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Monday February 22nd Mortgage Update

February 22nd, 2010 11:23 AM

Monday's bond market has opened down slightly despite little action in the stock markets. The Dow is currently down 10 points and the Nasdaq nearly unchanged from Friday's close. The bond market is currently down 4/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

There was no relevant economic data posted this morning. We do, however, have Congressional testimony by Chairman Bernanke late this morning. He will be speaking to a House Financial committee about employment growth and whether further stimulus is needed. These are hot topics so his words may influence the markets and possibly mortgage rates.

Tomorrow morning brings us the first of this week's data with the release of February's Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingnes s to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 55.9 in January to 55.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Wednesday or Thursday, but Friday may be fairly active also. This would be a very good week to maintain contact with your mortgage professional, especially if still floating an interest rate.

Posted by Bryce Johnson on February 22nd, 2010 11:23 AMPost a Comment (0)

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Tuesday February 2nd Mortgage Update

February 2nd, 2010 9:46 AM

Tuesday's bond market has opened flat with no relevant economic data on tap. The stock markets are showing gains with the Dow up 54 points and the Nasdaq up 7 points. The bond market is currently up 2/32, which will likely keep this morning's mortgage rates at yesterday's levels.

There is no relevant economic data scheduled for release today. Neither of the two speaking engagements were market movers. Treasury Secretary Geithner spoke before a Senate Finance Committee about the U.S. budget while Paul Volcker, who is the Chairman of the President's Economic Recovery Advisory Board, spoke to the Senate Bank Committee about high-risk banking activities. Neither has resulted on any market movements.

Tomorrow's only data is not likely to affect mortgage rates. The Institute for Supply Management will post their services index late tomorrow morning. This is the same organization that posted Monday's manufacturing index that is considered to be infl uential on the markets. Tomorrow's index surveys service providers rather than manufacturers. But unless we see a wide variance from the 50.9 reading that is expected, I don't see mortgage rates reacting to its results.

Thursday brings us the release of two reports to watch. Employee Productivity and Costs data for the 4th quarter will be released early Thursday morning. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If it varies greatly from analysts' forecasts of a 6.0% increase, we may see some movement in mortgage rates. However, the markets will be much more interested in Friday's data.

Late Thursday morning, December's Factory Orders data will be posted. It is similar to last week's Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is one of the less important reports of the week, but can influence mortgage pricing if it varies greatly from forecasts.

Posted by Bryce Johnson on February 2nd, 2010 9:46 AMPost a Comment (0)

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Wednesday January 27th Mortgage Update

January 27th, 2010 10:36 AM

Wednesday's bond market has opened up slightly due to weaker than expected economic news and stock market losses. The Dow is showing a loss of 30 points while the Nasdaq has fallen 3 points. The bond market is currently up 3/32, which will likely improve this morning's mortgage rates by approximately .125 of a discount point.

Today's only factual economic data was the release of December's New Home Sales late this morning. The Commerce Department reported that sales of newly constructed homes fell 7.6% last month. That was a much larger decline than was expected and helps support the theory that the housing market still has some troubles to overcome. This is basically good news for bonds and mortgage rates but this data is not considered to be highly important, so its impact on this morning's rates has been minimal.

There is also a 5-year Note auction today that may influence bond trading and mortgage rates during afternoon hours. Results of t he sale will be posted at 1:00 PM ET. It doesn't directly impact mortgage rates, but it will gives us a measurement of investor interest in U.S. securities. If the demand for the sale was strong, the broader bond market will likely react positively, making an improvement to mortgage rates possible. However, a poor demand could lead to bond selling and higher mortgage rates this afternoon, particularly if the second afternoon event gives us any negative surprises.

Today also brings us the adjournment of the 2-day FOMC meeting that will end at 2:15 PM ET. It is expected to yield no change to short-term interest rates, but as is often the case, traders will be looking for any indication of the Fed's next move and when they may make it. I believe that there is little chance of indicating a possible rate hike in the near future, so I don't believe that this meeting will have the influence that the FOMC meetings usually do.

Look for an update to this repor t shortly after the markets have an opportunity to react to the afternoon events. There is relevant economic data scheduled for release tomorrow (December's Durable Goods Orders) along with the 7-year Note auction. But we will address those in today's afternoon update.

Posted by Bryce Johnson on January 27th, 2010 10:36 AMPost a Comment (0)

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Tuesday January 26th Mortgage Update

January 26th, 2010 10:20 AM

Tuesday's bond market has opened in positive territory despite stronger than expected results form this morning's important economic news and stock market gains. The major stock indexes have rebounded from early opening losses to move into positive ground. The Dow is currently up 58 points while the Nasdaq has gained 10 points. The bond market is currently up 4/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.

The Conference Board released their Consumer Confidence Index (CCI) for January late this morning. They reported a reading of 55.9 that exceeded forecasts by over two points. This can be considered negative news for bonds because it indicates that consumers may be more willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. But fortunately mortgage shoppers, the data seems to have had little influence on this morning's bond trading and mortgage pricing.

December's New Home Sales report will be posted late tomorrow morning. It is expected to show an increase in sales of newly constructed homes, but is not important enough to heavily influence mortgage pricing.

Also tomorrow is the 5-year Note auction. Results of the sale will be posted at 1:00 PM ET. This sale doesn't directly impact mortgage rates, but it will gives us a measurement of investor interest in U.S. securities. If the demand for the sale was strong, the broader bond market will likely react positively, making an improvement to mortgage rates possible. However, a poor demand could lead to bond selling and higher mortgage rates tomorrow afternoon.

Today begins the 2-day FOMC meeting that will adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to short-term interest rates, but as is often the case, traders will be looking for any indication of the Fed's next m ove and when they may make it. I believe that there is little chance of indicating a possible rate hike in the near future, so I don't believe that this meeting will have the influence they usually do.

It appears that tomorrow afternoon will be more active than tomorrow morning for the bond market and mortgage rates. The morning data is not very important since it covers only approximately 15% of all homes sold in the U.S. The 5-year Treasury Note auction is not the most important of the sales that we track. But it does carry the potential to influence the bond market enough to impact mortgage pricing. And that takes us to the FOMC results that can cause more movement in the markets than both of the other events combined. So, I would not be surprised to see the most movement in mortgage rates to come during afternoon hours.

Posted by Bryce Johnson on January 26th, 2010 10:20 AMPost a Comment (0)

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Wednesday January 20th Mortgage Update

January 20th, 2010 10:58 AM

Wednesday's bond market has opened in positive territory following the release of favorable economic data and early selling in stocks. The stock markets are reacting to some disappointing earnings results and the same economic data that is fueling the early buying bonds. The Dow is currently down 175 points while the Nasdaq has lost 40 points. The bond market is currently up 10/32, which will likely improve this morning's mortgage rates by approximately .125 of a discount point.

The Labor Department reported this morning that December's Producer Price Index (PPI) rose 0.2%. This exceeded forecasts since no change was expected, meaning prices paid at the producer level of the economy rose a little more than thought. Because rising prices equates to inflation that hurts bond prices, this could have been considered negative news for bonds. However, the much more important core data reading that excludes volatile food and energy prices was unchanged from Nove mber's level. It was expected to rise 0.1%, making this good news for bonds and mortgage rates.

The Commerce Department gave us December's Housing Starts this morning also. They announced a much smaller number of new housing starts than analysts were expecting. This indicates that the housing sector was not as well as thought. Unfortunately, this data is not considered to be of high importance to the markets and has had little impact on this morning's mortgage rates.

Tomorrow morning brings us the release of December's Leading Economic Indicators (LEI). This late morning release will attempt to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting to see an increase of 0.7%, meaning that economic growth over the next few months should rise fairly rapidly. A smaller than expected increase would be good news for the bond market and mortgage rates, but a larger than expected rise could lead to bond selling and a minor increase to mortgage pricing tomorrow.

Also tomorrow morning is the weekly unemployment update from the Labor Department. They are expected to say that 440,000 new claims for unemployment benefits were filed last week. That would be a small decline from the previous week. Generally speaking, the larger the sum of new claims, the better the news for bonds. However, since this data only tracks a single week's worth or new claims, its impact on mortgage rates is usually minimal.

Posted by Bryce Johnson on January 20th, 2010 10:58 AMPost a Comment (0)

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Tuesday January 19th Mortgage Update

January 19th, 2010 10:18 AM

Tuesday's bond market has opened in negative territory as stocks recover a good part of Friday's losses. The stock markets are off to a strong start following yesterday's holiday with the Dow up 73 points and the Nasdaq up 22 points. The bond market is down 6/32, which should push this morning's mortgage rates higher by approximately .125 of a discount point over Friday's morning rates.

This week brings us the release of three pieces of economic data to digest, but only one is considered to be of high importance. The first two reports will be released early tomorrow morning. The Labor Department will post their Producer Price Index (PPI) and the Commerce Department will release December's Housing Starts data, both at 8:30 AM. The PPI is much more important to the markets and mortgage rates because it measures inflationary pressures at the producer level of the economy. It is the sister report to last week's Consumer Price Index (CPI) that didn't give us an y major surprises. Analysts are expecting to see no change in the overall reading and a 0.1% increase in the more important core data reading that excludes volatile food and energy prices. Unexpected increases, particularly in the core reading, could mean higher mortgage rates tomorrow.

December's Housing Starts helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don't see it causing much movement in mortgage rates tomorrow. It is expected to show little change from November's starts.

Overall, tomorrow will likely turnout to be the most important day of the week with the PPI scheduled. If it meets expectations or is lower than forecasts, we could see mortgage rates close the week lower than this morning's opening levels. There will be discussion about Congress raising the debt ceiling this week that ma y bring the amount of outstanding U.S. debt in focus again. Unfortunately, if it becomes a hot topic, the bond market may see pressure as everyone is reminded about the large sum of debt we currently have outstanding. But, I don't think we have too much to be concerned with in this week's economic data and could see the rates move little this week.

Posted by Bryce Johnson on January 19th, 2010 10:18 AMPost a Comment (0)

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Thursday January 14th Mortgage Update

January 14th, 2010 11:49 AM

THURSDAY AFTERNOON UPDATE:

The bond market has improved from early gains following a fairly strong 30-year Bond auction. The stock markets have not moved too much from this morning's levels with the Dow currently up 30 points and the Nasdaq up 8 points. The bond market has improved from this morning, currently up 19/32. This will likely improve this afternoon's mortgage rates slightly, even after this morning's improvement. But, many lenders may opt to wait until tomorrow's pricing to reflect this improvement.

The Commerce Department reported this morning that retail level sales fell 0.3% last month, falling well short of expectations. Analysts were expecting to see a 0.5% increase in sales, meaning consumers spent less last month than many had thought. This is good news for bonds and mortgage rates because drops in consumer spending eases inflation and economic recovery concerns. That creates a favorable environment for the bond market and mo rtgage rates. However, minimizing this news was a sizable upward revision to November's sales, indicating that consumers spent more in November than was previously thought.

There are three economic reports scheduled for release tomorrow morning. The first is December's Consumer Price Index (CPI). This is also one of the most important monthly reports that we see since it measures inflationary pressures at the consumer level of the economy. The overall index is expected to rise 0.2% while the core data is expected to increase 0.1%. Weaker than expected readings should lead to bond improvements and lower mortgage rates tomorrow morning.

December's Industrial Production report is the second report. It will be released at 9:15 AM ET and measures output at U.S. factories, mines and utilities. This gives us a good indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.6% from November's lev el. A smaller than expected increase would be considered good news for bonds and should lead to lower mortgage rates as long as the CPI doesn't reveal any negative surprises.

The final report of the week is January's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates. Good news would be if it shows a reading weaker than the 73.8 that is expected. However, it is not one of the week's more important releases and probably will have little impact on tomorrow's mortgage rates due to the importance of the CPI and production reports.

Posted by Bryce Johnson on January 14th, 2010 11:49 AMPost a Comment (0)

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Wednesday January 13th Mortgage Update

January 13th, 2010 9:55 AM

Wednesday's bond market has opened in negative territory as investors prepare for today's auction. The stock markets are in positive ground with the Dow up 28 points and the Nasdaq up 6 points. The bond market is currently down 8/32, but we likely will see little change in this morning's mortgage rates due to strength late yesterday.

Today's only relevant economic news will come from the Federal Reserve this afternoon when they post their Beige Book report. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises. It will be released at 2:00 PM ET, so any reaction to its results will come later today.

Also on tap today is the 10-year Treasury Note auction. If there is a strong demand for them during the sal e, we should see the bond market move higher during afternoon trading. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward revisions to mortgage rates. We will repeat this scenario tomorrow for the 30-year Bond auction.

Tomorrow morning brings us the release of December's Retail Sales data. This is one of the more important reports we see each month it measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts are calling for an increase in sales of approximately 0.5%. A smaller than expected increase would be good news for bonds and mortgage rates tomorrow.

The Labor Department will post last week's unemployment figures tomorrow morning also. T hey are expected to show that 436,000 new claims for benefits were filed last week, but I doubt this data will cause much movement in mortgage rates. It tracks only a week's worth of new claims, so its impact on the markets is usually minimal.

Posted by Bryce Johnson on January 13th, 2010 9:55 AMPost a Comment (0)

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Tuesday January 12th Mortgage Update

January 12th, 2010 9:24 AM

Tuesday's bond market has opened well in positive territory following a negative open in stocks and disappointing corporate earnings news. The stock markets are down as investors prepare for the possibility of a weak earnings reporting season. The Dow is down 24 points while the Nasdaq has fallen 18 points. The bond market is currently up 23/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.

November's Goods and Services Trade Balance report was posted this morning, showing a larger than expected $36.4 billion trade deficit. Analysts were expecting to see a $34.5 billion deficit, but this data is the week's least important and does not carry the influence to heavily affect mortgage pricing. Therefore, its impact on today's rates has been minimal.

There is no relevant data scheduled for release tomorrow morning. However, the Federal Reserve will post its Fed Beige Book report at 2:00 PM ET tomorrow . This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises.

The first of this week's two important Treasury auctions is tomorrow also. The Treasury will sell 10-year Notes and will post results at 1:00 PM ET. If there is a strong demand for the Notes, we should see the bond market move higher during afternoon trading. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward revisions to mortgage rates.

This week also kicks off the quarterly earnings season. Alcoa, who is usually the first Dow component company to report each quarter, gave investors dis appointing results after the close yesterday. This has led to concern about results from other big-name companies in the coming weeks. That has some investors shifting funds from stocks (expecting stock prices to fall further as more disappointing results are announced) into bonds as a safe-haven. This is good news for the bond market, at least temporarily and could lead to further improvements in mortgage rates if the pattern continues.

Posted by Bryce Johnson on January 12th, 2010 9:24 AMPost a Comment (0)

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Wednesday November 25th Mortgage Update

November 25th, 2009 9:54 AM

Wednesday's bond market has opened has opened in negative territory following the release of stronger than expected economic data. The stock markets are showing minor gains with the Dow up 22 points and the Nasdaq up 6 points. The bond market is currently down 8/32, but we still should see an improvement of approximately .250 of a discount point in this morning's mortgage rates due to strength in bonds late yesterday.

The first of today's four relevant reports was October's Durable Goods Orders that showed a 0.6% decline in new orders for big-ticket items. This was much lower than the 0.5% that was expected, but this particular report is known to show quite a bit of volatility from month-to-month. So a wide variance does not necessarily mean a big change to mortgage rates, but this morning's news can be considered favorable for bonds and mortgage pricing.

The second report of the day was October's Personal Income and Outlays data. It revealed a 0.2% rise in income that was expected, but a 0.7% increase in spending that exceeded forecasts. That means consumers spent more than many had thought, increasing the possibility of economic growth. This is bad news for bonds and mortgage rates because an expanding economy usually raises inflation concerns and makes mortgage-related bonds less attractive to investors.

The revised November reading to the University of Michigan Index of Consumer Sentiment came in at 67.4. This was slightly higher than expected, meaning consumers felt better about their own financial situations than many had thought. That can be considered bad news for bonds, however, this was not enough of a variance to affect mortgage rates.

The final report of the day was October's New Home Sales. It showed that sales of newly constructed homes rose 6.2% last month, greatly exceeding forecasts. As with Monday's Existing Home Sales report, this data indicates tha t the housing sector is strengthening at a quicker pace than many had thought. That is bad news for bonds and mortgage rates because a recovering housing sector makes a broader economic recovery more likely.

Also worth noting was a surprise drop in new claims for unemployment benefits filed last week. The Labor Department said that 466,000 new claims were filed last week, falling well below forecasts and their lowest total since September of last year. Fortunately this data is not considered to be highly important, but its results did somewhat influence the stock markets and bond trading this morning.

Yesterday's 5-year Note auction went very well, raising optimism about today's 7-year Note sale. As with yesterday's auction, results will be posted at 1:00 PM ET. If there was a strong demand from investors, we could see bond prices rise again during afternoon hours, possibly leading to improvements in mortgage rates. But a lacklu ster interest in the sale could lead to higher mortgage pricing.

The FOMC minutes that were released yesterday afternoon didn't really give us any surprising news, but did appear to be more optimistic about the economy than during previous meetings. The Fed raised their estimates for next year for overall economic activity (GDP reading) and lowered predictions for the unemployment rate. This means that they think economic activity will be better than previously thought and that unemployment will not be as bad as previously estimated. Those can be considered negative points for bonds and mortgage rates, but the strength of the 5-year Note auction yesterday prevented bonds from reacting negatively.

The financial markets will be closed tomorrow in observance of the Thanksgiving Day holiday. There will not be an early close today, but they will close early Friday afternoon and will reopen next Monday morning. I suspect that Friday wil l be a very light day in bond trading as many market participants will be home and there is no relevant economic news scheduled for release. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.

Posted by Bryce Johnson on November 25th, 2009 9:54 AMPost a Comment (0)

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