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Friday May 29th Mortgage Update

May 29th, 2009 10:10 AM

Friday's bond market has opened in positive territory after this morning's economic news failed to give us any significant surprises. The stock markets are showing minor losses with the Dow down 18 points and the Nasdaq down 5 points. The bond market is currently up 10/32, which should improve this morning's rates by approximately .250 - .375 of a discount point.

The more important of today's two reports was the revision to the 1st quarter Gross Domestic Product (GDP). It showed that the economy contracted at an annual pace of 5.7% during the first three months of the year. This was an upward revision from the previous estimate, but was slightly weaker than the 5.5% decline that was forecasted. This means that economic activity was stronger than previously announced, but was not as strong as analysts' revised forecasts. This basically is good news for bonds, however, the amount of the variance was not enough to heavily influence trading or mortgage pricin g this morning.

The University of Michigan updated their Index of Consumer Sentiment for May late this morning. They said the index stood at 68.7 compared to the 67.9 that was previously announced. This means that consumers were a little more optimistic about their own financial situations than was expected. That can be considered negative news for bonds, but as with the GDP revision, the results were not enough to affect mortgage rates.

Next week is packed with relevant economic data for the markets to digest. It begins with two reports Monday morning that are relevant to bonds and mortgage pricing. Early Monday morning we will see April's Personal Income and Outlays data that will give us a measurement of consumers' ability to spend and their current spending habits. It is expected to show a decline in both readings.

The Institute for Supply Management (ISM) will post their manufacturing index late Monday morning. This is a fairly im portant report because it measure manufacturer sentiment. It is expected to show a slight increase from March's reading, indicating that more surveyed manufacturers felt business improved this month than the last month.

Look for more details on next week's data and events in Sunday's weekly preview. It will likely be a pretty active week for mortgage rates with relevant data being posted four out of the five days.

Posted by Bryce Johnson on May 29th, 2009 10:10 AMPost a Comment (0)

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Wednesday May 20th Mortgage Update

May 20th, 2009 9:58 AM

Tuesday's bond market has opened down slightly despite the release of a much weaker than expected housing report. The stock markets have had little reaction to the data with both the Dow and Nasdaq currently nearly unchanged from yesterday's close. The bond market is down 5/32, which should push this morning's mortgage rates higher by approximately .125 of a discount point.

The Commerce Department said this morning that April's Housing Starts fell almost 13% last month. This was well off of the small increase that was expected and indicates that the housing sector, particularly new construction, is still softening. This is fairly good news for bonds, however, this data is not considered to be highly important. Therefore, its impact on mortgage rates was minimal.

There is no relevant economic news scheduled for release tomorrow, but we will get to see the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form a guess about when the Fed may make another move to help the economy. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.

Overall, I think it will be a fairly calm week for mortgage rates, at least compared to last week. We could see little movement in rates if the stock markets remain calm and the week's data doesn't reveal any major surprises. The FOMC minutes may lead to some volatility in the markets, but neither of the economic reports are of great concern.

Posted by Bryce Johnson on May 20th, 2009 9:58 AMPost a Comment (0)

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Tuesday May 12th Mortgage Update

May 12th, 2009 9:54 AM

Tuesday's bond market has opened down slightly with no important economic news scheduled for release today. The stock markets are showing minor losses with the Dow down 6 points and the Nasdaq down 17 points. The bond market is currently down 4/32, but we will still likely see an improvement in this morning's mortgage rates of approximately .125 - .250 of a discount point due to strength late yesterday.

March's Goods and Services Trade Balance report was posted this morning, revealing a trade deficit of $27.6 billion. This figure was below forecasts, but since this data is not considered to be highly important, its impact on this morning's trading has been minimal.

The first important piece of data comes tomorrow morning when April's Retail Sales report will be released. This is an extremely important report for the financial markets as it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, this data can ha ve a pretty significant impact on the markets. Current forecasts are calling for a 0.1% decline in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower tomorrow. However, a larger increase could fuel bond selling and lead to higher mortgage rates.

Thursday brings us another important report with the release of April's Producer Price Index (PPI). This index helps us measure inflationary pressures at the producer level of the economy. If it reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.1%, while the core data that excludes food and energy prices is also expected to rise 0.1%. A smaller than expected increase in the core data would be ideal for mortgage shoppers.

Posted by Bryce Johnson on May 12th, 2009 9:54 AMPost a Comment (0)

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Thursday May 7th Mortgage Update

May 7th, 2009 10:27 AM

Thursday's bond market has opened in negative territory following the release of stronger than expected economic data and early stock gains. The stock markets are showing moderate strength during early trading with the Dow up 53 points and the Nasdaq up 10 points. The bond market is currently down 13/32, which will likely push this morning's mortgage rates higher by approximately .125 - .250 of a discount point compared to yesterday's morning rates.

The Labor Department gave us both of this morning's releases. The more important of the two was the 1st Quarter Productivity and Costs data that revealed a larger than expected 0.8% increase in worker output. The bad news came from the Unit Labor Costs reading that showed a 3.3% increase. That was higher than the 2.7% that was forecasted, meaning employer costs were higher than thought. Higher costs can translate to wage inflation concerns, therefore, this portion of the report is a negative for bonds.
< br />The second bit of news was last week's unemployment figures. It showed that 601,000 new claims for benefits were filed last week. This is a three month low and was well below forecasts of 635,000, but fortunately this data is not considered to be highly influential on mortgage rates. However, it does raise additional concern about tomorrow's monthly report.

Yesterday's 10-year Note sale was met with a decent demand from investors. That led to improvements in bonds during afternoon trading yesterday and some lenders to revise mortgage pricing lower. The Treasury will sell 30-year Bonds today, posting the results at 1:30 PM ET. Another round of strong bidding could cause bonds to get back some of this morning's earlier losses. However, I suspect that most mortgage lenders will wait until tomorrow's big news rather than revising their rates this afternoon.

Tomorrow morning brings us the release of the almighty Employment report, giving us April 's employment statistics. This is where we may see a huge rally or major sell-off in the bond market and large changes in mortgage rates. The ideal situation for the bond and mortgage markets would be a larger than expected increase in the unemployment rate and more payrolls lost during the month than was expected.

It could turn out to be a wonderful day in the mortgage market tomrrow, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings. Current forecasts are calling for an 8.9% unemployment rate and approximately 620,000 jobs lost during the month.

Posted by Bryce Johnson on May 7th, 2009 10:27 AMPost a Comment (0)

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Wednesday May 6th Update

May 6th, 2009 10:48 AM

Wednesday's bond market has opened down slightly with no relevant data on the agenda today. The stock markets are mixed with the Dow up 22 points and the Nasdaq down 10 points. The bond market is currently down 4/32, which will likely keep this morning's mortgage rates at yesterday's levels.

There was no important economic news scheduled for release today. The Treasury is selling 10-year Notes today and 30-year Bond tomorrow. Results of these sales will be posted at 1:30 PM ET each day. If they are met with a strong demand, we should see bond prices rise during afternoon trading. If the reaction is strong in the market, it could lead to afternoon improvements to mortgage rates. However, a lackluster demand, particularly from international buyers, could lead to bond selling and higher mortgage rates during afternoon trading.

The Labor Department will release its 1st Quarter Productivity and Costs data early tomorrow morning. This information hel ps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rising, the bond market should react favorably. However, a decrease could cause bond prices to drop and mortgage rates to rise tomorrow morning. It is expected to show a 0.6% increase in productivity and a 2.7% increase in the labor costs reading.

We will also get last week's unemployment figures from the Labor Department tomorrow morning. This data usually does not influence bond trading enough to affect mortgage rates. However, because April's monthly figures will be posted Friday morning, we may see a stronger reaction than normal as investors prepare for the monthly release. Analysts are expecting to see that 635,000 new claims for benefits were filed last week.

Friday is where we may see a huge rally or major sell-off in the bond market and large changes in mortgage rates. The monthly Employme nt report is considered to be one of the most influential releases posted each month. It gives us many readings on the status of the labor market, but the key or headline figures are the national unemployment rate and the number of jobs lost or added during the month. The average hourly earnings reading is also watched because it helps us measure the likelihood of wage inflation and potential consumer spending. This report makes Friday the most important day of the week for mortgage rates.

Posted by Bryce Johnson on May 6th, 2009 10:48 AMPost a Comment (0)

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Tuesday May 5th Mortgage Update

May 5th, 2009 9:38 AM

Tuesday's bond market has opened flat following a relatively calm opening for stocks and a lack of any significant surprises in this morning's testimony by Fed Chairman Bernanke. The stock markets are showing somewhat minor losses at the moment with the Dow down 27 points and the Nasdaq down 29 points. The bond market is currently nearly unchanged from yesterday's close, but we should still see an improvement in this morning's mortgage rates of a approximately .125 of a discount point due to strength late yesterday.

There was no important economic news scheduled for release today. But Chairman Bernanke is giving his speech before a Joint Economic Committee. His headline comment was that the economy will likely begin to expand later this year, effectively ending the recession. However, he also stated that activity and a broader expansion will be slow and that unemployment may rise further. Overall, it can be considered a cautiously optimistic outlook, whic h doesn't differ greatly from many analysts' predictions.

There is no relevant economic news scheduled for release tomorrow. The Treasury will sell 10-year Notes tomorrow and post results of the sales at 1:30 PM ET. If it was met with a strong demand, we should see bond prices rise during afternoon trading. If the reaction is strong in the market, it could lead to afternoon improvements to mortgage rates. The flip side of that though, is a weak interest from buyers that could lead to bond selling and higher mortgage rates late tomorrow.

The Labor Department will release its 1st Quarter Productivity and Costs data early Thursday morning and April's Employment figures Friday morning. Thursday's report is fairly important, but Friday's data is one of the most important reports we see each month.

Posted by Bryce Johnson on May 5th, 2009 9:38 AMPost a Comment (0)

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Monday May 4th Mortgage Update

May 4th, 2009 10:04 AM

Monday's bond market has opened down slightly following early stock gains. The stock markets are starting the week in positive territory with the Dow up 93 points and the Nasdaq up 16 points. The bond market is currently down 4/32, but we will likely still see a slight improvement to mortgage rates due to strength in bonds late Friday.

There is no relevant economic news scheduled for release today. The week is very light in terms of the number of scheduled economic releases. However, we may still have an active week in the markets and mortgage rates due to the importance of the data that is being released and the other events on the calendar. There are only two reports scheduled that are worth watching, but one of them is highly important to bonds and mortgage rates.

The first event of the week will be testimony of Fed Chairman Bernanke as he speaks before a Joint Economic Committee late tomorrow morning. The topic will be the economy and the F ed's outlook for future activity. Market participants will be watching his words closely, which means that we will likely see some volatility in trading as he speaks. He will begin at 10:00 AM ET, so look for fluctuations in the markets during late morning trading and potential revisions to rates early afternoon.

The Labor Department will release its 1st Quarter Productivity and Costs data early Thursday morning and April's Employment figures Friday morning. Thursday's report is fairly important, but Friday's data is one of the most important reports we see each month.

In addition to this week's economic data, we also have Treasury auctions that can influence bond trading and affect mortgage rates. The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:30 PM ET each day. If they were met with a strong demand from investors, we could see bond prices rise enough during afterno on trading to cause downward revisions to mortgage rates. However, lackluster bidding could lead to higher mortgage pricing those afternoons.

Overall, I am expecting to see a fairly active week in mortgage rates. Expect to see movement in rates multiple days this week. Tomorrow's speech and Friday's Employment report will heavily influence trading, likely making them the most important days. However, Thursday's data and Treasury auction may also lead to noticeable changes in rates. Accordingly, I would strongly recommend maintaining contact with your mortgage professional the next few days if still floating an interest rate.

Posted by Bryce Johnson on May 4th, 2009 10:04 AMPost a Comment (0)

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