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Monday, April 30, 2012
Mortgage Rates
The bond market opened a little better early this morning with slightly weaker stock indexes. The 10 yr note at 1.91% and MBS prices +4/32 (.12 bp) at 8:30. March personal income at 8:30 up 0.4% a little better than forecasts, personal spending though at +0.3% a little softer than thought. On the report treasuries and mortgages didn’t show any reaction. US stock indexes early this morning trading lower, following the markets in Europe.
The DJIA opened -10, NASDAQ -7, S&P -2; the 10 yr note +4/32 1.92% -1 bp and mortgage prices 3/32 (.09 bp) frm Friday’s close.
At 9:45 the April Chicago purchasing mgrs. index, expected at 60.0 frm 62.2 in March; it fell to 56.2. The three components; new orders 57.4 frm 63.3, prices pd at 68.6 frm 70.1 and employment at 58.7 frm 56.3. Overall a weaker report adding to concerns of slowing economy. The weakness is primarily due to inventory levels declining but respondents to the survey also were saying they were looking for a strong summer. The DJIA slipped a little on the report but mortgage prices and the 10 yr note didn’t show much initial reaction.
Treasuries going for their biggest monthly gain since September as slowing U.S. economic growth and concern Europe’s debt crisis is worsening, increased demand for the relative safety of US treasuries. Ten-year notes are slightly higher for a third day with Spain going into its second recession since 2009 and economists said U.S. reports this week will show growth in manufacturing and services slowed. Not only Spain, the UK is in a double-dip recession since the 1970s as its longest peacetime slump for a century persists; UK GDP declined in the last two quarters. The increasingly serious question for Europe is whether the massive austerity cuts demanded have failed to gain support and are for a number of countries unachievable, leading to further deterioration of economies and dragging other global economies down with it. In the US economists predict Labor Department data this week will indicate U.S. hiring increased in April, though not enough to reduce the jobless rate. Consumer spending climbed in March, but a little weaker than estimates. The concern we have for the 10 yr is that it still has not shown the ability to hold under 1.90% on rallies going back to October.
This week may point to a slowdown in manufacturing, services and construction. A gauge of factory activity (ISM manufacturing) will fall to 53.0 from 53.4 in March, according to the median forecasts. An index of services (ISM services sector), the largest part of the economy, will decline to 54.1 from 56.0, while a construction measure will also fall, economists said in separate surveys. A reading above 50 indicates expansion. We won’t put much confidence on the estimates that recently have been more dart tossing than accurate assessments. This week is more about employment than any other report; however the data this weeks has a number of key points.
The 10 yr note is approaching 1.90%, since last October the 10 yr has fallen below it on three occasions but in each case the note was unable to hold under it. Not sure what will occur now but history does have an impact; a sustained decline under 1.90% would embolden traders to push rates lower, the next technical resistance under 1.90% at 1.80%.
The bond market opened a little better early this morning with slightly weaker stock indexes. The 10 yr note at 1.91% and MBS prices +4/32 (.12 bp) at 8:30. March personal income at 8:30 up 0.4% a little better than forecasts, personal spending though at +0.3% a little softer than thought. On the report treasuries and mortgages didn’t show any reaction. US stock indexes early this morning trading lower, following the markets in Europe.
The DJIA opened -10, NASDAQ -7, S&P -2; the 10 yr note +4/32 1.92% -1 bp and mortgage prices 3/32 (.09 bp) frm Friday’s close.
At 9:45 the April Chicago purchasing mgrs. index, expected at 60.0 frm 62.2 in March; it fell to 56.2. The three components; new orders 57.4 frm 63.3, prices pd at 68.6 frm 70.1 and employment at 58.7 frm 56.3. Overall a weaker report adding to concerns of slowing economy. The weakness is primarily due to inventory levels declining but respondents to the survey also were saying they were looking for a strong summer. The DJIA slipped a little on the report but mortgage prices and the 10 yr note didn’t show much initial reaction.
Treasuries going for their biggest monthly gain since September as slowing U.S. economic growth and concern Europe’s debt crisis is worsening, increased demand for the relative safety of US treasuries. Ten-year notes are slightly higher for a third day with Spain going into its second recession since 2009 and economists said U.S. reports this week will show growth in manufacturing and services slowed. Not only Spain, the UK is in a double-dip recession since the 1970s as its longest peacetime slump for a century persists; UK GDP declined in the last two quarters. The increasingly serious question for Europe is whether the massive austerity cuts demanded have failed to gain support and are for a number of countries unachievable, leading to further deterioration of economies and dragging other global economies down with it. In the US economists predict Labor Department data this week will indicate U.S. hiring increased in April, though not enough to reduce the jobless rate. Consumer spending climbed in March, but a little weaker than estimates. The concern we have for the 10 yr is that it still has not shown the ability to hold under 1.90% on rallies going back to October.
This week may point to a slowdown in manufacturing, services and construction. A gauge of factory activity (ISM manufacturing) will fall to 53.0 from 53.4 in March, according to the median forecasts. An index of services (ISM services sector), the largest part of the economy, will decline to 54.1 from 56.0, while a construction measure will also fall, economists said in separate surveys. A reading above 50 indicates expansion. We won’t put much confidence on the estimates that recently have been more dart tossing than accurate assessments. This week is more about employment than any other report; however the data this weeks has a number of key points.
The 10 yr note is approaching 1.90%, since last October the 10 yr has fallen below it on three occasions but in each case the note was unable to hold under it. Not sure what will occur now but history does have an impact; a sustained decline under 1.90% would embolden traders to push rates lower, the next technical resistance under 1.90% at 1.80%.
Friday, April 27, 2012
Mortgage Rates--
Early this morning a quiet start I the bond and mortgage markets. At 8:30 Q1 advance GDP report was expected at +2.5%, as reported the economy grew 2.2% in the quarter. Less than expected but neither the stock market or the bond and mortgage markets showed any reaction to the weaker quarter. Q4 2011 GDP was 3.0%. Consumer spending in Q1 up 2.9% frm +2.1% in Q4; a smaller contribution from inventories overshadowed the biggest gain in consumer spending in more than a year. The GDP estimate is the first of three for the quarter, with the other releases scheduled for May and June when more information becomes available, and usually sees revisions to the advance report. The Q1 employment cost index was +0.4% about in line with forecasts; yr/yr up 1.9%.
The weaker GDP didn’t move markets much; slower growth in Q1 was expected, that is lower than most estimates didn’t surprise, at least based on how the markets are acting. Minor price declines in treasuries and mortgages as US and Europe’s stock markets didn’t experience significant selling. By 9:00 this morning the 10 yr note traded unchanged from yesterday while the MBS markets were weaker with 30 yr FNMA’s down 4/32 (.12 bp). Stock indexes at 9:00 were better following Europe’s stock markets trading better today.
Standard & Poor’s cut its rating on Spain by two levels to BBB+, citing concern that the country will need to pour more money into its lenders. The downgrade has fueled concern that France may be next for a downgrade on its debt. Meanwhile Spain’s Economy Minister Luis de Guindos ruled out seeking a bailout. Optimism always comes from politicians, markets continue to expect Spain will need a bailout sooner rather than later. Spanish unemployment, already the highest in the European Union, rose to 24.4% in the first quarter, just below the 24.55% record of March 1994. The yield on Spain’s 10-year benchmark bonds rose 13 basis points to 5.96%, pushing the spread with similar German maturities to 429 basis points from 415 basis points yesterday.
More than 75% of the 270 companies in the S&P 500 that reported results since April 10 have topped analysts’ estimates. Eight out of 10 groups in the S&P 500 delivered better-than-forecast results, as financial, telephone and technology companies led with a positive rate of more than 10%. Earnings rose 6.9% on average. Better results have propelled stock indexes higher and this morning even with a weak Q1 GDP the indexes started better.
At 9:30 the DJIA opened +28, NASDAQ +8, S&P +4. The 10 yr note at 9:30 -2/32 at 1.95% unchanged, MBSs -3/32 (.09 bp).
The U. of Michigan consumer sentiment index was expected unchanged at 75.7, the index two weeks ago. The sentiment index increased to 76.4 frm 76.2 at the end of March, current conditions at 82.9 frm 86.0 at the end of March and expectations index at 72.3 frm 69.8. Weaker than a month ago but somewhat better than two weeks ago. Stock indexes succumbed and declined a little and US interest rates not much reaction.
Nothing has changed on the technical’ s; still mostly bullish but the 10 yr continues to slow when it’s yield moves close to 1.90%. We have noted many times here that the 10 yr note has very strong resistance at that level. While 1.90% is a wall for the note, 2.00% is also a wall keeping rates low. Mortgage rates based on the weekly MBA data released Wednesday are at their lowest levels ever. Wed take some exception to that, mtg rates were a little lower for a few days back in late Sept but literally only a day or
Early this morning a quiet start I the bond and mortgage markets. At 8:30 Q1 advance GDP report was expected at +2.5%, as reported the economy grew 2.2% in the quarter. Less than expected but neither the stock market or the bond and mortgage markets showed any reaction to the weaker quarter. Q4 2011 GDP was 3.0%. Consumer spending in Q1 up 2.9% frm +2.1% in Q4; a smaller contribution from inventories overshadowed the biggest gain in consumer spending in more than a year. The GDP estimate is the first of three for the quarter, with the other releases scheduled for May and June when more information becomes available, and usually sees revisions to the advance report. The Q1 employment cost index was +0.4% about in line with forecasts; yr/yr up 1.9%.
The weaker GDP didn’t move markets much; slower growth in Q1 was expected, that is lower than most estimates didn’t surprise, at least based on how the markets are acting. Minor price declines in treasuries and mortgages as US and Europe’s stock markets didn’t experience significant selling. By 9:00 this morning the 10 yr note traded unchanged from yesterday while the MBS markets were weaker with 30 yr FNMA’s down 4/32 (.12 bp). Stock indexes at 9:00 were better following Europe’s stock markets trading better today.
Standard & Poor’s cut its rating on Spain by two levels to BBB+, citing concern that the country will need to pour more money into its lenders. The downgrade has fueled concern that France may be next for a downgrade on its debt. Meanwhile Spain’s Economy Minister Luis de Guindos ruled out seeking a bailout. Optimism always comes from politicians, markets continue to expect Spain will need a bailout sooner rather than later. Spanish unemployment, already the highest in the European Union, rose to 24.4% in the first quarter, just below the 24.55% record of March 1994. The yield on Spain’s 10-year benchmark bonds rose 13 basis points to 5.96%, pushing the spread with similar German maturities to 429 basis points from 415 basis points yesterday.
More than 75% of the 270 companies in the S&P 500 that reported results since April 10 have topped analysts’ estimates. Eight out of 10 groups in the S&P 500 delivered better-than-forecast results, as financial, telephone and technology companies led with a positive rate of more than 10%. Earnings rose 6.9% on average. Better results have propelled stock indexes higher and this morning even with a weak Q1 GDP the indexes started better.
At 9:30 the DJIA opened +28, NASDAQ +8, S&P +4. The 10 yr note at 9:30 -2/32 at 1.95% unchanged, MBSs -3/32 (.09 bp).
The U. of Michigan consumer sentiment index was expected unchanged at 75.7, the index two weeks ago. The sentiment index increased to 76.4 frm 76.2 at the end of March, current conditions at 82.9 frm 86.0 at the end of March and expectations index at 72.3 frm 69.8. Weaker than a month ago but somewhat better than two weeks ago. Stock indexes succumbed and declined a little and US interest rates not much reaction.
Nothing has changed on the technical’ s; still mostly bullish but the 10 yr continues to slow when it’s yield moves close to 1.90%. We have noted many times here that the 10 yr note has very strong resistance at that level. While 1.90% is a wall for the note, 2.00% is also a wall keeping rates low. Mortgage rates based on the weekly MBA data released Wednesday are at their lowest levels ever. Wed take some exception to that, mtg rates were a little lower for a few days back in late Sept but literally only a day or
Thursday, April 26, 2012
Mortgage Rates--
Weekly jobless claims were expected to have declined about 13K last week; claims were down 1K to 388K with last week’s claims revised from 386K to 389K. Continuing claims at 381,750 frm 375,500 last week. Another employment measuring stick that isn’t good. Although claims remain under 400K, a level that has been defined as pivotal for the jobs outlook, claims have increased from 350K levels to 388K levels over the last few weeks. Treasuries and mortgages were already better prior to the 8:30 report and added more on the claims. US stock indexes extended their weakness but not much; nevertheless US stock markets are opening weaker following Europe’s decline on a decline in business confidence in Italy.
At 9:30 the DJIA opened -9, the 10 yr note +12/32 at 1.94% -5 bp but the yield is 1 bp higher than at 8:30. Mortgage prices at 9:30 +8/32 (.25 bp) on 30s and +3/32 (.09 bp) on 15s.
At 10:00 March NAR pending home sales expected +0.5%, jumped 4.1%, yr/yr +12.8%. A good report. Pending sales are contracts signed but not closed, cancellations have been running high as credit issues continue to drag on mortgage markets. The report jumped the stock indexes with the DJIA prior to the report +12 now +40.
The last auction today at 1:00; $29B of 7 yr notes, yesterday’s 5 yr note saw solid demand.
Interest rates are declining this morning with US and European equity markets weaker. Yesterday the FOMC and Bernanke’s press conference indicated the Fed was not ready for another easing move that had been touted but wasn’t much of a factor in the decline in interest rates over the last month. Most traders and analysts were not looking for another QE at this time; the decline in US rates is more attributable to the continuing decline in Europe’s economy and the increasing reality that banks in Italy and Spain are facing serious problems with the debt they hold. Europe is dragging the rest of the world’s economic outlook down; if Europe were not headed for a deeper recession global economies including the US would be on a stronger growth path. Taken from a wide perspective Europe’s debt mess and the attempt at unrealistic austerity is back-firing; cutting jobs and spending is the correct thing most of the time but in the current situation cutting too much is actually hindering the debt problems’ resolution as economies decline.
Italian business confidence unexpectedly fell to the lowest level in more than two years in April amid concerns that the country’s fourth recession in a decade may deepen. The manufacturing-sentiment index dropped to 89.5 from a revised 91.1 in March. Economists had predicted a reading of 92.1. Pessimism among households has grown as tax increases and higher gasoline prices crimp domestic demand. Consumer confidence plunged to the lowest in more than 15 years this month.
Spain’s recession undermines efforts to cut the deficit, the risk of bank losses is keeping 10-year yields at almost 6% as investors speculate the government will be forced to bail out the financial system. The Bank of Spain said April 23 that gross domestic product contracted 0.4% in the first quarter, tipping the nation into its second recession since 2009. Spanish banks’ non-performing loans as a proportion of total lending jumped to 8.16% in February, the highest level since 1994, from less than 1% in 2007.
The Fed and Bernanke didn’t say no more easing; the FOMC and Bernanke said at the present it isn’t in the cards but on the other hand it isn’t off the table completely. As long as the US is growing, albeit at a snail’s pace, the fed won’t launch another easing. Will Europe fall deeper into recession (depression) and drag the rest of the world down? China’s growth is slowing, the US is growing but employment isn’t improving. In all the data yesterday the Fed’s forecasts were revised higher on GDP growth and unemployment declining. Not the kind of background that warrants more easing.
Given all the present issues impacting interest rates the question now is how much lower can rates fall? Looking at past history on the 10 yr note over the last seven months it’s yield has not been able to hold under 1.90% for any length of time. Since October 11th the 10 yr has traded under 1.90% only 10 days. We can’t ignore it; 1.90% is a solid resistance level and in terms of mortgage rates the present levels are at the best for months.
Weekly jobless claims were expected to have declined about 13K last week; claims were down 1K to 388K with last week’s claims revised from 386K to 389K. Continuing claims at 381,750 frm 375,500 last week. Another employment measuring stick that isn’t good. Although claims remain under 400K, a level that has been defined as pivotal for the jobs outlook, claims have increased from 350K levels to 388K levels over the last few weeks. Treasuries and mortgages were already better prior to the 8:30 report and added more on the claims. US stock indexes extended their weakness but not much; nevertheless US stock markets are opening weaker following Europe’s decline on a decline in business confidence in Italy.
At 9:30 the DJIA opened -9, the 10 yr note +12/32 at 1.94% -5 bp but the yield is 1 bp higher than at 8:30. Mortgage prices at 9:30 +8/32 (.25 bp) on 30s and +3/32 (.09 bp) on 15s.
At 10:00 March NAR pending home sales expected +0.5%, jumped 4.1%, yr/yr +12.8%. A good report. Pending sales are contracts signed but not closed, cancellations have been running high as credit issues continue to drag on mortgage markets. The report jumped the stock indexes with the DJIA prior to the report +12 now +40.
The last auction today at 1:00; $29B of 7 yr notes, yesterday’s 5 yr note saw solid demand.
Interest rates are declining this morning with US and European equity markets weaker. Yesterday the FOMC and Bernanke’s press conference indicated the Fed was not ready for another easing move that had been touted but wasn’t much of a factor in the decline in interest rates over the last month. Most traders and analysts were not looking for another QE at this time; the decline in US rates is more attributable to the continuing decline in Europe’s economy and the increasing reality that banks in Italy and Spain are facing serious problems with the debt they hold. Europe is dragging the rest of the world’s economic outlook down; if Europe were not headed for a deeper recession global economies including the US would be on a stronger growth path. Taken from a wide perspective Europe’s debt mess and the attempt at unrealistic austerity is back-firing; cutting jobs and spending is the correct thing most of the time but in the current situation cutting too much is actually hindering the debt problems’ resolution as economies decline.
Italian business confidence unexpectedly fell to the lowest level in more than two years in April amid concerns that the country’s fourth recession in a decade may deepen. The manufacturing-sentiment index dropped to 89.5 from a revised 91.1 in March. Economists had predicted a reading of 92.1. Pessimism among households has grown as tax increases and higher gasoline prices crimp domestic demand. Consumer confidence plunged to the lowest in more than 15 years this month.
Spain’s recession undermines efforts to cut the deficit, the risk of bank losses is keeping 10-year yields at almost 6% as investors speculate the government will be forced to bail out the financial system. The Bank of Spain said April 23 that gross domestic product contracted 0.4% in the first quarter, tipping the nation into its second recession since 2009. Spanish banks’ non-performing loans as a proportion of total lending jumped to 8.16% in February, the highest level since 1994, from less than 1% in 2007.
The Fed and Bernanke didn’t say no more easing; the FOMC and Bernanke said at the present it isn’t in the cards but on the other hand it isn’t off the table completely. As long as the US is growing, albeit at a snail’s pace, the fed won’t launch another easing. Will Europe fall deeper into recession (depression) and drag the rest of the world down? China’s growth is slowing, the US is growing but employment isn’t improving. In all the data yesterday the Fed’s forecasts were revised higher on GDP growth and unemployment declining. Not the kind of background that warrants more easing.
Given all the present issues impacting interest rates the question now is how much lower can rates fall? Looking at past history on the 10 yr note over the last seven months it’s yield has not been able to hold under 1.90% for any length of time. Since October 11th the 10 yr has traded under 1.90% only 10 days. We can’t ignore it; 1.90% is a solid resistance level and in terms of mortgage rates the present levels are at the best for months.
Wednesday, April 25, 2012
Mortgage Rates
The interest rate markets weaker again this morning; not surprising with the FOMC policy statement and Bernanke’s press conference this afternoon. The 10 yr note at 9:00 at 2.00% after another push down to close to its strong resistance at 1.90% (the low in this run lower, 1.92%). Mortgages of course are also lower in price, down 3/32 (.09 bp) frm yesterday’s close.
At 8:30 March durable goods orders were much weaker than forecasts; down 4.2% overall against estimates of -1.9%; ex transportation orders, expected up 0.5% were down 1.1%. The decline in orders was the largest month to month since January 2009. There was no noticeable reaction to the weak data in the stock market that was trading better. The US and Europe’s key stock markets are rallying nicely today. In the US the key indexes up driven by Apple’s Q1 report late yesterday, this morning in pre-opening Apple stock up over 50 points and the NASADAQ up 53 on the strong earnings report.
Although Europe’s equity markets are better today, the debt crisis and declining economy in the region are still alive and well. The decisions from the EU, ECB, and IMF to drive austerity and massive spending cuts is showing increasing signs that to achieve those goals will push Europe into a deeper and longer recession and eventually defaults. As long as the situation in Europe continues as it is now, US treasuries won’t increase much as safety moves to the US will continue to support low rates. In the Netherlands the government has collapsed as those austerity goals can’t be met; the entire government resigned. Previously while Greece was the poster child the Netherlands was a strong supporter for massive cuts I government spending and deep austerity on payrolls and job cuts; the country failed to meet the objectives it championed when Greece was the target.
This afternoon at 2:15 we will get the FOMC policy statement followed by Bernanke’s press conference. Unlikely the US financial markets will see much change between now and then. The issue with the Fed; another QE signal from the Fed? We don’t expect the Fed will actually announce an easing move but if Bernanke holds course he will hang out the carrot based as always on the economic climate going forward. Most of the recent decline in rates is attributable to the escalation of the crisis in Europe with some of it driven by a weaker economic outlook that prevails at the present time.
US mortgage rates set record lows last week. The MBA Market Composite Index decreased 3.8% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 5.6% from the previous week, with the Conventional Refinance Index decreasing by 6.1% and the Government Refinance Index decreasing by 2.1%. The seasonally adjusted Purchase Index increased 2.7% from one week earlier. The refinance share of mortgage activity decreased to 73.4% of total applications from 75.2% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.6% from 5.3% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.04% from 4.05%, with points decreasing to 0.40 from 0.45 (including the origination fee) for 80% loans. This is the lowest 30-year fixed interest rate recorded in the history of the survey. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.27% from 4.36%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo interest rate recorded since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.81% from 3.83%, with points decreasing to 0.52 from 0.61 (including the origination fee) for 80% loans. This is the lowest FHA interest rate recorded in the history of the survey. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32% from 3.33%, while points remained unchanged at 0.41 (including the origination fee) for 80% loans. This is the lowest 15-year fixed interest rate recorded in the history of the survey.
The interest rate markets weaker again this morning; not surprising with the FOMC policy statement and Bernanke’s press conference this afternoon. The 10 yr note at 9:00 at 2.00% after another push down to close to its strong resistance at 1.90% (the low in this run lower, 1.92%). Mortgages of course are also lower in price, down 3/32 (.09 bp) frm yesterday’s close.
At 8:30 March durable goods orders were much weaker than forecasts; down 4.2% overall against estimates of -1.9%; ex transportation orders, expected up 0.5% were down 1.1%. The decline in orders was the largest month to month since January 2009. There was no noticeable reaction to the weak data in the stock market that was trading better. The US and Europe’s key stock markets are rallying nicely today. In the US the key indexes up driven by Apple’s Q1 report late yesterday, this morning in pre-opening Apple stock up over 50 points and the NASADAQ up 53 on the strong earnings report.
Although Europe’s equity markets are better today, the debt crisis and declining economy in the region are still alive and well. The decisions from the EU, ECB, and IMF to drive austerity and massive spending cuts is showing increasing signs that to achieve those goals will push Europe into a deeper and longer recession and eventually defaults. As long as the situation in Europe continues as it is now, US treasuries won’t increase much as safety moves to the US will continue to support low rates. In the Netherlands the government has collapsed as those austerity goals can’t be met; the entire government resigned. Previously while Greece was the poster child the Netherlands was a strong supporter for massive cuts I government spending and deep austerity on payrolls and job cuts; the country failed to meet the objectives it championed when Greece was the target.
This afternoon at 2:15 we will get the FOMC policy statement followed by Bernanke’s press conference. Unlikely the US financial markets will see much change between now and then. The issue with the Fed; another QE signal from the Fed? We don’t expect the Fed will actually announce an easing move but if Bernanke holds course he will hang out the carrot based as always on the economic climate going forward. Most of the recent decline in rates is attributable to the escalation of the crisis in Europe with some of it driven by a weaker economic outlook that prevails at the present time.
US mortgage rates set record lows last week. The MBA Market Composite Index decreased 3.8% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 5.6% from the previous week, with the Conventional Refinance Index decreasing by 6.1% and the Government Refinance Index decreasing by 2.1%. The seasonally adjusted Purchase Index increased 2.7% from one week earlier. The refinance share of mortgage activity decreased to 73.4% of total applications from 75.2% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.6% from 5.3% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.04% from 4.05%, with points decreasing to 0.40 from 0.45 (including the origination fee) for 80% loans. This is the lowest 30-year fixed interest rate recorded in the history of the survey. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.27% from 4.36%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo interest rate recorded since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.81% from 3.83%, with points decreasing to 0.52 from 0.61 (including the origination fee) for 80% loans. This is the lowest FHA interest rate recorded in the history of the survey. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32% from 3.33%, while points remained unchanged at 0.41 (including the origination fee) for 80% loans. This is the lowest 15-year fixed interest rate recorded in the history of the survey.
Tuesday, April 24, 2012
Mortgage Rates
Interest rate markets began the day about unchanged from yesterday; yesterday the 10 yr note yield declined 2 basis points to 1.94% and mortgage prices on the day +4/32 (.12 bp). At 9:00 this morning the Feb Case/Shiller 20 city home price index declined 0.8% frm January and yr/yr -3.5%, both in line with estimates and the smallest 12-month drop since February 2011. Stock indexes in pre-opening trade were up fractionally after falling 102 points on the DJIA yesterday. At 9:30 the DJIA opened +25, the 10 yr note -2/32 1.95% +0.5% and mortgage prices +1/32 (.03 bp). German 10-year bund yields rose three basis points to 1.67% after dropping to an all-time low of 1.633% yesterday.
Today the FOMC meeting begins to conclude tomorrow afternoon with the policy statement then Bernanke will hold a press conference. Six weeks ago at the last meeting (3/13) the Fed was a little more optimistic about the economic recovery than in past reports. Since then though Europe’s economy and China’s economy are weakening and in the US weekly claims and non-farm jobs suggest hiring is slowing from earlier this year. Now what is the Fed thinking? Most, including us, are not expecting anything about another easing move from the Fed, but Bernanke will use his influence to jaw-bone the possibility based on economic performance.
The EU’s plan for countries in the region to drastically cut spending in massive austerity moves may be back-firing. The demanded cuts put on Greece, now Spain and Italy; not to forget Ireland and Portugal, have caused the economic outlook to worsen sending Europe back into recession and adding concern that the cuts in spending may not be achieved increasing the possibility of sovereign defaults. The deterioration in Europe is further stressed with the French elections where Sarkozy was unable to get enough votes the first time around against his opponent that is against many of the plans agreed on between France and Germany. The overall reaction to Europe’s decline and China’s slowdown has driven US long term rates down as investors turn to safe investments. The US economic outlook is being thought weaker as a result of these global factors.
Three reports hit at 10:00 this morning; March new home sales were expected up 2.2% to 320K units (annualized), sales declined 7.1% BUT Feb sales were revised to +7.3% frm -1.6% and Jan sales were also revised higher. The median sales price $234,500. +6.3% yr/yr; inventory levels fell to 5.3 months, overall it was an encouraging report. The April consumer confidence index at 69.2 frm Feb revised to 69.5 frm 70.2; the expectations index jumped to 81.1, the present situation index at 51.4 the highest since Sept 2008. The Feb FHFA housing price index +0.3%, Jan revised to -0.5% frm unchanged, yr/yr prices up 0.4%.
The three data points at 10:000 boosted the stock markets and pushed bond and mortgage prices a little lower.
This afternoon Treasury auction $35B of 2 yr notes, we expect the auction will go OK but bidding will be closely scrutinized as recent auctions while not bad have lacked the strong bidding in Feb and January.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Interest rate markets began the day about unchanged from yesterday; yesterday the 10 yr note yield declined 2 basis points to 1.94% and mortgage prices on the day +4/32 (.12 bp). At 9:00 this morning the Feb Case/Shiller 20 city home price index declined 0.8% frm January and yr/yr -3.5%, both in line with estimates and the smallest 12-month drop since February 2011. Stock indexes in pre-opening trade were up fractionally after falling 102 points on the DJIA yesterday. At 9:30 the DJIA opened +25, the 10 yr note -2/32 1.95% +0.5% and mortgage prices +1/32 (.03 bp). German 10-year bund yields rose three basis points to 1.67% after dropping to an all-time low of 1.633% yesterday.
Today the FOMC meeting begins to conclude tomorrow afternoon with the policy statement then Bernanke will hold a press conference. Six weeks ago at the last meeting (3/13) the Fed was a little more optimistic about the economic recovery than in past reports. Since then though Europe’s economy and China’s economy are weakening and in the US weekly claims and non-farm jobs suggest hiring is slowing from earlier this year. Now what is the Fed thinking? Most, including us, are not expecting anything about another easing move from the Fed, but Bernanke will use his influence to jaw-bone the possibility based on economic performance.
The EU’s plan for countries in the region to drastically cut spending in massive austerity moves may be back-firing. The demanded cuts put on Greece, now Spain and Italy; not to forget Ireland and Portugal, have caused the economic outlook to worsen sending Europe back into recession and adding concern that the cuts in spending may not be achieved increasing the possibility of sovereign defaults. The deterioration in Europe is further stressed with the French elections where Sarkozy was unable to get enough votes the first time around against his opponent that is against many of the plans agreed on between France and Germany. The overall reaction to Europe’s decline and China’s slowdown has driven US long term rates down as investors turn to safe investments. The US economic outlook is being thought weaker as a result of these global factors.
Three reports hit at 10:00 this morning; March new home sales were expected up 2.2% to 320K units (annualized), sales declined 7.1% BUT Feb sales were revised to +7.3% frm -1.6% and Jan sales were also revised higher. The median sales price $234,500. +6.3% yr/yr; inventory levels fell to 5.3 months, overall it was an encouraging report. The April consumer confidence index at 69.2 frm Feb revised to 69.5 frm 70.2; the expectations index jumped to 81.1, the present situation index at 51.4 the highest since Sept 2008. The Feb FHFA housing price index +0.3%, Jan revised to -0.5% frm unchanged, yr/yr prices up 0.4%.
The three data points at 10:000 boosted the stock markets and pushed bond and mortgage prices a little lower.
This afternoon Treasury auction $35B of 2 yr notes, we expect the auction will go OK but bidding will be closely scrutinized as recent auctions while not bad have lacked the strong bidding in Feb and January.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Mortgage Rates
Interest rate markets began the day about unchanged from yesterday; yesterday the 10 yr note yield declined 2 basis points to 1.94% and mortgage prices on the day +4/32 (.12 bp). At 9:00 this morning the Feb Case/Shiller 20 city home price index declined 0.8% frm January and yr/yr -3.5%, both in line with estimates and the smallest 12-month drop since February 2011. Stock indexes in pre-opening trade were up fractionally after falling 102 points on the DJIA yesterday. At 9:30 the DJIA opened +25, the 10 yr note -2/32 1.95% +0.5% and mortgage prices +1/32 (.03 bp). German 10-year bund yields rose three basis points to 1.67% after dropping to an all-time low of 1.633% yesterday.
Today the FOMC meeting begins to conclude tomorrow afternoon with the policy statement then Bernanke will hold a press conference. Six weeks ago at the last meeting (3/13) the Fed was a little more optimistic about the economic recovery than in past reports. Since then though Europe’s economy and China’s economy are weakening and in the US weekly claims and non-farm jobs suggest hiring is slowing from earlier this year. Now what is the Fed thinking? Most, including us, are not expecting anything about another easing move from the Fed, but Bernanke will use his influence to jaw-bone the possibility based on economic performance.
The EU’s plan for countries in the region to drastically cut spending in massive austerity moves may be back-firing. The demanded cuts put on Greece, now Spain and Italy; not to forget Ireland and Portugal, have caused the economic outlook to worsen sending Europe back into recession and adding concern that the cuts in spending may not be achieved increasing the possibility of sovereign defaults. The deterioration in Europe is further stressed with the French elections where Sarkozy was unable to get enough votes the first time around against his opponent that is against many of the plans agreed on between France and Germany. The overall reaction to Europe’s decline and China’s slowdown has driven US long term rates down as investors turn to safe investments. The US economic outlook is being thought weaker as a result of these global factors.
Three reports hit at 10:00 this morning; March new home sales were expected up 2.2% to 320K units (annualized), sales declined 7.1% BUT Feb sales were revised to +7.3% frm -1.6% and Jan sales were also revised higher. The median sales price $234,500. +6.3% yr/yr; inventory levels fell to 5.3 months, overall it was an encouraging report. The April consumer confidence index at 69.2 frm Feb revised to 69.5 frm 70.2; the expectations index jumped to 81.1, the present situation index at 51.4 the highest since Sept 2008. The Feb FHFA housing price index +0.3%, Jan revised to -0.5% frm unchanged, yr/yr prices up 0.4%.
The three data points at 10:000 boosted the stock markets and pushed bond and mortgage prices a little lower.
This afternoon Treasury auction $35B of 2 yr notes, we expect the auction will go OK but bidding will be closely scrutinized as recent auctions while not bad have lacked the strong bidding in Feb and January.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Interest rate markets began the day about unchanged from yesterday; yesterday the 10 yr note yield declined 2 basis points to 1.94% and mortgage prices on the day +4/32 (.12 bp). At 9:00 this morning the Feb Case/Shiller 20 city home price index declined 0.8% frm January and yr/yr -3.5%, both in line with estimates and the smallest 12-month drop since February 2011. Stock indexes in pre-opening trade were up fractionally after falling 102 points on the DJIA yesterday. At 9:30 the DJIA opened +25, the 10 yr note -2/32 1.95% +0.5% and mortgage prices +1/32 (.03 bp). German 10-year bund yields rose three basis points to 1.67% after dropping to an all-time low of 1.633% yesterday.
Today the FOMC meeting begins to conclude tomorrow afternoon with the policy statement then Bernanke will hold a press conference. Six weeks ago at the last meeting (3/13) the Fed was a little more optimistic about the economic recovery than in past reports. Since then though Europe’s economy and China’s economy are weakening and in the US weekly claims and non-farm jobs suggest hiring is slowing from earlier this year. Now what is the Fed thinking? Most, including us, are not expecting anything about another easing move from the Fed, but Bernanke will use his influence to jaw-bone the possibility based on economic performance.
The EU’s plan for countries in the region to drastically cut spending in massive austerity moves may be back-firing. The demanded cuts put on Greece, now Spain and Italy; not to forget Ireland and Portugal, have caused the economic outlook to worsen sending Europe back into recession and adding concern that the cuts in spending may not be achieved increasing the possibility of sovereign defaults. The deterioration in Europe is further stressed with the French elections where Sarkozy was unable to get enough votes the first time around against his opponent that is against many of the plans agreed on between France and Germany. The overall reaction to Europe’s decline and China’s slowdown has driven US long term rates down as investors turn to safe investments. The US economic outlook is being thought weaker as a result of these global factors.
Three reports hit at 10:00 this morning; March new home sales were expected up 2.2% to 320K units (annualized), sales declined 7.1% BUT Feb sales were revised to +7.3% frm -1.6% and Jan sales were also revised higher. The median sales price $234,500. +6.3% yr/yr; inventory levels fell to 5.3 months, overall it was an encouraging report. The April consumer confidence index at 69.2 frm Feb revised to 69.5 frm 70.2; the expectations index jumped to 81.1, the present situation index at 51.4 the highest since Sept 2008. The Feb FHFA housing price index +0.3%, Jan revised to -0.5% frm unchanged, yr/yr prices up 0.4%.
The three data points at 10:000 boosted the stock markets and pushed bond and mortgage prices a little lower.
This afternoon Treasury auction $35B of 2 yr notes, we expect the auction will go OK but bidding will be closely scrutinized as recent auctions while not bad have lacked the strong bidding in Feb and January.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Thursday, April 19, 2012
Mortgage Rates
Prior to 8:30 weekly jobless claims the bond and mortgage markets were unchanged. Weekly claims were expected at have declined to 368K frm originally reported 380K last week. Claims as reported were at 386K, down 2K frm a revised 388K last week. Not a good report for the employment sector. Continuing claims increased to 3.297 mil frm 3.271.mil; the 4 week average that smooth’s the claims increased from 369,250 to 374.750. The reaction to the weaker report pushed mortgage prices up 3/32 (.09 bp), the 10 yr note yield down to 1.96% frm 1.98%, the DJIA frm +50 to +12. Not much change from levels prior to the 8:30 report with three more data points at 10:00.
Spain sold 2.54 billion euros ($3.3 billion) of two- and 10-year bonds at an auction today. The country’s government had set a maximum target of 2.5 billion euros. Spain sold the 10-year benchmark bonds at an average yield of 5.743%, compared with 5.789% on the secondary market before the auction, and 5.403% when it last sold the debt in January. It auctioned two-year securities at 3.463%. Generally a little better than what was thought, but still higher than in January as Spain and Italy are increasingly confronted with budget cuts that can’t be met. German bunds advanced and futures contracts rose to a record as investors sought the safest assets. Italian 10-year bond yields climbed for the fourth time in five days after a report showed the nation’s industrial orders plunged more than forecast in February.
At 9:30 the DJIA opened +8, the 10 yr note +5/32 at 1.96% -2 bp and mortgage prices +2/32 (.06 bp).
Three reports at 10:00. March existing home sales expected up 0.7% were down 2.6% to 4.48 mil annualized; yr/yr sales of existing home sales are up 5.2%. Inventory levels declined 1.3% to 2.37 mil homes for sale, a 6.3 month supply. Listed inventory is 21.8% lower than in march 2011. The median price of sales $163,800.00 up 2.5% frm March 2011. The Philly Fed April business index was expected at 10.3 frm 12.5 in March, it was at 8.5; new orders component at 2.7 frm 3.3, employment index at 17.9 frm 6.8 and prices pd at 22.5 frm 18.7 in March. March leading economic indicators at +0.3% against forecasts of +0.2%.
The existing home sales decline is directly impacted by the decline in inventory levels; if inventories fall then sales will do likewise. The Philly Fed was disappointing as was the Empire State manufacturing index on Monday (any index over zero is considered growth but with the overall index at 8.5 there isn’t a lot of it.
At 10:10 the 10 yr note rate at 1.95%, it fell one basis point on the 10:00 data; mortgage prices +4/32 (.12 bp). Still a bullish bias in the bond and mortgage markets but not much compared to two weeks ago. The 10 yr will likely test 1.90%, if it does that may be about all there is for a while----at least until the FOMC meeting next week, or unless more debt problems increase in Europe.
Prior to 8:30 weekly jobless claims the bond and mortgage markets were unchanged. Weekly claims were expected at have declined to 368K frm originally reported 380K last week. Claims as reported were at 386K, down 2K frm a revised 388K last week. Not a good report for the employment sector. Continuing claims increased to 3.297 mil frm 3.271.mil; the 4 week average that smooth’s the claims increased from 369,250 to 374.750. The reaction to the weaker report pushed mortgage prices up 3/32 (.09 bp), the 10 yr note yield down to 1.96% frm 1.98%, the DJIA frm +50 to +12. Not much change from levels prior to the 8:30 report with three more data points at 10:00.
Spain sold 2.54 billion euros ($3.3 billion) of two- and 10-year bonds at an auction today. The country’s government had set a maximum target of 2.5 billion euros. Spain sold the 10-year benchmark bonds at an average yield of 5.743%, compared with 5.789% on the secondary market before the auction, and 5.403% when it last sold the debt in January. It auctioned two-year securities at 3.463%. Generally a little better than what was thought, but still higher than in January as Spain and Italy are increasingly confronted with budget cuts that can’t be met. German bunds advanced and futures contracts rose to a record as investors sought the safest assets. Italian 10-year bond yields climbed for the fourth time in five days after a report showed the nation’s industrial orders plunged more than forecast in February.
At 9:30 the DJIA opened +8, the 10 yr note +5/32 at 1.96% -2 bp and mortgage prices +2/32 (.06 bp).
Three reports at 10:00. March existing home sales expected up 0.7% were down 2.6% to 4.48 mil annualized; yr/yr sales of existing home sales are up 5.2%. Inventory levels declined 1.3% to 2.37 mil homes for sale, a 6.3 month supply. Listed inventory is 21.8% lower than in march 2011. The median price of sales $163,800.00 up 2.5% frm March 2011. The Philly Fed April business index was expected at 10.3 frm 12.5 in March, it was at 8.5; new orders component at 2.7 frm 3.3, employment index at 17.9 frm 6.8 and prices pd at 22.5 frm 18.7 in March. March leading economic indicators at +0.3% against forecasts of +0.2%.
The existing home sales decline is directly impacted by the decline in inventory levels; if inventories fall then sales will do likewise. The Philly Fed was disappointing as was the Empire State manufacturing index on Monday (any index over zero is considered growth but with the overall index at 8.5 there isn’t a lot of it.
At 10:10 the 10 yr note rate at 1.95%, it fell one basis point on the 10:00 data; mortgage prices +4/32 (.12 bp). Still a bullish bias in the bond and mortgage markets but not much compared to two weeks ago. The 10 yr will likely test 1.90%, if it does that may be about all there is for a while----at least until the FOMC meeting next week, or unless more debt problems increase in Europe.
Wednesday, April 18, 2012
Mortgage Rates
A slight bit better in the bond and mortgage markets today, but overall interest rates on mortgages hasn’t changed for the last six days with the bellwether 10 yr note hovering around 2.00% for over a week now. This morning the stock indexes are opening lower after the strong rally yest4erday that saw the NASDAQ achieve its best daily gain this year (+54). There are no scheduled economic reports today.
European shares fell for the first time in three days and the pound strengthened after Bank of England policy makers said inflation may be higher than forecast. U.S. stock futures dropped while Spanish bonds rose for a second day. Inflation may be more of a danger than previously expected and the Bank of England should refrain from further stimulus, according to the minutes of a meeting of its Monetary Policy Committee released today. The yield on the Spanish 10-year bond fell six basis points, dropping for the second straight day.
The DJIA opened -84 at 9:30; mortgage prices +2/32 (.06 bp) and the 10 yr note 1.98% -1 bp. So far another flat day appears to be what we will see today.
Warren Buffett said this morning he has prostate cancer; he said it is contained and there is no evidence it has spread. Likely he will undergo radiation treatments to treat the disease. Generally not having any impact on markets.
When last month’s employment report was released there were concerns that some were getting the report out before others making it unfair and possibly having a momentary imp[act on trading in markets. Most reporting companies have their own communications connections at the Labor Dept. but now Labor is saying no more, news organizations are going to be required to use internet access provided by the Labor Dept. to end any chance that news is out sooner by some than others. There is always something to tinker with these days after the financial collapse in 2008. The agency ordered media organizations to remove computer software, hardware and communications lines they have installed at the department to transmit news on data such as the unemployment rate and consumer prices. Instead, reporters will have to use government equipment, software and Internet connections. Under the current system, credentialed journalists in so-called lockups are given data in advance of their release to the public, allowing time to prepare stories, headlines and tables. Communication by phone or computer is cut off for the half hour that reporters are typically given to write their stories. A Department of Labor employee then flips a switch that opens telephone and data lines, allowing journalists to transmit their stories using their own equipment.
The weekly mortgage applications out today for the week ending 4/13. The Market Composite Index, a measure of mortgage loan application volume, increased 6.9%. The Refinance Index increased 13.5% from the previous week. The seasonally adjusted Purchase Index decreased 11.2% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 1.60%. The four week moving average is down 0.52% for the seasonally adjusted Purchase Index, while this average is up 2.36 percent for the Refinance Index. The refinance share of mortgage activity increased to 75.2% of total applications from 70.5%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.05% from 4.10%, with points increasing to 0.45 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) decreased to 4.36% from 4.43%, with points remaining unchanged at 0.36 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.83% from 3.87%, with points increasing to 0.61 from 0.55 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.33% from 3.37%, with points increasing to 0.41 from 0.37 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.83% from 2.89%, with points decreasing to 0.35 from 0.38 (including the origination fee) for 80% loans.
Looks like another day when the bond and mortgage markets will be flat with not much movement. The 10 yr note isn’t showing much demand to move lower than 2.00% and MBSs follow it. Next week’s FOMC meeting appears to be what traders are waiting for; some evidence the Fed is about to consider another easing. We are not expecting much in the way of improvement after the big decline a week ago.
A slight bit better in the bond and mortgage markets today, but overall interest rates on mortgages hasn’t changed for the last six days with the bellwether 10 yr note hovering around 2.00% for over a week now. This morning the stock indexes are opening lower after the strong rally yest4erday that saw the NASDAQ achieve its best daily gain this year (+54). There are no scheduled economic reports today.
European shares fell for the first time in three days and the pound strengthened after Bank of England policy makers said inflation may be higher than forecast. U.S. stock futures dropped while Spanish bonds rose for a second day. Inflation may be more of a danger than previously expected and the Bank of England should refrain from further stimulus, according to the minutes of a meeting of its Monetary Policy Committee released today. The yield on the Spanish 10-year bond fell six basis points, dropping for the second straight day.
The DJIA opened -84 at 9:30; mortgage prices +2/32 (.06 bp) and the 10 yr note 1.98% -1 bp. So far another flat day appears to be what we will see today.
Warren Buffett said this morning he has prostate cancer; he said it is contained and there is no evidence it has spread. Likely he will undergo radiation treatments to treat the disease. Generally not having any impact on markets.
When last month’s employment report was released there were concerns that some were getting the report out before others making it unfair and possibly having a momentary imp[act on trading in markets. Most reporting companies have their own communications connections at the Labor Dept. but now Labor is saying no more, news organizations are going to be required to use internet access provided by the Labor Dept. to end any chance that news is out sooner by some than others. There is always something to tinker with these days after the financial collapse in 2008. The agency ordered media organizations to remove computer software, hardware and communications lines they have installed at the department to transmit news on data such as the unemployment rate and consumer prices. Instead, reporters will have to use government equipment, software and Internet connections. Under the current system, credentialed journalists in so-called lockups are given data in advance of their release to the public, allowing time to prepare stories, headlines and tables. Communication by phone or computer is cut off for the half hour that reporters are typically given to write their stories. A Department of Labor employee then flips a switch that opens telephone and data lines, allowing journalists to transmit their stories using their own equipment.
The weekly mortgage applications out today for the week ending 4/13. The Market Composite Index, a measure of mortgage loan application volume, increased 6.9%. The Refinance Index increased 13.5% from the previous week. The seasonally adjusted Purchase Index decreased 11.2% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 1.60%. The four week moving average is down 0.52% for the seasonally adjusted Purchase Index, while this average is up 2.36 percent for the Refinance Index. The refinance share of mortgage activity increased to 75.2% of total applications from 70.5%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.05% from 4.10%, with points increasing to 0.45 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) decreased to 4.36% from 4.43%, with points remaining unchanged at 0.36 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.83% from 3.87%, with points increasing to 0.61 from 0.55 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.33% from 3.37%, with points increasing to 0.41 from 0.37 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.83% from 2.89%, with points decreasing to 0.35 from 0.38 (including the origination fee) for 80% loans.
Looks like another day when the bond and mortgage markets will be flat with not much movement. The 10 yr note isn’t showing much demand to move lower than 2.00% and MBSs follow it. Next week’s FOMC meeting appears to be what traders are waiting for; some evidence the Fed is about to consider another easing. We are not expecting much in the way of improvement after the big decline a week ago.
Tuesday, April 17, 2012
Mortgage Rates
Treasuries and mortgages opened slightly weaker this morning. At 8:30 March housing starts and building permits; starts were expected to be up 0.3%, they fell 5.8% the lowest level since Oct 2011, permits were thought to be -0.9%, they increased 4.5% to 747K the highest level of permits since Sept 2008. The starts headline didn’t impress; however multi-family starts were down 16.9% while single family starts were down just 0.2%. Prior to the data the 10 yr traded down 7/32 at 2.10% and MBS prices were down 3/32 (.09 bp); by 9:00 both were unchanged from the levels prior to the data. At 9:00 the DJIA index traded +83.
9:15 March industrial production, expected up 0.2% was unchanged; capacity utilization was right on estimates at 78.6% down from 78.7% in February. No initial reaction to the two reports in either the bond or stock market.
The world economy will expand 3.5% this year and 4.1% in 2013, the IMF said today in its World Economic Outlook, raising forecasts made in January from 3.3% for 2012 and 4.0% for next year. The U.S. will grow 2.1% this year and 2.4% in 2013, up from 1.8% and 2.2% in the lender’s January projections. The euro area economy is projected to decline by 0.3% in 2012, an improvement from the 0.5% in the IMF’s previous forecast. China is projected to grow 8.2% and Japan 2.0% this year. “The most immediate concern is still that further escalation of the euro-area crisis will trigger a much more generalized flight from risk,” the IMF said. “Geopolitical uncertainty could trigger a sharp increase in oil prices.” A 50% increase in the cost of oil would reduce global output by 1.25%, according to the report.
Some relaxing of safety moves to US treasuries this morning on Spain’s better than expected auctions in Europe. Spanish bond yields, which rose as high as 6.16% yesterday, fell to 5.91% after it’s Treasury sold more bills than the 3 billion euros it targeted for the auction. It was a better than expected outcome but a few hours after the auction Spain’s central bank chief said the country risks missing deficit estimates unveiled last month just hours after a successful bill sale dissipated some concerns that the government may have to seek a bailout. “The projected course of total revenues in the budget is subject to downside risks,” Bank of Spain Governor Miguel Angel Fernandez Ordonez was quoted. Spain isn’t out of the woods and any money managers continue to fear more debt bailouts will be needed.
At 9:30 the DJIA opened +100, NASDAQ +15 and the S&P 500 +9. The 10 yr treasury -7/32 at 2.01% and 30 yr mortgage prices -4/32 (.12 bp).
At about 11:15 the President is due to talk about something; not really sure what he wants to say but it is unlikely it will get much attention from markets.
Not a bad start in the rate markets this morning, a little lower in prices but with stock indexes rallying and a fractional relaxation over Europe so far not much selling in the bond and mortgage markets. Yesterday the 10 yr note at one point fell to 1.9% but couldn’t be sustained and ended the day unchanged at 1.99%. The bond and mortgage markets continue to be driven by safety moves into US treasuries and the idea the FOMC meeting next week will end with the policy statement confirming the Fed is considering another easing move---not in that plain of English but using Fed speak.
Treasuries and mortgages opened slightly weaker this morning. At 8:30 March housing starts and building permits; starts were expected to be up 0.3%, they fell 5.8% the lowest level since Oct 2011, permits were thought to be -0.9%, they increased 4.5% to 747K the highest level of permits since Sept 2008. The starts headline didn’t impress; however multi-family starts were down 16.9% while single family starts were down just 0.2%. Prior to the data the 10 yr traded down 7/32 at 2.10% and MBS prices were down 3/32 (.09 bp); by 9:00 both were unchanged from the levels prior to the data. At 9:00 the DJIA index traded +83.
9:15 March industrial production, expected up 0.2% was unchanged; capacity utilization was right on estimates at 78.6% down from 78.7% in February. No initial reaction to the two reports in either the bond or stock market.
The world economy will expand 3.5% this year and 4.1% in 2013, the IMF said today in its World Economic Outlook, raising forecasts made in January from 3.3% for 2012 and 4.0% for next year. The U.S. will grow 2.1% this year and 2.4% in 2013, up from 1.8% and 2.2% in the lender’s January projections. The euro area economy is projected to decline by 0.3% in 2012, an improvement from the 0.5% in the IMF’s previous forecast. China is projected to grow 8.2% and Japan 2.0% this year. “The most immediate concern is still that further escalation of the euro-area crisis will trigger a much more generalized flight from risk,” the IMF said. “Geopolitical uncertainty could trigger a sharp increase in oil prices.” A 50% increase in the cost of oil would reduce global output by 1.25%, according to the report.
Some relaxing of safety moves to US treasuries this morning on Spain’s better than expected auctions in Europe. Spanish bond yields, which rose as high as 6.16% yesterday, fell to 5.91% after it’s Treasury sold more bills than the 3 billion euros it targeted for the auction. It was a better than expected outcome but a few hours after the auction Spain’s central bank chief said the country risks missing deficit estimates unveiled last month just hours after a successful bill sale dissipated some concerns that the government may have to seek a bailout. “The projected course of total revenues in the budget is subject to downside risks,” Bank of Spain Governor Miguel Angel Fernandez Ordonez was quoted. Spain isn’t out of the woods and any money managers continue to fear more debt bailouts will be needed.
At 9:30 the DJIA opened +100, NASDAQ +15 and the S&P 500 +9. The 10 yr treasury -7/32 at 2.01% and 30 yr mortgage prices -4/32 (.12 bp).
At about 11:15 the President is due to talk about something; not really sure what he wants to say but it is unlikely it will get much attention from markets.
Not a bad start in the rate markets this morning, a little lower in prices but with stock indexes rallying and a fractional relaxation over Europe so far not much selling in the bond and mortgage markets. Yesterday the 10 yr note at one point fell to 1.9% but couldn’t be sustained and ended the day unchanged at 1.99%. The bond and mortgage markets continue to be driven by safety moves into US treasuries and the idea the FOMC meeting next week will end with the policy statement confirming the Fed is considering another easing move---not in that plain of English but using Fed speak.
Monday, April 16, 2012
Mortgage Rates
Treasuries and mortgage markets opened about unchanged this morning. At 8:30 two data reports; March retail sales, expected up 0.3%, was up 0.8% and ex auto sales +0.8% (ex-autos expected up 0.6%). April Empire State manufacturing index was expected at 17.5 frm 20.2 in March; as reported the overall index plunged to 6.56; new orders component at 6.48 frm 6.84 and the employment component at 19.28 frm 13.58---- over zero is considered expansion, more indication that there is a slowing in the manufacturing sector. The retail sales report is trumping the Empire State data this morning; stock index are better and at 9:00 the 10 yr note, after being up slightly (+3/32) was -1/32 at 2.00%, mortgage prices at 9:00 -2/32 after opening +3/32 prior to the 8:30 data.
Asian stocks fell overnight, with the regional benchmark index headed for its biggest drop in almost two weeks after the cost of insuring against a Spanish default climbed and U.S. consumer confidence dropped last Friday, clouding the earnings outlook for Asia’s exporters. Stocks also fell after five-year credit-default swaps on Spain surged to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout.
European stocks rebounded from four consecutive weeks of losses and U.S. index futures advanced after American retail sales increased more than forecast in March. Spanish bond yields climbed before a debt sale while the euro weakened. Credit-default swaps on Spain jumped 17 basis points to 519. Contracts on Italy rose seven basis points to 441, the highest level in almost three months. Spanish 10-year bond yields jumped as much as 18 basis points, to 6.16%, the highest level since Dec. 1. Five-year credit-default swaps linked to Spanish bonds jumped to an all-time high. Spain will sell 12- and 18-month bills tomorrow, followed by auctions of debt due in October 2014 and January 2022 on April 19.
At 9:30 the DJIA opened +85, the 10 yr note traded unchanged At 1.99% and 3-0 yr MBS prices unchanged.
Although Europe’s debt issues remain, this morning there is a little relaxation about the possibility of default as EU ministers are calling for the ECB to step up and buy Spain’s bonds to keep their interest rates from increasing more. So far nothing from the ECB but words implying it is “prepared” to act if necessary. The US bond market remains the safe port for investors and has been one of the reasons we have seen US rates fall over the last two weeks. US stock market is rallying this morning on the March retail sales increase, US interest rates are not seeing any selling on the better stock indexes; as long as the debt problems in Europe continue it should keep a bid in US treasuries, thus supporting the mortgage markets.
At 10:00 Feb business inventories were expected up 0.5%, as reported inventories increased 0.6%, sales were up 0.7% with an inventory to sale ratio unchanged from Jan at 1.28months. Also at 10:00 the April NAHB housing index, expected at 29 frm 28 in March, fell to 28, the first decline in 7 months; single family index at 26 down from 29. The drop in the NAHB index sparked some increases in bond and mortgage prices. The DJIA off its high, the NASDAQ has been weaker all session so far.
Technically the treasury and mortgage markets remain bullish; the 10 yr so far today is holding a gain as are mortgage prices, but at 9:30 both were flat on the day and now boosted by the NAHB housing mkt index and stock indexes off their best levels. Looks like the 10 yr is headed to 1.90% (at 10:10 1.96% -3 bp today).
Treasuries and mortgage markets opened about unchanged this morning. At 8:30 two data reports; March retail sales, expected up 0.3%, was up 0.8% and ex auto sales +0.8% (ex-autos expected up 0.6%). April Empire State manufacturing index was expected at 17.5 frm 20.2 in March; as reported the overall index plunged to 6.56; new orders component at 6.48 frm 6.84 and the employment component at 19.28 frm 13.58---- over zero is considered expansion, more indication that there is a slowing in the manufacturing sector. The retail sales report is trumping the Empire State data this morning; stock index are better and at 9:00 the 10 yr note, after being up slightly (+3/32) was -1/32 at 2.00%, mortgage prices at 9:00 -2/32 after opening +3/32 prior to the 8:30 data.
Asian stocks fell overnight, with the regional benchmark index headed for its biggest drop in almost two weeks after the cost of insuring against a Spanish default climbed and U.S. consumer confidence dropped last Friday, clouding the earnings outlook for Asia’s exporters. Stocks also fell after five-year credit-default swaps on Spain surged to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout.
European stocks rebounded from four consecutive weeks of losses and U.S. index futures advanced after American retail sales increased more than forecast in March. Spanish bond yields climbed before a debt sale while the euro weakened. Credit-default swaps on Spain jumped 17 basis points to 519. Contracts on Italy rose seven basis points to 441, the highest level in almost three months. Spanish 10-year bond yields jumped as much as 18 basis points, to 6.16%, the highest level since Dec. 1. Five-year credit-default swaps linked to Spanish bonds jumped to an all-time high. Spain will sell 12- and 18-month bills tomorrow, followed by auctions of debt due in October 2014 and January 2022 on April 19.
At 9:30 the DJIA opened +85, the 10 yr note traded unchanged At 1.99% and 3-0 yr MBS prices unchanged.
Although Europe’s debt issues remain, this morning there is a little relaxation about the possibility of default as EU ministers are calling for the ECB to step up and buy Spain’s bonds to keep their interest rates from increasing more. So far nothing from the ECB but words implying it is “prepared” to act if necessary. The US bond market remains the safe port for investors and has been one of the reasons we have seen US rates fall over the last two weeks. US stock market is rallying this morning on the March retail sales increase, US interest rates are not seeing any selling on the better stock indexes; as long as the debt problems in Europe continue it should keep a bid in US treasuries, thus supporting the mortgage markets.
At 10:00 Feb business inventories were expected up 0.5%, as reported inventories increased 0.6%, sales were up 0.7% with an inventory to sale ratio unchanged from Jan at 1.28months. Also at 10:00 the April NAHB housing index, expected at 29 frm 28 in March, fell to 28, the first decline in 7 months; single family index at 26 down from 29. The drop in the NAHB index sparked some increases in bond and mortgage prices. The DJIA off its high, the NASDAQ has been weaker all session so far.
Technically the treasury and mortgage markets remain bullish; the 10 yr so far today is holding a gain as are mortgage prices, but at 9:30 both were flat on the day and now boosted by the NAHB housing mkt index and stock indexes off their best levels. Looks like the 10 yr is headed to 1.90% (at 10:10 1.96% -3 bp today).
Friday, April 13, 2012
Mortgage Rates
US interest rates better this morning with US stock markets opening lower on reports out of China show its economy is slowing more than thought. China’s GDP rose 8.1% in the first quarter from a year earlier following an 8.9% increase in the fourth quarter, the National Bureau of Statistics in Beijing said today; that was less than the 8.4% growth predicted. China’s economy slowing as exports decline to Europe and the US, and the latest data shows imports are also slowing.
Europe’s debt problems are back as we noted previously; average net borrowings by Spanish banks climbed to 227.6 billion euros last month from 152.4 billion euros in February, the Bank of Spain said. Lenders in the whole euro system took 361.7 billion euros, the data showed. Spanish government bonds headed for a second weekly decline, a sign the respite in the region’s debt crisis created by the ECB’s three-year loan program may be coming to an end. Seventeen of 22 economists surveyed this week predicted the ECB will be forced to resume its so-called Securities Markets Program to contain bond yields. In Italy protests by labor unions against the austerity plans being implemented. Prime Minister Monti’s pension plan was part of a $26 billion austerity package passed in January to fight the sovereign crisis by putting Italy’s debt, the second highest in Europe after Greece, on a downward trajectory from next year.
With slowing in global economic growth comes an increasing belief the US Fed will institute another QE soon. Europe’s debt crisis is adding support to lower interest rates. The recent swift decline in rates after the 10 yr spiked to 2.40% may be already discounting another easing action. This morning the stock indexes are lower after a two days of improvement, the 10 yr note hit 2.00% this morning.
At 8:30 March consumer price index was right on estimates; the overall CPI increased 0.3% frm Feb, yr/yr up 2.7%. The core rates (ex food and energy) up 0.2%, yr/yr +2.3%. There was no immediate reaction to the report.
At 9:30 the DJIA opened down 41 points, the 10 yr note at 2.01% -4 bp and mortgage prices up 6/32 (.18 bp).
The last data this week, at 9:55 the U.of Michigan/Reuters consumer sentiment index was expected unchanged at 76.2, it fell to 75.7, the current conditions index at 80.6 frm 86.0, expectations at 72.5 frm 69.8 and the 12 month outlook at 87 frm 79. The stock market worsened further and the bond market gained a little with the 10 yr at 2.00% and MBS prices .06 bp better than at 9:30.
Federal Reserve Chairman Ben Bernanke will speaking to the Russell Sage Foundation and The Century Foundation on "Rethinking Finance" at 1:00 this afternoon and will take questions from the audience. More than likely he will field questions on what the fed may be prepared to do, and questions on his outlook on the US economy and the Fed’s course of keeping the FF rate at zero to +0.25% for the next two and a half years.
Two readings on employment recently, the March employment report and yesterday’s weekly jobless claims, both added concern about the status of the economy. Tie that to the renewed fears of debt problems and economic decline in Europe and slower growth in China and we have a momentary perfect storm for lower interest rates. But how much lower will longer term rates fall is the ultimate question. The 10 yr note is just 10 basis points higher now than where it has encountered major resistance at 1.90%; although the rate did fall below 1.90% a few times but each time it couldn’t be sustained (only fifteen days since last September). The majority of trading on the 10 yr note since the beginning of last Sept has been between 2.10% and 1.90%.
This week had very little key economic data, only weekly jobless claims. Next week there are a number of key measurements; March retail sales, Apr Empire State manufacturing and the Apr Philly Fed business index, March housing starts and permits and March existing home sales March industrial production and factory usage--- a lot of data that pending the results may either encourage more QE talk or dampen it. The next FOMC meeting on Tuesday the 24th and Wednesday the 25th.
Putting it in perspective; this week the 10 yr note has been tied to a 7 bp range; mortgage prices so far this week have traded in an 8/32 (.25 bp) range (103.14 to 103.06). For all the angst and talk the rate markets were essentially flat this week , at least through 10:00 this morning.
US interest rates better this morning with US stock markets opening lower on reports out of China show its economy is slowing more than thought. China’s GDP rose 8.1% in the first quarter from a year earlier following an 8.9% increase in the fourth quarter, the National Bureau of Statistics in Beijing said today; that was less than the 8.4% growth predicted. China’s economy slowing as exports decline to Europe and the US, and the latest data shows imports are also slowing.
Europe’s debt problems are back as we noted previously; average net borrowings by Spanish banks climbed to 227.6 billion euros last month from 152.4 billion euros in February, the Bank of Spain said. Lenders in the whole euro system took 361.7 billion euros, the data showed. Spanish government bonds headed for a second weekly decline, a sign the respite in the region’s debt crisis created by the ECB’s three-year loan program may be coming to an end. Seventeen of 22 economists surveyed this week predicted the ECB will be forced to resume its so-called Securities Markets Program to contain bond yields. In Italy protests by labor unions against the austerity plans being implemented. Prime Minister Monti’s pension plan was part of a $26 billion austerity package passed in January to fight the sovereign crisis by putting Italy’s debt, the second highest in Europe after Greece, on a downward trajectory from next year.
With slowing in global economic growth comes an increasing belief the US Fed will institute another QE soon. Europe’s debt crisis is adding support to lower interest rates. The recent swift decline in rates after the 10 yr spiked to 2.40% may be already discounting another easing action. This morning the stock indexes are lower after a two days of improvement, the 10 yr note hit 2.00% this morning.
At 8:30 March consumer price index was right on estimates; the overall CPI increased 0.3% frm Feb, yr/yr up 2.7%. The core rates (ex food and energy) up 0.2%, yr/yr +2.3%. There was no immediate reaction to the report.
At 9:30 the DJIA opened down 41 points, the 10 yr note at 2.01% -4 bp and mortgage prices up 6/32 (.18 bp).
The last data this week, at 9:55 the U.of Michigan/Reuters consumer sentiment index was expected unchanged at 76.2, it fell to 75.7, the current conditions index at 80.6 frm 86.0, expectations at 72.5 frm 69.8 and the 12 month outlook at 87 frm 79. The stock market worsened further and the bond market gained a little with the 10 yr at 2.00% and MBS prices .06 bp better than at 9:30.
Federal Reserve Chairman Ben Bernanke will speaking to the Russell Sage Foundation and The Century Foundation on "Rethinking Finance" at 1:00 this afternoon and will take questions from the audience. More than likely he will field questions on what the fed may be prepared to do, and questions on his outlook on the US economy and the Fed’s course of keeping the FF rate at zero to +0.25% for the next two and a half years.
Two readings on employment recently, the March employment report and yesterday’s weekly jobless claims, both added concern about the status of the economy. Tie that to the renewed fears of debt problems and economic decline in Europe and slower growth in China and we have a momentary perfect storm for lower interest rates. But how much lower will longer term rates fall is the ultimate question. The 10 yr note is just 10 basis points higher now than where it has encountered major resistance at 1.90%; although the rate did fall below 1.90% a few times but each time it couldn’t be sustained (only fifteen days since last September). The majority of trading on the 10 yr note since the beginning of last Sept has been between 2.10% and 1.90%.
This week had very little key economic data, only weekly jobless claims. Next week there are a number of key measurements; March retail sales, Apr Empire State manufacturing and the Apr Philly Fed business index, March housing starts and permits and March existing home sales March industrial production and factory usage--- a lot of data that pending the results may either encourage more QE talk or dampen it. The next FOMC meeting on Tuesday the 24th and Wednesday the 25th.
Putting it in perspective; this week the 10 yr note has been tied to a 7 bp range; mortgage prices so far this week have traded in an 8/32 (.25 bp) range (103.14 to 103.06). For all the angst and talk the rate markets were essentially flat this week , at least through 10:00 this morning.
Thursday, April 12, 2012
Mortgage Rates
Prior to 8:30 data the 10 yr and mortgage prices were unchanged. At 8:30 three data points; weekly jobless claims were expected to be about unchanged, as reported claims were up 13K to 380K and last week’s claims were revised from 357K to 367K. Continuing claims were down 98K to 3.251 mil. Claims much higher than thought but the caveat is being explained by Easter week that distorted the claims data. Always has amazed me that economists and analysts that come up with forecasts and estimates don’t seem to take holidays into their estimates until after the data is reported then we have excuses. That said, it is what it is.
March PPI was thought to be +0.3% overall and +0.2% for the core (ex food and energy); as reported the overall PPI was unchanged and the core jumped 0.3%. Yr/yr overall PPI +2.8%, yr/yr core +2.9%; the headline implies inflation a little hotter than what the Fed pegs as its acceptable target of 2.5%. Looking into it we find though that the increase in the core PPI was mostly due to light truck prices increasing in March.
The Feb international trade deficit was expected at -$52B, as reported the deficit was -$46.03B.
The focus this morning on the 8:30 data is about the increase in jobless claims, although since Easter holiday week may have distorted the data somewhat. The jump in the core PPI has been dismissed due to the increase in light truck prices. Inflation isn’t much of an immediate issue now. Janet Yellen, Vice Chair at the Fed commented; “I consider a highly accommodative policy stance to be appropriate in present circumstances,” Yellen said yesterday in a speech in New York. She also said that allowing the Fed’s program to extend the maturity of the assets on its balance sheet to expire in June wouldn’t amount to a policy tightening. She agrees with Bernanke by saying unemployment will decline “only gradually.” “Over the next several years, I anticipate that we will fall far short in achieving our maximum employment objective, ”Yellen said. Still, “considerable uncertainty surrounds the outlook, and I remain prepared to adjust my policy views in response to incoming information.”
At 9:30 the DJIA opened +20, 10 yr note at 2.02% -1 bp with MBS prices up 4/32 (.12 bp).
At 1:00 this afternoon Treasury will complete its auctions with $13B of 30 yr bonds, re-opening the bond issued in February. The 10 yr yesterday and the 3 yr note auction on Tuesday were both OK but were not met with very strong demand, today’s 30 will likely be the same, not too cool but not too hot, just right.
Treasuries and mortgages are being trumped a little so far this morning by the stock market. The stock market has ignored the increase in jobless claims so far, the DJIA opened +20 but since then the index as well as the NASDAQ and S&P indexes gaining ground. The mortgage market was +4/32 (.12 bp) at 9:30, at 10:00 up 1/32 (.03 bp). The 10 yr note, driver for mortgage markets was up 4/32 at 9:30, now up just 1/32. The wider outlook is bullish for the bond and mortgage markets, however the 10 yr has found resistance at 2.00% levels. The idea of another easing move from the Fed is still out there but the recent swift decline in yields after the weak March employment report may have already discounted the easing move; and there is still a lot of analysts and traders holding that the Fed will not ease any time soon.
Prior to 8:30 data the 10 yr and mortgage prices were unchanged. At 8:30 three data points; weekly jobless claims were expected to be about unchanged, as reported claims were up 13K to 380K and last week’s claims were revised from 357K to 367K. Continuing claims were down 98K to 3.251 mil. Claims much higher than thought but the caveat is being explained by Easter week that distorted the claims data. Always has amazed me that economists and analysts that come up with forecasts and estimates don’t seem to take holidays into their estimates until after the data is reported then we have excuses. That said, it is what it is.
March PPI was thought to be +0.3% overall and +0.2% for the core (ex food and energy); as reported the overall PPI was unchanged and the core jumped 0.3%. Yr/yr overall PPI +2.8%, yr/yr core +2.9%; the headline implies inflation a little hotter than what the Fed pegs as its acceptable target of 2.5%. Looking into it we find though that the increase in the core PPI was mostly due to light truck prices increasing in March.
The Feb international trade deficit was expected at -$52B, as reported the deficit was -$46.03B.
The focus this morning on the 8:30 data is about the increase in jobless claims, although since Easter holiday week may have distorted the data somewhat. The jump in the core PPI has been dismissed due to the increase in light truck prices. Inflation isn’t much of an immediate issue now. Janet Yellen, Vice Chair at the Fed commented; “I consider a highly accommodative policy stance to be appropriate in present circumstances,” Yellen said yesterday in a speech in New York. She also said that allowing the Fed’s program to extend the maturity of the assets on its balance sheet to expire in June wouldn’t amount to a policy tightening. She agrees with Bernanke by saying unemployment will decline “only gradually.” “Over the next several years, I anticipate that we will fall far short in achieving our maximum employment objective, ”Yellen said. Still, “considerable uncertainty surrounds the outlook, and I remain prepared to adjust my policy views in response to incoming information.”
At 9:30 the DJIA opened +20, 10 yr note at 2.02% -1 bp with MBS prices up 4/32 (.12 bp).
At 1:00 this afternoon Treasury will complete its auctions with $13B of 30 yr bonds, re-opening the bond issued in February. The 10 yr yesterday and the 3 yr note auction on Tuesday were both OK but were not met with very strong demand, today’s 30 will likely be the same, not too cool but not too hot, just right.
Treasuries and mortgages are being trumped a little so far this morning by the stock market. The stock market has ignored the increase in jobless claims so far, the DJIA opened +20 but since then the index as well as the NASDAQ and S&P indexes gaining ground. The mortgage market was +4/32 (.12 bp) at 9:30, at 10:00 up 1/32 (.03 bp). The 10 yr note, driver for mortgage markets was up 4/32 at 9:30, now up just 1/32. The wider outlook is bullish for the bond and mortgage markets, however the 10 yr has found resistance at 2.00% levels. The idea of another easing move from the Fed is still out there but the recent swift decline in yields after the weak March employment report may have already discounted the easing move; and there is still a lot of analysts and traders holding that the Fed will not ease any time soon.
Wednesday, April 11, 2012
Mortgage Rates
Treasuries and mortgages are lower in price this morning, driven by the stock market opening better. After five sessions sending the DJIA down 546 points this morning a bounce; not unusual. The bond and mortgage markets have declined in yield on the weak employment report, soft US and global equity markets and renewed thinking that the Fed will have to do another QE. The current decline in rates has about totally discounted another easing into present rates. Going back to early August last year the 10 yr note has traded in a 50 basis point yield range frm 2.40% to 1.90% with the exception of 15 days when it dropped under 1.90%. Yesterday the 10 yr fell to 1.97% before closing at 1.99%; based on the last eight months the 10 is nearing its best levels on weaker global economic outlooks and the belief the Fed will ease again.
At 8:30 March import prices were up more than expect at +1.3%, mostly on energy imports; export prices +0.8%. Yr/yr import prices +3.4%, yr/yr export prices +0.9%. No reaction to the report.
Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2012. The Refinance Index decreased 3.1% from the previous week. The seasonally adjusted Purchase Index decreased 0.5% from one week earlier. The four week moving average for the seasonally adjusted Market Index is down 2.08%. The four week moving average is up 2.19% for the seasonally adjusted Purchase Index, while this average is down 3.45% for the Refinance Index. The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5% of total applications from 71.2% the previous week. This is the lowest refinance share since July 29, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.10% from 4.16%, with points remaining unchanged at 0.43 (including the origination fee) for 80% loans. This is the lowest 30-year fixed rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.43% from 4.46%, with points decreasing to 0.36 from 0.49 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% from 3.89%, with points decreasing to 0.55 from 0.58 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37% from 3.40%, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.89% from 2.93%, with points increasing to 0.38 from 0.35 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened +90, NASDAQ +28 and S&P 500 +12. The 10 yr note -14/32 at 2.03 and mortgage prices -6/32 (.18 bp) on 30s and -5/32 (.15 bp;) on 15s.
1:00 this afternoon Treasury will auction $21B of 10 yr notes, a re-open of the 10 yr note issued in February. Yesterday’s 3 yr note was OK, today’s 10 yr should also get solid bidding; if not look for yields to increase.
The Fed’s Beige Book will be released at 2:00 pm. Details from each of the 12 Fed districts. After the weak employment report for March and other recent data points the Book will get a lot of attention. The Book is used by the FOMC when it meets on April 25th.
European stocks rebounded from a two-month low and U.S. equities halted the longest slump of the year as Alcoa Inc. opened the earnings season with an unexpected profit. Spanish bonds rose as a European Central Bank official signaled the ECB may revive its bond-purchase program. The euro strengthened from a seven-week low against the yen as Spain’s bonds climbed after a board member of the European Central Bank indicated it may buy the nation’s debt to reduce borrowing costs. “Spain shows the markets remain nervous,” ECB Executive Board member Benoit Coeure said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.” Last week Spain’s Prime Minister’s comments renewed fears of another debt crisis and it is one of the issues that has led to the decline in US interest rates.
Treasuries and mortgages are lower in price this morning, driven by the stock market opening better. After five sessions sending the DJIA down 546 points this morning a bounce; not unusual. The bond and mortgage markets have declined in yield on the weak employment report, soft US and global equity markets and renewed thinking that the Fed will have to do another QE. The current decline in rates has about totally discounted another easing into present rates. Going back to early August last year the 10 yr note has traded in a 50 basis point yield range frm 2.40% to 1.90% with the exception of 15 days when it dropped under 1.90%. Yesterday the 10 yr fell to 1.97% before closing at 1.99%; based on the last eight months the 10 is nearing its best levels on weaker global economic outlooks and the belief the Fed will ease again.
At 8:30 March import prices were up more than expect at +1.3%, mostly on energy imports; export prices +0.8%. Yr/yr import prices +3.4%, yr/yr export prices +0.9%. No reaction to the report.
Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2012. The Refinance Index decreased 3.1% from the previous week. The seasonally adjusted Purchase Index decreased 0.5% from one week earlier. The four week moving average for the seasonally adjusted Market Index is down 2.08%. The four week moving average is up 2.19% for the seasonally adjusted Purchase Index, while this average is down 3.45% for the Refinance Index. The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5% of total applications from 71.2% the previous week. This is the lowest refinance share since July 29, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.10% from 4.16%, with points remaining unchanged at 0.43 (including the origination fee) for 80% loans. This is the lowest 30-year fixed rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.43% from 4.46%, with points decreasing to 0.36 from 0.49 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% from 3.89%, with points decreasing to 0.55 from 0.58 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37% from 3.40%, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.89% from 2.93%, with points increasing to 0.38 from 0.35 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened +90, NASDAQ +28 and S&P 500 +12. The 10 yr note -14/32 at 2.03 and mortgage prices -6/32 (.18 bp) on 30s and -5/32 (.15 bp;) on 15s.
1:00 this afternoon Treasury will auction $21B of 10 yr notes, a re-open of the 10 yr note issued in February. Yesterday’s 3 yr note was OK, today’s 10 yr should also get solid bidding; if not look for yields to increase.
The Fed’s Beige Book will be released at 2:00 pm. Details from each of the 12 Fed districts. After the weak employment report for March and other recent data points the Book will get a lot of attention. The Book is used by the FOMC when it meets on April 25th.
European stocks rebounded from a two-month low and U.S. equities halted the longest slump of the year as Alcoa Inc. opened the earnings season with an unexpected profit. Spanish bonds rose as a European Central Bank official signaled the ECB may revive its bond-purchase program. The euro strengthened from a seven-week low against the yen as Spain’s bonds climbed after a board member of the European Central Bank indicated it may buy the nation’s debt to reduce borrowing costs. “Spain shows the markets remain nervous,” ECB Executive Board member Benoit Coeure said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.” Last week Spain’s Prime Minister’s comments renewed fears of another debt crisis and it is one of the issues that has led to the decline in US interest rates.
Tuesday, April 10, 2012
Mortgage Rates
A quiet start this morning in the bond, mortgage and stock markets. At 9:00 the 10 yr +3/32 at 2.04% unch, MBS prices on 30 yr fixed +2/32 (.06 bp) and the DJIA index +9. By 9:30 the 10 yr yield down 1 bp, +5/32 and MBS prices on 30s +5/32 (.15 bp); the DJIA opened -20 points. European stocks fell to a two-month low and Asian equities retreated on concern growth is slowing after China’s imports missed economists’ forecasts. Bernanke said in a speech yesterday that the U.S. was still “far from having fully recovered.” The Bank of Japan kept its key interest rate unchanged today and no policy maker proposed extra stimulus. China reported a trade surplus for March as import growth trailed forecasts; March exports rose 8.9% from a year earlier, after an 18.4% increase in February. Growing concerns that China’s economy is slowing as imports slide.
The German 10 yr note yield sits at 1.67%; Spain’s 10 yr note at 5.94%, the spread the largest since late Nov as Spain struggles to cut expenses; Spain’s 10 yr up 18 basis points from last week. The euro region as the debt problem hasn’t gone away despite the liquidity support from the European Central Bank, a strong support for US treasuries as safety moves increase to treasuries.
Today begins earnings season for Q1 with Alcoa reporting late this afternoon. There is concern that earnings in Q1 may be lower than in Q4 when very strong earnings dominated; economic slowing in China and Europe will likely push earnings lower. The U.S. economy will accelerate 2.2% this year, up from 1.7% in 2011, according to the average of 72 estimates compiled by Bloomberg.
10 yr treasury yields would have to rise about 120 basis points to track the estimated price-earnings ratio for the S&P 500 as they did during the first three quarters of 2011; the differential primarily reflects the Federal Reserve’s plan to keep its benchmark interest rate close to zero at least through late 2014.
Last Friday’s very soft employment data for March is continuing to dominate traders’ thoughts. Was the data a one and out thing with job growth likely to bounce back in April? Or was it the beginning of a downturn in job growth that will continue as the global economic outlook declines. Europe’s economies with the exception of Germany and France are declining as cost cutting and job losses widen. Talk of QE 3 increased immediately on the employment data. While still uncertain what the fed will do, the momentum is building for another easing. The Fed however isn’t likely to move quickly, wanting to see more key data and possibly the April employment report on May 4th. Whether or not the Fed does ease again, the outlook for another easing has increased in the rate markets.
The only data point today, Feb wholesale inventories were expected +0.5%; as reported up 0.9%. Sales were up 1.2%, the inventory to sale ratio 1.17 months unchanged from January. Stock indexes sold off while the bond and mortgage markets gained a little on the report.
This afternoon at 1:00 Treasury will begin three days of auctions with $32B of 3 yr notes, the auction is expected to see strong bidding.
A quiet start this morning in the bond, mortgage and stock markets. At 9:00 the 10 yr +3/32 at 2.04% unch, MBS prices on 30 yr fixed +2/32 (.06 bp) and the DJIA index +9. By 9:30 the 10 yr yield down 1 bp, +5/32 and MBS prices on 30s +5/32 (.15 bp); the DJIA opened -20 points. European stocks fell to a two-month low and Asian equities retreated on concern growth is slowing after China’s imports missed economists’ forecasts. Bernanke said in a speech yesterday that the U.S. was still “far from having fully recovered.” The Bank of Japan kept its key interest rate unchanged today and no policy maker proposed extra stimulus. China reported a trade surplus for March as import growth trailed forecasts; March exports rose 8.9% from a year earlier, after an 18.4% increase in February. Growing concerns that China’s economy is slowing as imports slide.
The German 10 yr note yield sits at 1.67%; Spain’s 10 yr note at 5.94%, the spread the largest since late Nov as Spain struggles to cut expenses; Spain’s 10 yr up 18 basis points from last week. The euro region as the debt problem hasn’t gone away despite the liquidity support from the European Central Bank, a strong support for US treasuries as safety moves increase to treasuries.
Today begins earnings season for Q1 with Alcoa reporting late this afternoon. There is concern that earnings in Q1 may be lower than in Q4 when very strong earnings dominated; economic slowing in China and Europe will likely push earnings lower. The U.S. economy will accelerate 2.2% this year, up from 1.7% in 2011, according to the average of 72 estimates compiled by Bloomberg.
10 yr treasury yields would have to rise about 120 basis points to track the estimated price-earnings ratio for the S&P 500 as they did during the first three quarters of 2011; the differential primarily reflects the Federal Reserve’s plan to keep its benchmark interest rate close to zero at least through late 2014.
Last Friday’s very soft employment data for March is continuing to dominate traders’ thoughts. Was the data a one and out thing with job growth likely to bounce back in April? Or was it the beginning of a downturn in job growth that will continue as the global economic outlook declines. Europe’s economies with the exception of Germany and France are declining as cost cutting and job losses widen. Talk of QE 3 increased immediately on the employment data. While still uncertain what the fed will do, the momentum is building for another easing. The Fed however isn’t likely to move quickly, wanting to see more key data and possibly the April employment report on May 4th. Whether or not the Fed does ease again, the outlook for another easing has increased in the rate markets.
The only data point today, Feb wholesale inventories were expected +0.5%; as reported up 0.9%. Sales were up 1.2%, the inventory to sale ratio 1.17 months unchanged from January. Stock indexes sold off while the bond and mortgage markets gained a little on the report.
This afternoon at 1:00 Treasury will begin three days of auctions with $32B of 3 yr notes, the auction is expected to see strong bidding.
Monday, April 9, 2012
Mortgage Rates
Friday’s March employment report (non-farm jobs up just 120K and private jobs +121K) was half what was expected by economist and analysts. The reaction was swift and strong sending mortgage prices up 28/32 (.88 bp) and the 10 yr note yield down to 2.04% -14 basis points. Mortgage rates down about 12 basis points. The stock market was closed on Friday for Good Friday; this morning the key indexes are catching up to the reaction to the soft employment. The DJIA opened at 9:30 -90, NASDAQ -44, and S&P 500 -15; within five minutes the DJIA was off 143. The 10 yr note +4/32 to 2.03% -1 bp while MBS prices were up 4/32 (.12 bp) frm Friday’s close.
Employment didn’t come close to the forecasts, while not unusual for the monthly report, it was so far off the mark it sent traders and investors back into treasuries on increased belief the Fed may be more inclined to ease further. It was not only employment that drove rates down; Europe’s debt problems are back again after a month or so of little news. Spain’s prime minister saying his country is in “extreme difficulty”. Once again investors are turning to safety on the idea Spain is going to need a bailout and reprise concern that Europe’s economies will drag the region into recession and resurrect the concerns that the EU may not survive. The renewed fears are hitting US equity markets; after the strong rally in the key indexes stocks were prime for some decline but until Spain and the employment report took control the pull back in stock markets was being thought of as a buying opportunity; now the outlook has become much less optimistic. Not only is Spain in the headlights; The European Central Bank’s financing for Portuguese lenders rose to a record in March. Portugal became the third euro-area country after Greece and Ireland to require aid and will receive 78 billion euros under its agreement with the International Monetary Fund and the European Union.
Although job gains in March were half of what the last four months revealed, is that enough to get the Fed to ease again? Not a question easy to answer; one month of disappointing job growth isn’t in itself enough to get the Fed to ease. Besides as long as long term rates are at the present low levels an easing move wouldn’t likely add much to pushing rates much lower. Low interest rates are not the problem for the economy, low rates haven’t driven employment up or done much for the housing sector. That said, the potential of another QE will be debated now for a month. Investors are plowing into Treasuries at a record pace as the supply of the world’s safest securities dwindles, ensuring yields will stay low regardless of whether the Federal Reserve undertakes more stimulus to fight unemployment.
Treasury will auction $66B of note and bonds beginning tomorrow with $32B of 3 yr notes, Wednesday $21B of 10 yr notes and Thursday $13B of 30 yr bonds.
After the huge rally in the bond and mortgage markets on Friday the technical outlook has improved. The 10 yr note yield well under its 20 and 40 day averages and all of the momentum oscillators we track went from neutral to bullish levels. Although the picture has changed we still believe there will be continued volatility in the bond market for the next week or two until things settle a little.
Friday’s March employment report (non-farm jobs up just 120K and private jobs +121K) was half what was expected by economist and analysts. The reaction was swift and strong sending mortgage prices up 28/32 (.88 bp) and the 10 yr note yield down to 2.04% -14 basis points. Mortgage rates down about 12 basis points. The stock market was closed on Friday for Good Friday; this morning the key indexes are catching up to the reaction to the soft employment. The DJIA opened at 9:30 -90, NASDAQ -44, and S&P 500 -15; within five minutes the DJIA was off 143. The 10 yr note +4/32 to 2.03% -1 bp while MBS prices were up 4/32 (.12 bp) frm Friday’s close.
Employment didn’t come close to the forecasts, while not unusual for the monthly report, it was so far off the mark it sent traders and investors back into treasuries on increased belief the Fed may be more inclined to ease further. It was not only employment that drove rates down; Europe’s debt problems are back again after a month or so of little news. Spain’s prime minister saying his country is in “extreme difficulty”. Once again investors are turning to safety on the idea Spain is going to need a bailout and reprise concern that Europe’s economies will drag the region into recession and resurrect the concerns that the EU may not survive. The renewed fears are hitting US equity markets; after the strong rally in the key indexes stocks were prime for some decline but until Spain and the employment report took control the pull back in stock markets was being thought of as a buying opportunity; now the outlook has become much less optimistic. Not only is Spain in the headlights; The European Central Bank’s financing for Portuguese lenders rose to a record in March. Portugal became the third euro-area country after Greece and Ireland to require aid and will receive 78 billion euros under its agreement with the International Monetary Fund and the European Union.
Although job gains in March were half of what the last four months revealed, is that enough to get the Fed to ease again? Not a question easy to answer; one month of disappointing job growth isn’t in itself enough to get the Fed to ease. Besides as long as long term rates are at the present low levels an easing move wouldn’t likely add much to pushing rates much lower. Low interest rates are not the problem for the economy, low rates haven’t driven employment up or done much for the housing sector. That said, the potential of another QE will be debated now for a month. Investors are plowing into Treasuries at a record pace as the supply of the world’s safest securities dwindles, ensuring yields will stay low regardless of whether the Federal Reserve undertakes more stimulus to fight unemployment.
Treasury will auction $66B of note and bonds beginning tomorrow with $32B of 3 yr notes, Wednesday $21B of 10 yr notes and Thursday $13B of 30 yr bonds.
After the huge rally in the bond and mortgage markets on Friday the technical outlook has improved. The 10 yr note yield well under its 20 and 40 day averages and all of the momentum oscillators we track went from neutral to bullish levels. Although the picture has changed we still believe there will be continued volatility in the bond market for the next week or two until things settle a little.
Friday, April 6, 2012
Mortgage Rates
This morning’s March employment report shocked markets with its weakness. Non-farm jobs were widely expected to have increased 201K, as reported up just 120K; non-farm private jobs were expected up 224K, as reported +121K. The unemployment rates declined to 8.2% frm 8.3% suggesting more people are not looking for jobs. On Wednesday ADP said private jobs increased 209K. The bond and mortgage markets rallying hard this morning, at 9:00 the 10 yr note yield at 2.08% down 10 basis points frm yesterday’s close and mortgage prices +16/32 (.50 bp). Employment data has always been difficult to forecast, usually there is a burst of volatility on the data, today is one major example. If the stock market were trading today the DJIA would open down 150 points based on trading in the futures markets. The Feb jobs originally reported +227K was revised to 240K; Jan jobs originally reported +284K revised to 275K. A smaller than forecast addition of 120,000 jobs last month broke a pattern that was giving U.S. voters a growing sense of security.
The very weak March employment data will increase the idea the Fed may consider another easing; we have held the Fed would not ease again, but if employment continues to be soft the Fed has the evidence it needs to ease again if necessary. Although the odds have increased as a result of the employment data, and somewhat confirms what the Fed has been concerned about that the economic recovery is not on solid footing; another easing may be unnecessary as long as interest rates stay low. With today’s sharp drop in rates, and the declines this week, the Fed doesn’t have to ease.
What now appears to be a weaker economy that had driven equity markets to four year highs, has changed the near term outlook on the surprisingly weak employment data. Not only the economy but Europe, after a couple of months of stability, is now back on the front page. Two days ago Spain’s Prime Minister rocked markets with his comment that its economy is in“extreme difficulty,” renewing the possibility that another bailout will be needed. The two events has changed the outlook for the bond and mortgage markets for the moment. Today’s improvement in the bond and mortgage markets turned most of our technical work from generally neutral to bullish. When markets open on Monday we expect the recent increase in volatility to continue. We were not looking for rates to decline much, with safety trades back on Europe and the very weak employment report today the outlook has changed. From now until the next FOMC meeting on April 25th the debate on another Fed ease will dominate thinking and be influenced on every data point between now and then.
This morning’s March employment report shocked markets with its weakness. Non-farm jobs were widely expected to have increased 201K, as reported up just 120K; non-farm private jobs were expected up 224K, as reported +121K. The unemployment rates declined to 8.2% frm 8.3% suggesting more people are not looking for jobs. On Wednesday ADP said private jobs increased 209K. The bond and mortgage markets rallying hard this morning, at 9:00 the 10 yr note yield at 2.08% down 10 basis points frm yesterday’s close and mortgage prices +16/32 (.50 bp). Employment data has always been difficult to forecast, usually there is a burst of volatility on the data, today is one major example. If the stock market were trading today the DJIA would open down 150 points based on trading in the futures markets. The Feb jobs originally reported +227K was revised to 240K; Jan jobs originally reported +284K revised to 275K. A smaller than forecast addition of 120,000 jobs last month broke a pattern that was giving U.S. voters a growing sense of security.
The very weak March employment data will increase the idea the Fed may consider another easing; we have held the Fed would not ease again, but if employment continues to be soft the Fed has the evidence it needs to ease again if necessary. Although the odds have increased as a result of the employment data, and somewhat confirms what the Fed has been concerned about that the economic recovery is not on solid footing; another easing may be unnecessary as long as interest rates stay low. With today’s sharp drop in rates, and the declines this week, the Fed doesn’t have to ease.
What now appears to be a weaker economy that had driven equity markets to four year highs, has changed the near term outlook on the surprisingly weak employment data. Not only the economy but Europe, after a couple of months of stability, is now back on the front page. Two days ago Spain’s Prime Minister rocked markets with his comment that its economy is in“extreme difficulty,” renewing the possibility that another bailout will be needed. The two events has changed the outlook for the bond and mortgage markets for the moment. Today’s improvement in the bond and mortgage markets turned most of our technical work from generally neutral to bullish. When markets open on Monday we expect the recent increase in volatility to continue. We were not looking for rates to decline much, with safety trades back on Europe and the very weak employment report today the outlook has changed. From now until the next FOMC meeting on April 25th the debate on another Fed ease will dominate thinking and be influenced on every data point between now and then.
Thursday, April 5, 2012
Mortgage Rates
Early activity this morning had the bond and mortgage markets continuing their rebound from Tuesday’s selling. The 10 yr note this morning has regained all of its losses from the one day selling, mortgage prices at the end of the day Monday were 102.30/32 for April 30 yr FNMAs, this morning at 8:45 the price 102.27/32.
Weekly jobless claims this morning were about where they were expected, -6K to 357K, the decline based on last week’s claims revised from 359K to 363K. Continuing claims declined to 3.338 mil frm 3.354 mil the previous week. Claims are now the lowest since April 2008 and continuing claims the lowest since August 2008. Prior to data at 8:30 the stock index futures were weaker and treasury and mortgage markets were strong; after the data stock indexes, still lower but well off the lows and the bond and mortgage markets were holding but also off their best levels as volatility continues to exaggerate movement.
In the FOMC minutes Tuesday there was no mention about the possibility of another QE frm the Fed, traders dumped treasuries and other fixed income investments. The Fed’s comments that the US economy was improving gave some momentary credence that the Fed would not have to do another easing move; but what was over-looked was the comments that the Fed remained concerned that the employment sector still is weak and uneven. Since Tuesday’s selling two factors have taken the driver’s seat in the bond market. The stock market has come under attack and has declined, the DJIA -190 points on Tuesday and Wednesday. Europe is back in play as Spain’s bond market has seen yields increase implying investors are reconsidering the potential of another default crisis. European stocks fell for a third day, the euro weakened and Spanish bonds declined on concern that slowing growth will exacerbate the region’s debt crisis. The recent pattern for the US stock market is to follow Europe’s markets, as they fall the US stock market is following the down.
Although I still do not think the Fed will do another easing move; the markets are not giving up on the idea. We hold that the US economy will continue to improve---slowly---but enough that the Fed will not find it necessary to ease again. The foundation for not expecting another easing is based primarily on our more positive outlook for the economy. If however we are wrong then the Fed will not hesitate to ease again. It depends on one’s outlook whether the Fed will ease or not. I admit that the Fed has a point about the sluggish recovery and the uneven and shaky employment outlook, and every day the stock market slips the outlook for another easing increases. Europe’s stock markets falling, the US market selling off in what we believe is a long overdue correction after the huge increases in the last two months.
Just when Europe’s debt crisis has ebbed, it is back. Spain’s increase in their bond market rates is roiling markets again. Recent bond sales in Spain had been meeting with better than expected demand and at slightly lower rates than analysts were thinking. Now Spain is seeing rates increase as investors decline to buy at the levels seen a week ago; the debt crisis is once again being brought into question. The EU debt problems won’t go away, it will likely continue to surface and fade then resurface for a long time, each time it will impair equity markets and add support to the bond markets.
At 9:30 the DJIA opened down 48, NASDAQ -6, S&P -5. The 10 yr note +13/32 at 2.17% -6 bp and MBS 30 yr prices +6/32 (.18 bp).
There are no more scheduled data points today. Tomorrow the March employment report is generally expected to see non-farm jobs increase about 200K and private jobs up 240K with the unemployment rate unchanged at 8.3%. Yesterday ADP reported private jobs up 209K, recently ADP’s data has been close to what the BLS reports on the “official” re[ort. Tomorrow is Good Friday, most markets will be closed; the stock market will be closed but as I understand it stock index futures will trade until noon. The bond market will trade until noon.
As we noted Tuesday when markets went postal, the action would set up increased volatility. Today so far a prime example; at 8:00 this morning the 10 yr note rate fell to 2.13% and MBS prices were up 14/32 (.44 bp). By 9:30 the 10 yr at 2.17% and MBSs +6/32 (.18 bp). At 10:00 the 10 yr back to 2.20% and MBS prices +3/32 (.09 bp). The DJIA opened -48 at 9:30, at 10:00 -24. The remainder of the day for the interest rate markets will be following the stock indexes, a rally will add some pressure on rates while another strong sell-off will support better prices and some lower rates.
Early activity this morning had the bond and mortgage markets continuing their rebound from Tuesday’s selling. The 10 yr note this morning has regained all of its losses from the one day selling, mortgage prices at the end of the day Monday were 102.30/32 for April 30 yr FNMAs, this morning at 8:45 the price 102.27/32.
Weekly jobless claims this morning were about where they were expected, -6K to 357K, the decline based on last week’s claims revised from 359K to 363K. Continuing claims declined to 3.338 mil frm 3.354 mil the previous week. Claims are now the lowest since April 2008 and continuing claims the lowest since August 2008. Prior to data at 8:30 the stock index futures were weaker and treasury and mortgage markets were strong; after the data stock indexes, still lower but well off the lows and the bond and mortgage markets were holding but also off their best levels as volatility continues to exaggerate movement.
In the FOMC minutes Tuesday there was no mention about the possibility of another QE frm the Fed, traders dumped treasuries and other fixed income investments. The Fed’s comments that the US economy was improving gave some momentary credence that the Fed would not have to do another easing move; but what was over-looked was the comments that the Fed remained concerned that the employment sector still is weak and uneven. Since Tuesday’s selling two factors have taken the driver’s seat in the bond market. The stock market has come under attack and has declined, the DJIA -190 points on Tuesday and Wednesday. Europe is back in play as Spain’s bond market has seen yields increase implying investors are reconsidering the potential of another default crisis. European stocks fell for a third day, the euro weakened and Spanish bonds declined on concern that slowing growth will exacerbate the region’s debt crisis. The recent pattern for the US stock market is to follow Europe’s markets, as they fall the US stock market is following the down.
Although I still do not think the Fed will do another easing move; the markets are not giving up on the idea. We hold that the US economy will continue to improve---slowly---but enough that the Fed will not find it necessary to ease again. The foundation for not expecting another easing is based primarily on our more positive outlook for the economy. If however we are wrong then the Fed will not hesitate to ease again. It depends on one’s outlook whether the Fed will ease or not. I admit that the Fed has a point about the sluggish recovery and the uneven and shaky employment outlook, and every day the stock market slips the outlook for another easing increases. Europe’s stock markets falling, the US market selling off in what we believe is a long overdue correction after the huge increases in the last two months.
Just when Europe’s debt crisis has ebbed, it is back. Spain’s increase in their bond market rates is roiling markets again. Recent bond sales in Spain had been meeting with better than expected demand and at slightly lower rates than analysts were thinking. Now Spain is seeing rates increase as investors decline to buy at the levels seen a week ago; the debt crisis is once again being brought into question. The EU debt problems won’t go away, it will likely continue to surface and fade then resurface for a long time, each time it will impair equity markets and add support to the bond markets.
At 9:30 the DJIA opened down 48, NASDAQ -6, S&P -5. The 10 yr note +13/32 at 2.17% -6 bp and MBS 30 yr prices +6/32 (.18 bp).
There are no more scheduled data points today. Tomorrow the March employment report is generally expected to see non-farm jobs increase about 200K and private jobs up 240K with the unemployment rate unchanged at 8.3%. Yesterday ADP reported private jobs up 209K, recently ADP’s data has been close to what the BLS reports on the “official” re[ort. Tomorrow is Good Friday, most markets will be closed; the stock market will be closed but as I understand it stock index futures will trade until noon. The bond market will trade until noon.
As we noted Tuesday when markets went postal, the action would set up increased volatility. Today so far a prime example; at 8:00 this morning the 10 yr note rate fell to 2.13% and MBS prices were up 14/32 (.44 bp). By 9:30 the 10 yr at 2.17% and MBSs +6/32 (.18 bp). At 10:00 the 10 yr back to 2.20% and MBS prices +3/32 (.09 bp). The DJIA opened -48 at 9:30, at 10:00 -24. The remainder of the day for the interest rate markets will be following the stock indexes, a rally will add some pressure on rates while another strong sell-off will support better prices and some lower rates.
Wednesday, April 4, 2012
Mortgage Rates
A better start this morning after the huge sell-off yesterday after the FOMC minutes implied the Fed would not initiate another easing move (QE 3) unless the US economy back slides. Never say never and never say always, a traders mantra. While another easing is presently off the table it is not buried yet; the Fed is still somewhat concerned that the economy isn’t yet completely out of the woods. That said, the economy is improving slowly, but it is growing; in the minutes yesterday it was noted the Fed will likely increase its forecasts of GDP growth from the estimates released in January. Taken together, the Fed’s continuing “promise” to ease further if the economic outlook declines and the Fed’s increasing optimism that the economy is improving slowly; to expect another easing has to be founded on belief that the economy will weaken.
Will interest rates continue to move higher? The question for the moment; as we have noted many times here we do not expect rates will increase much frm present levels as long as the Fed funds rate remains at zero to +0.25% as Bernanke continues to imply; there is little reason to expect a major spike in longer term rates (mortgages). The 10 yr not has strong support at 2.40%, yesterday it closed at 2.29%. On the other side; will rates fall back to levels seen in Feb with 30 yr mortgages under 4.00%? That is highly unlikely as long as there is not another crisis in Europe on its debt mess. It was Europe’s crisis that sent US interest rates to the lows from Nov to early March, not US domestic issues.
At 8:15 ADP released its numbers on non-farm private jobs; estimates were for an increase of 210K area, as reported ADP said job growth increased 209K. US stock indexes were already lower on yesterday’s FOMC minutes and didn’t improve. The stock market declined yesterday, this morning the indexes are opening weaker. Stock markets have been expected to correct after the recent strong gains; from what we hear even the most optimistic analysts were looking for a pull-back.
The European Central Bank left interest rates unchanged as policy makers balance the threat of inflation in Germany against the need to fight the sovereign debt crisis. ECB officials meeting in Frankfurt today kept the benchmark rate at a record low of 1.0%, as predicted by all 57 economists in a survey conducted recently. President Mario Draghi holds a press conference at a 2:30 p.m.
At 9:30 the DJIA opened -110, NASDAQ -31, S&P 500 -12. The bellwether 10 yr note +15/32 back to 2.24% -5 bp frm yesterday’s close. 30 yr MBSs +11/32 (.34 bp) frm yesterday’s close.
At 10:00 March ISM service sector index, expected at 56.9 frm 57.3, was at 56.0. Sub-components, new orders at 58.8 frm 61.2, prices index 63.9 frm 68.4, employment at 56.7 frm 55.7. Indexes over 50 indicate expansion. There was little reaction to the fractionally weaker data; the stock market already off substantially and the bond and mortgage markets rallying.
After the sharp sell-off yesterday in the bond markets we can expect interday volatility to be high for the next week or so as investors and traders assess the impact that it is now unlikely the Fed will ease again. Technically, the 10 yr note yield is pointing to a little higher rates with key support at 2.40% and strong resistance at 2.20%; MBSs and mortgage rates also in a 10 to 15 basis point range for 30 yr rates. Today the stock market started weaker aiding a nice bounce in the bond and mortgage markets. For over 30 years interest rates have been declining, the long bull market is ending. We still hold rates will not increase much through the rest of the year, but they will move up. Take full advantage of where rates are today and move on any rallies to lock in these low rates. The only thing we can see on the horizon that may drive long term rates lower would be Europe’s debt crisis resurrecting with the potential of defaults increasing again.
A better start this morning after the huge sell-off yesterday after the FOMC minutes implied the Fed would not initiate another easing move (QE 3) unless the US economy back slides. Never say never and never say always, a traders mantra. While another easing is presently off the table it is not buried yet; the Fed is still somewhat concerned that the economy isn’t yet completely out of the woods. That said, the economy is improving slowly, but it is growing; in the minutes yesterday it was noted the Fed will likely increase its forecasts of GDP growth from the estimates released in January. Taken together, the Fed’s continuing “promise” to ease further if the economic outlook declines and the Fed’s increasing optimism that the economy is improving slowly; to expect another easing has to be founded on belief that the economy will weaken.
Will interest rates continue to move higher? The question for the moment; as we have noted many times here we do not expect rates will increase much frm present levels as long as the Fed funds rate remains at zero to +0.25% as Bernanke continues to imply; there is little reason to expect a major spike in longer term rates (mortgages). The 10 yr not has strong support at 2.40%, yesterday it closed at 2.29%. On the other side; will rates fall back to levels seen in Feb with 30 yr mortgages under 4.00%? That is highly unlikely as long as there is not another crisis in Europe on its debt mess. It was Europe’s crisis that sent US interest rates to the lows from Nov to early March, not US domestic issues.
At 8:15 ADP released its numbers on non-farm private jobs; estimates were for an increase of 210K area, as reported ADP said job growth increased 209K. US stock indexes were already lower on yesterday’s FOMC minutes and didn’t improve. The stock market declined yesterday, this morning the indexes are opening weaker. Stock markets have been expected to correct after the recent strong gains; from what we hear even the most optimistic analysts were looking for a pull-back.
The European Central Bank left interest rates unchanged as policy makers balance the threat of inflation in Germany against the need to fight the sovereign debt crisis. ECB officials meeting in Frankfurt today kept the benchmark rate at a record low of 1.0%, as predicted by all 57 economists in a survey conducted recently. President Mario Draghi holds a press conference at a 2:30 p.m.
At 9:30 the DJIA opened -110, NASDAQ -31, S&P 500 -12. The bellwether 10 yr note +15/32 back to 2.24% -5 bp frm yesterday’s close. 30 yr MBSs +11/32 (.34 bp) frm yesterday’s close.
At 10:00 March ISM service sector index, expected at 56.9 frm 57.3, was at 56.0. Sub-components, new orders at 58.8 frm 61.2, prices index 63.9 frm 68.4, employment at 56.7 frm 55.7. Indexes over 50 indicate expansion. There was little reaction to the fractionally weaker data; the stock market already off substantially and the bond and mortgage markets rallying.
After the sharp sell-off yesterday in the bond markets we can expect interday volatility to be high for the next week or so as investors and traders assess the impact that it is now unlikely the Fed will ease again. Technically, the 10 yr note yield is pointing to a little higher rates with key support at 2.40% and strong resistance at 2.20%; MBSs and mortgage rates also in a 10 to 15 basis point range for 30 yr rates. Today the stock market started weaker aiding a nice bounce in the bond and mortgage markets. For over 30 years interest rates have been declining, the long bull market is ending. We still hold rates will not increase much through the rest of the year, but they will move up. Take full advantage of where rates are today and move on any rallies to lock in these low rates. The only thing we can see on the horizon that may drive long term rates lower would be Europe’s debt crisis resurrecting with the potential of defaults increasing again.
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