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Friday November 21st Mortgage Update

November 21st, 2008 10:04 AM

Friday's bond market has opened sharply lower, giving back much of its gains from the past two days. The stock markets are showing gains but no major rebound from yesterday's beating. The Dow is currently up 35 points after falling 444 points yesterday while the Nasdaq has gained 8 points. The bond market is not having a good day, currently down 39/32, as investors shift funds back out of bonds. This will likely push this morning's mortgage rates higher by approximately .375 of a discount point.

Today's losses effectively erase yesterday's rally that pushed yields on the major Treasury bonds and Notes to their lowest levels since 1962. As is often the case, the funds will move out of bonds just as quickly, if not faster as they flowed in. The result usually is a spike in mortgage pricing as investors move away from the safety appeal that led to funds being moved into bonds earlier this week.

There is no relevant economic data scheduled for rel ease today. I would not be surprised to see further volatility in the stock and bond markets as the day progresses. This may affect mortgage rates this afternoon if bonds recover some of their losses or fall much further form their current levels.

Next week is pretty busy in terms of economic releases scheduled to be posted but also is a holiday shortened week. Monday brings us the release of October's Existing Home Sales data that will give us a measurement of housing sector strength. It is expected to show a decline in home resales last month. But look for more details on next week's data and events in Sunday's weekly preview of the upcoming week.

Posted by Bryce Johnson on November 21st, 2008 10:04 AMPost a Comment (0)

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Wednesday November 26th Mortgage Update

November 26th, 2008 2:31 PM

Wednesday's bond market has opened in positive territory following weaker than expected economic news. The stock markets are currently in positive ground after initially opening with losses. The Dow is now showing a 42 point gain while the Nasdaq is up 28 points. The bond market is currently up 19/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.

The first piece of data released this morning was October's Durable Goods Orders that showed a drop of 6.2% in new orders and revised September's orders lower than previously announced. Analysts were expecting to see a 2% drop in October's orders, meaning that demand for big-ticket products was much weaker than thought. In fact, this was the largest monthly decline in approximately two years. That is good news for bonds and mortgage rates, because the slowing economic activity makes mortgage related bonds more attractive to investors.

The second was October's Personal Income and Outlays data, which gave us mixed results. The bad news came in the income portion of the report that revealed a 0.3% rise in income compared to forecasts of a 0.1% increase. This means that consumers have more money available to spend than was expected. However, the good news was that they spent less than analysts had predicted. What was supposed to be a 0.7% decline in spending actually came in at a 1.0% drop. With consumer spending making up two-thirds of the U.S. economy, the weaker than expected spending is taken as good news for bonds.

This month's revision of the University of Michigan's Index of Consumer Sentiment was also favorable to bonds and mortgage rates with a reading of 55.3. This was much lower than the 58.0 that was expected, indicating that consumers were less optimistic about their own financial situations than analysts had thought. This means they are less likely to make large purchases in the near future.

The last report of the day was October's New Home Sales figures that showed that sales of newly constructed homes fell to its lowest level in almost 18 years. While this is generally good news for bonds and mortgage rates, this data is not considered to be oh high importance to the markets, therefore, its impact ton today's trading and mortgage rates has been minimal.

The bond market will close at 2:00 PM ET today ahead of tomorrow's Thanksgiving Day holiday and will reopen Friday morning. There is no relevant data scheduled for release Friday, so I am expecting to see a very light and thinly traded day. The bond market will also close at 2:00 PM Friday, so look for little activity that day.

Posted by Bryce Johnson on November 26th, 2008 2:31 PMPost a Comment (0)

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Tuesday November 25th Mortgage Update

November 25th, 2008 9:46 AM

Tuesday's bond market has opened sharply higher following more bailout news from the Fed that is being received as very favorable for bonds and mortgage rates. The stock markets are in negative territory with the Dow down 5 points and the Nasdaq down 18 points. The bond market is currently up 50/32, which will likely improve this morning's mortgage rates by approximately .750 of a discount point over yesterday's rates.

There were two important pieces of economic data released this morning, giving us mixed results. The first revision to the 3rd Quarter Gross Domestic Product (GDP) came in at ?0.5%, which was close to latest forecasts. This means that economic activity during the 3rd quarter was weaker than analysts had predicted last month but close to their latest projections. Accordingly, this data has not had much of an impact on this morning's mortgage rates.

November's Consumer Confidence Index (CCI) was also released this morning, showing a reading of 44.9. This was much higher than the 39.5 reading that was expected, indicating that consumers were more optimistic about their own financial situations than many had thought. This is considered negative news for bonds and mortgage rates because rising confidence usually means consumers are more apt to make large purchases in the near future.

Posted by Bryce Johnson on November 25th, 2008 9:46 AMPost a Comment (0)

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Monday November 24th Mortgage update

November 24th, 2008 11:03 AM

Monday's bond market has opened well into negative territory as investor interest turns back towards stocks. The stock markets are posting strong gains during morning trading with the Dow up 289 points and the Nasdaq up 52 points. The bond market is currently down 14/32, which will likely push this morning's mortgage rates up slightly from Friday's levels.

The National Association of Realtors reported this morning that home resales in the U.S. fell more than analysts had expected last month. This is fairly good news for bonds but since this data is not considered to be of high importance it has had little impact on today's rates.

The first important data of the week comes early tomorrow morning when we will get the first revision to the 3rd Quarter Gross Domestic Product (GDP) reading. The GDP revision is expected to show a downward revision from last month's preliminary reading of -0.3%. Current forecasts call for a reading of approximately -0.6 %, meaning that there was less economic growth during the third quarter than previously thought. This would be good news for the bond market and mortgage rates.

Late tomorrow morning, November's Consumer Confidence Index (CCI) will be posted. The Conference Board will release the CCI for the month of November at 10:00 AM ET, giving us a measurement of consumer willingness to spend. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This raises inflation concerns and usually pushes mortgage rates higher. Analysts are expecting a small increase from last month's 38.0 reading to somewhere around 39.5. A weaker than expected reading should be good news for mortgage rates, but a stronger than expected reading could push mortgage rates higher tomorrow.

Overall, I believe that it is going to be an active week for the mortgage market. Today or Friday will be the least i mportant day of the week and either tomorrow or Wednesday will be the most important. The bond market will close early Wednesday and remain closed Thursday in observance of the Thanksgiving Day holiday. I still expect to see plenty of movement in rates the remaining days, so please be careful and maintain contact with your mortgage professional if you have not locked an interest rate yet.

Posted by Bryce Johnson on November 24th, 2008 11:03 AMPost a Comment (0)

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Thursday Nov 20th Mortgage Update

November 20th, 2008 9:42 AM

Thursday's bond market has opened up sharply as it continues yesterday's late rally that came as a result of the Fed FOMC minutes that were released during afternoon trading. The stock markets are mixed with the Dow down 41 points and the Nasdaq up 3 points. The bond market is currently up 33/32, but since mortgage bonds have not rallied nearly as much as Treasury Bonds, the improvement in this morning's mortgage rates is limited to approximately .250 of a discount point.

Yesterday's release of the minutes from the last FOMC meeting did bring us some surprises and led to the selling in stocks and shifting of funds into bonds. The minutes revealed that several Fed members are concerned about deflation (instead of inflation) where prices actually deflate rather than rise. That creates a very favorable environment for bonds and other long-term securities because their future fixed interest payments are worth more down the road. The minutes also showed the Fe d significantly lowered its outlook on economic growth and employment activity, raising more concern that the economy has more room to shrink before stabilizing. This also makes bonds more attractive to investors because slowing economic activity usually means weaker corporate profits that drive stock prices lower.

The Labor Department gave us last week's unemployment figures this morning, saying that new claims for benefits rose from 515,000 to 542,000 when they were expected to drop to 503,000. While this is only a week's worth of claims, it does however further support the theory that the employment sector is still weakening quickly. Another favorable note for bonds.

October's Leading Economic Indicators (LEI) was posted by the Conference Board late this morning, showing a decline of 0.8%.and lowering September's reading by 0.2%. Analysts were expecting to see a 0.6% drop, meaning that they are expecting economic activity to slow over the next th ree to six months at a quicker pace than many had thought.

There is no relevant economic data scheduled for release tomorrow, but I would not be surprised to see more volatility in the markets. Mortgage rates have not improved nearly as much as Treasury bonds have, but I am expecting to see the improvements in rates slowly continue. Accordingly, I am holding the float recommendations for the time being.

Posted by Bryce Johnson on November 20th, 2008 9:42 AMPost a Comment (0)

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Wednesday November 19th Mortgage Update

November 19th, 2008 10:35 AM

Wednesday's bond market has opened in positive territory following favorable results from today's CPI release. The stock markets are showing another round of early losses with the Dow down 150 points and the Nasdaq down 40 points. The bond market is currently up 17/32, which will likely improve this morning's mortgage rates by approximately .250 of a discount point.

The Labor Department gave us today's big news with the release of October's Consumer Price Index (CPI). They reported that the overall reading fell 1.0% last month while the core data fell 0.1%. Both of these readings were below forecasts, indicating that inflationary pressures at the consumer level of the economy were not as bad as many had thought. This is very good news for bonds and mortgage rates.

October's Housing Starts was also posted this morning, showing a stronger level of new starts than what forecasts were calling for. That could be considered bad news for the bond ma rket and mortgage pricing, but this data is not considered to be of high importance to the markets therefore has had little impact on today's pricing.

The minutes to the last FOMC meeting will be released at 2:00 PM ET. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher tomorrow afternoon. However, if they indicate a likelihood of another rate cut in the coming months, we should see the bond market rise and mortgage rates drop during afternoon trading.

Tomorrow brings us the release of weekly unemployment figures and October's Leading Economic Indicators (LEI). The Labor Department will post weekly unemployment claims but unless it varies greatly from the 503,000 that is expected, I don't believe this data will affect tomorrow's mortgage pricing.

The LEI will be posted by the Conference Board at 10:00 AM ET and is expected to show a decline of 0.6%. This means that the report is predicting economic activity to slow relatively quickly in the next three to six months. That would be good news for bonds because a slowing or weakening economy generally speaking makes bonds more attractive to investors and usually leads to lower mortgage rates.

Posted by Bryce Johnson on November 19th, 2008 10:35 AMPost a Comment (0)

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Tuesday November 18th Mortgage Update

November 18th, 2008 10:12 AM

Tuesday's bond market has opened in positive territory again, despite early stock gains. The stock markets are rebounding from yesterday's 223 point loss in the Dow with fairly strong gains during morning trading. The Dow is currently up 181 points while the Nasdaq has gained 11 points. The bond market is currently up 9/32, which will likely improve this morning's mortgage rates by approximately .125 of a discount point.

The Labor Department gave us the first of the week's two key inflation readings. They reported that the PPI fell a whopping 2.8% that was a much larger drop than analysts had forecasted. However, the more important core data reading that excludes more volatile food and energy prices rose 0.4% when analysts were expecting to see a 0.1% rise. This means that prices for non food and energy costs rose more than expected, which is considered bad news for bonds and mortgage rates.

Today's markets are being boosted by favorable comme nts by Treasury Secretary Paulson that the Fed bailout program was making progress. Many lawmakers had questioned the usage of the money for the program but market participants liked what they heard, helping to fuel this morning's buying in stocks and bonds.

Tomorrow's only data is October's Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeably impact on mortgage rates. I don't expect this month's version to be any different unless it varies greatly from analysts forecast. It is expected to show a decline in starts of new homes.

Tomorrow afternoon brings us the release of the minutes to the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates highe r tomorrow afternoon. However, if they indicate a likelihood of another rate cut in the coming months, we should see the bond market rise and mortgage rates drop during afternoon trading.

Posted by Bryce Johnson on November 18th, 2008 10:12 AMPost a Comment (0)

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Friday November 14th Mortgage Update

November 14th, 2008 11:13 AM

Friday's bond market has opened in positive territory following the release of weaker than expected economic news. The stock markets are posting sizable losses after yesterday's late rally in stocks hurt bond prices and mortgage rates. The Dow is currently down 260 points while the Nasdaq has lost 60 points. The bond market is currently up 22/32, but due to yesterday's late losses we likely will not see much of an improvement in this morning's mortgage rates.

October's Retail Sales report was posted this morning, showing a surprising drop in sales of 2.8%. This was a larger decline than was expected, the fourth consecutive monthly drop and the largest monthly decline since January 1987. This indicates that the economy is still softening, which is good news for the bond market and mortgage rates.

The second report of the day was the preliminary reading to the University of Michigan's Index of Consumer Sentiment for this month. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It revealed a reading of 57.9 that was a little stronger than expected, but not enough to negatively affect bond trading.

Next week is moderately busy with economic reports but it does bring us the release of two key inflation readings that can significantly impact bond prices and mortgage rates. The week kicks off Monday with the release of October's Industrial Production that tracks manufacturing output. This report is considered to have a medium level of importance to the markets and is expected to show a small decline in output.

Besides the two inflation readings and Monday's manufacturing report, we also will get the minutes from the last FOMC meeting and a couple of other lesser important releases. Look for more details on next week's events in Sunday's weekly preview.

Posted by Bryce Johnson on November 14th, 2008 11:13 AMPost a Comment (0)

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Tuesday November 4th Mortgage Update

November 4th, 2008 9:22 AM

Tuesday's bond market has opened up slightly despite sizable stock gains during early trading. The stock markets are strong this morning with the Dow up 262 points and the Nasdaq up 42 points. The bond market is currently up 2/32, which will likely improve this morning's mortgage rates by approximately .125 of a discount point.

Today's only relevant data came from the Commerce Department who posted September's Factory Orders report. It showed a decline of 2.5% that was an improvement from August's 4/3% drop, but was also much weaker than the 0.8% decline that was expected. This means that new orders at U.S. factories fell much more than thought and indicates a rapidly slowing manufacturing sector. This is good news for bonds and mortgage rates.

There is no important data scheduled for release tomorrow. Thursday's sole important report is the 3rd Quarter Productivity reading. The productivity index is expected to show a level of worker productivi ty during the third quarter much lower than last quarter's final reading of 4.3%. Analysts have forecasted a 1.0 rise in worker output. A larger increase would be good news for the bond market because high levels of productivity helps the economy to expand without inflationary pressures being a concern.

We also will get weekly unemployment figures from the Labor Department early tomorrow morning. It is expected to show that new claims for benefits fell slightly to 476,000 last week. While this data usually does not have much of an impact on the markets because it tracks only a week's worth of claims, tomorrow's release may be a little more influential than usual. This is because the release will cover the last full week of October and with Friday's monthly report coming out for the entire month, traders will be looking for any significant change in claims that may alter their estimates for the monthly report.

Posted by Bryce Johnson on November 4th, 2008 9:22 AMPost a Comment (0)

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Monday Nov 3rd Mortgage Update

November 3rd, 2008 9:43 AM

Monday's bond market has opened in positive territory following weaker than expected economic news. The stock markets are posting gains with the Dow up 42 points and the Nasdaq up 15 points. The bond market is currently up 3/32, but we may still see slight increase in this morning's mortgage rates due to weakness late Friday.

The week's first report came late this morning from the Institute for Supply Management (ISM). They posted their Manufacturing Index for October, showing a reading of 38.9 that was well below forecasts and a 26-year low. The index measures manufacturer sentiment and this morning's release indicated sentiment is softening. This is good news for bonds and mortgage rates because slowing manufacturing activity usually means a weakening economy and eases inflation concerns.

Tomorrow's only relevant news is September's Factory Orders report. This report is similar to last week's Durable Goods Orders release except it includes o rders for both durable and non-durable goods. It is expected to show 0.8% decline in orders from August's level. A larger decline would be good news for the bond market and mortgage rates while a smaller than expected drop is bad news.

There is no important data scheduled for release Wednesday. Thursday's report is the 3rd Quarter Productivity reading. The productivity index is expected to show a level of worker productivity during the third quarter much lower than last quarter's final reading of 4.3%. Analysts have forecasted a 1.0 rise in worker output. A larger increase would be good news for the bond market because high levels of productivity helps the economy to expand without inflationary pressures being a concern.

The last report of the week is the most important. Friday brings us the release of one of the most important monthly reports- the Employment report. The Labor Department will post October's employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for a 0.2% rise in unemployment to bring the national rate to 6.3%, a drop in payrolls of approximately 200,000 and a 0.2% increase in average earnings. Weaker than expected readings should rally bonds and lead to improvements in mortgage rates, especially if the stock markets react poorly to the news.

Overall, I am expecting to see a moderately active week in mortgage pricing. The key to the week will be Friday's employment numbers, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than this morning's levels.

Posted by Bryce Johnson on November 3rd, 2008 9:43 AMPost a Comment (0)

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