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Thursday July 2nd Mortgage Update

July 2nd, 2009 11:55 AM

Thursday's bond market has opened in positive territory following a weak opening on stocks. The stock markets are posting sizable losses with the Dow down 174 points and the Nasdaq 43 points. The bond market is currently up 9/32, which, with yesterday's late strength, should improve this morning's mortgage rates by approximately .375 of a discount point compared to yesterday's morning rates.

This morning's economic data gave us mixed results, beginning when the Labor Department reported that the U.S. unemployment rose 0.1% last month to stand at 9.5%. This was slightly lower than the 9.6% that many analysts and market traders had expected and can be considered negative for bonds because it fell short of forecasts.

However, the other two headline numbers from this report gave us favorable results and are making the biggest impact on bond trading this morning. The report showed that 467,000 jobs were lost during the month, ex ceeding forecasts of approximately 365,000. In addition, the reading that gives average hourly earnings showed no change from May's level. This means that earnings did not rise when they were expected to move higher 0.1%. While the earnings data may not be good for workers, it shows that wage inflation is little threat at this time.

May's Factory Orders data was released late this morning by the Commerce Department. It showed that combined orders for durable and non-durable goods rose 1.2% last month. This was also stronger than analysts' forecasts and hints that manufacturing activity was better than expected. Fortunately, this data is not one of the most important reports we see each month and has not derailed this morning's momentum from the employment figures.

Overall, the Employment report was favorable for bonds with the larger than expected decline in jobs taking center stage. The unemployment rate was somewhat of a disappointment, but it was still an increase from May's rate. The average hourly earnings reading is the least important of the three but still gave us favorable results. The Factory Orders report was not favorable to bonds or mortgage rates, but it also has nowhere near the level of importance as the monthly Employment report. Therefore, today's data can be considered good news for bonds and mortgage rates.

The financial markets will be closed tomorrow in observance of the Independence Day holiday and will reopen Monday morning. There will not be an early close in the bond market today, but I suspect that trading will be thin during afternoon hours as market participants head home for the holiday weekend. This means we should see a fairly quiet afternoon in bonds and mortgage pricing as long as no unexpected news surprises the markets.

Next week is very light in terms of relevant economic data being posted. This could leave the bond market and mortgage rates to the mer cy of outside influences. There will be no update to this report tomorrow, but look for details on next week's events in Sunday's weekly preview.

Posted by Bryce Johnson on July 2nd, 2009 11:55 AMPost a Comment (0)

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Tuesday June 23rd Mortgage Update

June 23rd, 2009 10:14 AM

Tuesday's bond market has opened in positive territory again after this morning's economic data showed weaker than expected results and the stock markets are posting early losses. The major stock indexes are in negative ground with the Dow down 35 points and the Nasdaq down 8 points. The bond market is currently up 10/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.

The National Association of Realtors announced this morning that home resales rose 2.4% last month. This was an increase from April's sales, but was a smaller rise than analysts had expected. This indicates that the housing sector did improve last month, but at a slower pace than many had thought. Generally speaking, a softening housing sector makes an economic recovery that much more difficult, which helps to keep bonds more attractive to investors. However, this particular data is not considered to be one of the more important reports we see e ach month. Therefore, its impact on trading and mortgage rates is usually fairly minimal.

This week's FOMC meeting began today but will not adjourn until tomorrow afternoon. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy or inflation, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing tomorrow afternoon.

May's Durable Goods Orders is the more important of tomorrow's two reports. It gives us an indication of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last three or more years. This data is known to be quite volatile from month to month and is expe cted to show a decline of 0.9% in new orders from April to May. A larger decline would be the ideal scenario for the bond market and could lead to a decline in mortgage pricing tomorrow.

Also tomorrow is the release of May's New Home Sales that is similar to today's Existing Home Sales report. This report tells us how well sales of newly constructed homes were last month. It is also expected to show a rise in sales, but will likely not have much of an impact on mortgage rates because this data is considered to be of low importance to the markets.

Posted by Bryce Johnson on June 23rd, 2009 10:14 AMPost a Comment (0)

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Monday June 22nd Mortgage Update

June 22nd, 2009 11:00 AM

Monday's bond market has opened in positive territory following heavy selling in stocks. The stock markets are starting the week with the Dow down 135 points and the Nasdaq down 43 points. The bond market is currently up 16/32, which should improve this morning's mortgage rates approximately .375 - .500 of a discount point over Friday's morning rates.

There is no relevant economic news scheduled for release today. Tomorrow brings us the first data with the release of May's Existing Home Sales report. The National Association of Realtors will give us figures on last month's home resales. This data helps us measure housing sector strength and mortgage credit demand, but it is one of the lesser important reports of the week. It is expected to show an increase in sales from April to May.

The FOMC meeting that begins tomorrow will adjourn Wednesday afternoon. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy or inflation, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing Wednesday afternoon.

Overall, there are six reports scheduled for release this week in addition to the FOMC meeting. The most active day should be Wednesday due to the importance of the data and FOMC meeting. Friday's news may also affect mortgage rates, but likely not as much as earlier days. This would definitely be a good week to maintain constant contact with your mortgage professional.

Also worth noting is the fact that the Fed will be selling $104 billion in new debt this week. These sales may influence trading enough to affect mortgage rates. There are sales every day except Friday but the two most likely to affect rates are Wednesday and Thursday's sales. If they are met with a strong demand, we could see bond prices rise some during afternoon trading. This could lead to afternoon improvements to mortgage rates. But, if the sales draw a lackluster interest from investors, mortgage rates may move higher during afternoon trading.

Posted by Bryce Johnson on June 22nd, 2009 11:00 AMPost a Comment (0)

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Wednesday June 10th Mortgage Update

June 10th, 2009 9:53 AM

Wednesday's bond market has opened in negative territory following news from overseas that Russia will start selling some of its U.S. Treasury Securities it currently holds. The stock markets are showing losses with the Dow and Nasdaq both down approximately 14 points. The bond market is currently down 16/32, which will likely push this morning's mortgage rates higher by .250 of a discount point.

April's Goods and Services Trade Balance was released this morning, revealing a $29.2 billion trade deficit. This was very close to forecasts, therefore ha shad little impact on this morning's bond trading or mortgage rates.

The Federal Reserve will release its Beige Book this afternoon. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve during FOMC meetings in determining monetary policy. If it shows surprisingly softer economic activity, the bond market may thrive and mortgage rates cou ld drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing, we could see mortgage rates revise higher later today.

Also contributing to this morning's bond losses is today's 10-year Treasury Note auction. Traders that are participating in these sales often sell holdings before the auctions for a couple of strategic purposes. If the sale is met with a strong demand from investors, we may see bond prices move higher this afternoon?assuming the Beige Book doesn't give us negative surprises. However, a lackluster interest could lead to more selling and possibly higher mortgage rates.

May's Retail Sales data will be released tomorrow morning. This report measures consumer spending, which is important to the bond market because consumer spending makes up two-thirds of the U.S. economy. Analysts are expecting to see that sales rose 0.5% last month. A smaller than expected rise in sales would be good news for the bond market and could lead to lower mortgage rates tomorrow.

Posted by Bryce Johnson on June 10th, 2009 9:53 AMPost a Comment (0)

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Thursday June 4th Mortgage Update

June 4th, 2009 9:36 AM

Thursday's bond market has opened down sharply as investors prepare for tomorrow's economic data and upcoming debt sales. The stock markets are showing minor gains with the Dow up 26 points and the Nasdaq up 9 points. The bond market is currently down 30/32, which will likely push this morning's mortgage rates higher by approximately .250 - .375 of a discount point.

This morning's release of revised figures on 1st Quarter Productivity and Costs showed a larger than expected increase of a 1.6% gain. Analysts were expecting to see a 1.2% increase, meaning workers were more productive in the quarter than previously thought. However, the costs reading revealed a slight upward revision that is considered bad news for bonds and rates. But the bottom line is that this data failed to influence bond trading or mortgage rates this morning.

The Labor Department reported that 621,000 new claims for benefits were filed last week. This was very close to for ecasts and has had little impact on today's rates. The biggest influence on trading today is concern about the amount of debt the Fed is going to announce that is coming to sale in the immediate future.

Tomorrow's sole report is arguably the single most important report that we see each month. The Labor Department will post May's Employment data during early trading. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate climb to 9.2% with approximately 520,000 jobs lost during the month.

A higher than expected increase in the unemployment rate and a larger drop in payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates tomorrow. However, if we see stronger than expected numbers, it could lead to a spike in mortgage rates tomorrow.

Posted by Bryce Johnson on June 4th, 2009 9:36 AMPost a Comment (0)

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Wednesday June 3rd Mortgage Update

June 3rd, 2009 11:04 AM

Wednesday's bond market has opened in positive territory despite stronger than expected economic data. The stock markets are well into negative ground with the Dow down 82 points and the Nasdaq down 13 points. The bond market is currently up 16/32, which with yesterday's late gains should improve this morning's mortgage rates by approximately .500 of a discount point.

The Commerce Department gave us April's Factory Orders data this morning, revealing a 0.7% increase. This was stronger than expected, but a 1.0% downward revision to March's orders offset that surprise increase.

The Institute for Supply Management released its services index this morning also. It was expected to show a reading of 45.0, but came in at 44.0. This was not enough of a variance to influence bond trading or mortgage rates this morning.

Fed Chairman Bernanke spoke before a House Budget Committee this morning, but his prepared statement didn't reveal any signific ant surprises. He indicated that they expect the economy to begin to strengthen late this year, but there are factors such rising unemployment that may impact the recovery. Overall, nothing of significance that we had not heard before.

The revised 1st Quarter Productivity and Costs report will be released morning along with last week's unemployment figures. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month's preliminary reading revealed a 0.8% rate, but I don't think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from its forecasted revised reading of 1.2%.

The Labor Department is expected to say that 620,000 new claims for unemployment benefits were filed last week. With May's monthly figures co ming Friday morning, any noticeable difference between forecasts and the actual number could create volatility in the markets as investors adjust their forecasts for Friday's release.

Posted by Bryce Johnson on June 3rd, 2009 11:04 AMPost a Comment (0)

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Monday June 1st Morgage Update

June 1st, 2009 10:05 AM

Monday's bond market has opened down sharply following stronger than expected economic news and a significant rally in stocks. The Dow is currently up over 200 points while the Nasdaq has gained 50 points. This has led to heavy selling in bonds, pushing the benchmark 10-year Treasury Note down 60/32. However, the impact on this morning's mortgage rates will likely be much less than one may expect. We will probably see an increase of approximately .250 of a discount point in this morning's rates compared to Friday's morning rates due to significant strength late Friday.

April's Personal Income and Outlays data was posted at 8:30 AM, but it showed stronger than expected readings in both portions. It revealed an increase in income of 0.5%, which was a large variance form the 0.2% decline that forecasted. The surprise in the spending reading was only by .1%, but the report indicated that consumer ability to spend grew rapidly and that they were spending more than thought. This is bad news for bonds because increases in consumer spending translates into economic growth. The spike in income may also raise wage-inflation concerns once the economy begins to recover.

The Institute for Supply Management's (ISM) manufacturing index also exceeded forecasts, however, by a much more moderate amount. The index rose to 42.8 last month, compared to predictions of 42.3. This means that surveyed manufacturers were more optimistic about business conditions than in April and by a wider margin than analysts had expected. This is also bad news for bonds because expanding manufacturing activity means the economy may be stabilizing.

There is no relevant data due to be posted tomorrow, but Wednesday has two reports scheduled for release. The first and possibly the only relevant news is the Commerce Department's release of April's Factory Orders data late morning. This manufacturing sector report is similar to last week's Du rable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn't expected to cause much change in rates this month. Current forecasts are expecting to see an increase in orders of 0.3%.

The second report of the day may have a noticeable impact on the markets or be a non-factor depending on its results. The Institute for Supply Management will release its services index late Wednesday morning. It is expected to show a reading of 45.0, with the same principals as Monday's manufacturing index. If this reading varies greatly from forecasts, we may see volatility in the markets and mortgage rates. However, if its results are in the general area of expectations, it will likely have no influence on the markets and mortgage pricing

Posted by Bryce Johnson on June 1st, 2009 10:05 AMPost a Comment (0)

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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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