better report but no reaction to it in financial markets.
The markets quiet this morning and likely will stay that way until at least 2:00 when the minutes from 1/25 FOMC meeting will be released. How much, if any, talk took place about the possibility of another easing move from the Fed; and the discussions on how long to keep rates low. The Fed’s outlook for the economic recovery isn’t as optimistic as in the private sector.
Greece was dealt another blow in its efforts to get financial aid to avoid default next month. Euro area finance officials are investigating delaying parts or all of the second bailout while still avoiding a disorderly default, Reuters reported, citing several European Union sources. A decision slated for tonight on aid totaling 130 billion euros ($171 billion) was postponed until Feb. 20 at the earliest. Greek Finance Minister Evangelos Venizelos said Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the 17-nation euro area as talks over a second aid program ran into new obstacles. Europe’s finance ministers canceled a Brussels meeting slated for today on concern about the lack of assurances from Greek leaders to stick to spending cuts. They will hold a teleconference instead. Meanwhile China said it will get more involved in Europe’s bailout effort. China, which holds the world’s largest currency reserves, can provide help through avenues including the central bank and its sovereign wealth fund, said a People’s Bank of China governor. In the past China has said it would help, but not likely unless Greece gets its bailout funds that continue to allude it.
Mortgage applications decreased 1.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 10, 2012. The Refinance Index increased 0.8% from the previous week to its highest level since August 8, 2011. The seasonally adjusted Purchase Index decreased 8.4% from one week earlier. The refinance share of mortgage activity increased to 81.1% of total applications from 80.5% the previous week. This is the highest refinance share since January 20, 2012. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4% from 6.0% of total applications from the previous week. The average loan size in the United States in January 2012 was $226,000. Average loan size has been increasing in recent months, up from $225,000 in December 2011 and up from $207,000 in January 2011. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.08% from 4.05%, with points increasing to 0.51 from 0.44 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.30% from 4.29%, with points increasing to 0.44 from 0.43 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% from 3.89%, with points remaining unchanged at 0.78 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.33%, with points increasing to 0.40 from 0.37 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.93% from 2.91%, with points increasing to 0.42 from 0.40 (including the origination fee) for 80% loans.
Tuesday, February 14, 2012
Mortgage Rates
Prior to 8:30 treasuries and mortgage prices were up a little but generally unchanged. At 8:30 Jan retail sales, expected +0.8% overall and +0.5% when auto sales are excluded, as reported it was a strange outcome. Overall sales were up just 0.4% but when auto sales are eliminated sales were up 0.7% suggesting not many autos sold. The reaction improved treasury and mortgage prices and pushed stock indexes lower. Also at 8:30 Jan import prices were up 0.3% and export prices up 0.2%.
German Finance Minister Wolfgang Schaeuble said Europe is better prepared for a Greek default than two years ago. German investor confidence surged to a 10-month high in February as global growth improved and Europe’s debt crisis showed signs of abating. Italian and Spanish borrowing costs fell to the lowest in at least 11 months at debt sales today as investors ignored downgrades by Moody’s Investors Service. Euro-area finance ministers are due to convene in Brussels tomorrow for their second extraordinary meeting in a week after telling Greek officials to identify additional cuts of 325 million euros ($428 million). The measures are among conditions that must be met by tomorrow for Greece to secure a 130 billion-euro rescue needed to avert financial collapse. The comment that Europe is better prepared for a default in Greece might temper a default if Greece cannot meet requirements needed for the bailout. No matter the day or the new Greece’s debt issues seem to go on forever, will it end soon? The bond market this morning is seeing some buying, some over weaker retail sales but also some safety buys on Schaeuble’ s comments.
At 9:30 the DJIA opened -30; the 10 yr note +7/32 at 1.95%, MBS prices +6/32 (.18 bp) frm yesterdays close.
At 10:00 Dec business inventories, expected up 0.5%, as reported +0.4%, sales were up 0.7% with a 1.26 month inventory to sales ratio. The equity market saw some initial selling on the data with rate markets edging a little higher in prices.
The 10 yr note, better this morning, has moved to its 40 day average, for the last five sessions the note yield has been above it. Interest rates continue to trade in a narrow range with not much changes in either mortgage rates or the yield on the 10 yr. Tomorrow the Fed will release the minutes of the 1/25 FOMC meeting, today like yesterday, we don’t expect much movement in either bonds or mortgage prices. The rest of the session will focus on how equity markets trade; there is a growing belief that stocks are set to continue the recent rally. Although opening a little weaker this morning if the market turns around and rallies as it did yesterday after opening weaker, it will take away any significant improvement in the bond and mortgage markets.
Prior to 8:30 treasuries and mortgage prices were up a little but generally unchanged. At 8:30 Jan retail sales, expected +0.8% overall and +0.5% when auto sales are excluded, as reported it was a strange outcome. Overall sales were up just 0.4% but when auto sales are eliminated sales were up 0.7% suggesting not many autos sold. The reaction improved treasury and mortgage prices and pushed stock indexes lower. Also at 8:30 Jan import prices were up 0.3% and export prices up 0.2%.
German Finance Minister Wolfgang Schaeuble said Europe is better prepared for a Greek default than two years ago. German investor confidence surged to a 10-month high in February as global growth improved and Europe’s debt crisis showed signs of abating. Italian and Spanish borrowing costs fell to the lowest in at least 11 months at debt sales today as investors ignored downgrades by Moody’s Investors Service. Euro-area finance ministers are due to convene in Brussels tomorrow for their second extraordinary meeting in a week after telling Greek officials to identify additional cuts of 325 million euros ($428 million). The measures are among conditions that must be met by tomorrow for Greece to secure a 130 billion-euro rescue needed to avert financial collapse. The comment that Europe is better prepared for a default in Greece might temper a default if Greece cannot meet requirements needed for the bailout. No matter the day or the new Greece’s debt issues seem to go on forever, will it end soon? The bond market this morning is seeing some buying, some over weaker retail sales but also some safety buys on Schaeuble’ s comments.
At 9:30 the DJIA opened -30; the 10 yr note +7/32 at 1.95%, MBS prices +6/32 (.18 bp) frm yesterdays close.
At 10:00 Dec business inventories, expected up 0.5%, as reported +0.4%, sales were up 0.7% with a 1.26 month inventory to sales ratio. The equity market saw some initial selling on the data with rate markets edging a little higher in prices.
The 10 yr note, better this morning, has moved to its 40 day average, for the last five sessions the note yield has been above it. Interest rates continue to trade in a narrow range with not much changes in either mortgage rates or the yield on the 10 yr. Tomorrow the Fed will release the minutes of the 1/25 FOMC meeting, today like yesterday, we don’t expect much movement in either bonds or mortgage prices. The rest of the session will focus on how equity markets trade; there is a growing belief that stocks are set to continue the recent rally. Although opening a little weaker this morning if the market turns around and rallies as it did yesterday after opening weaker, it will take away any significant improvement in the bond and mortgage markets.
Monday, February 13, 2012
Mortgage Rates
This Week: after last week with little economic reports this week has more than a handful to absorb. No data on Monday but the rest of the week has inflation reports (PPI, CPI), reports on manufacturing 9Industrial production and capacity utilization), Philly Fed and Empire State indexes and of course weekly jobless claims. On Wednesday the FOMC minutes from the 1/25 meeting, some thinking out there that the Fed may be considering another QE to boost spending, unlikely the Fed will act but it is something in play now.
Greece still holding Europe and the rest of the world hostage trying to get austerity cuts in order to get another round of funds to avoid defaulting on its debt on March 20th. Over the weekend riots ensued in Greece in rebellion to the draconian cuts needed to trigger the financial package. Overall there isn’t much movement expected in the bond and mortgage markets this week as the 10 yr and mortgages continue in their respective ranges that have been in place since November. Long term rates (10 yr note) cannot be sustained below 2.00%, and cannot climb over 2.05%; mortgage rates confined an even tighter range.
This Week: after last week with little economic reports this week has more than a handful to absorb. No data on Monday but the rest of the week has inflation reports (PPI, CPI), reports on manufacturing 9Industrial production and capacity utilization), Philly Fed and Empire State indexes and of course weekly jobless claims. On Wednesday the FOMC minutes from the 1/25 meeting, some thinking out there that the Fed may be considering another QE to boost spending, unlikely the Fed will act but it is something in play now.
Greece still holding Europe and the rest of the world hostage trying to get austerity cuts in order to get another round of funds to avoid defaulting on its debt on March 20th. Over the weekend riots ensued in Greece in rebellion to the draconian cuts needed to trigger the financial package. Overall there isn’t much movement expected in the bond and mortgage markets this week as the 10 yr and mortgages continue in their respective ranges that have been in place since November. Long term rates (10 yr note) cannot be sustained below 2.00%, and cannot climb over 2.05%; mortgage rates confined an even tighter range.
Friday, February 10, 2012
Mortgage Rates
Treasuries and MBSs opened better this morning; all about Greece and technical factors. Yesterday markets were buoyed by news that Greek politicians had come to an agreement to meet conditions to get another infusion of money to avoid default on March 20th, overnight the summit meeting in Brussels didn’t approve the austerity plans, apparently because the various cuts in spending were not specific enough. Greece must pass its latest austerity package into law and identify 325 million euros ($431 million) in spending cuts before euro-area governments endorse a second bailout for the country, Luxembourg Prime Minister Jean-Claude Juncker said. One Greek politician said the roadmap proposed for Greece is wrong and he can’t vote for the accord as is. The Greek parliament is due to vote on the measures this weekend. Euro-region ministers are set to meet again on Feb. 15. The German finance minister, briefing lawmakers in Germany on estimates by the so-called troika assessing Greek progress, said that Greece’s pledges would leave debt at as much as 136% of gross domestic product by 2020. The target was to reduce debt to 120% of GDP by then.
Technically, yesterday the 10 yr note held at its near term support level at 2.05% (intraday 2.07%, close 2.04%). This morning bouncing back on the uncertainty over Greece, the 10 is getting another round of safety moves ahead of the weekend. Mortgage prices better but not much change from yesterday morning’s pricing. The 10 yr at 9:30 at 1.98%, resistance now at 1.94%.
We are getting questions and frustrations from some people questioning why there is so much attention to Greece. If Greece defaults the fear is that it will spread through the EU with other countries teetering on the edge of default. Greece defaulting is seen as a huge problem from Europe’s banks as well as the implications for Europe falling back into deep recession; a domino effect. For all the talk about Greece’s austerity budget, unless Germany and France step up with more financing there is no plan that will end the crisis.
The DJIA opened down 112 points at 9:30 on Europe; the 10 yr 1.98% -6 bp while mortgage prices traded +7/32 (.22 bp) frm yesterday’s close.
Earlier this morning the Dec trade deficit was about in line with forecasts, -$48.8B, a six month high as the US is importing more than exporting. No direct reaction to the data.
At 9:55 the mid-Feb U. of Michigan consumer sentiment index was expected to decline a little to 74.5 frm 75.0 at the end of Jan; the index was weaker at 72.5 The current conditions index at 79.6 frm 84.2 two weeks ago, expectations at 68.0 frm 69.1 and the 12 month outlook unchanged at 82. The weaker indexes pushed the DJIA to a new low on the day but the bond and mortgage markets didn’t move on the report. The only thing left in a week that had little economic data, at 2:00 Treasury will report the Jan budget data, a deficit of $40.0B is expected.
With 100% attention on Europe’s debt problems and no approval on the Greek austerity plan, the rest of the day will likely be relatively quiet with treasuries and mortgages holding about where they are presently trading and equity indexes weak. Unlikely we will see additional price gains in either treasuries or MBSs. What occurs or doesn’t occur in Europe over the weekend (Greek parliament is scheduled to vote over the weekend) will dictate how markets trade on Monday. IF Greece wasn’t driving trade the bond and mortgage markets would likely be moving higher in yield and lower in prices as many pundits are now turning bearish on the bond market in favor of equities.
Treasuries and MBSs opened better this morning; all about Greece and technical factors. Yesterday markets were buoyed by news that Greek politicians had come to an agreement to meet conditions to get another infusion of money to avoid default on March 20th, overnight the summit meeting in Brussels didn’t approve the austerity plans, apparently because the various cuts in spending were not specific enough. Greece must pass its latest austerity package into law and identify 325 million euros ($431 million) in spending cuts before euro-area governments endorse a second bailout for the country, Luxembourg Prime Minister Jean-Claude Juncker said. One Greek politician said the roadmap proposed for Greece is wrong and he can’t vote for the accord as is. The Greek parliament is due to vote on the measures this weekend. Euro-region ministers are set to meet again on Feb. 15. The German finance minister, briefing lawmakers in Germany on estimates by the so-called troika assessing Greek progress, said that Greece’s pledges would leave debt at as much as 136% of gross domestic product by 2020. The target was to reduce debt to 120% of GDP by then.
Technically, yesterday the 10 yr note held at its near term support level at 2.05% (intraday 2.07%, close 2.04%). This morning bouncing back on the uncertainty over Greece, the 10 is getting another round of safety moves ahead of the weekend. Mortgage prices better but not much change from yesterday morning’s pricing. The 10 yr at 9:30 at 1.98%, resistance now at 1.94%.
We are getting questions and frustrations from some people questioning why there is so much attention to Greece. If Greece defaults the fear is that it will spread through the EU with other countries teetering on the edge of default. Greece defaulting is seen as a huge problem from Europe’s banks as well as the implications for Europe falling back into deep recession; a domino effect. For all the talk about Greece’s austerity budget, unless Germany and France step up with more financing there is no plan that will end the crisis.
The DJIA opened down 112 points at 9:30 on Europe; the 10 yr 1.98% -6 bp while mortgage prices traded +7/32 (.22 bp) frm yesterday’s close.
Earlier this morning the Dec trade deficit was about in line with forecasts, -$48.8B, a six month high as the US is importing more than exporting. No direct reaction to the data.
At 9:55 the mid-Feb U. of Michigan consumer sentiment index was expected to decline a little to 74.5 frm 75.0 at the end of Jan; the index was weaker at 72.5 The current conditions index at 79.6 frm 84.2 two weeks ago, expectations at 68.0 frm 69.1 and the 12 month outlook unchanged at 82. The weaker indexes pushed the DJIA to a new low on the day but the bond and mortgage markets didn’t move on the report. The only thing left in a week that had little economic data, at 2:00 Treasury will report the Jan budget data, a deficit of $40.0B is expected.
With 100% attention on Europe’s debt problems and no approval on the Greek austerity plan, the rest of the day will likely be relatively quiet with treasuries and mortgages holding about where they are presently trading and equity indexes weak. Unlikely we will see additional price gains in either treasuries or MBSs. What occurs or doesn’t occur in Europe over the weekend (Greek parliament is scheduled to vote over the weekend) will dictate how markets trade on Monday. IF Greece wasn’t driving trade the bond and mortgage markets would likely be moving higher in yield and lower in prices as many pundits are now turning bearish on the bond market in favor of equities.
Wednesday, February 8, 2012
Mortgage Rates
In early trade this morning the 10 yr note yield touched 2.00% ahead of the $24B 10 yr auction later this afternoon (1:00 pm). Mortgage prices started slightly weaker; both the 10 yr and MBS prices holding well so far with no economic releases scheduled again today. Stock index futures traded slightly better prior to the open at 9:30. At 9:00 this morning, after testing support at 2.00% the 10 yr was back to 1.98% unchanged from yesterday and mortgage prices were also unchanged.
At 9:30 the DJIA opened generally unchanged (-3 points); the 10 yr note -132 at 1.98% unch and mortgage prices also unchanged. Investors should have 100% of investments in equities because of valuations and higher returns than bonds, said Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager.
Greece remains a major focus for markets as it struggles to come up with a debt relief plan. Greece’s prime minister delayed a meeting of Greece’s political parties again yesterday, the second delay in as many days. Greek Prime Minister Lucas Papademos is set to negotiate with leaders of the political parties supporting his caretaker government after he missed another deadline to secure a second aid package. The ECB is prepared to swap its holdings of Greek government bonds to contribute to a reduction of the country’s debt burden, Dow Jones reported yesterday, citing unidentified people briefed on the talks. The agreement could reduce Greece’s debt by as much as 11 billion euros, Dow Jones said. A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due. Parliament may be called to vote on the terms of the write-down on Feb. 12, state-runs Athens News Agency reported yesterday, without saying how it got the information.
Mortgage applications increased 7.5% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 3, 2012. The Refinance Index increased 9.4% from the previous week. The seasonally adjusted Purchase Index increased 0.1% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 4.88%. The four week moving average is up 0.65% for the seasonally adjusted Purchase Index, while this average is up 5.72% for the Refinance Index. The refinance share of mortgage activity increased to 80.5% of total applications from 80.0% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.0% from 5.6% 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) decreased to 4.05%, the lowest rate in the history of the survey, from 4.09%, with points increasing to 0.44 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.29%, the lowest rate in the history of the survey, from 4.33%, with points increasing to 0.43 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.89%, the lowest rate in the history of the survey, from 3.96%, with points increasing to 0.78 from 0.61 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.33%, the lowest rate in the history of the survey, from 3.36%, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.91% from 2.94%, with points increasing to 0.40 from 0.39 (including the origination fee) for 80% loans.
At 1:00 Treasury auction a new 10 yr note, selling $24B of the notes. Yesterday’s 3 yr note didn’t do quite as well as previous 3 yr auctions, today’s 10 yr with the yield close to 2.00% on the current 10 yr will be a good test of demand after yields have increased over the last week. If demand is weak look for the 10yr to exceed 2.00%; a strong auction will likely rally the 10 yr and mortgages. In the meantime the bond market will likely be relatively flat this morning ahead of the auction.
MBS markets are holding well frm a technical perspective while the bellwether 10 yr note is slightly bearish, trading above its 40 day average on the yield and the relative strength index above the pivotal 50 level. That said, so far the 10 yr is holding its first support at 2.00%. The outlook for the rate markets depends on three factors; the Greek debt issues, how the stock market trades and today’s $24B 10 yr auction. As for lower rates ahead, the 10 yr has heavy lifting to do when it moves below 2.00%, there is huge resistance at 1.80%; mortgage rates don’t have much more improvement left at the moment, however there is not much likelihood mortgage rates will increase much either.
In early trade this morning the 10 yr note yield touched 2.00% ahead of the $24B 10 yr auction later this afternoon (1:00 pm). Mortgage prices started slightly weaker; both the 10 yr and MBS prices holding well so far with no economic releases scheduled again today. Stock index futures traded slightly better prior to the open at 9:30. At 9:00 this morning, after testing support at 2.00% the 10 yr was back to 1.98% unchanged from yesterday and mortgage prices were also unchanged.
At 9:30 the DJIA opened generally unchanged (-3 points); the 10 yr note -132 at 1.98% unch and mortgage prices also unchanged. Investors should have 100% of investments in equities because of valuations and higher returns than bonds, said Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager.
Greece remains a major focus for markets as it struggles to come up with a debt relief plan. Greece’s prime minister delayed a meeting of Greece’s political parties again yesterday, the second delay in as many days. Greek Prime Minister Lucas Papademos is set to negotiate with leaders of the political parties supporting his caretaker government after he missed another deadline to secure a second aid package. The ECB is prepared to swap its holdings of Greek government bonds to contribute to a reduction of the country’s debt burden, Dow Jones reported yesterday, citing unidentified people briefed on the talks. The agreement could reduce Greece’s debt by as much as 11 billion euros, Dow Jones said. A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due. Parliament may be called to vote on the terms of the write-down on Feb. 12, state-runs Athens News Agency reported yesterday, without saying how it got the information.
Mortgage applications increased 7.5% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 3, 2012. The Refinance Index increased 9.4% from the previous week. The seasonally adjusted Purchase Index increased 0.1% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 4.88%. The four week moving average is up 0.65% for the seasonally adjusted Purchase Index, while this average is up 5.72% for the Refinance Index. The refinance share of mortgage activity increased to 80.5% of total applications from 80.0% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.0% from 5.6% 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) decreased to 4.05%, the lowest rate in the history of the survey, from 4.09%, with points increasing to 0.44 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.29%, the lowest rate in the history of the survey, from 4.33%, with points increasing to 0.43 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.89%, the lowest rate in the history of the survey, from 3.96%, with points increasing to 0.78 from 0.61 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.33%, the lowest rate in the history of the survey, from 3.36%, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.91% from 2.94%, with points increasing to 0.40 from 0.39 (including the origination fee) for 80% loans.
At 1:00 Treasury auction a new 10 yr note, selling $24B of the notes. Yesterday’s 3 yr note didn’t do quite as well as previous 3 yr auctions, today’s 10 yr with the yield close to 2.00% on the current 10 yr will be a good test of demand after yields have increased over the last week. If demand is weak look for the 10yr to exceed 2.00%; a strong auction will likely rally the 10 yr and mortgages. In the meantime the bond market will likely be relatively flat this morning ahead of the auction.
MBS markets are holding well frm a technical perspective while the bellwether 10 yr note is slightly bearish, trading above its 40 day average on the yield and the relative strength index above the pivotal 50 level. That said, so far the 10 yr is holding its first support at 2.00%. The outlook for the rate markets depends on three factors; the Greek debt issues, how the stock market trades and today’s $24B 10 yr auction. As for lower rates ahead, the 10 yr has heavy lifting to do when it moves below 2.00%, there is huge resistance at 1.80%; mortgage rates don’t have much more improvement left at the moment, however there is not much likelihood mortgage rates will increase much either.
Tuesday, February 7, 2012
Mortgage Rates
Very early this morning the US stock indexes were weak following Europe’s equity markets; the 10 yr note at 7:00 am -2/32. By 8:30 however the 10 yr note fell further, down 11/32 at 1.94% +4 bp, MBS prices -2/32 (.06 bp). This is another day with no economic data until 3:00 this afternoon when Dec consumer credit is reported (+$8.5B). At 1:00 Treasury will auction $32B of 3 yr notes, last month’s 3 yr auction drew the largest demand on record for a 3 yr note.
A little volatility early this morning when a story hit that Greece was close to a deal to avoid default, it didn’t last long though as there were no follow-up details. No one will jump the gun on Greece’s ability to get a deal with creditors resolved given that Greek officials have constantly said a deal was close and would be completed in “a few days”.
German Chancellor Angela Merkel said time was running out for Greece to accept conditions for a bailout. Meanwhile Greek Prime Minister Lucas Papademos meets political leaders today to discuss more cuts needed to get a rescue package. They have already agreed to make further cuts this year equal to 1.5% of gross domestic product, they have yet to decide how to recapitalize banks, ensure the viability of pension funds and reduce wages to increase the economy’s competitiveness. Yesterday the Prime Minister was reported to have asked for a detailed analysis from his staff on how Greece will fair if it decides to simply default.
In this global economy, markets pay a lot of attention to what is occurring in Europe and China; China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today. “The global economy is slowing down, Europe’s sovereign-debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said. German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9% from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged.
I guess it is obvious that Europe’s debt crisis is so extreme that coming up with any solution is elusive at best. Banks won’t be able to take the haircut necessary, the ECB doesn’t have the funds to absorb much of the massive debt and the IMF won’t do much until there is some kind of assurance the EU countries can manage their budgets with huge spending cuts. In the meantime the economy in Europe is teetering on the edge and holding back what might be a solid global economic rebound. In the case of Greece, if it does default the repercussions in US markets may not be as serious as investors now believe. Estimates we hear are that the US equity market might lose 3.0% to 5.0% if Greece defaults; not good but if that were all there is likely it would be recovered quickly. Where the serious implications occur is a Greek default would likely leads to other sovereigns tossing in the towel unwinding the EU.
The DJIA opened -20 at 9:30, the 10 yr note -14/32 the weakest so far at 1.95% +5 bp. MBS prices holding but likely lenders will price defensively, at 9:30 -2/32 (.06 bp).
Fed chair Bernanke will testify on the economy at 10:00 at the Senate Budget Committee.
Technically the 10 yr note is presently testing its 40 day MA at 1.95%, a close above 1.95% would support a move to 2.00%. The relative strength index is at neutral 50. Although the note looks a little soft so far today, it is unlikely that interest rates will increase much; equally as we have commented a few times, we do not believe there is a lot left in the present rally. The 10 yr has a wall at 1.80%; it is in a range between 2.00% and 1.80% and likely will stay there. Mortgage rates also confined to a 15 to 20 basis point range in rates.
Very early this morning the US stock indexes were weak following Europe’s equity markets; the 10 yr note at 7:00 am -2/32. By 8:30 however the 10 yr note fell further, down 11/32 at 1.94% +4 bp, MBS prices -2/32 (.06 bp). This is another day with no economic data until 3:00 this afternoon when Dec consumer credit is reported (+$8.5B). At 1:00 Treasury will auction $32B of 3 yr notes, last month’s 3 yr auction drew the largest demand on record for a 3 yr note.
A little volatility early this morning when a story hit that Greece was close to a deal to avoid default, it didn’t last long though as there were no follow-up details. No one will jump the gun on Greece’s ability to get a deal with creditors resolved given that Greek officials have constantly said a deal was close and would be completed in “a few days”.
German Chancellor Angela Merkel said time was running out for Greece to accept conditions for a bailout. Meanwhile Greek Prime Minister Lucas Papademos meets political leaders today to discuss more cuts needed to get a rescue package. They have already agreed to make further cuts this year equal to 1.5% of gross domestic product, they have yet to decide how to recapitalize banks, ensure the viability of pension funds and reduce wages to increase the economy’s competitiveness. Yesterday the Prime Minister was reported to have asked for a detailed analysis from his staff on how Greece will fair if it decides to simply default.
In this global economy, markets pay a lot of attention to what is occurring in Europe and China; China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today. “The global economy is slowing down, Europe’s sovereign-debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said. German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9% from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged.
I guess it is obvious that Europe’s debt crisis is so extreme that coming up with any solution is elusive at best. Banks won’t be able to take the haircut necessary, the ECB doesn’t have the funds to absorb much of the massive debt and the IMF won’t do much until there is some kind of assurance the EU countries can manage their budgets with huge spending cuts. In the meantime the economy in Europe is teetering on the edge and holding back what might be a solid global economic rebound. In the case of Greece, if it does default the repercussions in US markets may not be as serious as investors now believe. Estimates we hear are that the US equity market might lose 3.0% to 5.0% if Greece defaults; not good but if that were all there is likely it would be recovered quickly. Where the serious implications occur is a Greek default would likely leads to other sovereigns tossing in the towel unwinding the EU.
The DJIA opened -20 at 9:30, the 10 yr note -14/32 the weakest so far at 1.95% +5 bp. MBS prices holding but likely lenders will price defensively, at 9:30 -2/32 (.06 bp).
Fed chair Bernanke will testify on the economy at 10:00 at the Senate Budget Committee.
Technically the 10 yr note is presently testing its 40 day MA at 1.95%, a close above 1.95% would support a move to 2.00%. The relative strength index is at neutral 50. Although the note looks a little soft so far today, it is unlikely that interest rates will increase much; equally as we have commented a few times, we do not believe there is a lot left in the present rally. The 10 yr has a wall at 1.80%; it is in a range between 2.00% and 1.80% and likely will stay there. Mortgage rates also confined to a 15 to 20 basis point range in rates.
Monday, February 6, 2012
Mortgage Rates
Treasuries and mortgages opened unchanged this morning with no news. Greece still can’t finalize anything on their debt workout; three weeks and counting since Greek officials said they were close to an agreement with creditors. Last week’s Jan employment report was much better than even the most optimistic forecasts and counter to the pessimistic outlook delivered from the Fed at the conclusion of the Jan 25th FOMC meeting. Not only the employment data stronger but the two ISM reports for Jan (manufacturing and service sector) were better than what had been expected.
European bank supervisors may discuss easing requirements for lenders to hold capital against sovereign debt this week as part of more than 30 meetings this month to track banks’ progress in complying with updated requirements, two people with knowledge of the discussions said. After three weeks of discussions and nothing coming from it Fitch said a Greek disorderly default “cannot be wholly discounted.” “Fitch expects Greece to undertake an orderly debt restructuring, which would ensure that a payment system is in place,” the ratings company said in a statement today. “However, a disorderly default, which may include an exit from the euro zone, cannot be wholly discounted.” European leaders stepped up pressure on Greek politicians to accept the conditions for a 130 billion-euro ($171 billion) bailout, saying time was running out.
Today we have no scheduled reports; this week the economic calendar doesn’t offer much. Treasury will auction $72B of notes and bonds this week beginning tomorrow through Thursday.
At 9:30 the DJIA opened -60, the 10 yr note -3/32 to 1.94% +1.5% and mortgage prices +1/32 (.03 bp). Treasuries facing auctions this week are hanging back with yields unchanged after Friday’s drumming over the Jan employment report.
This Week’s Economic Calendar:
Tuesday;
1:00 pm $32B 3 yr note auction
3:00 pm Dec consumer credit (+$8.5B, +$20.4B in Nov)
Wednesday;
7:00 am MBA mortgage applications
1:00 pm $24B 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+3K to 370K; continuing claims 3.475 mil frm 3.437 mil)
10:00 am Dec wholesale inventories (+0.4%)
1:00 pm $16B 30 yr bond auction
Friday;
8:30 am Dec trade balance (-$48.2B)
9:55 am U. of Michigan sentiment index (74.0 frm 75.0)
2:00 pm Jan Treasury budget (-$40.0B)
Treasuries continue to weaken this morning, after opening slightly better the 10 yr note at 10:00 -4/32 at 1.94% +1.5% with MBS trade -1/32 (.03 bp) at 10:00. Technically still positive but softening now. As we have noted countless times, the 10 yr note struggles when it falls below 2.00%, mortgage rates remain subject to treasuries and also have demonstrated an inability to fall when at the present levels. Safe haven to treasuries has waned even with the potential of Greece deflating. Traders don’t believe Greece will default even with nothing being finalized for weeks and the clock ticking for Greece to make its next payment next month.
Treasuries and mortgages opened unchanged this morning with no news. Greece still can’t finalize anything on their debt workout; three weeks and counting since Greek officials said they were close to an agreement with creditors. Last week’s Jan employment report was much better than even the most optimistic forecasts and counter to the pessimistic outlook delivered from the Fed at the conclusion of the Jan 25th FOMC meeting. Not only the employment data stronger but the two ISM reports for Jan (manufacturing and service sector) were better than what had been expected.
European bank supervisors may discuss easing requirements for lenders to hold capital against sovereign debt this week as part of more than 30 meetings this month to track banks’ progress in complying with updated requirements, two people with knowledge of the discussions said. After three weeks of discussions and nothing coming from it Fitch said a Greek disorderly default “cannot be wholly discounted.” “Fitch expects Greece to undertake an orderly debt restructuring, which would ensure that a payment system is in place,” the ratings company said in a statement today. “However, a disorderly default, which may include an exit from the euro zone, cannot be wholly discounted.” European leaders stepped up pressure on Greek politicians to accept the conditions for a 130 billion-euro ($171 billion) bailout, saying time was running out.
Today we have no scheduled reports; this week the economic calendar doesn’t offer much. Treasury will auction $72B of notes and bonds this week beginning tomorrow through Thursday.
At 9:30 the DJIA opened -60, the 10 yr note -3/32 to 1.94% +1.5% and mortgage prices +1/32 (.03 bp). Treasuries facing auctions this week are hanging back with yields unchanged after Friday’s drumming over the Jan employment report.
This Week’s Economic Calendar:
Tuesday;
1:00 pm $32B 3 yr note auction
3:00 pm Dec consumer credit (+$8.5B, +$20.4B in Nov)
Wednesday;
7:00 am MBA mortgage applications
1:00 pm $24B 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+3K to 370K; continuing claims 3.475 mil frm 3.437 mil)
10:00 am Dec wholesale inventories (+0.4%)
1:00 pm $16B 30 yr bond auction
Friday;
8:30 am Dec trade balance (-$48.2B)
9:55 am U. of Michigan sentiment index (74.0 frm 75.0)
2:00 pm Jan Treasury budget (-$40.0B)
Treasuries continue to weaken this morning, after opening slightly better the 10 yr note at 10:00 -4/32 at 1.94% +1.5% with MBS trade -1/32 (.03 bp) at 10:00. Technically still positive but softening now. As we have noted countless times, the 10 yr note struggles when it falls below 2.00%, mortgage rates remain subject to treasuries and also have demonstrated an inability to fall when at the present levels. Safe haven to treasuries has waned even with the potential of Greece deflating. Traders don’t believe Greece will default even with nothing being finalized for weeks and the clock ticking for Greece to make its next payment next month.
Sunday, February 5, 2012
Friday, February 3, 2012
Mortgage Rates
If the monthly employment data ever came close to forecasts the world would stop rotating. Jan unemployment rate fell to 8.3% frm 8.5% in Dec and expected unchanged in Jan. Non-farm jobs increased 243K, forecasts +135K; non-farm private jobs +257K, forecasts +170K. Nov non-farm jobs were revised from +100K to +157K, factory jobs +50K and service producing jobs +162K. As for the decline in the unemployment rate, the implication is that many more unemployed have stopped looking for a job. The reaction in financial markets was swift; the 10 yr note yield increased 9 basis points to 1.90%, MBS prices declined 8/32 (.25 bp) as of 9:00 am. Stock indexes rallied, up 110 points on the DJIA and rallied Europe’s markets. The 243,000 increase in payrolls was the most since April and exceeded all forecasts in a Bloomberg News survey.
A week ago at the conclusion of the FOMC meeting Bernanke said unemployment was not likely to decline as the economy was faltering. The Fed was so certain about the sluggish outlook it announced it would keep rates low until the end of 2014. The Fed isn’t likely to back off their outlook on one employment report but trading this morning in the FF futures market is marked to the Fed increasing the FF rate at the end of 2013. Markets now consider whether the Fed will increase buying of Treasury’s and MBSs. The Fed purchased $2.3 trillion of debt in two rounds of quantitative easing; at the conclusion of the Jan 25th FOMC meeting Bernanke said he was considering another round of QE if the economy isn’t recovering. After the employment report another easing move doesn’t seem likely now.
You can skip this paragraph if you have read it before. Greek officials are out this morning saying a deal is almost complete with investors to fend off defaults by getting another infusion of cash. For all of three weeks the deal has “almost” been completed. Markets have become numb to the continual news that has had no substance; everyone now is from Missouri.
At 9:30 the DJIA opened +110, the 10 yr note -27/32 at 1.92% +10 bp and MBS prices for 30 yr mortgages -12/32 (.37 bp). Technically, the 10 yr has some support at 1.93%, the high so far today.
At 10:00 the Jan ISM services sector index, expected at 53.0 frm 52.6, as released the index jumped to 56.8; every component was better. New orders at 59.4 frm 54.6, employment at 57.4 frm 49.8 and prices pd at 63.5 frm 62.0. The 10 yr and mortgages saw more selling while the DJIA popped up more.
Also at 10:00 Dec factory orders, thought to be +1.5%, increased 1.1% but Nov was revised to +2.2% frm +1.8%.
We have been noting that the 10 yr note had technical resistance at 1.80%, the low yield back in mid-Dec; it failed so far. The low on the 10 was 1.81%, triggered by the Jan employment this morning the 10 yr yield has moved to 1.93% up 11 basis points this morning. On numerous occasions I have commented that the 10 yr has a strong recent history that it can’t sustain long under 2.00% and moves from lows at 1.80% have all been swift. The note has technical support at 1.93%.
The data this morning; employment and the ISM services, were surprisingly stronger than markets were expecting. The 10 yr not is now likely to increase to test 2.00%. Better economic outlook today with the data and no safety moves to treasuries over Europe at the moment.
If the monthly employment data ever came close to forecasts the world would stop rotating. Jan unemployment rate fell to 8.3% frm 8.5% in Dec and expected unchanged in Jan. Non-farm jobs increased 243K, forecasts +135K; non-farm private jobs +257K, forecasts +170K. Nov non-farm jobs were revised from +100K to +157K, factory jobs +50K and service producing jobs +162K. As for the decline in the unemployment rate, the implication is that many more unemployed have stopped looking for a job. The reaction in financial markets was swift; the 10 yr note yield increased 9 basis points to 1.90%, MBS prices declined 8/32 (.25 bp) as of 9:00 am. Stock indexes rallied, up 110 points on the DJIA and rallied Europe’s markets. The 243,000 increase in payrolls was the most since April and exceeded all forecasts in a Bloomberg News survey.
A week ago at the conclusion of the FOMC meeting Bernanke said unemployment was not likely to decline as the economy was faltering. The Fed was so certain about the sluggish outlook it announced it would keep rates low until the end of 2014. The Fed isn’t likely to back off their outlook on one employment report but trading this morning in the FF futures market is marked to the Fed increasing the FF rate at the end of 2013. Markets now consider whether the Fed will increase buying of Treasury’s and MBSs. The Fed purchased $2.3 trillion of debt in two rounds of quantitative easing; at the conclusion of the Jan 25th FOMC meeting Bernanke said he was considering another round of QE if the economy isn’t recovering. After the employment report another easing move doesn’t seem likely now.
You can skip this paragraph if you have read it before. Greek officials are out this morning saying a deal is almost complete with investors to fend off defaults by getting another infusion of cash. For all of three weeks the deal has “almost” been completed. Markets have become numb to the continual news that has had no substance; everyone now is from Missouri.
At 9:30 the DJIA opened +110, the 10 yr note -27/32 at 1.92% +10 bp and MBS prices for 30 yr mortgages -12/32 (.37 bp). Technically, the 10 yr has some support at 1.93%, the high so far today.
At 10:00 the Jan ISM services sector index, expected at 53.0 frm 52.6, as released the index jumped to 56.8; every component was better. New orders at 59.4 frm 54.6, employment at 57.4 frm 49.8 and prices pd at 63.5 frm 62.0. The 10 yr and mortgages saw more selling while the DJIA popped up more.
Also at 10:00 Dec factory orders, thought to be +1.5%, increased 1.1% but Nov was revised to +2.2% frm +1.8%.
We have been noting that the 10 yr note had technical resistance at 1.80%, the low yield back in mid-Dec; it failed so far. The low on the 10 was 1.81%, triggered by the Jan employment this morning the 10 yr yield has moved to 1.93% up 11 basis points this morning. On numerous occasions I have commented that the 10 yr has a strong recent history that it can’t sustain long under 2.00% and moves from lows at 1.80% have all been swift. The note has technical support at 1.93%.
The data this morning; employment and the ISM services, were surprisingly stronger than markets were expecting. The 10 yr not is now likely to increase to test 2.00%. Better economic outlook today with the data and no safety moves to treasuries over Europe at the moment.
Thursday, February 2, 2012
Mortgage Rates
Generally a quiet open this morning with treasuries fractionally weaker but MBS prices with a minor improvement. At 9:00 the 10 yr -1/32 at 1.84% and MBSs +2/32 (.06 bp). 8:30 data; weekly jobless claims were expected to increase a few thousand, as released claims fell 12K to 367K; continuing claims at 3.437 mil frm 3.567 mil last week. Continuing claims the lowest since Sept 6th 2008. Q4 non-farm productivity was right on +0.7%, Q3 productivity was revised from +2.3% to +1.9%. The dip in productivity in Q4 implies higher prices to some extent, however that isn’t likely with the US economy soft. Also at 8:30 Q4 unit labor costs were expected +0.7% but increased 1.2%; again implying higher end costs for some goods; also again, there is no pricing power in the economy now.
At 9:30 the DJIA opened +11, the 10 yr -2/32 at 1.84% +0.5% and MBSs +2/32 (.06 bp).
Still waiting; the world is waiting patiently for how Greece will dodge the default bullet. Greece and its creditors are locked in talks over a debt-swap deal for the nation. Bondholders last week lowered their demands for an average coupon on the new debt they would get after European officials demanded they take steeper losses. The ECB is likely to refuse to show its hand on how it will help cut Greece’s debt burden until the deal is reached. Two weeks ago Greece officials were saying a deal would be finalized quickly, now as it continues to drag on with nothing resolved we have to question just how close a deal is. Close is good in horseshoes but is a little tenuous when nothing happens day in and day out.
Earlier this morning the Challenger jobs report on layoffs was worse than expected. Layoff announcements rose to 53,486 in January from 41,785 in December in what is not a good signal for tomorrow's employment report. At 12,426, announcements were heaviest by far in the retail sector which the report stresses is probably not a seasonal effect as post-holiday layoffs of temporary employees are not usually announced. Remember this report is a count of announcements only. Challenger suggests that the retail layoffs reflect restructurings and/or store closures or other cost-cutting measures in the retail sector. (Bloomberg)
The remainder of the day is likely to be quiet with Jan employment out tomorrow morning. The report is expected to show non-farm jobs increased 135K overall; non-farm private jobs are seen at +170K. The unemployment rate is expected unchanged at 8.5%. The real unemployment rate is about 16.0% if those that have stopped looking are added back. Usually the report sets off a lot of volatility as it rarely matches estimates.
Fed chief Bernanke is about to testify in Congress; grilling’s frm Congress are commonplace, likely nothing will emerge that will move markets in any substantive way.
Generally a quiet open this morning with treasuries fractionally weaker but MBS prices with a minor improvement. At 9:00 the 10 yr -1/32 at 1.84% and MBSs +2/32 (.06 bp). 8:30 data; weekly jobless claims were expected to increase a few thousand, as released claims fell 12K to 367K; continuing claims at 3.437 mil frm 3.567 mil last week. Continuing claims the lowest since Sept 6th 2008. Q4 non-farm productivity was right on +0.7%, Q3 productivity was revised from +2.3% to +1.9%. The dip in productivity in Q4 implies higher prices to some extent, however that isn’t likely with the US economy soft. Also at 8:30 Q4 unit labor costs were expected +0.7% but increased 1.2%; again implying higher end costs for some goods; also again, there is no pricing power in the economy now.
At 9:30 the DJIA opened +11, the 10 yr -2/32 at 1.84% +0.5% and MBSs +2/32 (.06 bp).
Still waiting; the world is waiting patiently for how Greece will dodge the default bullet. Greece and its creditors are locked in talks over a debt-swap deal for the nation. Bondholders last week lowered their demands for an average coupon on the new debt they would get after European officials demanded they take steeper losses. The ECB is likely to refuse to show its hand on how it will help cut Greece’s debt burden until the deal is reached. Two weeks ago Greece officials were saying a deal would be finalized quickly, now as it continues to drag on with nothing resolved we have to question just how close a deal is. Close is good in horseshoes but is a little tenuous when nothing happens day in and day out.
Earlier this morning the Challenger jobs report on layoffs was worse than expected. Layoff announcements rose to 53,486 in January from 41,785 in December in what is not a good signal for tomorrow's employment report. At 12,426, announcements were heaviest by far in the retail sector which the report stresses is probably not a seasonal effect as post-holiday layoffs of temporary employees are not usually announced. Remember this report is a count of announcements only. Challenger suggests that the retail layoffs reflect restructurings and/or store closures or other cost-cutting measures in the retail sector. (Bloomberg)
The remainder of the day is likely to be quiet with Jan employment out tomorrow morning. The report is expected to show non-farm jobs increased 135K overall; non-farm private jobs are seen at +170K. The unemployment rate is expected unchanged at 8.5%. The real unemployment rate is about 16.0% if those that have stopped looking are added back. Usually the report sets off a lot of volatility as it rarely matches estimates.
Fed chief Bernanke is about to testify in Congress; grilling’s frm Congress are commonplace, likely nothing will emerge that will move markets in any substantive way.
Wednesday, February 1, 2012
Mortgage Rates
At 8:15 ADP reported its private jobs data for Jan; forecasts were for an increase of 200K jobs, as reported +170K. ADP revised Dec job growth from 325K to 292K. Prior to the rep[ort the 10 yr note traded lower by 8/32, the reaction to the weaker report briefly back to unchanged but by 9:00 back to -6/32 with MBS prices at 9:00 -1/32 (.03 bp). US equity market trading prior to the open at 9:30 had indexes trading higher in line with better markets in Europe. On Friday A the BLS report is forecast to show the U.S. added 145,000 jobs, according to 81 economists in a separate survey, compared with 200,000 the previous month. The unemployment rate is forecast to remain steady 8.5%.
China reported an unexpected increase in manufacturing today; that spurred rallies in Europe’s markets. Borrowing costs in Italy fell slightly on sales to the lowest since October as stock gains spurred demand for riskier assets. Portugal’s notes rose as borrowing costs declined at bill sales. The German 10-year yield rose two basis points, or 0.02 percentage point, to 1.81% at 1:52 p.m. London time after falling to 1.78% yesterday, the lowest since Jan. 18, and the same yield as US 10 yr notes.
At 9:30 the DJIA opened +75, the 10 yr note -10/32 back to 1.83% +3 bp, and MBS prices -3/32 (.09 bp).
Weekly MBA mortgage applications for last week out at 7:00 this morning. Mortgage applications decreased 2.9% from one week earlier, for the week ending January 27, 2012. The Refinance Index decreased 3.6% from the previous week. The seasonally adjusted Purchase Index decreased 1.7% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 4.11 percent. The four week moving average is up 2.48% for the seasonally adjusted Purchase Index, while this average is up 4.22 % for the Refinance Index. The refinance share of mortgage activity decreased to 80.0% of total applications from 81.3% the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.09% from 4.11%, with points decreasing to 0.41 from 0.47 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.33% from 4.39%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.96% from 3.97%, with points increasing to 0.61 from 0.57 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.36% from 3.40%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.94% from 2.91%, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80% loans.
Next up, at 10:00, Jan ISM manufacturing index, expected at 54.5 frm 53.9; as reported 54.1 frm a revised 53.1 in Dec; new orders index 57.6 frm 54.8. employment at 54.3 frm 54.8 and prices pd at 55.5 frm 47.5. Not much of an initial reaction in either stock indexes of the bond and mortgage markets.
Finally today, Dec construction spending was expected up 0.4%, as reported +1.5% but Nov was revised lower to +0.4% frm +1.2% originally reported.
Treasury announced next week’s quarterly refunding details this morning; a total of $72B, $3B more than last month al on the 30 yr bond.
Technically, the 10 yr has once again found resistance at 1.80% for the moment. The overall low yield was 1.70% back on Sept 23, 2011. At the present level on the 10 yr and MBSs are looking a little overbought based on momentum oscillators. If the bond market has run out of fuel now, technically we would continue a bullish outlook as long as the 10 yr doesn’t move above 1.93%. MBSs have support at 103.08 bp, presently at 103.25 bp
At 8:15 ADP reported its private jobs data for Jan; forecasts were for an increase of 200K jobs, as reported +170K. ADP revised Dec job growth from 325K to 292K. Prior to the rep[ort the 10 yr note traded lower by 8/32, the reaction to the weaker report briefly back to unchanged but by 9:00 back to -6/32 with MBS prices at 9:00 -1/32 (.03 bp). US equity market trading prior to the open at 9:30 had indexes trading higher in line with better markets in Europe. On Friday A the BLS report is forecast to show the U.S. added 145,000 jobs, according to 81 economists in a separate survey, compared with 200,000 the previous month. The unemployment rate is forecast to remain steady 8.5%.
China reported an unexpected increase in manufacturing today; that spurred rallies in Europe’s markets. Borrowing costs in Italy fell slightly on sales to the lowest since October as stock gains spurred demand for riskier assets. Portugal’s notes rose as borrowing costs declined at bill sales. The German 10-year yield rose two basis points, or 0.02 percentage point, to 1.81% at 1:52 p.m. London time after falling to 1.78% yesterday, the lowest since Jan. 18, and the same yield as US 10 yr notes.
At 9:30 the DJIA opened +75, the 10 yr note -10/32 back to 1.83% +3 bp, and MBS prices -3/32 (.09 bp).
Weekly MBA mortgage applications for last week out at 7:00 this morning. Mortgage applications decreased 2.9% from one week earlier, for the week ending January 27, 2012. The Refinance Index decreased 3.6% from the previous week. The seasonally adjusted Purchase Index decreased 1.7% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 4.11 percent. The four week moving average is up 2.48% for the seasonally adjusted Purchase Index, while this average is up 4.22 % for the Refinance Index. The refinance share of mortgage activity decreased to 80.0% of total applications from 81.3% the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.09% from 4.11%, with points decreasing to 0.41 from 0.47 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.33% from 4.39%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.96% from 3.97%, with points increasing to 0.61 from 0.57 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.36% from 3.40%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.94% from 2.91%, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80% loans.
Next up, at 10:00, Jan ISM manufacturing index, expected at 54.5 frm 53.9; as reported 54.1 frm a revised 53.1 in Dec; new orders index 57.6 frm 54.8. employment at 54.3 frm 54.8 and prices pd at 55.5 frm 47.5. Not much of an initial reaction in either stock indexes of the bond and mortgage markets.
Finally today, Dec construction spending was expected up 0.4%, as reported +1.5% but Nov was revised lower to +0.4% frm +1.2% originally reported.
Treasury announced next week’s quarterly refunding details this morning; a total of $72B, $3B more than last month al on the 30 yr bond.
Technically, the 10 yr has once again found resistance at 1.80% for the moment. The overall low yield was 1.70% back on Sept 23, 2011. At the present level on the 10 yr and MBSs are looking a little overbought based on momentum oscillators. If the bond market has run out of fuel now, technically we would continue a bullish outlook as long as the 10 yr doesn’t move above 1.93%. MBSs have support at 103.08 bp, presently at 103.25 bp
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