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Wednesday April 22nd Mortgage Update

April 22nd, 2009 9:35 AM

Wednesday's bond market has opened in negative territory with no relevant economic news and early stock gains making bonds less attractive. The Dow is currently up 60 points while the Nasdaq has gained 28 points. The bond market is currently down 13/32, which should equate to an increase in this morning's mortgage rates of approximately .250 of a discount point.

There is no relevant data scheduled for release again today, so look for any movement in bond prices and mortgage rates to come as a result of a swing in stock prices. Yesterday's afternoon weakness in bonds was not a complete surprise and we may have more of it today. Accordingly, this may be a good time to lock a rate if closing in the immediate future.

We do have some relevant data scheduled for release tomorrow. The National Association of Realtors will post March's Existing Homes Sales early tomorrow morning. They are expected to show a drop from February's sales, but this data is not considered highly important. It can however, influence trading and lead to slight changes in mortgage rates if it varies greatly from forecasts.

Also tomorrow is the weekly release of unemployment figures from the Labor Department. They are expected to show that 639,000 new claims for benefits were filed last week. This would be an increase from the previous week's total. The higher the number of claims, the better the news for bonds and mortgage rates

Posted by Bryce Johnson on April 22nd, 2009 9:35 AMPost a Comment (0)

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Monday April 27th Mortgage Update

April 27th, 2009 9:58 AM

Monday's bond market has opened in positive territory following early stock weakness. The Dow is currently down 64 points while the Nasdaq has lost 15 points. The bond market is currently up 12/32, but I am not expecting to see much a change in this morning's mortgage rates.

The first of this week's seven relevant economic reports comes late tomorrow morning when the Consumer Confidence Index (CCI) for April will be released. This Conference Board index is a key indicator of future spending by consumers. The group surveys 5000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to make large purchases in the near future. However, if they are concerned about issues such as job security and investments, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would ke ep inflation concerns to a minimum. But, a sizable increase could hurt the bond market, pushing mortgage rates higher tomorrow. It is expected to show a reading of 28.8, which would be an increase from March's 26.0 reading.

Wednesday brings us the release of a very important report along with the FOMC meeting results. The report is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets Wednesday and therefore the mortgage market also. Analysts are expecting to see a decline in output at an annual rate of 4.9%. A larger decline would be ideal for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates Wednesday morning.

This week's FOMC meeting will begin on Tuesday but will not adjourn until Wednesday afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement.

Overall, look for plenty of movement in the financial markets and mortgage rates this week. Wednesday will likely be the most important day of the week with the GDP being posted along with the FOMC adjournment, but we may see noticeable changes to rates tomorrow and Friday also. If this week's reports reveal weaker than expected economic conditions, the bond market should rally and mortgage rates should fall significantly for the week.

Posted by Bryce Johnson on April 27th, 2009 9:58 AMPost a Comment (0)

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Monday April 20th Mortgage Update

April 20th, 2009 9:51 AM

Monday's bond market has opened strong following a sizable sell-off in stocks. The stock markets are starting the week off with large losses during early trading. The Dow is currently down 213 points while the Nasdaq has lost 51 points. The bond market is currently up 28/32, but we will likely see little change in this morning's mortgage rates due to weakness late Friday.

The Conference Board gave us the week's first data late this morning, saying that their Leading Economic Indicators (LEI) for March fell 0.3%. This matched forecasts and therefore had little impact on today's bond trading or mortgage rates. The decline means that the index is predicting moderate slowing in economic activity over the next several months.

There is no relevant data scheduled for release tomorrow or Wednesday, so expect to have any movement in stocks to be the driving force behind bond and mortgage rates swings.

The National Association of Realtors wil l post March's Existing Homes Sales numbers Thursday morning, which are expected to show a drop from February. A similar report to this one and actually the week's least important data- March's New Home Sales will be released Friday morning. Both of these releases give us an indication of housing sector strength and mortgage credit demand, but unless they vary greatly from analysts' forecasts, I don't think they will cause much movement in mortgage rates.

Overall, look for Friday to be the most important day of the week with the Durable Goods report being posted. The rest of the week will likely be heavily influenced by the stock markets. If the major stock indexes rally, bonds will likely suffer and mortgage rates will move higher. If stocks fall for the week, we could see mortgage rates move lower the next few days.

Posted by Bryce Johnson on April 20th, 2009 9:51 AMPost a Comment (0)

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Tuesday April 14th Mortgage Update

April 14th, 2009 9:37 AM

Tuesday's bond market has opened in positive territory after this morning's economic data revealed much weaker than expected readings. The stock markets are showing losses with the Dow down 49 points and the Nasdaq down 6 points. The bond market is currently up 10/32, which should improve this morning's mortgage rates by approximately .125 - .250 of a discount point.

There were two pieces of important economic data posted this morning and both gave us favorable results. The Commerce Department said that sales at retail establishments in the U.S. fell 1.1% last month. This was well off forecasts of a 0.3% rise and indicates that consumers are not spending nearly as much as thought. That is good news for bonds and mortgage rates because consumer spending makes up two-thirds of the U.S. economy. When consumer spending is softening, economic activity slows, creating a favorable environment for bonds and longer-term securities.

The second report of the day was March's Producer Price Index (PPI), which also gave us surprising results. The overall index fell 1.2% when it was expected to remain unchanged from February's level. But the more important core data, that excludes volatile food and energy prices, did not change. It was expected to rise 0.1%, meaning that prices paid at the producer level of the economy were lower than analysts had expected. This eases inflation concerns and makes bonds more appealing to investors.

Tomorrow brings us the release of three reports to watch. The first is the sister report of today's PPI. March's Consumer Price Index (CPI) will be released early tomorrow morning. This index is very similar to today's release, but tracks prices at the more important consumer level of the economy. This is one of the most important pieces of data we see each month, so stronger than expected readings will most likely lead to higher mortgage rates. Current forecasts are calling for an incr ease of 0.2% in the overall index and 0.1% in the core data.

The second report is March's Industrial Production data at 9:15 AM ET. It gives us a measurement of output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for a decline in production of 0.9%. Since signs of a weakening economy are considered favorable to bonds and therefore mortgage rates, a larger decline would be good news for mortgage pricing. However, the CPI is by far the most important data of the day and will likely be the most influential on tomorrow's rates.

The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET tomorrow afternoon. 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.

Posted by Bryce Johnson on April 14th, 2009 9:37 AMPost a Comment (0)

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Monday April 13th Mortgage Update

April 13th, 2009 10:11 AM

Monday's bond market has opened in positive territory following early stock losses that are in part due to concern about a possible bankruptcy filing by GM. The Dow is currently down 85 points while the Nasdaq has lost 15 points. The bond market is currently up 18/32, which will likely improve this morning's mortgage by approximately .125 of a discount point.

This week brings us the release of seven relevant economic reports for the bond market to digest. We are also heading into corporate earnings season, which could lead to fluctuations in the stock markets. If earnings come in lighter than estimates, the stock markets may fall, leading to an influx of funds into bonds. But, if earnings and forecasts are strong, the major stock indexes may rally, pulling funds from bonds and leading to higher mortgage rates.

There is no relevant economic news scheduled for release today. The first important report comes early tomorrow morning when the Commerce Department will release March's Retail Sales data. This piece of data gives us a measurement of consumer spending, which is very important because consumer spending makes up two-thirds of the U.S. economy. Current forecasts call for a 0.3% increase in sales last month. If we see a larger increase in spending, the bond market will probably fall and mortgage rates will rise. However, a weaker than expected reading could push bond prices higher and mortgage rates lower tomorrow.

The Labor Department will post March's Producer Price Index (PPI) early tomorrow morning also, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices, leading to higher mortgage rates tomorrow morning. However, a small increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates. Current forecasts are calling for no change in the overall reading and a 0.1% rise in the core data.

Overall, look for the most movement in rates the middle part of the week. The Retail Sales, PPI and CPI reports are the biggest names on the agenda. Any of the three can cause significant movement in the markets and mortgage rates. It appears that we have a very active week ahead of us so please proceed cautiously if still floating an interest rate.

Posted by Bryce Johnson on April 13th, 2009 10:11 AMPost a Comment (0)

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Thursday April 9th Mortgage Update

April 9th, 2009 9:39 AM

Thursday's bond market has opened in negative territory following early stock strength. The stock markets are rallying this morning with the Dow up 192 points and the Nasdaq up 48 points. The bond market is currently down 16/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point.

Today's only monthly economic data was February's Goods and Service Trade Balance. It showed that the U.S. trade deficit fell to $26.0 billion in February. This was much lower than expected and was its lowest level since 1999. Unfortunately, this data isn't considered to be highly important to mortgage rates directly. In fact, the news has had little impact on trading despite the wide variance between forecasts and the actual reading. However, news like this can strengthen the U.S. dollar versus other currencies, making U.S. securities more appealing to international investors. This is because a stronger dollar makes the secur ities more valuable when sold and their proceeds are converted to the investors' own currency.

The Labor Department reported that 654,000 new claims for unemployment benefits were filed last week. This was close to forecasts and also has had little influence on this morning's bond trading or mortgage rates.

Yesterday's FOMC minutes basically gave the bond market good news but consumers and businesses bad news. The minutes showed that during the last meeting the Fed revised their outlook for the economy and recovery to a worse position. They extended out their estimate of when the Gross Domestic Product (GDP), which is the most important benchmark of economic activity, will stabilize. They also renewed concerns about deflation, meaning that inflation is not an immediate concern. Overall, the minutes didn't reveal any major surprises, but did support the theory that the economy is worse than many, including the Fed, had previously thought. Generall y speaking, weak economic conditions usually create a favorable environment for bonds, leading to lower mortgage rates.

Today's 10-year Treasury auction's results will be posted at 1:00 PM ET. If there was a strong demand from investors, we may see bond prices improve and mortgage rates revise lower during the last hour of trading. The bond market will close today at 2:00 PM ET today ahead of tomorrow's Good Friday holiday. The markets will reopen Monday morning for regular trading hours. Most lenders will be closed tomorrow also, but if any are working they will likely keep today's afternoon rates until Monday morning.

Posted by Bryce Johnson on April 9th, 2009 9:39 AMPost a Comment (0)

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Wednesday April 8th Mortgage Update

April 8th, 2009 9:39 AM

Wednesday's bond market opened up in positive territory again despite modest stock gains and a lack of economic news. The stock markets are posting fairly minor gains with the Dow up 25 points and the Nasdaq up 18 points. The bond market is currently up 7/32, which should improve this morning's mortgage rates compared to yesterday's morning rates.

There is no relevant economic data scheduled for release today. However, we will get the minutes from the last FOMC meeting later this afternoon. Market participants will be looking at these minutes closely. They give us insight to the Fed's current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release could cause afternoon volatility in the markets and possible changes in mortgage pricing.

Yesterday's 10-year TIPS auction was met with an acceptable demand. That creates some optimism about tomorrow's 10-year Note sale. With a large quantity of new debt being brough t to market, there was some concern about how much interest investors would have in these sales. If the sale goes well tomorrow, we may see bonds move higher again as we head into the holiday weekend.

There are two bits of economic data scheduled for release tomorrow but neither is considered to be of high importance. The first is February's Goods and Service Trade Balance report. This data gives us the size of the U.S. trade deficit, but unless it varies greatly from forecasts, it likely will not cause much movement in mortgage rates. It is expected to show little change from January's $36.0 billion deficit.

The second piece of data will be weekly unemployment figures from the Labor Department. They are expected to show that approximately 655,000 new claims for benefits were filed last week. A much larger or smaller number could influence bond trading enough to slightly affect mortgage rates. But the fact is that this data is not considered to be important because it gives us only a single week's worth of claims.

Also worth noting is an early close for bonds tomorrow ahead of Friday's Good Friday holiday. The markets will reopen Monday morning for regular trading hours. Most lenders will be closed tomorrow also, but if any are working they will likely keep Thursday's afternoon rates until Monday morning.

Posted by Bryce Johnson on April 8th, 2009 9:39 AMPost a Comment (0)

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Tuesday April 7th Mortgage Update

April 7th, 2009 9:38 AM

Tuesday's bond market opened up in positive territory following early stock losses. The stock markets are showing another negative morning with the Dow down 153 points and the Nasdaq down 30 points. The bond market is currently up 8/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.

There are no relevant economic reports scheduled for release today, but we do have the first of this week's two Treasury auctions that may influence mortgage rates. The Fed will sell $6 billion of 10-year Treasury Inflation Protected Securities (TIPS) today. Results of the sale will be posted at 1:00 PM ET. If it was met with a strong demand, we should see bond prices rise during afternoon trading, possibly improving mortgage rates. However, a weak demand could lead to selling in bonds and an upward revision to mortgage rates.

Helping fuel this morning's stock selling is the beginning of quarterly earnings season. Aft er the markets close today the first of the big name earning reports will be released. Market participants are concerned that we may see weaker than expected results in those corporate earnings. This has led to an interest in bonds as investors prepare for a possible sell-off in stocks in the coming days if it appears that the recession has hit earnings worse than thought. The downside for bonds is that if the quarterly earnings beat expectations, particularly in the big-name companies, stocks will likely rise and bonds will fall. That could lead to upward movement in rates.

Tomorrow afternoon brings us the release of the minutes from the last FOMC meeting. Market participants will be looking at these minutes closely. They give us insight to the Fed's current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release could cause afternoon volatility in the markets tomorrow and possible changes in mortgage pricing.

Posted by Bryce Johnson on April 7th, 2009 9:38 AMPost a Comment (0)

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