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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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Friday July 31st Mortgage Update

July 31st, 2009 10:08 AM

Friday's bond market has opened in positive territory despite stronger than expected economic readings. The stock markets are showing modest gains with the Dow up 26 points and the Nasdaq up 4 points. The bond market is currently up 11/32, which with yesterday's late strength should improve this morning's mortgage rates by approximately .375 of a discount point over yesterday's morning rates.

Today's major news was the initial reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic activity. It was expected to show that the economy shrank at a 1.5% annual rate last quarter, but actually revealed a 1.0% decline. In addition to the stronger than expected reading for this quarter, the 1st quarter's GDP was revised lower from down 5.5% to down 6.4%. The downward revision is not necessarily good news for bonds and mortgage rates because it is too old to influence trading. However, it does increase the s ize of the improvement from the 1st quarter to the 2nd quarter, which should be taken as a negative for bonds and mortgage pricing. Fortunately, traders seem to be less concerned with these results than many had expected.

The second report of the day was the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It also gave us stronger than expected results with a 0.4% increase. This means that wage and benefit costs rose slightly more than analysts had predicted. This is also negative news for the bond market because rising wages can lead to wage inflation that likely spreads to other parts of the economy. But as with the GDP reading, this data is not having much of an impact on today's trading or rates.

Yesterday's 7-year Treasury Note auction had mixed results. Some measurements of whether the sale went well or not showed respectable results. But other readings indicated that there was a lackluster intere st in the auction. The bond market initially reacted negatively but then managed to bounce back before closing.

Next week is fairly busy with economic postings, bringing us a couple of very important reports. There is relevant data being posted four out of the five days, including Monday morning. Monday's sole report is July's ISM manufacturing index. This important index measures manufacturer sentiment about business conditions and is usually the first report we see each month. Look for more details on it and next week's other events in Sunday's weekly preview.

Posted by Bryce Johnson on July 31st, 2009 10:08 AMPost a Comment (0)

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Thursday July 30th Mortgage Update

July 30th, 2009 9:27 AM

Thursday's bond market has opened in negative territory following strong stock gains and renewed fears about the amount of debt the government is selling. The stock markets are rallying around fairly positive earnings reports that have the Dow up 129 points and the Nasdaq up 35 points. The bond market is currently down 11/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point compared to yesterday's morning rates.

Today's only economic news was weekly unemployment claims from the Labor Department. They reported that 584,000 new claims for unemployment benefits were filed last week. This nearly matched forecasts and therefore has had no impact on this morning's bond trading or mortgage rates.

Neither of yesterday's afternoon events were favorable to bonds. The Fed Beige Book indicated that the economy is stabilizing in several regions of the U.S., which is bad for bonds because economic strength makes long-term securities such as mortgage-related bonds less attractive to investors. Yesterday's 5-year Note sale did not go too well, leading many to believe there is little chance of a strong demand in today's 7-year Note sale. If we do get another lackluster interest in today's auction, we most likely will see further weakness in bonds this afternoon. That may cause upward revisions to mortgage rates after the results are posted at 1:00 PM ET.

There are two important releases scheduled to be posted tomorrow morning. The first is the preliminary reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic activity. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. This reading is arguably the single most important piece of data we get regularly. Current forecasts are estimating that the economy shrank at a 1.5% annual rate du ring the second quarter. A smaller decline will probably hurt bond prices, leading to higher mortgage rates tomorrow. But a larger than expected decline could fuel a bond market rally and lead to lower mortgage pricing.

The second report of the day is the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It is considered to be an important measurement of wage inflation and can have a pretty big impact on the bond market and mortgage rates if it varies much from forecasts. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.3%.

I would not be surprised to see afternoon revisions to mortgage rates this afternoon and a sizable move tomorrow. If today's auction does not show a fairly strong interest from investors, particularly international buyers, and tomorrow's GDP reading gives us a stronger than expected readi ng, those changes will probably reflect higher rates. Accordingly, please proceed cautiously if still floating an interest rate.

Posted by Bryce Johnson on July 30th, 2009 9:27 AMPost a Comment (0)

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Wednesday July 29th Mortgage Update

July 29th, 2009 9:04 AM

Wednesday's bond market has opened in positive ground following the release of weaker than expected economic data and another soft opening in stocks. The Dow is currently down 37 points while the Nasdaq has slid 10 points. The bond market is currently up 11/32, which should improve this morning's mortgage rates by approximately .125 of a discount point over yesterday's morning rates.

The Commerce Department reported this morning that new orders for durable goods fell 2.5% last month. This was much weaker than the 0.5% decline that was expected, indicating that manufacturing activity for big-ticket items is slowing. That is good news for bonds and mortgage rates because a slowing manufacturing sector makes an economic recovery less likely anytime soon. However, a secondary reading that tracks new orders excluding the most volatile transportation-related orders showed a 1.1% increase. That was much higher than analysts were expecting, but fortunately bond traders have ignored the news.

We have an afternoon release that may affect bond trading and mortgage rates. The Federal Reserve will release its Beige Book report at 2:00 ET today. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke's testimony to Congress last week gave us a recent update, I don't think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates this afternoon as a result of this report, but the possibly does exist.

Also today is the 5-year Treasury Note auction. Results of the sale will be posted at 1:00 PM ET. If it was met with a strong demand, we may see bond prices rise and mortgage rates fall during afternoon trading. However, a lackluster interest coul d lead to higher mortgage rates later today.

There is no relevant monthly or quarterly economic data scheduled for release tomorrow. The Labor Department will give us last week's unemployment figures, but this data is not considered to be of high importance because it basically tracks only a week's worth of new claims. It is expected to show that 585,000 new claims for unemployment benefits were filed last week. The larger the number, the better the news for bonds and mortgage rates. But, unless it varies greatly from forecasts, I don't see this news having much of an influence on bond trading or mortgage rates tomorrow.

Posted by Bryce Johnson on July 29th, 2009 9:04 AMPost a Comment (0)

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Tuesday July 28th Mortgage Update

July 28th, 2009 10:42 AM

Tuesday's bond market has opened in positive ground following early stock weakness and a weaker than expected consumer confidence reading. The stock markets are showing losses with the Dow down 34 points and the Nasdaq down 6 points. The bond market is currently up 14/32, which will likely improve this morning's mortgage rates by approximately .250 of a discount point.

The Conference Board gave us today's important data with the release of their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment about their personal financial situations, giving us an idea of consumer willingness to spend. It showed a reading of 46.6 that fell short of forecasts by a couple of points. This is good news for bonds and mortgage rates because a less optimistic consumer is less likely to make a large purchase in the near future, limiting economic growth.

Tomorrow brings us two reports that may influence mortgage rates. The first will come from the Commerce Department when they post June's Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.

The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meeting s. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke's testimony to Congress last week gave us a recent update, I don't think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates tomorrow afternoon as a result of this report, but the possibly does exist.

Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are tomorrow's 5-year and Thursday's 7-year Note sales. The last auctions of the 5-year and 7-year securities were met with very good demand from investors, leading to bond strength following the sales. But there is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wednesday and Thursday's sales, we can exp ect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.

Posted by Bryce Johnson on July 28th, 2009 10:42 AMPost a Comment (0)

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Monday July 27 Mortgage Update

July 27th, 2009 9:27 AM

There are several important reports scheduled for release this week that are likely to affect mortgage pricing. The first is tomorrow's release of June's New Home Sales that gives us a measurement of housing sector strength and mortgage credit demand. It is expected to show an increase in sales of newly constructed homes, indicating that the housing sector gained some strength. That would be considered negative news for bonds, but since this data tracks only 25% of all home sales it usually has little impact on the bond market and mortgage rates unless it varies greatly from forecasts.

The Conference Board will post their Consumer Confidence Index (CCI) for July late Tuesday morning. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, we may see bond prices rise and mortgage rates drop Tuesd ay. Current forecasts are calling for a reading of 48.7, which would be a lightly lower reading than June's reading.

Wednesday brings us two events that are relevant to mortgage rates. The first will come from the Commerce Department when they will post June's Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates Wednesday morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.

The Federal Reserve will release its Beige Book report Wednesday afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke's testimony to Congress last week gave us a recent update, I don't think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates Wednesday afternoon as a result of this report.

There is no relevant monthly or quarterly data scheduled for release Thursday, but there are two releases scheduled to be posted Friday morning. The first is the preliminary reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic activity. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. This reading is arguably the single most important we get regularly. Current forecasts are estimating that the economy shrank at a 1.5% annual rate during the second quarter. A smaller decline will probably hurt bond prices, leading to higher mortgage rates Friday. But a larger than expected decline would likely fuel a bond market rally and lead to lower mortgage pricing.

The second report of the day Friday is the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It is considered to be an important measurement of wage inflation and can have a pretty big impact on the bond market and mortgage rates if it varies much from forecasts. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.3%.

Also worth mentioning are a couple of Treasury auctions that may affect bond tradi ng and mortgage rates this week. The two most important are Wednesday's 5-year Note and Thursday's 7-year Note sales. The last auctions of these securities were met with very good demand from investors. That led to bond strength following the sales. Results of this week's auctions will be posted 1:00 PM ET each day. If investor interest is strong again, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates Wednesday and Thursday afternoons.

Overall, it likely will be a fairly active week in the mortgage market. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day. The most important report of the week is Friday's preliminary GDP reading, making it one of the most important days of the week. But it is difficult to say which day we can expect to see the most movement in rates as several of releases and scheduled events have the potential to influence mortgage rates.

Posted by Bryce Johnson on July 27th, 2009 9:27 AMPost a Comment (0)

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Tuesday July 21st Mortgage Update

July 21st, 2009 9:43 AM

Tuesday's bond market initially opened in negative territory but has since rallied well into positive ground. The stock markets are mixed with the Dow up 60 points and the Nasdaq down 3 points. The bond market is currently up 19/32, which will likely improve this morning's mortgage rates by approximately .250 - .375 of a discount point.

Today's bond rally is the result of Fed Chairman Bernanke's semi-annual testimony to Congress on the status of the economy and monetary policy. He stated that the economy's slowdown has slowed significantly, meaning the recession may be ending relatively soon. But he cautioned that there is uncertainty ahead for the economy and strengthening may be gradual. He also sated that the labor market remains weak and that the unemployment rate will likely remain higher than they would prefer until 2012 or later.

The weak employment and housing markets should help keep inflation under control in the near future, making long-term securities such as mortgage-related bonds more attractive to investors. This led to the surge in bond prices this morning and pushed today's mortgage rates lower. And if bond prices continue to rise, we may even see more improvements in rates later today. In other words, today's events were extremely favorable to mortgage shoppers.

Mr. Bernanke will repeat this act tomorrow to the Senate Banking Committee, likely with little change to his prepared testimony. Therefore, his words are not expected to have much of an impact on the markets unless an answer to a Senator's question surprises traders or contradicts something portrayed today.

There is no relevant economic data scheduled for release tomorrow to influence bond trading or mortgage rates. This should be good news for mortgage rates as today's rally may continue into tomorrow's trading with nothing on the calendar that has the potential to derail it.

The next monthly econo mic data comes from the National Association of Realtors Thursday morning when they post June's Existing Home Sales figures. This report gives us a measurement of housing sector strength and mortgage credit demand, but it is not considered highly important and often has a minimal impact on mortgage rates. Current forecasts are calling for an increase from May's sales totals. A smaller than expected increase or a decline in sales would be considered good news for bonds and mortgage rates because a weak housing sector would make it difficult for the economy to recover anytime soon. However, unless this data varies greatly from forecasts it probably will not lead to much of a change in rates.

Posted by Bryce Johnson on July 21st, 2009 9:43 AMPost a Comment (0)

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Monday July 20th Mortgage Update

July 20th, 2009 11:23 AM

Monday's bond market has opened down slightly following stronger than expected economic news and minor gains in stocks. The stock markets are starting the week in positive territory with the Dow up 22 points and the Nasdaq up 5 points. The bond market is currently down 2/32, which should keep this morning's mortgage rates at Friday's levels.

The Conference Board, who is a New York-based business research group, reported that their Leading Economic Indicators (LEI) rose 0.7% last month. Analysts were expecting a 0.5% increase, meaning that the index is predicting more economic activity over the next three to six months than many had thought. That news is considered bad for bonds, but fortunately this index is considered to be only moderately important to bonds and mortgage rates.

There is no relevant economic data scheduled for release tomorrow, but Fed Chairman Bernanke will speak before the House Financial Services Committee. This is day one hi s semi-annual testimony on the Fed's monetary policy and the status of the economy. He will speak to the Senate Banking Committee Wednesday morning. Analysts and traders will be watching his words closely for any hint of the Fed's next move with key interest rates. They will likely create a great deal of volatility in the markets during the testimony and the question and answer session that follows.

If his testimony indicates that inflation is a point of concern or that the economy looks to recover sooner than thought, we will likely see the bond market tank and mortgage rates rise. We usually see the most movement in rates during the first day of testimony as the Chairman's prepared words for both appearances are quite similar to each other, meaning that the second day rarely gives us anything we did not hear during the first day.

Overall, this is a moderately significant week for the bond market and mortgage rates. If we get weaker than expected ec onomic results and Chairman Bernanke's words do not surprise the markets, we may see mortgage rates move lower for the week. However, if Mr. Bernanke's testimony raises inflation concerns- rates may again move higher on the week.

Posted by Bryce Johnson on July 20th, 2009 11:23 AMPost a Comment (0)

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Friday July 17th Mortgage update

July 17th, 2009 10:46 AM

Friday's bond market has opened in negative territory after today's only economic data showed much stronger than expected results. The stock markets are relatively flat with the Dow up a few points and the Nasdaq down a few points. The bond market is currently down 16/32, which should push this morning's mortgage rates higher by approximately .250 of a discount point.

June's Housing Starts was the only relevant data posted this morning. It showed that construction starts of new homes rose 3.6% over May's significantly upward revised total. Analysts were expecting to see little change from May to June, but today's report revealed that demand for new homes was much stronger in May and June than thought. This indicates that the housing market may be stabilizing, which is considered negative news for the bond market and mortgage rates.

I am expecting to see a fairly calm afternoon as the weekend approaches. Unless the stock markets make a sizable move higher or lower, I believe bonds and mortgage pricing will remain near current levels the rest of the day.

Next week is fairly light in terms of economic reports for the markets to digest. There are only a couple of reports scheduled, but none are considered to be of high importance. Unlike most, there is relevant news scheduled for release this Monday. The Conference Board will post June's Leading Economic Indicators (LEI) Monday, which is expected to show a moderate increase. This means it is predicting economic growth over the next three to six months. But look for more details on this report and next week's events in Sunday's weekly preview.

Posted by Bryce Johnson on July 17th, 2009 10:46 AMPost a Comment (0)

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Wednesday July 8th Mortgage Update

July 8th, 2009 10:29 AM

Wednesday's bond market has opened flat again as investors prepare for the events of the next couple of days. The stock markets are showing minor gains after yesterday's afternoon sell-off. The Dow is currently up 28 points while the Nasdaq is nearly unchanged. The bond market is currently up 3/32, which will likely keep this morning's mortgage rates near yesterday's morning rates.

There is no relevant economic data scheduled for release yet again today. But we do have two issues that are quite relevant to bond trading and mortgage rates. The first is today's 10-year Treasury Note auction. Results of the sale will be posted at 1:00 PM ET. If the sale was met with a strong demand from investors, particularly international buyers, we could see bonds rally during afternoon trading. The flip side is that a weak demand would indicate a waning interest in U.S. securities, making current bonds less appealing to investors. That likely would drive bond prices lower and mortgage rates higher this afternoon.

The second event is the release of quarterly earnings from Dow component Alcoa after the stock markets close today. They traditionally are the first major company to release earnings each quarter. If their results and forecasts fall short of expectations, we can expect to see stocks fall during after-hours trading and early tomorrow morning. The stock weakness could drive bonds higher as traders seek safe-haven in bonds. But if they beat forecasts, we will probably see stocks move higher, drawing funds from bonds and leading to higher mortgage rates in the morning.

The only semi-relevant economic data scheduled for release tomorrow morning are weekly unemployment figures from the Labor Department. They are expected to say that 600,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week's total. However, this data usually has a limited impact on bo nd trading and mortgage rates since it gives us only a week's worth of new claims. With no other relevant economic data on the calendar tomorrow and little news already posted this week, we may see a slightly stronger than usual reaction to the results. But I don't see this data being a market mover tomorrow or significantly affecting mortgage rates.

Also tomorrow is the Treasury's sale of 30-year Bonds. This sale is less likely to affect mortgage rates than today's 10-year Note sale does, but that doesn't mean we can ignore its results. The same principals apply as today's sale?a strong demand is favorable for bonds while a lackluster interest could lead to bond weakness and potential increases to mortgage rates.

Friday morning gives us some factual monthly economic data for the markets to digest. Neither of the two reports are considered to be of high importance to the financial markets or mortgage rates, but do carry enough weight to cause some mo vement if their results vary greatly from forecasts. We will touch more on those in tomorrow's commentary.

Posted by Bryce Johnson on July 8th, 2009 10:29 AMPost a Comment (0)

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Tuesday July 7th Mortgage Update

July 7th, 2009 9:43 AM

Tuesday's bond market has opened relatively flat with no relevant economic news on the agenda today. The stock markets are showing losses with the Dow down 78 points and the Nasdaq down 15 points. The bond market is currently up 2/32, but we will see an improvement in this morning's mortgage rates of approximately .250 of a discount point due to strength late yesterday.

There is no relevant economic news scheduled for release again today. The weakness in stocks will probably keep bonds from turning sour today. We have seen some improvements in mortgage rates over the past couple of days, but there is question as to whether or not they can hold. It currently appears that they may for the time being, but we know that mortgage rates will rise much quicker than they improve. Accordingly, if still floating an interest rate please be very cautious over the next several days. At least until we get the results of Wednesday's Treasury auction and a couple of the major earnings releases behind us.

There are only two monthly economic reports being posted this week and they both come Friday. There are also two relevant Treasury auctions left that may influence mortgage rates. 10-year Notes will be sold tomorrow and 30-year Bonds Thursday. These sales can influence market trading in bonds and possibly affect mortgage rates. If the sales are met with a strong demand from investors, particularly Wednesday's sale, we should see afternoon improvements in bonds that could lead to downward revisions to mortgage rates. However, if concerns over the amount of debt being sold keeps buyers on the sidelines, we may see bonds fall after results are posted at 1:00 PM ET and mortgage rates move higher during afternoon trading tomorrow or Thursday.

Tomorrow kicks off the earnings season when Alcoa posts their quarterly results. Market participants are anxiously waiting for these results to see just how hard the weak economy is affecting earnings. Just as important as this past quarter's results are their forward-looking estimates. If revenue, earnings and projections from the big-named companies exceed expectations, stocks will likely rally, making bonds less appealing to investors. But if results are weaker than expected, indicating that the economy is still stifling earnings, bonds will be more attractive to investors as stocks slide. This could help boost bond prices and lead to lower mortgage rates.

Posted by Bryce Johnson on July 7th, 2009 9:43 AMPost a Comment (0)

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Monday July 6th Mortgage Update

July 6th, 2009 10:11 AM

Monday's bond market has opened in negative territory despite early stock losses. The stock markets are starting the week with minor losses as concerns over this week's events prevent gains in the major indexes. The Dow is down 51 points while the Nasdaq has lost 23 points. The bond market is currently down 8/32, which should push this morning's mortgage rates higher by approximately .125 of a discount point over Thursday's morning rates.

There is no relevant economic news scheduled for release today. This week brings us the release of only two monthly economic reports and they both will be posted Friday. It also is the beginning of corporate earnings season that can lead to significant volatility in the stock markets and has the potential to influence bond trading and mortgage rates.

There are a couple of Treasury auctions that are scheduled to take place this week, beginning with the 10-year TIPS (Treasury Inflation Protected Securities) today . This sale isn't exactly the most important auction of the week, but with no relevant data being posted until later in the week it may influence bonds and possibly mortgage rates if we see a very strong or extremely poor demand from investors. Results will be posted at 1:00 PM ET, so any change in rates from this event would come during afternoon hours.

Wednesday kicks off the earnings season when Alcoa posts their quarterly results. Market participants are anxiously waiting for these results to see just how hard the weak economy is affecting earnings. Just as important as this past quarter's results are their forward-looking estimates. If revenue, earnings and projections from the big-named companies exceed expectations, stocks will likely rally, making bonds less appealing to investors. But if results are weaker than expected, indicating that the economy is still stifling earnings, bonds will be more attractive to investors as stocks slide. This could hel p boost bond prices and lead to lower mortgage rates.

Overall, I am expecting to see a fairly active week in mortgage rates. It is difficult to say which day will be the most important of the week. Friday is the easy candidate with two monthly reports scheduled to be posted, but neither is considered to be a major release. Wednesday is also a possibility due to the 10-year Note auction and the opening act of earnings season. I suspect that we may see some pressure in bonds the first part of the week unless the major stock indexes continue Thursday's selling. If the corporate earnings reports that are scheduled for this week are a disappointment, stocks will probably move lower and investors may seek safe-haven in bonds. This would help push bond prices higher and mortgage rates lower for the week. But if the Treasury sales are met with a lackluster demand and earnings exceed expectations, rates will most likely finish the week higher than last week's closing l evels.

Posted by Bryce Johnson on July 6th, 2009 10:11 AMPost a Comment (0)

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