Mortgage Rate Update
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Thursday, March 29, 2012
Mortgage Rates--
A better open again this morning on weekly jobless claims at 8:30. Weekly claims were expected +2K to 350K, claims were -5K to 359K because last week’s claims were revised from 348K to 364K, an increase of 16K claims from original data. Continuing claims however continue to decline, 3.34 mil frm 3.381 mil last week; the 4 wk average on claims, a smoother look, 365K this week from 368.5K.
Q4 final GDP was +3.0% the same as the preliminary report last month. The data also showed corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool. To some degree the declining profits may justify the stance Bernanke and the Fed maintain that the economy isn’t on firm footing. To add more confusion to the economic outlook; the Business Roundtable’s economic outlook index increased to 96.9 in the first quarter from 77.9 in the previous three months, the Washington-based trade group reported. Readings greater than 50 are consistent with economic expansion, and this quarter’s measure is the highest since April-June 2011. 42% said they will increase payrolls, compared with 35% in the prior quarter, while 43% plan to hold their staffing levels steady.
A couple of weeks ago when markets were relaxing on Europe’s debt crisis, it is back on the table and adding support to US treasuries on some renewed safety moves back into treasuries.
At 9:00 the 10 yr note yield was down to 2.16% and falling, MBS prices up 6/32 (.19 bp). Stock indexes helping, the DJIA and other key indexes down indicating a lower opening at 9:30.
The DJIA opened -51, NASDAQ -17; the 10 yr at 2.16% and mortgage prices gained 6/32 (.18 bp) frm yesterday’s close.
This afternoon Treasury will complete the auctions with $29B of 7 yr notes. Yesterday’s 5 yr note auction didn’t impress with demand good but not as good as traders were expecting. On the 5 yr results treasuries and mortgage markets slipped into the close with mortgage prices down .12 bp frm 9:30 yesterday. The stock market fell yesterday, the DJIA down 71 points yet treasuries and mortgages didn’t take hold; this morning the weaker 5 yr yesterday has drifted into the background.
Other than the 7 yr auction this afternoon there isn’t anything on the schedule other than watching equity markets and keeping alert to any comments. Bernanke will speak again at 12:45 delivering his fourth of four lectures at the George Washington School of Business. Yesterday he continued to remind that the Fed would keep rates low on his concern the economy is still on soft footing. America’s policy makers don’t rule out further options to support growth, he said on Tuesday.
At 9:30 the 10 yr is testing its 20 day moving average; the momentum oscillators after running to oversold levels are back to neutral 50 levels on the 10 yr note yield. Interest rates have fallen 23 basis points on the 10 yr and 15 basis points on 30 yr mortgages; these are very good levels that should be taken advantage of. Sure rates may fall more but we don’t expect much more unless the Fed were to confirm another QE move that some continue to expect; even Bernanke said the other day an easing move isn’t off the table pending how the economy does in the next few months----and that is very questionable in either direction.
A better open again this morning on weekly jobless claims at 8:30. Weekly claims were expected +2K to 350K, claims were -5K to 359K because last week’s claims were revised from 348K to 364K, an increase of 16K claims from original data. Continuing claims however continue to decline, 3.34 mil frm 3.381 mil last week; the 4 wk average on claims, a smoother look, 365K this week from 368.5K.
Q4 final GDP was +3.0% the same as the preliminary report last month. The data also showed corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool. To some degree the declining profits may justify the stance Bernanke and the Fed maintain that the economy isn’t on firm footing. To add more confusion to the economic outlook; the Business Roundtable’s economic outlook index increased to 96.9 in the first quarter from 77.9 in the previous three months, the Washington-based trade group reported. Readings greater than 50 are consistent with economic expansion, and this quarter’s measure is the highest since April-June 2011. 42% said they will increase payrolls, compared with 35% in the prior quarter, while 43% plan to hold their staffing levels steady.
A couple of weeks ago when markets were relaxing on Europe’s debt crisis, it is back on the table and adding support to US treasuries on some renewed safety moves back into treasuries.
At 9:00 the 10 yr note yield was down to 2.16% and falling, MBS prices up 6/32 (.19 bp). Stock indexes helping, the DJIA and other key indexes down indicating a lower opening at 9:30.
The DJIA opened -51, NASDAQ -17; the 10 yr at 2.16% and mortgage prices gained 6/32 (.18 bp) frm yesterday’s close.
This afternoon Treasury will complete the auctions with $29B of 7 yr notes. Yesterday’s 5 yr note auction didn’t impress with demand good but not as good as traders were expecting. On the 5 yr results treasuries and mortgage markets slipped into the close with mortgage prices down .12 bp frm 9:30 yesterday. The stock market fell yesterday, the DJIA down 71 points yet treasuries and mortgages didn’t take hold; this morning the weaker 5 yr yesterday has drifted into the background.
Other than the 7 yr auction this afternoon there isn’t anything on the schedule other than watching equity markets and keeping alert to any comments. Bernanke will speak again at 12:45 delivering his fourth of four lectures at the George Washington School of Business. Yesterday he continued to remind that the Fed would keep rates low on his concern the economy is still on soft footing. America’s policy makers don’t rule out further options to support growth, he said on Tuesday.
At 9:30 the 10 yr is testing its 20 day moving average; the momentum oscillators after running to oversold levels are back to neutral 50 levels on the 10 yr note yield. Interest rates have fallen 23 basis points on the 10 yr and 15 basis points on 30 yr mortgages; these are very good levels that should be taken advantage of. Sure rates may fall more but we don’t expect much more unless the Fed were to confirm another QE move that some continue to expect; even Bernanke said the other day an easing move isn’t off the table pending how the economy does in the next few months----and that is very questionable in either direction.
Wednesday, March 28, 2012
Mortgage Rates
A very nice rally in the bond and mortgage markets yesterday on comments frm Bernanke that the US economy while improving is still questionable therefore he will continue to keep short term rates low for a considerably long period. While he won’t commit to another QE from the Fed, as long as he remains concerned about the underlying strength of the recovery, it somewhat removes the bond market fear that rates will increase as the Fed may consider tightening to end off the inflation fears that will not go away. The jobless rate remains too high and policy makers don’t rule out further options to boost growth, he said in a transcript of an interview with ABC News anchor Diane Sawyer provided by the network. The 10 yr note rate declined to 2.19% frm 2.25% on Monday, mortgage prices ended up 14/32 (.44 bp) on 30s and +9/32 (.28 bp) on 15s.
This morning at 8:30 Feb durable goods orders, expected to be up 2.8% were up 2.2%; ex transportation orders which are very volatile month to month orders increased +1.6% against forecasts of +1.0%. There was little reaction to the report in the rate markets which opened weaker this morning. The 10 yr note at 8:30 traded -7/32 at 2.21% +2 bp and the MBS 30 yr prices -4/32 (.12 bp) frm yesterday’s close. Stock indexes yesterday declined a little (DJIA -44, NASDAQ -2.22), this morning in pre-open trading the indexes were a little stronger with the DJIA +12.
European leaders seeing rising confidence that their region’s crisis is near an end. The euro area’s woes are “almost over” after a slow initial response by policy makers, Italian Prime Minister Mario Monti said in Tokyo today. German Chancellor Angela Merkel said yesterday that the crisis is ebbing and her country’s borrowing costs will probably rise as its status as a haven wanes. Make what we want on the “almost over” quote. Conclusions to Europe’s turmoil have been called prematurely before. In March 2010 the EU Pres. said the worst of Greece’s financial crisis was over and other European nations wouldn’t follow in its path. Since then, Portugal and Ireland needed bailouts.
Yesterday’s $35B 2 yr note auction was solid with strong bidding, bid/cover 3.70, indirect bidders took 34% while direct bidders took 21%. Today Treasury will auction $35B of 5 yr notes at 1:00pm.
Mortgage applications decreased 2.7% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 23, 2012. The Refinance Index decreased 4.6% from the previous week. The Refinance Index has decreased for six consecutive weeks, falling to its lowest level since December, and is 24.2% lower than its 2012 peak observed in February. The decline in the Refinance Index this week was driven largely by a 12.0% drop in government refinance activity, while conventional refinance applications fell by less, decreasing 3.4% from the previous week. The four week moving average for the seasonally adjusted Market Index is down 3.40%. The four week moving average is up 2.14% for the seasonally adjusted Purchase Index, while this average is down 4.94% for the Refinance Index. The refinance share of mortgage activity decreased to 71.9% of total applications, the lowest level since July 2011, from 73.4% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4% 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) increased to 4.23%, the highest rate since November 2011, from 4.19%, with points decreasing to 0.45 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) increased to 4.54%, the highest since rate December 2011, from 4.49%, with points increasing to 0.46 from 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.96% from 3.93%, with points increasing to 0.52 from 0.48 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.50%, the highest rate since December 2011, from 3.47%, with points increasing to 0.42 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 3.00%, the highest since rate December 2011, from 2.90%, with points decreasing to 0.42 from 0.44 (including the origination fee) for 80% loans.
The DJIA opened +6 at 9:30; the 10 yr -5/32 at 2.20% +1 bp and mortgage prices -3/32 (.09 bp) on 30s and -2/32 (.06 bp) on 15s.
We have resistance at 2.20% on the 10 yr but it will depend on the stock market performs the rest of the day. The longer outlook continues to look weak for the bond market based solely on the technical picture but at the moment we don’t put much confidence on the longer outlook. Still believe taking advantage of these rates now is appropriate for loans that need to be closed within the next two weeks.
A very nice rally in the bond and mortgage markets yesterday on comments frm Bernanke that the US economy while improving is still questionable therefore he will continue to keep short term rates low for a considerably long period. While he won’t commit to another QE from the Fed, as long as he remains concerned about the underlying strength of the recovery, it somewhat removes the bond market fear that rates will increase as the Fed may consider tightening to end off the inflation fears that will not go away. The jobless rate remains too high and policy makers don’t rule out further options to boost growth, he said in a transcript of an interview with ABC News anchor Diane Sawyer provided by the network. The 10 yr note rate declined to 2.19% frm 2.25% on Monday, mortgage prices ended up 14/32 (.44 bp) on 30s and +9/32 (.28 bp) on 15s.
This morning at 8:30 Feb durable goods orders, expected to be up 2.8% were up 2.2%; ex transportation orders which are very volatile month to month orders increased +1.6% against forecasts of +1.0%. There was little reaction to the report in the rate markets which opened weaker this morning. The 10 yr note at 8:30 traded -7/32 at 2.21% +2 bp and the MBS 30 yr prices -4/32 (.12 bp) frm yesterday’s close. Stock indexes yesterday declined a little (DJIA -44, NASDAQ -2.22), this morning in pre-open trading the indexes were a little stronger with the DJIA +12.
European leaders seeing rising confidence that their region’s crisis is near an end. The euro area’s woes are “almost over” after a slow initial response by policy makers, Italian Prime Minister Mario Monti said in Tokyo today. German Chancellor Angela Merkel said yesterday that the crisis is ebbing and her country’s borrowing costs will probably rise as its status as a haven wanes. Make what we want on the “almost over” quote. Conclusions to Europe’s turmoil have been called prematurely before. In March 2010 the EU Pres. said the worst of Greece’s financial crisis was over and other European nations wouldn’t follow in its path. Since then, Portugal and Ireland needed bailouts.
Yesterday’s $35B 2 yr note auction was solid with strong bidding, bid/cover 3.70, indirect bidders took 34% while direct bidders took 21%. Today Treasury will auction $35B of 5 yr notes at 1:00pm.
Mortgage applications decreased 2.7% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 23, 2012. The Refinance Index decreased 4.6% from the previous week. The Refinance Index has decreased for six consecutive weeks, falling to its lowest level since December, and is 24.2% lower than its 2012 peak observed in February. The decline in the Refinance Index this week was driven largely by a 12.0% drop in government refinance activity, while conventional refinance applications fell by less, decreasing 3.4% from the previous week. The four week moving average for the seasonally adjusted Market Index is down 3.40%. The four week moving average is up 2.14% for the seasonally adjusted Purchase Index, while this average is down 4.94% for the Refinance Index. The refinance share of mortgage activity decreased to 71.9% of total applications, the lowest level since July 2011, from 73.4% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4% 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) increased to 4.23%, the highest rate since November 2011, from 4.19%, with points decreasing to 0.45 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) increased to 4.54%, the highest since rate December 2011, from 4.49%, with points increasing to 0.46 from 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.96% from 3.93%, with points increasing to 0.52 from 0.48 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.50%, the highest rate since December 2011, from 3.47%, with points increasing to 0.42 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 3.00%, the highest since rate December 2011, from 2.90%, with points decreasing to 0.42 from 0.44 (including the origination fee) for 80% loans.
The DJIA opened +6 at 9:30; the 10 yr -5/32 at 2.20% +1 bp and mortgage prices -3/32 (.09 bp) on 30s and -2/32 (.06 bp) on 15s.
We have resistance at 2.20% on the 10 yr but it will depend on the stock market performs the rest of the day. The longer outlook continues to look weak for the bond market based solely on the technical picture but at the moment we don’t put much confidence on the longer outlook. Still believe taking advantage of these rates now is appropriate for loans that need to be closed within the next two weeks.
Tuesday, March 27, 2012
Mortgage Rates---
Treasuries and MBSs opened better this morning on some weakness in the stock index futures in early trading. At 9:00 the DJIA -11; the 10 yr note +7/32 at 2.23% -2 bp and mortgage prices +9/32 (.28 bp frm yesterday’s close. The Jan Case/Shiller home price index hit. U.S. single-family home prices were unchanged in January, suggesting the battered housing market continues to crawl along the bottom, a closely watched survey said on Tuesday. The composite index of 20 metropolitan areas was flat in January on a seasonally adjusted basis. A Reuters poll of economists forecast a decline of 0.2 percent after December's 0.5 percent drop. But on a non-seasonally adjust basis, prices tumbled 0.8 percent. On a yearly basis, prices fared a little better with January notching a 3.8 percent decline compared to the year before, in line with expectations and an improvement from December's 4.0 percent drop.
At 9:30 the DJIA opened better, +21, 10 yr +6/32 at 2.23% -2 bp and mortgage prices +7/32 (.22 bp).
At 10:00 the Mar consumer confidence index from the Conference Board, thought to be at 70.1 frm 70.8 in Feb. As reported the index was 70.2 frm a revised 71.7 in Feb originally 70.8; the present situation index at 51.0 frm 46.4 in Feb the highest since Sept 2008, the expectations index at 83.0 frm 88.4. The 12 month outlook on inflation also increased. The reaction added a little improvement in mortgage prices and treasuries.
Also at 10:00 the Richmond Fed business index data was a little weaker than thought. The two reports have pushed the stock indexes lower (DJIA at 10:05 -15) 10 yr note rate 2.21% -4 bp on the day.
At 1:00 this afternoon Treasury will start the auctions for the week with $35B of 2 yr notes. It should go well with the recent increase in rates; if not we can expect some pressure in the bond and mortgage markets.
The 10 yr has near term resistance at 2.20%, a break below that would suggest a move down to 2.10%. The Fed through Bernanke’s speech yesterday is going to keep the FF rate low as the Fed has been saying for six months. Bernanke continues to fret about the underlying strength in the economy even with most private economists painting a more favorable outlook. As long as traders and investors are convinced the Fed won’t increase rates anytime soon the outlook for the long end of the curve, including mortgage markets, won’t increase much as we have noted previously.
Treasuries and MBSs opened better this morning on some weakness in the stock index futures in early trading. At 9:00 the DJIA -11; the 10 yr note +7/32 at 2.23% -2 bp and mortgage prices +9/32 (.28 bp frm yesterday’s close. The Jan Case/Shiller home price index hit. U.S. single-family home prices were unchanged in January, suggesting the battered housing market continues to crawl along the bottom, a closely watched survey said on Tuesday. The composite index of 20 metropolitan areas was flat in January on a seasonally adjusted basis. A Reuters poll of economists forecast a decline of 0.2 percent after December's 0.5 percent drop. But on a non-seasonally adjust basis, prices tumbled 0.8 percent. On a yearly basis, prices fared a little better with January notching a 3.8 percent decline compared to the year before, in line with expectations and an improvement from December's 4.0 percent drop.
At 9:30 the DJIA opened better, +21, 10 yr +6/32 at 2.23% -2 bp and mortgage prices +7/32 (.22 bp).
At 10:00 the Mar consumer confidence index from the Conference Board, thought to be at 70.1 frm 70.8 in Feb. As reported the index was 70.2 frm a revised 71.7 in Feb originally 70.8; the present situation index at 51.0 frm 46.4 in Feb the highest since Sept 2008, the expectations index at 83.0 frm 88.4. The 12 month outlook on inflation also increased. The reaction added a little improvement in mortgage prices and treasuries.
Also at 10:00 the Richmond Fed business index data was a little weaker than thought. The two reports have pushed the stock indexes lower (DJIA at 10:05 -15) 10 yr note rate 2.21% -4 bp on the day.
At 1:00 this afternoon Treasury will start the auctions for the week with $35B of 2 yr notes. It should go well with the recent increase in rates; if not we can expect some pressure in the bond and mortgage markets.
The 10 yr has near term resistance at 2.20%, a break below that would suggest a move down to 2.10%. The Fed through Bernanke’s speech yesterday is going to keep the FF rate low as the Fed has been saying for six months. Bernanke continues to fret about the underlying strength in the economy even with most private economists painting a more favorable outlook. As long as traders and investors are convinced the Fed won’t increase rates anytime soon the outlook for the long end of the curve, including mortgage markets, won’t increase much as we have noted previously.
Monday, March 26, 2012
Mortgage Rates
Early this morning the bond and mortgage markets were under pressure with stock indexes trading higher on anticipation of a better open at 9:30. Mortgage prices started down 7/32 (.22 bp) but by 9:00 climbed back to unchanged frm Friday, the 10 yr note at 9:00 -5/32 frm -13/32 at 8:00 am, the yield at 2.25% +2 bp. Bernanke spoke this morning saying the drop in the unemployment rate may reflect a reversal of the large layoffs that occurred during late 2008 and over 2009. “To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” he said. He also reiterated that while the economy is improving, he still sees structural weakness that will require the Feds to keep the FF rate at this level for a lot longer. Last week there was some talk among traders that the Fed would not hold rates through the end of 2014 as the Fed had been saying, Bernanke didn’t put a time frame on his comments this morning but did counter the idea that inflation was heating up to the point that the fed would have to begin increasing rates.
At 9:30 the DJIA opened +97, NASDAQ +26, S&P 500 +11. The 10 yr note -3/32 at 2.24% +1 bp and MBS prices on 30 yr loans +3/32 (.09 bp).
The only data today; at 10:00 the NAR reported pending home sales for Feb (contracts signed but not yet closed). Forecasts were for sales to have increased +0.5%, as reported sales fell 0.5%. There was no reaction to the report, although as the day moves on the stock indexes are improving and mortgage prices slipping back a little; mortgage prices -4/32 (.12 bp) at 10:10, at 9:30 +3/32 (.09 bp).
Comments from Bernanke this morning that he will keep FF rates low and has no thoughts of any increases as far out as he can see has added support to both stocks and bonds. Concerns still persist in his mind that the economy remains fragile. His remarks stabilized the bond market which was weak. Even with the stock indexes rallying hard so far, the bond and mortgage markets are doing well considering that when the stock market does better the bond and mortgage markets suffer. Mortgage prices actually holding a minor improvement at 9:30, based on Bernanke saying the economic recovery is essentially improving more than what the Fed was thinking two months ago. Pressure on the rate markets is less than what would be the norm with the key indexes doing better because of his statement that the Fed would keep rates low with no increases in sight. It is reducing the link between equity markets and the bond markets; at least so far today.
Technically, 2.25% on the 10 yr note could well be a resistance level but at this time we need more trading to be sure. Still suggest locking on rallies as we don’t believe rates will decline much----unless---Europe comes back to the edge of default and at the point that doesn’t seem likely, or the US stock market declines and too doesn’t show much promise even with many calling for a correction.
Early this morning the bond and mortgage markets were under pressure with stock indexes trading higher on anticipation of a better open at 9:30. Mortgage prices started down 7/32 (.22 bp) but by 9:00 climbed back to unchanged frm Friday, the 10 yr note at 9:00 -5/32 frm -13/32 at 8:00 am, the yield at 2.25% +2 bp. Bernanke spoke this morning saying the drop in the unemployment rate may reflect a reversal of the large layoffs that occurred during late 2008 and over 2009. “To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” he said. He also reiterated that while the economy is improving, he still sees structural weakness that will require the Feds to keep the FF rate at this level for a lot longer. Last week there was some talk among traders that the Fed would not hold rates through the end of 2014 as the Fed had been saying, Bernanke didn’t put a time frame on his comments this morning but did counter the idea that inflation was heating up to the point that the fed would have to begin increasing rates.
At 9:30 the DJIA opened +97, NASDAQ +26, S&P 500 +11. The 10 yr note -3/32 at 2.24% +1 bp and MBS prices on 30 yr loans +3/32 (.09 bp).
The only data today; at 10:00 the NAR reported pending home sales for Feb (contracts signed but not yet closed). Forecasts were for sales to have increased +0.5%, as reported sales fell 0.5%. There was no reaction to the report, although as the day moves on the stock indexes are improving and mortgage prices slipping back a little; mortgage prices -4/32 (.12 bp) at 10:10, at 9:30 +3/32 (.09 bp).
Comments from Bernanke this morning that he will keep FF rates low and has no thoughts of any increases as far out as he can see has added support to both stocks and bonds. Concerns still persist in his mind that the economy remains fragile. His remarks stabilized the bond market which was weak. Even with the stock indexes rallying hard so far, the bond and mortgage markets are doing well considering that when the stock market does better the bond and mortgage markets suffer. Mortgage prices actually holding a minor improvement at 9:30, based on Bernanke saying the economic recovery is essentially improving more than what the Fed was thinking two months ago. Pressure on the rate markets is less than what would be the norm with the key indexes doing better because of his statement that the Fed would keep rates low with no increases in sight. It is reducing the link between equity markets and the bond markets; at least so far today.
Technically, 2.25% on the 10 yr note could well be a resistance level but at this time we need more trading to be sure. Still suggest locking on rallies as we don’t believe rates will decline much----unless---Europe comes back to the edge of default and at the point that doesn’t seem likely, or the US stock market declines and too doesn’t show much promise even with many calling for a correction.
Thursday, March 22, 2012
Mortgage Rates--
Prior to 8:30 when weekly jobless claims were released the 10 yr note had dropped to 2.25% frm 2.29% at the close yesterday. Weekly claims were expected to be up a little (+5K), as reported claims declined 5K to 348K, the lowest level in four years. Last week’s claims included the 12th of the month and will be used in the calculation of the March employment report on April 6th. Continuing claims fell to 3.352 mil frm 3.361 mil last week; the 4 wk average declined to 355K frm 356,250K last week. The slightly better claims took some of the improvement away, at 9:00 the 10 yr +4/32 at 2.28%; mortgage prices +2/32 (.06 bp); by 9:30 however the bond and mortgage markets recovered. Mortgage prices at 9:30 +7/32 (.22 bp) and the 10 yr +10/32 at 2.26%, up just one basis point from its level prior to the claims data.
Stock indexes trading in the futures markets were weaker prior to the claims report and did not improve. The stock market is ripe for a correction as we have noted but the longer outlook remains quite bullish for equities. Goldman Sachs yesterday said buying equities now is the best opportunity in our lifetimes----a rather astounding comment unless our lifetime is defined as a few months. Europe’s economy is struggling and China is forecasting its growth rate will slow to 8.0% frm 11%+. At 9:30 the DJIA opened -70, NASDAQ -20 and the S&P -9. Global equity markets are weaker on concerns of weakness in China and Europe.
The last month or so Europe had faded to the background after Greece got its bailout funds to avoid default. Now however, Europe is back in the minds of traders. Interest rates in Spain and other EU countries are increasing as renewed concerns of debt concerns are reviving. Europe’s economy is weakening based on recent data, if its economy continues to soften it brings into question whether the debt ridden countries will be able to meet the austerity plans required to gain assistance from the ECB and IMF. Some of the current improvement in US rates can be attributed to renewed safety trades.
Two data points at 10:00; the Jan FHFA home price index was expected up 0.4%, it was unchanged. Dec home price index originally reported +0.7% was revised to +0.1%; yr/yr price declined 0.8%. Feb leading economic indicators were a little better at +0.7% against +0.6% forecast; Jan LEI revised lower to +0.2% frm +0.4%.
The 10 yr note tried twice already this morning to move below 2.25%, both times it failed to move lower. MBS prices at 10:00 lower than at 9:30; down 3/32 (.09 bp) frm 9:30 levels.
Prior to 8:30 when weekly jobless claims were released the 10 yr note had dropped to 2.25% frm 2.29% at the close yesterday. Weekly claims were expected to be up a little (+5K), as reported claims declined 5K to 348K, the lowest level in four years. Last week’s claims included the 12th of the month and will be used in the calculation of the March employment report on April 6th. Continuing claims fell to 3.352 mil frm 3.361 mil last week; the 4 wk average declined to 355K frm 356,250K last week. The slightly better claims took some of the improvement away, at 9:00 the 10 yr +4/32 at 2.28%; mortgage prices +2/32 (.06 bp); by 9:30 however the bond and mortgage markets recovered. Mortgage prices at 9:30 +7/32 (.22 bp) and the 10 yr +10/32 at 2.26%, up just one basis point from its level prior to the claims data.
Stock indexes trading in the futures markets were weaker prior to the claims report and did not improve. The stock market is ripe for a correction as we have noted but the longer outlook remains quite bullish for equities. Goldman Sachs yesterday said buying equities now is the best opportunity in our lifetimes----a rather astounding comment unless our lifetime is defined as a few months. Europe’s economy is struggling and China is forecasting its growth rate will slow to 8.0% frm 11%+. At 9:30 the DJIA opened -70, NASDAQ -20 and the S&P -9. Global equity markets are weaker on concerns of weakness in China and Europe.
The last month or so Europe had faded to the background after Greece got its bailout funds to avoid default. Now however, Europe is back in the minds of traders. Interest rates in Spain and other EU countries are increasing as renewed concerns of debt concerns are reviving. Europe’s economy is weakening based on recent data, if its economy continues to soften it brings into question whether the debt ridden countries will be able to meet the austerity plans required to gain assistance from the ECB and IMF. Some of the current improvement in US rates can be attributed to renewed safety trades.
Two data points at 10:00; the Jan FHFA home price index was expected up 0.4%, it was unchanged. Dec home price index originally reported +0.7% was revised to +0.1%; yr/yr price declined 0.8%. Feb leading economic indicators were a little better at +0.7% against +0.6% forecast; Jan LEI revised lower to +0.2% frm +0.4%.
The 10 yr note tried twice already this morning to move below 2.25%, both times it failed to move lower. MBS prices at 10:00 lower than at 9:30; down 3/32 (.09 bp) frm 9:30 levels.
Wednesday, March 21, 2012
Mortgage Rate Update--
A better open today in the US bond and mortgage markets. Yesterday the 10 yr note ran to 2.40%, held and found a little support; last Oct. the 10 increased to 2.40% where it reversed and moved lower. As we have noted, the 10 yr from a technical perspective was oversold and due for a retracement. We don’t look for much of a rebound however, unlike last October when Europe’s debt crisis was boiling and the US economic outlook was murky at best this time the rate increases are driven by a different set of fundamentals.
The economic outlook has improved since last October, inflation fears have edged a little higher and the Fed is unlikely to increase the purchase of mortgage-backed securities (no additional QE is anticipated now). The Fed is however continuing to buy MBSs but not at an increased pace than what it is doing now. While Europe is still facing huge decisions within the EU to reduce spending in a number of countries in an effort to increase revenues and fend off defaults, at the moment markets have put Europe on the back burner. Presently the US bond market is adjusting to the better economic outlook, investors are bailing on low fixed rate investments, unwinding the huge safety trade that drove the 10 yr to lows not seen since prior to WW II. Interest rates are on the increase, although we continue to believe rates will not increase much. The definition of how much of an increase depends on what ones outlook is, but when seen in historical perspective rates will remain low.
Mortgage applications decreased 7.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 16, 2012. The Refinance Index decreased 9.3% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The unadjusted Purchase Index was 1.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.79%. The four week moving average is up 3.25% for the Purchase Index, while this average is down 4.31% for the Refinance Index. The refinance share of mortgage activity decreased to 73.4% of total applications, the lowest since July 2011, from 75.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 5.8% of total applications from the previous week. The average loan size of all loans for home purchase in the US was $225,463 in February 2012, up from $216,888 in January. The average loan size for a refinance was $222,048, down from $227,563 in January. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.19% from 4.06%, with points increasing to 0.47 from 0.43 (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 4.49% from 4.39%, with points decreasing to 0.38 from 0.39 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.93% from 3.82%, with points decreasing to 0.48 from 0.55 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.47% from 3.36%, with points increasing to 0.40 from 0.34 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.90% from 2.81 percent, with points increasing to 0.44 from 0.37 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened generally unchanged; the 10 yr note rate at 2.32% -4 bp and mortgage prices +8/32 (.25 bp).
The only data today at 10:00 Feb existing home sales were expected to be up 0.7% frm January. As reported sales declined 0.9% to 4.59 mil (annualized) frm 4.63 mil in Jan; January sales were revised higher, from +4.3% to +5.7%. Based on sales pace there is a 6.4 month supply, the median sales price was $156,000 +0.3% yr/yr. 34% of sales were distressed sales. No significant reaction to the report in either equity markets or the bond market.
Bernanke and Geithner are testifying at the House Oversight Committee on the European debt crisis. Bernanke saying that US banks are not exposed, Geithner saying there is a huge amount of work left to do. Likely no market reaction to their comments or testimony.
We are finally getting the rebound we have been expecting; after the 10 yr held at 2.40% yesterday the 10 yr has fallen to 2.31% at 10:05 this morning; mortgage prices at 10:05 +10/32 (.31 bp) +.06 bp frm 9:30. Use this improvement as an opportunity to lock in critical loans; there is the potential to take the 10 yr back to 2.25% but it will not change the overall direction in the rates, rate markets are bearish and will continue to be so.
A better open today in the US bond and mortgage markets. Yesterday the 10 yr note ran to 2.40%, held and found a little support; last Oct. the 10 increased to 2.40% where it reversed and moved lower. As we have noted, the 10 yr from a technical perspective was oversold and due for a retracement. We don’t look for much of a rebound however, unlike last October when Europe’s debt crisis was boiling and the US economic outlook was murky at best this time the rate increases are driven by a different set of fundamentals.
The economic outlook has improved since last October, inflation fears have edged a little higher and the Fed is unlikely to increase the purchase of mortgage-backed securities (no additional QE is anticipated now). The Fed is however continuing to buy MBSs but not at an increased pace than what it is doing now. While Europe is still facing huge decisions within the EU to reduce spending in a number of countries in an effort to increase revenues and fend off defaults, at the moment markets have put Europe on the back burner. Presently the US bond market is adjusting to the better economic outlook, investors are bailing on low fixed rate investments, unwinding the huge safety trade that drove the 10 yr to lows not seen since prior to WW II. Interest rates are on the increase, although we continue to believe rates will not increase much. The definition of how much of an increase depends on what ones outlook is, but when seen in historical perspective rates will remain low.
Mortgage applications decreased 7.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 16, 2012. The Refinance Index decreased 9.3% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The unadjusted Purchase Index was 1.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.79%. The four week moving average is up 3.25% for the Purchase Index, while this average is down 4.31% for the Refinance Index. The refinance share of mortgage activity decreased to 73.4% of total applications, the lowest since July 2011, from 75.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 5.8% of total applications from the previous week. The average loan size of all loans for home purchase in the US was $225,463 in February 2012, up from $216,888 in January. The average loan size for a refinance was $222,048, down from $227,563 in January. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.19% from 4.06%, with points increasing to 0.47 from 0.43 (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 4.49% from 4.39%, with points decreasing to 0.38 from 0.39 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.93% from 3.82%, with points decreasing to 0.48 from 0.55 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.47% from 3.36%, with points increasing to 0.40 from 0.34 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.90% from 2.81 percent, with points increasing to 0.44 from 0.37 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened generally unchanged; the 10 yr note rate at 2.32% -4 bp and mortgage prices +8/32 (.25 bp).
The only data today at 10:00 Feb existing home sales were expected to be up 0.7% frm January. As reported sales declined 0.9% to 4.59 mil (annualized) frm 4.63 mil in Jan; January sales were revised higher, from +4.3% to +5.7%. Based on sales pace there is a 6.4 month supply, the median sales price was $156,000 +0.3% yr/yr. 34% of sales were distressed sales. No significant reaction to the report in either equity markets or the bond market.
Bernanke and Geithner are testifying at the House Oversight Committee on the European debt crisis. Bernanke saying that US banks are not exposed, Geithner saying there is a huge amount of work left to do. Likely no market reaction to their comments or testimony.
We are finally getting the rebound we have been expecting; after the 10 yr held at 2.40% yesterday the 10 yr has fallen to 2.31% at 10:05 this morning; mortgage prices at 10:05 +10/32 (.31 bp) +.06 bp frm 9:30. Use this improvement as an opportunity to lock in critical loans; there is the potential to take the 10 yr back to 2.25% but it will not change the overall direction in the rates, rate markets are bearish and will continue to be so.
Tuesday, March 20, 2012
Mortgage Rates
A better start this morning on weaker stock market indexes and technical factors. At 9:00 the DJIA -74, the 10 yr +10/32 at 2.33% -4 bp and MBS prices +10/32 (.31 bp). 8:30 brought the only data today; Feb housing starts and building permits. Starts were thought to be up 0.8%, as reported starts declined 1.1% to 698K units annualized, January starts were revised from +1.5% to +3.7%; single family starts declined 9.9% while multi-family starts increased 21.1%. Feb building permits were stronger than the +2.3% estimate, up 5.1% to 717K annualized units, permits the highest since Oct 2008. There was little reaction to the data.
The rate markets remain oversold based on our various length relative strength indexes; the selling in the bond market over the last nine days has pushed the rate up 27 basis points and pushed up mortgage rates by 25 basis points. The 10 yr note is still below last year’s high of 3.77% and the average of 3.87% over the past decade.
Looking over the news wires this morning there are many, including us, that believe the bond market is due for a little bounce; comments such as “the bond market has overrun itself” and many references to the same technical momentum oscillators we use. We still want the 10 yr to test 2.40% and hold it before we can actually count on a brief improvement. This morning a good example of the continued bearishness, at 9:00 the 10 up 10/32 with its yield at 2.33% -4 bp and MBS prices +10/32 (.31 bp); by 9:30 the 10 year up only 4/32 and MBS prices up 4/32 (.12 bp). At 9:30 the DJIA opened -78, the 10 yr note +6/32 while MBS prices +5/32 (.15 bp), already the bond market has lost some ground from earlier. So far similar to yesterday when the bond market opened better but collapsed through the rest of the day.
If today is the day for a nice retracement it will depend on how the stock market trades the rest of the day. That market is overdue for a correction, even the strongest bulls believe equities are overbought for the near term, discounting a continuing stronger recovery than what the Fed is expecting. So far the bond and mortgage markets are not exuding much confidence that rates are ready to retrace the recent spike; the DJIA off 95 point and yet the 10 yr note can only manage a 7/32 price improvement and mortgage prices up just 5/32 (.15 bp) frm yesterday’s heavy selling.
A better start this morning on weaker stock market indexes and technical factors. At 9:00 the DJIA -74, the 10 yr +10/32 at 2.33% -4 bp and MBS prices +10/32 (.31 bp). 8:30 brought the only data today; Feb housing starts and building permits. Starts were thought to be up 0.8%, as reported starts declined 1.1% to 698K units annualized, January starts were revised from +1.5% to +3.7%; single family starts declined 9.9% while multi-family starts increased 21.1%. Feb building permits were stronger than the +2.3% estimate, up 5.1% to 717K annualized units, permits the highest since Oct 2008. There was little reaction to the data.
The rate markets remain oversold based on our various length relative strength indexes; the selling in the bond market over the last nine days has pushed the rate up 27 basis points and pushed up mortgage rates by 25 basis points. The 10 yr note is still below last year’s high of 3.77% and the average of 3.87% over the past decade.
Looking over the news wires this morning there are many, including us, that believe the bond market is due for a little bounce; comments such as “the bond market has overrun itself” and many references to the same technical momentum oscillators we use. We still want the 10 yr to test 2.40% and hold it before we can actually count on a brief improvement. This morning a good example of the continued bearishness, at 9:00 the 10 up 10/32 with its yield at 2.33% -4 bp and MBS prices +10/32 (.31 bp); by 9:30 the 10 year up only 4/32 and MBS prices up 4/32 (.12 bp). At 9:30 the DJIA opened -78, the 10 yr note +6/32 while MBS prices +5/32 (.15 bp), already the bond market has lost some ground from earlier. So far similar to yesterday when the bond market opened better but collapsed through the rest of the day.
If today is the day for a nice retracement it will depend on how the stock market trades the rest of the day. That market is overdue for a correction, even the strongest bulls believe equities are overbought for the near term, discounting a continuing stronger recovery than what the Fed is expecting. So far the bond and mortgage markets are not exuding much confidence that rates are ready to retrace the recent spike; the DJIA off 95 point and yet the 10 yr note can only manage a 7/32 price improvement and mortgage prices up just 5/32 (.15 bp) frm yesterday’s heavy selling.
Monday, March 19, 2012
Mortgage Rates----
A better start in the bond and mortgage markets this morning after the strong selling last week. The bond market, temporarily oversold on the quick selling last week, should bounce back a little but won’t change the present bearish bias, but so far today the early improvement has lost all its momentum. That said, as we have noted previously interest rates are not likely to increase a lot as long as the Fed is keeping short rates low. Any significant decline in rates will have to be driven by a pullback in the stock market. At 8:00 the 10 yr note +8/32 at 2.27% -2 bp, mortgage prices +5/32 (.15 bp); by 9:30 when the stock markets opened -13, the NASDAQ unchanged; the 10 yr fell back to unchanged and MBS prices +2/32 (.06 bp).
This week’s economic data is thin, what there is focuses on the housing sector with existing and new home sales for Feb. This morning Apple announced it plans to pay a dividend and buy back $10B of its stock, returning some of its $97.6B in cash and investments to shareholders. Not a surprise, it was widely expected.
The only data today; at 10:00 the March NAHB housing mkt index, expected up to 31 frm 29, as reported a little disappointing, the index was unchanged.
Federal Reserve Bank of New York President William C. Dudley said signs the economy is improving don’t dispel “meaningful” risks to growth, including higher gasoline prices, fiscal cutbacks and a weak housing market. “The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established,” Dudley said today in a speech in Melville, New York. “But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.” A recent survey of a number of economists and analysts showed 90% of those surveyed do not believe the Fed will keep the FF rate at zero to +0.25% through 2014 as the Fed continues to chant. The economy is improving, the biggest voice against the strength is the Fed as it tries to temper optimism in attempts to avoid having to raise rates. The rightly believes higher rates now will hinder and slow growth in the economy.
A little disappointing so far this morning; the bond and mortgage markets opened better earlier but couldn’t hold even with a minor decline in stock indexes. That the rate markets couldn’t even hold a small gain in prices doesn’t bode well for our view that there should be a little bounce in the otherwise bearish rate markets. We will stick with our prediction of a little improvement based on momentum oscillators remaining oversold, however we can’t stress hard enough the recent spike in rates is significant that the bond market will not likely decline much (rates).
A better start in the bond and mortgage markets this morning after the strong selling last week. The bond market, temporarily oversold on the quick selling last week, should bounce back a little but won’t change the present bearish bias, but so far today the early improvement has lost all its momentum. That said, as we have noted previously interest rates are not likely to increase a lot as long as the Fed is keeping short rates low. Any significant decline in rates will have to be driven by a pullback in the stock market. At 8:00 the 10 yr note +8/32 at 2.27% -2 bp, mortgage prices +5/32 (.15 bp); by 9:30 when the stock markets opened -13, the NASDAQ unchanged; the 10 yr fell back to unchanged and MBS prices +2/32 (.06 bp).
This week’s economic data is thin, what there is focuses on the housing sector with existing and new home sales for Feb. This morning Apple announced it plans to pay a dividend and buy back $10B of its stock, returning some of its $97.6B in cash and investments to shareholders. Not a surprise, it was widely expected.
The only data today; at 10:00 the March NAHB housing mkt index, expected up to 31 frm 29, as reported a little disappointing, the index was unchanged.
Federal Reserve Bank of New York President William C. Dudley said signs the economy is improving don’t dispel “meaningful” risks to growth, including higher gasoline prices, fiscal cutbacks and a weak housing market. “The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established,” Dudley said today in a speech in Melville, New York. “But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.” A recent survey of a number of economists and analysts showed 90% of those surveyed do not believe the Fed will keep the FF rate at zero to +0.25% through 2014 as the Fed continues to chant. The economy is improving, the biggest voice against the strength is the Fed as it tries to temper optimism in attempts to avoid having to raise rates. The rightly believes higher rates now will hinder and slow growth in the economy.
A little disappointing so far this morning; the bond and mortgage markets opened better earlier but couldn’t hold even with a minor decline in stock indexes. That the rate markets couldn’t even hold a small gain in prices doesn’t bode well for our view that there should be a little bounce in the otherwise bearish rate markets. We will stick with our prediction of a little improvement based on momentum oscillators remaining oversold, however we can’t stress hard enough the recent spike in rates is significant that the bond market will not likely decline much (rates).
Friday, March 16, 2012
Mortgage Rates--
More selling in the bond and mortgage markets this morning; the 10 yr note at 9:00 -15/32 at 2.34%, mortgage prices -10/32 (.31 bp) frm yesterday’s close. The stock indexes prior to the 9:30 open were up 37 points on the DJIA at 9:00. Feb consumer price index at 8:30 was in line; the overall CPI up 0.4% and the core rate (ex food and energy) up 0.1%, a slightly better read than 0.2% that was expected. The cost of living in the U.S. rose in February by the most in 10 months, reflecting a jump in gasoline that failed to spread to other goods and services. The biggest jump in gasoline in more than a year accounted for about 80% of the increase in prices last month. Yr/yr overall CPI +2.9%; yr/yr core rate +2.2%.
At 9:15 Feb industrial production and factory use; production was thought to have increased 0.4%, as reported production was unchanged. January was revised higher however, from unchanged to +0.4%. Factory usage was thought to be at 78.8%, as reported 78.7%; Jan revision revised higher to 78.8% frm 78.5% originally reported.
The DJIA opened up 26, the 10 yr note -19/32 at 2.35% while MBS prices -12/32 (.37 bp) frm yesterday’s closes.
At 9:55 the last data for the week; the U. of Michigan consumer sentiment mid-month index was expected at 76.0 frm 75.3; as reported it declined to 74.3. The current conditions index increased to 84.2 frm 83.0 at the end of Feb, the 12 month outlook fell from 82 frm to 74 and the 1 yr inflation outlook increased to 4 frm 3.3. The inflation index is the highest since May 2011 and likely a result of the recent increase on oil prices that has pushed gasoline prices over $4.00 in many areas of the country. On the report the stock indexes backed down and the interest rate markets found momentary support.
This week saw interest rates increase the most in eight months. The economy is growing more quickly than was expected a month or two ago and stronger than what the Fed has been thinking, although the FOMC statement Tuesday was more optimistic than at the meeting in January. The outlook for the economy has been increasing recently, driving stock indexes to the best levels since the sub-prime economic meltdown in 2008. Whether or not one believes it based on personal observations is not important, it is what it is based on how the stock market is performing recently. Economic data is reflecting improvement at a faster rate than expected six months ago, as the outlook improves the fear of inflation also has increased.
One major factor that had kept US rates low in the last five months was the safety moves in US treasuries on the debt crisis in Europe; that is no longer a force after Greece got its bailout funds and will avoid default this month. Europe’s crisis however if far from over, but for now it is no longer a factor in the bond market. Another factor that held rates artificially low is the Fed’s constant reaffirmation that it will keep the FF rate at 0 to 0.25% through the end of 2014; the Fed still is saying it but not many are buying it anymore.
It isn’t only in the US that rates are increasing; the German bund is increasing. Like the US 10 yr German rates were trading in a narrow 4 month range, it too has broken out to the upside (yield).
This week has been anything but good for potential home buyers and those that may want to re-finance. Mortgage rates up about 15 basis points in rate on 30 yr fixed mtgs., it isn’t a death sentence however. The Fed remains committed to keep long term rate low, it is more a matter of definition about what low is. Low by the Fed’s definition may be higher than what most had believed; compared to the last 50 years even with the 10 yr note at 2.35% and mtg rates at 4.25% the levels are the lowest in a half a century.
Technically, the near term is oversold in the bond and mortgage markets, suggesting at least some consolidation at current levels or possibly some minor retracements in prices and yields next week. There is support on the 10 yr note at 2.40% and 102.00 on the Apr 30 yr FNMA coupon. The wider outlook however is not so good; we expect the US rate markets will trade in a choppy pattern now through the rest of the year and by the end of 2012 the 10 yr at 2.75%. It is of course a moving target; as long as Europe’s crisis can be contained the outlook is for increased rates, but still by the long term definition rates will remain low.
More selling in the bond and mortgage markets this morning; the 10 yr note at 9:00 -15/32 at 2.34%, mortgage prices -10/32 (.31 bp) frm yesterday’s close. The stock indexes prior to the 9:30 open were up 37 points on the DJIA at 9:00. Feb consumer price index at 8:30 was in line; the overall CPI up 0.4% and the core rate (ex food and energy) up 0.1%, a slightly better read than 0.2% that was expected. The cost of living in the U.S. rose in February by the most in 10 months, reflecting a jump in gasoline that failed to spread to other goods and services. The biggest jump in gasoline in more than a year accounted for about 80% of the increase in prices last month. Yr/yr overall CPI +2.9%; yr/yr core rate +2.2%.
At 9:15 Feb industrial production and factory use; production was thought to have increased 0.4%, as reported production was unchanged. January was revised higher however, from unchanged to +0.4%. Factory usage was thought to be at 78.8%, as reported 78.7%; Jan revision revised higher to 78.8% frm 78.5% originally reported.
The DJIA opened up 26, the 10 yr note -19/32 at 2.35% while MBS prices -12/32 (.37 bp) frm yesterday’s closes.
At 9:55 the last data for the week; the U. of Michigan consumer sentiment mid-month index was expected at 76.0 frm 75.3; as reported it declined to 74.3. The current conditions index increased to 84.2 frm 83.0 at the end of Feb, the 12 month outlook fell from 82 frm to 74 and the 1 yr inflation outlook increased to 4 frm 3.3. The inflation index is the highest since May 2011 and likely a result of the recent increase on oil prices that has pushed gasoline prices over $4.00 in many areas of the country. On the report the stock indexes backed down and the interest rate markets found momentary support.
This week saw interest rates increase the most in eight months. The economy is growing more quickly than was expected a month or two ago and stronger than what the Fed has been thinking, although the FOMC statement Tuesday was more optimistic than at the meeting in January. The outlook for the economy has been increasing recently, driving stock indexes to the best levels since the sub-prime economic meltdown in 2008. Whether or not one believes it based on personal observations is not important, it is what it is based on how the stock market is performing recently. Economic data is reflecting improvement at a faster rate than expected six months ago, as the outlook improves the fear of inflation also has increased.
One major factor that had kept US rates low in the last five months was the safety moves in US treasuries on the debt crisis in Europe; that is no longer a force after Greece got its bailout funds and will avoid default this month. Europe’s crisis however if far from over, but for now it is no longer a factor in the bond market. Another factor that held rates artificially low is the Fed’s constant reaffirmation that it will keep the FF rate at 0 to 0.25% through the end of 2014; the Fed still is saying it but not many are buying it anymore.
It isn’t only in the US that rates are increasing; the German bund is increasing. Like the US 10 yr German rates were trading in a narrow 4 month range, it too has broken out to the upside (yield).
This week has been anything but good for potential home buyers and those that may want to re-finance. Mortgage rates up about 15 basis points in rate on 30 yr fixed mtgs., it isn’t a death sentence however. The Fed remains committed to keep long term rate low, it is more a matter of definition about what low is. Low by the Fed’s definition may be higher than what most had believed; compared to the last 50 years even with the 10 yr note at 2.35% and mtg rates at 4.25% the levels are the lowest in a half a century.
Technically, the near term is oversold in the bond and mortgage markets, suggesting at least some consolidation at current levels or possibly some minor retracements in prices and yields next week. There is support on the 10 yr note at 2.40% and 102.00 on the Apr 30 yr FNMA coupon. The wider outlook however is not so good; we expect the US rate markets will trade in a choppy pattern now through the rest of the year and by the end of 2012 the 10 yr at 2.75%. It is of course a moving target; as long as Europe’s crisis can be contained the outlook is for increased rates, but still by the long term definition rates will remain low.
Wednesday, March 14, 2012
Mortgage Rates
Interest rates are hitting a four month high this morning, breaking many technical support levels. The 10 yr and MBSs were hit hard yesterday and so far this morning another spike in rates. For four months the 10 yr traded quietly in essentially a 15 basis point yield range with a few forays out of the range that lasted just a day or so. We noted for weeks that although the range was holding the momentum oscillators were weakening; the relative strength index was slightly negative since the first of February. Nothing was changing however; the situation in Europe with Greece’s debt kept a bid in US treasuries, the Fed’s constant comments that the US economy wasn’t on solid footing, and that the Fed would keep the FF rate at zero to +0.25% thru 2014 kept long rates in check. Much of the rationale for low rates is still there but has lessened. Putting it in perspective, as we have constantly commented, interest rates are at 50 yr lows and were unlikely to decline much regardless of the momentary circumstances.
Yesterday the dam broke, traders have been nervous about being long bonds but held on until the 10 blew through its first key support at 2.05%, the level that had previously stopped selling. Yesterday the trigger that started the run was two-fold; Feb retail sales were stronger than thought then in the afternoon the FOC policy statement was the preverbal straw. There was a growing thought that the Fed would launch another easing move to increase buying of treasuries and MBSs; the FOMC said no, not yet. The economic outlook according to the Fed had improved somewhat from the previous FOMC meeting. The stock market has continued to increase taking another support from the bond market. Meanwhile in Europe there are still huge debt issues but at the same time (at least at the moment) that its economy while in recession may not be as serious as markets had believed.
While the increase in rates in the past 24 hours has been swift, we continue to believe rates will not increase too much. How high is questionable but I don’t see them higher than 2.25% (10yr) on the 10 yr note on this move. Will rates fall back to under 2.00% on the 10 yr? Not likely as long as Europe doesn’t completely implode, and that isn’t expected. The Fed is committed to keeping rates low; it’s the definition that is in question. The bond market is capitulating, the exodus has been rapid however once positions are re-balanced the bond and mortgage markets will begin another trading range but at higher levels.
Q4 current account balance this morning was higher than expected at -$124.11B; generally ignored by traders. Feb import prices +0.4%, +5.5% yr/yr; export prices +0.4%, +1.5% yr/yr. also pushed in the background.
This afternoon Treasury will auction $13B of 30 yr bonds, re-opening the 30 yr bond issued last month; should go well given the spike in rates. If the auction isn’t strong it would suggest investors expect more increase in rates.
Gold is falling hard this morning, down over $44.00. Crude a little lower as Saudi Arabian Oil Minister Ali al-Naimi said the kingdom can make up for any shortage in global supply, easing concern that tensions with Iran may disrupt production. Pulling in the other direction, the improvement in the economic outlook.
The volume of purchase applications for home mortgages rose 4.4% in the March 9 week with the four-week average up 2.9%. These gains hint at underlying monthly strength for home sales though the report warns that purchase activity remains subdued and is holding in a narrow range. The rush for refinancing appears to be slowing with the index down 4.1% in the week, hitting the lowest level since the beginning of the year and down for a fourth straight week. But, in what the report believes is an indication that lenders are reaching out to underwater borrowers, the share of HARP loans (Home Affordable Refinance Program) continues to rise. Rates during the week were little changed with 30-year fixed mortgages for conforming balances ($417,500 or less) unchanged at 4.06 percent. Next data out of the housing sector will be Monday with the home builders' housing market index which has been on a marked improvement.
Interest rates are hitting a four month high this morning, breaking many technical support levels. The 10 yr and MBSs were hit hard yesterday and so far this morning another spike in rates. For four months the 10 yr traded quietly in essentially a 15 basis point yield range with a few forays out of the range that lasted just a day or so. We noted for weeks that although the range was holding the momentum oscillators were weakening; the relative strength index was slightly negative since the first of February. Nothing was changing however; the situation in Europe with Greece’s debt kept a bid in US treasuries, the Fed’s constant comments that the US economy wasn’t on solid footing, and that the Fed would keep the FF rate at zero to +0.25% thru 2014 kept long rates in check. Much of the rationale for low rates is still there but has lessened. Putting it in perspective, as we have constantly commented, interest rates are at 50 yr lows and were unlikely to decline much regardless of the momentary circumstances.
Yesterday the dam broke, traders have been nervous about being long bonds but held on until the 10 blew through its first key support at 2.05%, the level that had previously stopped selling. Yesterday the trigger that started the run was two-fold; Feb retail sales were stronger than thought then in the afternoon the FOC policy statement was the preverbal straw. There was a growing thought that the Fed would launch another easing move to increase buying of treasuries and MBSs; the FOMC said no, not yet. The economic outlook according to the Fed had improved somewhat from the previous FOMC meeting. The stock market has continued to increase taking another support from the bond market. Meanwhile in Europe there are still huge debt issues but at the same time (at least at the moment) that its economy while in recession may not be as serious as markets had believed.
While the increase in rates in the past 24 hours has been swift, we continue to believe rates will not increase too much. How high is questionable but I don’t see them higher than 2.25% (10yr) on the 10 yr note on this move. Will rates fall back to under 2.00% on the 10 yr? Not likely as long as Europe doesn’t completely implode, and that isn’t expected. The Fed is committed to keeping rates low; it’s the definition that is in question. The bond market is capitulating, the exodus has been rapid however once positions are re-balanced the bond and mortgage markets will begin another trading range but at higher levels.
Q4 current account balance this morning was higher than expected at -$124.11B; generally ignored by traders. Feb import prices +0.4%, +5.5% yr/yr; export prices +0.4%, +1.5% yr/yr. also pushed in the background.
This afternoon Treasury will auction $13B of 30 yr bonds, re-opening the 30 yr bond issued last month; should go well given the spike in rates. If the auction isn’t strong it would suggest investors expect more increase in rates.
Gold is falling hard this morning, down over $44.00. Crude a little lower as Saudi Arabian Oil Minister Ali al-Naimi said the kingdom can make up for any shortage in global supply, easing concern that tensions with Iran may disrupt production. Pulling in the other direction, the improvement in the economic outlook.
The volume of purchase applications for home mortgages rose 4.4% in the March 9 week with the four-week average up 2.9%. These gains hint at underlying monthly strength for home sales though the report warns that purchase activity remains subdued and is holding in a narrow range. The rush for refinancing appears to be slowing with the index down 4.1% in the week, hitting the lowest level since the beginning of the year and down for a fourth straight week. But, in what the report believes is an indication that lenders are reaching out to underwater borrowers, the share of HARP loans (Home Affordable Refinance Program) continues to rise. Rates during the week were little changed with 30-year fixed mortgages for conforming balances ($417,500 or less) unchanged at 4.06 percent. Next data out of the housing sector will be Monday with the home builders' housing market index which has been on a marked improvement.
Tuesday, March 13, 2012
Mortgage Rates----
Feb retail sales released at 8:30 was better than expected. Estimates were an increase of 1.0%, as reported +1.1%; excluding auto sales markets were looking for an increase of 0.7%, as reported +0.9%. January retail sales were revised from +0.4% to +0.6%; excluding auto sales from +0.7% to +1.1%. The initial reaction pushed the 10 yr note yield to 2.07% and MBS prices down 6/32 (.18 bp), but by 9:00 both treasuries and mortgage prices were off their lows, MBS price on 30 yr fixed down only 1/32 (.03 bp). Retail was the highest in five months with 11 of 13 industry groups showing increases in demand.
US stock indexes are stronger this morning on the solid retail sales data; at 9:30 the DJIA opened +44, NASDAQ +20 and S&P +7. 10 yr note -8/32 at 2.07% +4 bp and MBS 30 yr price -3/32 (.09 bp). Better US retail sales and gains in Germany investor confidence pushing equity prices higher. German investor confidence jumped to a 21-month high in March. The index of investor and analyst expectations, which aims to predict economic developments six months in advance, advanced to 22.3 from 5.4 in February. That’s the fourth straight increase and the highest reading since June 2010. Economists forecast a gain to 10.
At 10:00 Jan business inventories were thought to be up 0.6%; as reported inventories increased 0.7%. Final sales up 0.4% suggesting businesses are stock piling inventories; the growth in inventories is the largest since last October.
1:00 this afternoon brings Treasury back to the borrowing window with $21B of 10 yr notes to be auctioned. Yesterday’s 3 yr seemed OK to me but the consensus thought it didn’t meet expectations. Normally the farther out the curve investors are less aggressive, however at 2.07% the 10 may be attractive since it has held at 2.10% five times since mid-January. Today’s auction is in the face of the FOMC policy statement at 2:15.
The FOMC policy statement (2:15) will likely reiterate the Fed will continue to keep the FF at present levels through the end of 2014 even with employment improving and consumer confidence improving. Bernanke, in his semiannual monetary policy report to Congress, said maintaining monetary stimulus is warranted even with employment gains and a lower jobless rate. While there are “some positive developments in the labor market,” Bernanke told lawmakers on March 1, “the pace of expansion has been uneven.” The rise in gasoline prices “is likely to push up inflation temporarily while reducing consumers’ purchasing power.” Curious that he talked about gasoline prices increasing inflation since the Fed generally discounts food and energy prices when judging inflation.
There is still somewhat of a belief that the Fed will do another easing move; while not close to a consensus some still hold that the Fed will increase purchases of MBSs and treasuries to keep long term rates at these low levels. We do not believe the Fed is ready to launch another buying spree, while it will remain on the radar any potential easing isn’t likely as long as the economy is improving. The idea of another easing move comes from comments Bernanke has made more than a few times that the economic recovery has been “uneven”. Keeping the FF rate at 0.25% for another almost two years is sufficient to keep interest rates from increasing much, it fuels demand for long term rates.
Feb retail sales released at 8:30 was better than expected. Estimates were an increase of 1.0%, as reported +1.1%; excluding auto sales markets were looking for an increase of 0.7%, as reported +0.9%. January retail sales were revised from +0.4% to +0.6%; excluding auto sales from +0.7% to +1.1%. The initial reaction pushed the 10 yr note yield to 2.07% and MBS prices down 6/32 (.18 bp), but by 9:00 both treasuries and mortgage prices were off their lows, MBS price on 30 yr fixed down only 1/32 (.03 bp). Retail was the highest in five months with 11 of 13 industry groups showing increases in demand.
US stock indexes are stronger this morning on the solid retail sales data; at 9:30 the DJIA opened +44, NASDAQ +20 and S&P +7. 10 yr note -8/32 at 2.07% +4 bp and MBS 30 yr price -3/32 (.09 bp). Better US retail sales and gains in Germany investor confidence pushing equity prices higher. German investor confidence jumped to a 21-month high in March. The index of investor and analyst expectations, which aims to predict economic developments six months in advance, advanced to 22.3 from 5.4 in February. That’s the fourth straight increase and the highest reading since June 2010. Economists forecast a gain to 10.
At 10:00 Jan business inventories were thought to be up 0.6%; as reported inventories increased 0.7%. Final sales up 0.4% suggesting businesses are stock piling inventories; the growth in inventories is the largest since last October.
1:00 this afternoon brings Treasury back to the borrowing window with $21B of 10 yr notes to be auctioned. Yesterday’s 3 yr seemed OK to me but the consensus thought it didn’t meet expectations. Normally the farther out the curve investors are less aggressive, however at 2.07% the 10 may be attractive since it has held at 2.10% five times since mid-January. Today’s auction is in the face of the FOMC policy statement at 2:15.
The FOMC policy statement (2:15) will likely reiterate the Fed will continue to keep the FF at present levels through the end of 2014 even with employment improving and consumer confidence improving. Bernanke, in his semiannual monetary policy report to Congress, said maintaining monetary stimulus is warranted even with employment gains and a lower jobless rate. While there are “some positive developments in the labor market,” Bernanke told lawmakers on March 1, “the pace of expansion has been uneven.” The rise in gasoline prices “is likely to push up inflation temporarily while reducing consumers’ purchasing power.” Curious that he talked about gasoline prices increasing inflation since the Fed generally discounts food and energy prices when judging inflation.
There is still somewhat of a belief that the Fed will do another easing move; while not close to a consensus some still hold that the Fed will increase purchases of MBSs and treasuries to keep long term rates at these low levels. We do not believe the Fed is ready to launch another buying spree, while it will remain on the radar any potential easing isn’t likely as long as the economy is improving. The idea of another easing move comes from comments Bernanke has made more than a few times that the economic recovery has been “uneven”. Keeping the FF rate at 0.25% for another almost two years is sufficient to keep interest rates from increasing much, it fuels demand for long term rates.
Monday, March 12, 2012
Mortgage Rates--
A better start in the bond and mortgage markets to begin the week. Europe’s equity markets lower leading to a softer open in the US stock market. The 10 yr note back to 2.00% at 9:00 (2.03% Friday), MBS prices at 9:00 +6/32 (.18 bp). Interest rates remain in tight ranges, a pattern that began last November. There is an increasing clamor among analysts and traders to exit fixed income investments in favor of equities and commodities; almost every day now for weeks there is another pundit joining the pack that wants out of fixed income investments. So far about all we can take away from it is that interest rates have stopped their decline, however as we have noted previously, the rate markets are not likely to increase much.
Prior to the 9:30 open stock indexes were trading lower; at 9:30 the DJIA opened better, up 5 points. The 10 yr backed off its best level on the open but still up 7/32 at 2.00% -3 bp with MBS prices +6/32 (.18 bp).
Pressure in Europe and US equity markets this morning triggered on a report that showed that China’s exports grew at a slower pace than forecast. China’s exports are at lows that go back 12 years. China’s various economic reports recently have been weaker than thought, worrying investors that the global economy is slowing. Europe of course is falling back into recession and China’s explosive growth is slowing a little. The stock market however, opened better and continued to improve into 10:00 taking some of the early gains away from the bond and mortgage markets.
Finance ministers from the 17 nations that share the euro gather in Brussels today to approve the 130 billion-euro second bailout package for Greece. Bondholders last week agreed to exchange the country’s privately held debt for new securities. The finance ministers will also discuss Spain’s budget-cutting efforts and Portugal’s aid program.
The week’s economic data has a lot to assimilate, and focus on the FOMC meeting tomorrow. The Fed isn’t likely to change its direction on keeping the Fed funds rate at 0.25% until the end of 2014, however there is a growing belief within the FOMC that the target should be lifted in favor of keeping the rate low but couching it based on the economy and inflation expectations that are increasing somewhat. Inflation fears are increasing although businesses have little pricing power and likely won’t have for a year or so. Most concerns over inflation are based on past situations where the Fed failed to act rapidly enough to fight it, allowing the infection to spread into an inflationary spiral.
This afternoon at 1:00 Treasury will begin three days of auctions to borrow $66B. Today its $32B of 3 yr notes. At 2:00 Treasury will report the Feb budget, expected to be -$229.0B.
The near term outlook for US interest rates is flat; the bond and mortgage markets have for months been in a narrow range. There is little likelihood that rates will change much until there are new fundamentals and we don’t see where that would come from. That said, given the unsettled mid-east and in Europe as it heads into another recession shocks and surprises are not out of the equation. Technically, the 10 yr note continues to carry a very slight bearish bias although not much and most studies are not weakening, just holding steady. The rest of the day should be quiet ahead of tomorrow’s FOMC meeting and key economic data through the week and Treasury auctions today, tomorrow and Wednesday.
A better start in the bond and mortgage markets to begin the week. Europe’s equity markets lower leading to a softer open in the US stock market. The 10 yr note back to 2.00% at 9:00 (2.03% Friday), MBS prices at 9:00 +6/32 (.18 bp). Interest rates remain in tight ranges, a pattern that began last November. There is an increasing clamor among analysts and traders to exit fixed income investments in favor of equities and commodities; almost every day now for weeks there is another pundit joining the pack that wants out of fixed income investments. So far about all we can take away from it is that interest rates have stopped their decline, however as we have noted previously, the rate markets are not likely to increase much.
Prior to the 9:30 open stock indexes were trading lower; at 9:30 the DJIA opened better, up 5 points. The 10 yr backed off its best level on the open but still up 7/32 at 2.00% -3 bp with MBS prices +6/32 (.18 bp).
Pressure in Europe and US equity markets this morning triggered on a report that showed that China’s exports grew at a slower pace than forecast. China’s exports are at lows that go back 12 years. China’s various economic reports recently have been weaker than thought, worrying investors that the global economy is slowing. Europe of course is falling back into recession and China’s explosive growth is slowing a little. The stock market however, opened better and continued to improve into 10:00 taking some of the early gains away from the bond and mortgage markets.
Finance ministers from the 17 nations that share the euro gather in Brussels today to approve the 130 billion-euro second bailout package for Greece. Bondholders last week agreed to exchange the country’s privately held debt for new securities. The finance ministers will also discuss Spain’s budget-cutting efforts and Portugal’s aid program.
The week’s economic data has a lot to assimilate, and focus on the FOMC meeting tomorrow. The Fed isn’t likely to change its direction on keeping the Fed funds rate at 0.25% until the end of 2014, however there is a growing belief within the FOMC that the target should be lifted in favor of keeping the rate low but couching it based on the economy and inflation expectations that are increasing somewhat. Inflation fears are increasing although businesses have little pricing power and likely won’t have for a year or so. Most concerns over inflation are based on past situations where the Fed failed to act rapidly enough to fight it, allowing the infection to spread into an inflationary spiral.
This afternoon at 1:00 Treasury will begin three days of auctions to borrow $66B. Today its $32B of 3 yr notes. At 2:00 Treasury will report the Feb budget, expected to be -$229.0B.
The near term outlook for US interest rates is flat; the bond and mortgage markets have for months been in a narrow range. There is little likelihood that rates will change much until there are new fundamentals and we don’t see where that would come from. That said, given the unsettled mid-east and in Europe as it heads into another recession shocks and surprises are not out of the equation. Technically, the 10 yr note continues to carry a very slight bearish bias although not much and most studies are not weakening, just holding steady. The rest of the day should be quiet ahead of tomorrow’s FOMC meeting and key economic data through the week and Treasury auctions today, tomorrow and Wednesday.
Friday, March 9, 2012
Thursday, March 8, 2012
Mortgage Rates----
Europe’s stock markets trading better today and leading to a stronger open in the US at 9:30. Weekly jobless claims were expected to be up 4K, as reported claims increased 8K to 362K; last week’s claims were revised to 354K frm 351K. Continuing claims increased by 10K to 3.416 mil. A Labor Department official today said there were no unusual circumstances affecting today’s figures. The four-week moving average, a less-volatile measure, was little changed at 355,000 from 354,750, which were the fewest since March 2008. Twelve states and territories reported an increase in claims, while 41 had a decrease. Treasuries and mortgage prices were weaker prior to 8:30 and didn’t change on the claims data. At 8:45 the 10 yr note yield sat at 2.00% +3 bp frm yesterday’s close; MBS prices -2/32 (.06 bp).
Greece has until 10:00 pm in Athens to get lenders to agree on re-structuring debt; based on current count it now appears Greece will get the necessary participation. Holders of about 65% of the Greek bonds eligible for the deal, including Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers are now on board. 75% participation is the goal, based on comments from officials in Europe there will be enough to get the bailout funds necessary to avoid default. While Greece would prefer a voluntary deal, the government has said it will use collective action clauses to force holders of Greek-law bonds into the swap if the so-called private sector involvement falls short and it gets sufficient approval from investors to change the bonds’ terms. Bond holders are being forced to take a 53% write down on the debt. Europe’s stock markets are improving as the deadline approaches.
The ECB left its base interest rate unchanged at its meeting; nothing surprising it was widely anticipated.
The DJIA opened +60, the 10 yr note -6/32 at 1.99% and MBS prices unchanged. Earlier this morning the 10 yr tried 2.00% and mortgage prices were down 2/32 (.06 bp).
At 11:00 Treasury will announce next week’s auctions; 3 yr 10 yr and 30 yr issues will be auctioned in the regular monthly borrowing.
The rest of the day should be quiet in the bond and mortgage markets ahead of tomorrow’s employment data. The stock market should trade higher all session on the belief Greece will avoid default. Consensus estimates for non-farm jobs is for 203K jobs, 220K private jobs with the unemployment rate unchanged at 8.3%. Crude oil is higher again today on signs that sanctions on Iran are succeeding in cutting the nation’s crude exports. Gold higher on a weaker dollar this morning.
US interest rates remain generally unchanged and have been flat for weeks now. Technically the 10 yr has a slight bearish bias at these levels, however we do not expect interest rates will increase much on any selling. There is still an underlying thought in the markets that the Fed will step up with another buying program of treasuries and MBSs. Even though Bernanke tried to dampen the idea last week in his testimony in Congress, markets are not completely convinced the Fed is done. The foundation for the belief of more Fed buying is that the Fed wants to keep long term rates low to help the housing market.
Europe’s stock markets trading better today and leading to a stronger open in the US at 9:30. Weekly jobless claims were expected to be up 4K, as reported claims increased 8K to 362K; last week’s claims were revised to 354K frm 351K. Continuing claims increased by 10K to 3.416 mil. A Labor Department official today said there were no unusual circumstances affecting today’s figures. The four-week moving average, a less-volatile measure, was little changed at 355,000 from 354,750, which were the fewest since March 2008. Twelve states and territories reported an increase in claims, while 41 had a decrease. Treasuries and mortgage prices were weaker prior to 8:30 and didn’t change on the claims data. At 8:45 the 10 yr note yield sat at 2.00% +3 bp frm yesterday’s close; MBS prices -2/32 (.06 bp).
Greece has until 10:00 pm in Athens to get lenders to agree on re-structuring debt; based on current count it now appears Greece will get the necessary participation. Holders of about 65% of the Greek bonds eligible for the deal, including Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers are now on board. 75% participation is the goal, based on comments from officials in Europe there will be enough to get the bailout funds necessary to avoid default. While Greece would prefer a voluntary deal, the government has said it will use collective action clauses to force holders of Greek-law bonds into the swap if the so-called private sector involvement falls short and it gets sufficient approval from investors to change the bonds’ terms. Bond holders are being forced to take a 53% write down on the debt. Europe’s stock markets are improving as the deadline approaches.
The ECB left its base interest rate unchanged at its meeting; nothing surprising it was widely anticipated.
The DJIA opened +60, the 10 yr note -6/32 at 1.99% and MBS prices unchanged. Earlier this morning the 10 yr tried 2.00% and mortgage prices were down 2/32 (.06 bp).
At 11:00 Treasury will announce next week’s auctions; 3 yr 10 yr and 30 yr issues will be auctioned in the regular monthly borrowing.
The rest of the day should be quiet in the bond and mortgage markets ahead of tomorrow’s employment data. The stock market should trade higher all session on the belief Greece will avoid default. Consensus estimates for non-farm jobs is for 203K jobs, 220K private jobs with the unemployment rate unchanged at 8.3%. Crude oil is higher again today on signs that sanctions on Iran are succeeding in cutting the nation’s crude exports. Gold higher on a weaker dollar this morning.
US interest rates remain generally unchanged and have been flat for weeks now. Technically the 10 yr has a slight bearish bias at these levels, however we do not expect interest rates will increase much on any selling. There is still an underlying thought in the markets that the Fed will step up with another buying program of treasuries and MBSs. Even though Bernanke tried to dampen the idea last week in his testimony in Congress, markets are not completely convinced the Fed is done. The foundation for the belief of more Fed buying is that the Fed wants to keep long term rates low to help the housing market.
Wednesday, March 7, 2012
Tuesday, March 6, 2012
Monday, March 5, 2012
Mortgage Rates
Early trading was generally unchanged but both equities and the bond and mortgage markets opened slightly weaker. China announced the lowest economic growth target since 2004 and European services and manufacturing output was less than earlier estimated. China cut the nation’s economic growth target to 7.5% from an 8.0% goal in place since 2005, the driver for economic growth is slowing. European services and manufacturing output shrank in February more than earlier estimated and at 10:00 estimates were for Jan factory orders were for a decline of 1.9%.
This week private investors holding Greek debt have to decide whether to accept the haircut on debt that is mandated to get funds for Greece to avoid default. The Greek government has set a 75 percent participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility. Euro-area finance ministers last week authorized the EFSF to issue bonds for the swap. Whether that 130 billion-euro package can proceed will depend on the outcome of this week’s swap. A German investor letter advised private investors to reject the Greek bond offer. Yogi was right on…..it ain’t over ‘til it’s over.
At 9:30 the DJIA opened -13, the 10 yr note -3/32 at 1.99% and MBS prices -2/32 (.06 bp).
Two data points at 10:00; Feb ISM services index expected at 56.0 frm 56.8, it was better at 57.3. New orders component at 61.2 frm 59.4 in Jan, employment index at 55.7 frm 57.4 and prices paid index at 68.4 frm 63.5. Overall a mixed report, the overall index better but employment continues to drag. January factory orders were expected to be weak, as reported orders fell 1.0%, the largest decline in orders since Oct 2010. The reaction improved the stock indexes but no noticeable reaction to the data in the bond and mortgage markets.
The week ahead is about employment on Friday (expected to show 207K non-farm jobs and 220K non-farm private jobs with unemployment at 8.3% unch frm Jan),Europe’s mess is still on the radar in the bond market, and now with China forecasting growth at the lowest in five years all are combining this morning keeping the bond and mortgage markets stable with slightly lower stock indexes. The US interest rate markets are well contained in the narrow ranges that have mostly held now for since last November. The near term has the 10 yr note in a narrow 20 basis point range and MBS markets in a 100 basis point price range since the end of January.
Early trading was generally unchanged but both equities and the bond and mortgage markets opened slightly weaker. China announced the lowest economic growth target since 2004 and European services and manufacturing output was less than earlier estimated. China cut the nation’s economic growth target to 7.5% from an 8.0% goal in place since 2005, the driver for economic growth is slowing. European services and manufacturing output shrank in February more than earlier estimated and at 10:00 estimates were for Jan factory orders were for a decline of 1.9%.
This week private investors holding Greek debt have to decide whether to accept the haircut on debt that is mandated to get funds for Greece to avoid default. The Greek government has set a 75 percent participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility. Euro-area finance ministers last week authorized the EFSF to issue bonds for the swap. Whether that 130 billion-euro package can proceed will depend on the outcome of this week’s swap. A German investor letter advised private investors to reject the Greek bond offer. Yogi was right on…..it ain’t over ‘til it’s over.
At 9:30 the DJIA opened -13, the 10 yr note -3/32 at 1.99% and MBS prices -2/32 (.06 bp).
Two data points at 10:00; Feb ISM services index expected at 56.0 frm 56.8, it was better at 57.3. New orders component at 61.2 frm 59.4 in Jan, employment index at 55.7 frm 57.4 and prices paid index at 68.4 frm 63.5. Overall a mixed report, the overall index better but employment continues to drag. January factory orders were expected to be weak, as reported orders fell 1.0%, the largest decline in orders since Oct 2010. The reaction improved the stock indexes but no noticeable reaction to the data in the bond and mortgage markets.
The week ahead is about employment on Friday (expected to show 207K non-farm jobs and 220K non-farm private jobs with unemployment at 8.3% unch frm Jan),Europe’s mess is still on the radar in the bond market, and now with China forecasting growth at the lowest in five years all are combining this morning keeping the bond and mortgage markets stable with slightly lower stock indexes. The US interest rate markets are well contained in the narrow ranges that have mostly held now for since last November. The near term has the 10 yr note in a narrow 20 basis point range and MBS markets in a 100 basis point price range since the end of January.
Sunday, March 4, 2012
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Saturday, March 3, 2012
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Friday, March 2, 2012
Mortgage Rates
Treasuries and mortgage markets opened a little better this morning after three days of selling taking the 10 yr to 2.03% yesterday. Stock indexes opening a little weaker. There are no economic releases to deal with today, likely the markets will trade quietly into the weekend.
European leaders met in yet another summit in Brussels declaring a “turning point” after confirming the second bailout for Greece (the 17th summit meeting in the last two years). Leaders signed the deficit control treaty while Europe’s economy is still in recession mode; “We’re not out of the economic crisis yet but we are turning the page of the financial crisis,” French President Nicolas Sarkozy said. “It’s a reassuring picture which is still very fragile because we have a lot of uncertainty and the countries of Europe have to persevere,” ECB President Mario Draghi said at the summit. “It’s a much much better picture than we had until November.” German Chancellor Angela Merkel apparently changed her mind at the summit, agreeing to speed the payments into the planned 500 billion-euro permanent rescue fund barely a year after she won a deal to slow them down. “We are still in a fragile situation,” Merkel said. ‘This situation has calmed down a bit, but the crisis is hardly over and further steps will be required to get there.’’ And the beat goes on.
Crude oil markets were subject to another rumor yesterday, sending crude prices higher on reports apparently out of Iran’s media that a pipeline explosion occurred in Saudi Arabia. The rumor spiked prices but was totally denied by the Saudi officials. This morning crude oil is down about a dollar after the explosion was seen as a ruse by Iran; there was a fire at a refinery in the area but did didn’t cause any serious damage to the refinery or a pipeline. That crude hasn’t fallen much from the rumor reminds that the situation with Iran’s nuke program is escalating. The Obama administration is escalating warnings that the U.S. may join Israel in an attack on the nuclear facilities if Iran doesn’t dispel concern that its atomic-research program is aimed at producing weapons. Air Force Chief of Staff General Norton Schwartz told reporters this week that the Joint Chiefs of Staff have prepared military options.
At 9:30 the DJIA opened down 7 points, the 10 yr note +6/32 at 2.01% -2 bp and MBS prices +4/32 (.12 bp).
In the absence of any direct data today Tim Geithner’s op-ed piece in the WSJ is worth perusing. The point of the piece is that Wall Street continues to fight the number of new regulations forced on it after the financial disaster the Street and large banks foisted on America that set up the worst recession since the depression. ……” In the spring of 2008, more Americans were starting to face higher mortgage payments as teaser interest rates reset and they could no longer refinance out of them because the value of their homes stopped rising—the leading edge of a wave of foreclosures and a terrible fall in house prices. By the time Bear Stearns failed, the recession was then already several months old, but it would of course get much worse in coming months. These problems were partly the result of amnesia. There was no memory of extreme crisis, no memory of what can happen when a nation allows huge amounts of risk to build up outside of the safeguards all economies require.”…… To read the piece online, visit this link.
Yesterday the 10 yr note rose to 2.06% before closing the day at 2.03%; it hit its near term support and held, just as when it falls to its resistance at 1.90%. The 10 and mortgage rates are well contained in their respective ranges, it’s been that way for months and likely to continue. At 10:00 the 10 yr is back under 2.00% at 1.99% on weaker stock indexes. MBS prices already better than where prices traded when lenders priced this morning. The rest of the day should trade quietly with no driving news.
Treasuries and mortgage markets opened a little better this morning after three days of selling taking the 10 yr to 2.03% yesterday. Stock indexes opening a little weaker. There are no economic releases to deal with today, likely the markets will trade quietly into the weekend.
European leaders met in yet another summit in Brussels declaring a “turning point” after confirming the second bailout for Greece (the 17th summit meeting in the last two years). Leaders signed the deficit control treaty while Europe’s economy is still in recession mode; “We’re not out of the economic crisis yet but we are turning the page of the financial crisis,” French President Nicolas Sarkozy said. “It’s a reassuring picture which is still very fragile because we have a lot of uncertainty and the countries of Europe have to persevere,” ECB President Mario Draghi said at the summit. “It’s a much much better picture than we had until November.” German Chancellor Angela Merkel apparently changed her mind at the summit, agreeing to speed the payments into the planned 500 billion-euro permanent rescue fund barely a year after she won a deal to slow them down. “We are still in a fragile situation,” Merkel said. ‘This situation has calmed down a bit, but the crisis is hardly over and further steps will be required to get there.’’ And the beat goes on.
Crude oil markets were subject to another rumor yesterday, sending crude prices higher on reports apparently out of Iran’s media that a pipeline explosion occurred in Saudi Arabia. The rumor spiked prices but was totally denied by the Saudi officials. This morning crude oil is down about a dollar after the explosion was seen as a ruse by Iran; there was a fire at a refinery in the area but did didn’t cause any serious damage to the refinery or a pipeline. That crude hasn’t fallen much from the rumor reminds that the situation with Iran’s nuke program is escalating. The Obama administration is escalating warnings that the U.S. may join Israel in an attack on the nuclear facilities if Iran doesn’t dispel concern that its atomic-research program is aimed at producing weapons. Air Force Chief of Staff General Norton Schwartz told reporters this week that the Joint Chiefs of Staff have prepared military options.
At 9:30 the DJIA opened down 7 points, the 10 yr note +6/32 at 2.01% -2 bp and MBS prices +4/32 (.12 bp).
In the absence of any direct data today Tim Geithner’s op-ed piece in the WSJ is worth perusing. The point of the piece is that Wall Street continues to fight the number of new regulations forced on it after the financial disaster the Street and large banks foisted on America that set up the worst recession since the depression. ……” In the spring of 2008, more Americans were starting to face higher mortgage payments as teaser interest rates reset and they could no longer refinance out of them because the value of their homes stopped rising—the leading edge of a wave of foreclosures and a terrible fall in house prices. By the time Bear Stearns failed, the recession was then already several months old, but it would of course get much worse in coming months. These problems were partly the result of amnesia. There was no memory of extreme crisis, no memory of what can happen when a nation allows huge amounts of risk to build up outside of the safeguards all economies require.”…… To read the piece online, visit this link.
Yesterday the 10 yr note rose to 2.06% before closing the day at 2.03%; it hit its near term support and held, just as when it falls to its resistance at 1.90%. The 10 and mortgage rates are well contained in their respective ranges, it’s been that way for months and likely to continue. At 10:00 the 10 yr is back under 2.00% at 1.99% on weaker stock indexes. MBS prices already better than where prices traded when lenders priced this morning. The rest of the day should trade quietly with no driving news.
Thursday, March 1, 2012
Mortgage Rates
Prior to 8:30 economic releases the US bond and mortgage markets were under selling pressure; the 10 yr note yield at 2.04% +6 bp frm yesterday’s close and MBS prices down 12/32 (.37 bp) frm the close yesterday. Stock indexes were trading a little higher but not much.
At 8:30 weekly jobless claims were about unchanged from last week, -2K to 351K, the previous week claims were revised slightly, down 2K from 355K to 353K. Claims continue to reflect that employers, while still not hiring are not firing and cutting jobs. Jan personal income expected to be up 0.4% increased 0.3%; personal spending expected up 0.4% was up just 0.2%. The reaction to the data wasn’t much but treasuries early this morning were in wholesale selling mode on continuing improvement on Europe’s debt problems. The 10 yr shot up to 2.05% (+7 bp) and MBS prices at 9:00 -11/32 (.34 bp).
Comments from Italy’s Prime Minister Mario Monti this morning saying the worst may be over for the euro region’s most distressed bonds. He believes there will be a plan worked out by the end of this month to increase the firewall around the debt crisis in the EU. Meanwhile Germany is continuing to resist an increase in the bailout plans; Germany is saying it isn’t the time to increase the bailout fund. Today begins the EU leaders’ summit in Brussels. Italian bonds are improving, lessening the urgency to increase the firewall according the German government. Yesterday the ECB added more to the kitty than had been expected, adding to the current prevailing view that Europe may actually dodge the bullet. The safety trade into US treasuries is being unwound as investors are less concerned that defaults will occur. All that said, it is still a moving target that can swing from one extreme to another in a blink of an eye.
At 9:30 the DJIA opened +50, the 10 yr -21/32 to 2.05% and MBS prices -11/32 (.34 bp).
Two data points at 10:00; the Feb ISM manufacturing index was thought to be at 54.6 frm 54.1 in Jan, it fell to 52.4. New orders fell to 54.9 frm 57.6 and employment index fell to 53.2 frm 54.3. The initial reaction to the weak ISM data pulled stock indexes down from 60 to 26 and the 10 yr note from -21/32 to -14/32, mortgage prices at 9:30 -11/32 (.34 bp) at 10:05 +8/32 (.25 bp). Jan construction spending was expected up 1.0% as reported it fell to -0.1%, the first decline in construction spending since last July.
Yesterday Ben Bernanke essentially implied the Fed isn’t likely to ease again by purchasing MBSs or treasuries; given the reaction in the rate markets it appeared there were more than a few betting that the Fed would do another QE. No easing and more positive news from Europe are combining to push interest rates higher as traders and investors step away from long bond positions.
Since the beginning of November the bellwether 10 yr has spent 90% of the time in the range between 2.10% and 1.90%, 20 basis points over 4 months. Mortgage rates also in a very narrow range, about 12 basis points in rates. This morning the 10 yr at 2.05% is at the top of the range, we expect the range will continue to hold. If however circumstances push the 10 over 2.10% then the last port in the storm is 2.15%. Although the Fed isn’t going to ease again, it will continue to keep short rates low (Fed funds) and in turn keep the long end and mortgage rates from increasing much.
Prior to 8:30 economic releases the US bond and mortgage markets were under selling pressure; the 10 yr note yield at 2.04% +6 bp frm yesterday’s close and MBS prices down 12/32 (.37 bp) frm the close yesterday. Stock indexes were trading a little higher but not much.
At 8:30 weekly jobless claims were about unchanged from last week, -2K to 351K, the previous week claims were revised slightly, down 2K from 355K to 353K. Claims continue to reflect that employers, while still not hiring are not firing and cutting jobs. Jan personal income expected to be up 0.4% increased 0.3%; personal spending expected up 0.4% was up just 0.2%. The reaction to the data wasn’t much but treasuries early this morning were in wholesale selling mode on continuing improvement on Europe’s debt problems. The 10 yr shot up to 2.05% (+7 bp) and MBS prices at 9:00 -11/32 (.34 bp).
Comments from Italy’s Prime Minister Mario Monti this morning saying the worst may be over for the euro region’s most distressed bonds. He believes there will be a plan worked out by the end of this month to increase the firewall around the debt crisis in the EU. Meanwhile Germany is continuing to resist an increase in the bailout plans; Germany is saying it isn’t the time to increase the bailout fund. Today begins the EU leaders’ summit in Brussels. Italian bonds are improving, lessening the urgency to increase the firewall according the German government. Yesterday the ECB added more to the kitty than had been expected, adding to the current prevailing view that Europe may actually dodge the bullet. The safety trade into US treasuries is being unwound as investors are less concerned that defaults will occur. All that said, it is still a moving target that can swing from one extreme to another in a blink of an eye.
At 9:30 the DJIA opened +50, the 10 yr -21/32 to 2.05% and MBS prices -11/32 (.34 bp).
Two data points at 10:00; the Feb ISM manufacturing index was thought to be at 54.6 frm 54.1 in Jan, it fell to 52.4. New orders fell to 54.9 frm 57.6 and employment index fell to 53.2 frm 54.3. The initial reaction to the weak ISM data pulled stock indexes down from 60 to 26 and the 10 yr note from -21/32 to -14/32, mortgage prices at 9:30 -11/32 (.34 bp) at 10:05 +8/32 (.25 bp). Jan construction spending was expected up 1.0% as reported it fell to -0.1%, the first decline in construction spending since last July.
Yesterday Ben Bernanke essentially implied the Fed isn’t likely to ease again by purchasing MBSs or treasuries; given the reaction in the rate markets it appeared there were more than a few betting that the Fed would do another QE. No easing and more positive news from Europe are combining to push interest rates higher as traders and investors step away from long bond positions.
Since the beginning of November the bellwether 10 yr has spent 90% of the time in the range between 2.10% and 1.90%, 20 basis points over 4 months. Mortgage rates also in a very narrow range, about 12 basis points in rates. This morning the 10 yr at 2.05% is at the top of the range, we expect the range will continue to hold. If however circumstances push the 10 over 2.10% then the last port in the storm is 2.15%. Although the Fed isn’t going to ease again, it will continue to keep short rates low (Fed funds) and in turn keep the long end and mortgage rates from increasing much.
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