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Wednesday January 7th Mortgage Update

January 7th, 2009 9:50 AM

Wednesday's bond market has opened up slightly following strength late yesterday and morning losses in stocks today. The Dow and Nasdaq are both showing weakness with losses of 158 points and 35 points respectively. The bond market is currently up 2/32, but due to late gains in bonds yesterday, we should see an improvement in this morning's mortgage rates of approximately .375 of a discount point.

Helping to boost bond prices late yesterday was the minutes from the last FOMC meeting. They indicated that the Fed feels the economy will continue to weaken with the GDP falling and unemployment rising next year. This eased some concerns in the bond market that the economy may strengthen with another economic stimulus package, making long-term securities such as bonds less attractive to investors.

There is no relevant economic data scheduled for release today and the only slightly relevant news scheduled for release tomorrow are weekly unemployment c laims from the Labor Department. They are expected to show that 550,000 new claims for benefits were filed last week. However, this data is not considered to be of high importance to the markets because it tracks a single week's worth of new claims.

The final report of the week comes Friday morning when the Labor Department will post December's employment figures. The Employment report is considered to be one of the most important monthly releases we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a larger than expected drop in new payrolls and a small increase or even a decline in earnings would be good news for the bond market.

Current forecasts call for a 0.3% increase in the unemployment rate, pushing it to 7.0%. Analysts are expecting to see a drop in payrolls in the neighborhood of 475,000 with earnings rising 0.2%. If we see weaker than expected results, mortgage rates should improve Friday. However, stronger than expected readings will likely push mortgage rates higher.

Posted by Bryce Johnson on January 7th, 2009 9:50 AMPost a Comment (0)

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Thursday January 29th Mortgage Update

January 29th, 2009 11:01 AM

Thursday's bond market has opened in negative territory, continuing yesterday afternoon's selling. The stock markets are also showing losses as they give back a good portion of yesterday's gains. The Dow is currently down 154 points while the Nasdaq has lost 36 points. The bond market is currently down 8/32, which will push this morning's mortgage rates approximately .125 - .250 higher than yesterday's revised rates. This should equate to approximately .500 of a discount point higher than yesterday's morning rates.

This morning's economic data actually gave us favorable results. The Commerce Department said that new orders for big-ticket items, or Durable Goods, fell 2.6% last month. This was a larger than expected decline, but making the news even better was a significant reduction to November's orders that was revised from down 1.0 to down 3.7%. This means that orders for products that are expected to last or more years were lower than expected. This is considered good news for bonds because it indicates a still weakening manufacturing sector.

December's New Home Sales report was also posted this morning, revealing a sharp decline in sales of newly constructed homes. The 14.7% drop in December's sales were the weakest level of sales since records started being kept on them in 1963. This indicates a still softening housing sector that is generally good news for bonds.

There are three reports scheduled for release tomorrow. The first is one of the most important reports that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early tomorrow morning. This data is so important because it is considered to be the best measure of economic growth. The GDP itself is the total sum of all goods and services produced in the United States. Its' results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter's activity, each released approximately one month apart. The first, which usually carries the most volatility, is expected to be a decrease of 5.4%. A weaker reading would be great news for the bond market, but the 5.4% decline would be the biggest quarterly drop in 26 years.

The 4th Quarter Employment Cost Index (ECI) is also scheduled for release early tomorrow morning. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. It usually has more of an effect on the bond market than the stock markets. Current forecasts are showing an increase of 0.7%. A lower than expected reading would be favorable to bonds and mortgage rates, but the GDP reading will be the biggest influence on trading and rates tomorrow morning.

The last report of the week is the revised reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer co nfidence, which is thought to indicate consumer willingness to spend. I don't see this data having much of an impact on the markets or mortgage rates due to the importance of the employment index and GDP figures. It is expected to show no change from the preliminary reading of 61.9.

Posted by Bryce Johnson on January 29th, 2009 11:01 AMPost a Comment (0)

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Wednesday Jauary 28th Mortgage Update

January 28th, 2009 10:23 AM

Wednesday's bond market has opened in positive territory despite early stock gains. The stock markets are currently showing noticeable gains with the Dow up 118 points and the Nasdaq up 41 points. The bond market is currently up 2/32, which with yesterday's late gains should improve this morning's mortgage rates by approximately .250 of a discount point.

There is no relevant economic data being released today. Later this afternoon though we will get the results of the year's first FOMC meeting. It will adjourn at 2:15 PM ET but it is expected to yield no change to short-term interest rates and probably will not heavily influence trading or mortgage rates. Traders will be looking for any indication of the Fed's next move in the post meeting statement. However, I am not expecting major impact on the markets or mortgage rates because the Fed can't lower key rates much more. There is little chance of indicating a possible rate hike in the near future, so I do n't believe that this meeting will have the influence they usually do.

Tomorrow morning brings us the release of December's Durable Goods Orders. This data helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years. The data often is quite volatile from month to month, but is currently expected to show a decline in orders of 2.0%. A larger than expected drop would be good news for bonds and mortgage rates.

December's New Home Sales report, the sister release to Monday's Existing Home Sales, will be posted late tomorrow morning. It is expected to show another decline in sales of new homes, but is not important enough to heavily influence mortgage pricing.

Posted by Bryce Johnson on January 28th, 2009 10:23 AMPost a Comment (0)

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Tuesday January 27th Mortgage Update

January 27th, 2009 11:35 AM

Tuesday's bond market has opened in positive territory after this morning's economic news failed to give any significant surprises. The stock markets are showing gains during early trading with the Dow up 53 points and the Nasdaq up 15 points. The bond market is currently up 6/32, which will likely keep this morning's rates near yesterday's levels.

January's Consumer Confidence Index (CCI) was posted late this morning, revealing a reading of 37.7. This was a lower than forecasts of a 39.0 reading, but offsetting that favorable news was an upward revision of 0.6% to December's confidence reading. This means that consumers were more confident in their own financial situations than previously thought in December, but that sentiment has dropped in January. Lower levels of confidence are considered good news for bonds because it usually means consumers are less apt to make large purchases in the immediate future.

There is no factual economic data sc heduled for release tomorrow, but we will get the results of this year's first FOMC meeting. It will begin tomorrow and adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to short-term interest rate, but as is often the case, traders will be looking for any indication of the Fed's next move. However, I am not expecting this meeting to have a major impact on the markets or mortgage rates because the Fed can't lower key rates much more. 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.

The rest of the week is pretty busy with five relevant reports scheduled to be released over Thursday and Friday. There are two on Thursday's agenda while the most important one comes Friday along with two other moderately important reports. I am expecting to see additional movement in mortgage rates over the next couple of days, so please maintain contact with your mortgage professional.

Posted by Bryce Johnson on January 27th, 2009 11:35 AMPost a Comment (0)

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Friday January 23rd Mortgage Update

January 23rd, 2009 9:58 AM

Friday's bond market has opened in negative territory yet again even with the stock markets mixed. The Dow is currently down 109 points while the Nasdaq is currently up 3 points. The bond market is currently down 17/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

There is no relevant economic news scheduled for release today. If the stock markets remain near current levels, we should see bond prices and mortgage rates likely follow suit. However, a rebound in stocks could lead to higher mortgage rates this afternoon.

Next week brings us the release of several relevant reports for the markets to digest. There are two scheduled to be posted Monday, but neither are considered to be highly important. We will get December's Existing Home Sales and Leading Economic Indicators late Monday morning.

The rest of the week has several important reports scheduled for release in addition t o the first FOMC meeting of the year. I am expecting to see a very active week in the markets and mortgage pricing. Look for more details on next week's events in Sunday's weekly preview.

Posted by Bryce Johnson on January 23rd, 2009 9:58 AMPost a Comment (0)

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Thursday January 22nd Mortgage Update

January 22nd, 2009 1:15 PM

Thursday's bond market has opened in negative territory yet again despite significant stock weakness. The Dow is currently down 220 points while the Nasdaq has lost 45 points and it appears that those losses may widen as the day progresses. The bond market is currently down 19/32 as supply concerns continue to weigh on trading. This will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

There were two pieces of economic data released this morning and both gave us much weaker than expected results. Unfortunately, it appears bond traders are ignoring the data since they are not usually considered to be of high importance. This is despite wide variances between forecasts and actual readings.

The first was December's Housing Starts that showed a decline in new home starts that was quadruple the drop that was expected. This gives further credence to the theory that the housing sector has not bottomed out ye t.

The second piece of data was weekly unemployment figures from the Labor Department. They reported that 589,000 new claims for benefits were field last week, greatly exceeding the 543,000 claims that were forecasted. This points to a still softening labor market and does not give hope of a economic recovery anytime soon without stimulus assistance.

There is no relevant economic data scheduled for release tomorrow, so I would not be surprised to see more weakness in bonds and pressure in mortgage rates. It is becoming clear that the market is quite concerned about the amount of debt that the government will need to sell to meet goals that the new administration is expecting.

Posted by Bryce Johnson on January 22nd, 2009 1:15 PMPost a Comment (0)

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Tuesday January 20th Mortgage Update

January 20th, 2009 11:01 AM

Tuesday's bond market has opened well into negative territory despite early stock losses. The stock markets have also shown a weak opening with the Dow down 130 points and the Nasdaq down 40 points. The bond market is currently down 29/32, which will likely push this morning's mortgage rates higher by approximately .500 of a discount point over Friday's rates. The financial markets were closed yesterday in observance of the Martin Luther King holiday.

Today's weakness in bonds is a result of renewed concern about the supply of government debt that will need to be sold to cover the economic stimulus that President Obama has hinted at. The significant new debt that will be sold makes the current outstanding bonds less attractive to investors, leading to lower bond prices and higher mortgage rates this morning.

This holiday-shortened week brings us the release of only one monthly economic report for the markets to digest and it is not considered to be of high importance. This will likely leave the stock markets to be a major influence on bond trading and mortgage rates a good part of the week. Whether this is good or bad news for bonds depends if stocks rally or fall. If stocks move higher, bonds will likely suffer, leading to higher mortgage rates. However, if stocks show weakness, funds may shift into bonds, driving mortgage rates lower.

Today is Inauguration Day and while I don't believe the ceremony or President Obama's speech will directly affect the markets or mortgage rates, it does bring in the new administration, new policies and new theories. Those changes could come into play in the coming weeks and likely influence mortgage rates. Issues such economic stimulus and recovery along with tax and deficit news could create significant volatility in the markets and therefore mortgage pricing.

The week's only relevant monthly economic data is December's Housing Starts report early Thursday m orning, but I don't see it causing much movement in mortgage rates. This report gives us an indication of housing sector strength and future mortgage credit demand, but it is not considered to be a heavy influence on bond trading.

Posted by Bryce Johnson on January 20th, 2009 11:01 AMPost a Comment (0)

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Friday January 16th Mortgage Update

January 16th, 2009 10:27 AM

Friday's bond market has opened down sharply following the release of mixed economic news and concerns about future sales of related securities. The stock markets are mixed with the Dow up 13 points and the Nasdaq down 3 points. The bond market is currently down 45/32, which will likely push this morning's mortgage rates higher by approximately .375 of a discount point.

There were three economic reports released this morning with the most important coming first. The Labor Department said that the overall reading in December's Consumer Price Index (CPI) fell 0.7% when it was expected to fall 0.9%. However, the more important core data reading was unchanged from November's level when it was forecasted to rise 0.1%. This means that food and energy costs did not fall as much at the consumer level of the economy as was expected. The good news is that other prices did not rise.

December's Industrial Production report was next with a surprising drop in output of 2.0%. This was more than twice the decline that analysts were expecting. This, and a large downward revision to November's output, indicates that output at U.S. factories, mines and utilities are spiraling lower. This is not good news for the economy, but is generally taken as favorable for bonds and mortgage rates.

The final report of the week was January's preliminary reading to the University of Michigan's Index of Consumer Sentiment that showed a higher level of sentiment than was expected. The reading of 61.9 was an increase from December's final reading and stronger than the decline to 59.8 that was expected. This indicates that consumer willingness to spend may be rising, which is not considered to be good news for bonds.

Today's data has not seemed to heavily influence bond trading and mortgage rates this morning. What seems to be driving bonds lower this morning is concern that more economic stimulus and government bailout f unds are going to require a significant increase in the amount of debt the government will need to sell in the near future. That additional supply weakens demand for current securities in the market. Unfortunately, this issue may come to light more often in the coming weeks. Hopefully the concern over corporate earnings and economic weakness will help fuel investor appetite for mortgage related bonds. If not, we may see mortgage rates begin an upward trend.

Next week brings us very little economic data for the markets to digest. There is nothing of interest or relevance Monday that needs to be noted today. It will be a very quite week in terms of economic releases, but as we have seen many times in the past this is not a guarantee that we will have a calm week in mortgage rates.

Posted by Bryce Johnson on January 16th, 2009 10:27 AMPost a Comment (0)

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Thursday January 15th Mortgage Update

January 15th, 2009 9:56 AM

Thursday's bond market has opened fairly flat despite another round of sizable stock losses. The stock markets are continuing yesterday's selling with the Dow down 171 points and the Nasdaq down 25 points. The bond market is currently down 2/32, which will likely push this morning's mortgage rates higher by approximately .125 - .250 of a discount point.

The Labor Department gave us two pieces of economic news this morning. The first was the Producer Price Index (PPI) for December that revealed a decline of 1.9% in the overall reading. This matched forecasts, but the more important core reading that excludes more volatile food and energy prices rose 0.2% when it was expected to rise 0.1%. This indicates that prices at the producer level of the economy that do not include food or energy rose more than expected. That basically is bad news for the bond market because rising prices raises inflation concerns and makes long-term securities such as mortgage-rela ted bonds less attractive to investors. However, tomorrow's CPI reading that measures inflation at the consumer level of the economy is considered to be of more importance to the markets.

The second Labor Department release today was last week's initial unemployment claims filings. They reported that 524,000 new claims for benefits were filed last week, exceeding forecasts of 503,000. But since this data is a weekly reading, its results usually do not have much of an impact on the markets or mortgage pricing.

There are three relevant reports on the agenda for tomorrow. 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 fall 1.0% while the core data is expected to increase 0.1%. Weaker than expected readings should lead to bond improvements and lower mortgage rates tomorrow since this is the most important of the three.

December's Industrial Production report is the second report to be posted tomorrow. 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 a decline of 0.8% from November's production. A larger than expected drop would be good news and should lead to lower mortgage rates Friday as long as the CPI doesn't reveal any 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 60.0 that is expected. However, it is the week's least important of the five releases and probably will have little im pact on tomorrow's mortgage rates due to the importance of the CPI and production reports.

Posted by Bryce Johnson on January 15th, 2009 9:56 AMPost a Comment (0)

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Monday January 12th Mortgage Update

January 12th, 2009 9:45 AM

Monday's bond market opened in negative territory but has since rebounded into positive ground. The stock markets are showing losses with the Dow down 85 points and the Nasdaq down 26 points. The bond market is currently up 10/32, but we will likely still see a small increase in this morning's mortgage pricing due to weakness in mortgage bonds late Friday and early this morning.

There is no relevant economic news scheduled for release today or tomorrow. Look for the stock markets to influence bond trading and therefore mortgage rates until we get to the relevant data later in the week. If we continue to see stock weakness, bonds may thrive, pushing mortgage rates slightly lower.

The rest of the week brings us the release of five pieces of economic data to digest. The first is December's Retail Sales data early Wednesday morning. This Commerce Department report 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 a decline in sales of approximately 1.1%. A larger drop would be good news for bonds and mortgage rates.

Overall, Wednesday, Thursday or Friday may end up being the most important day of the week. The single most important report is the CPI, but the Retail Sales and PPI reports on Wednesday and Thursday respectively, are also considered to be of high importance and can heavily influence the markets. Therefore, I strongly recommend maintaining contact with your mortgage professional, especially the latter part of the week.

Posted by Bryce Johnson on January 12th, 2009 9:45 AMPost a Comment (0)

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Monday Jan 5th Mortgage Update

January 5th, 2009 10:13 AM

Monday's bond market has opened well into negative territory despite early stock losses. The stock markets are giving back some of Friday's new year gains with the Dow down 68 points and the Nasdaq down 7 points. The bond market is currently down 28/32, which will likely push this morning's mortgage rates higher by approximately .375 of a discount point.

There is no relevant economic news scheduled for release today. This morning's bond weakness can be attributed to economic stimulus news that has traders concerned. The concern comes from two angles with the first being that an economic recovery will likely be bad news for bonds as stocks will likely become the investment of choice. This could lead to significant selling that would push yields and mortgage rates higher.

The second concern is that any stimulus package will require a large amount of new debt to be issued by the government. The additional supply weakens demand for existing debt, which in turns drives bond prices lower and their yields higher. Even though hard figures or estimates have not been released, traders are assuming that it will create an unfavorable situation for current bonds and Treasury notes.

The rest of the week brings us the release of only two monthly reports that are relevant to the bond market and mortgage rates. However, in addition to those two reports, we also will see the minutes from the last FOMC meeting and a couple of Treasury auctions that may influence bond trading and possibly mortgage rates.

The first of the two reports will be posted late tomorrow morning when the Commerce Department releases November's Factory Orders data. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted late last month, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see a decline of 2.6% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates.

Also tomorrow will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed's thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed's future moves toward interest rates, even though the Fed appears to be running out of options. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn't affect the markets or mortgage rates until afternoon hours.
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There are two Treasury auctions that are worth watching also. The 10-year TIPS Notes (inflation-indexed securities) will be auctioned tomorrow while the traditional 10-year Treasury Note will be sold Thursday. If investor demand for these sales is strong, we should see bonds strengthen during afternoon trading those days and possibly improve mortgage rates slightly. However, a lackluster interest in the sales could cause bond prices to fall and mortgage rates to move higher following the announcement of the sale results.

Overall, the key data of the week will be Friday's Employment report, but look for tomorrow to also be important with the economic data, FOMC minutes and one of the two more important Treasury auctions. If they give us favorable results, mortgage rates will likely move lower for the week. But if not, we will probably see mortgage rates move higher again

Posted by Bryce Johnson on January 5th, 2009 10:13 AMPost a Comment (0)

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