Mortgage Rates
If the monthly employment data ever came close to forecasts the world would stop rotating. Jan unemployment rate fell to 8.3% frm 8.5% in Dec and expected unchanged in Jan. Non-farm jobs increased 243K, forecasts +135K; non-farm private jobs +257K, forecasts +170K. Nov non-farm jobs were revised from +100K to +157K, factory jobs +50K and service producing jobs +162K. As for the decline in the unemployment rate, the implication is that many more unemployed have stopped looking for a job. The reaction in financial markets was swift; the 10 yr note yield increased 9 basis points to 1.90%, MBS prices declined 8/32 (.25 bp) as of 9:00 am. Stock indexes rallied, up 110 points on the DJIA and rallied Europe’s markets. The 243,000 increase in payrolls was the most since April and exceeded all forecasts in a Bloomberg News survey.
A week ago at the conclusion of the FOMC meeting Bernanke said unemployment was not likely to decline as the economy was faltering. The Fed was so certain about the sluggish outlook it announced it would keep rates low until the end of 2014. The Fed isn’t likely to back off their outlook on one employment report but trading this morning in the FF futures market is marked to the Fed increasing the FF rate at the end of 2013. Markets now consider whether the Fed will increase buying of Treasury’s and MBSs. The Fed purchased $2.3 trillion of debt in two rounds of quantitative easing; at the conclusion of the Jan 25th FOMC meeting Bernanke said he was considering another round of QE if the economy isn’t recovering. After the employment report another easing move doesn’t seem likely now.
You can skip this paragraph if you have read it before. Greek officials are out this morning saying a deal is almost complete with investors to fend off defaults by getting another infusion of cash. For all of three weeks the deal has “almost” been completed. Markets have become numb to the continual news that has had no substance; everyone now is from Missouri.
At 9:30 the DJIA opened +110, the 10 yr note -27/32 at 1.92% +10 bp and MBS prices for 30 yr mortgages -12/32 (.37 bp). Technically, the 10 yr has some support at 1.93%, the high so far today.
At 10:00 the Jan ISM services sector index, expected at 53.0 frm 52.6, as released the index jumped to 56.8; every component was better. New orders at 59.4 frm 54.6, employment at 57.4 frm 49.8 and prices pd at 63.5 frm 62.0. The 10 yr and mortgages saw more selling while the DJIA popped up more.
Also at 10:00 Dec factory orders, thought to be +1.5%, increased 1.1% but Nov was revised to +2.2% frm +1.8%.
We have been noting that the 10 yr note had technical resistance at 1.80%, the low yield back in mid-Dec; it failed so far. The low on the 10 was 1.81%, triggered by the Jan employment this morning the 10 yr yield has moved to 1.93% up 11 basis points this morning. On numerous occasions I have commented that the 10 yr has a strong recent history that it can’t sustain long under 2.00% and moves from lows at 1.80% have all been swift. The note has technical support at 1.93%.
The data this morning; employment and the ISM services, were surprisingly stronger than markets were expecting. The 10 yr not is now likely to increase to test 2.00%. Better economic outlook today with the data and no safety moves to treasuries over Europe at the moment.
Friday, February 3, 2012
Thursday, February 2, 2012
Mortgage Rates
Generally a quiet open this morning with treasuries fractionally weaker but MBS prices with a minor improvement. At 9:00 the 10 yr -1/32 at 1.84% and MBSs +2/32 (.06 bp). 8:30 data; weekly jobless claims were expected to increase a few thousand, as released claims fell 12K to 367K; continuing claims at 3.437 mil frm 3.567 mil last week. Continuing claims the lowest since Sept 6th 2008. Q4 non-farm productivity was right on +0.7%, Q3 productivity was revised from +2.3% to +1.9%. The dip in productivity in Q4 implies higher prices to some extent, however that isn’t likely with the US economy soft. Also at 8:30 Q4 unit labor costs were expected +0.7% but increased 1.2%; again implying higher end costs for some goods; also again, there is no pricing power in the economy now.
At 9:30 the DJIA opened +11, the 10 yr -2/32 at 1.84% +0.5% and MBSs +2/32 (.06 bp).
Still waiting; the world is waiting patiently for how Greece will dodge the default bullet. Greece and its creditors are locked in talks over a debt-swap deal for the nation. Bondholders last week lowered their demands for an average coupon on the new debt they would get after European officials demanded they take steeper losses. The ECB is likely to refuse to show its hand on how it will help cut Greece’s debt burden until the deal is reached. Two weeks ago Greece officials were saying a deal would be finalized quickly, now as it continues to drag on with nothing resolved we have to question just how close a deal is. Close is good in horseshoes but is a little tenuous when nothing happens day in and day out.
Earlier this morning the Challenger jobs report on layoffs was worse than expected. Layoff announcements rose to 53,486 in January from 41,785 in December in what is not a good signal for tomorrow's employment report. At 12,426, announcements were heaviest by far in the retail sector which the report stresses is probably not a seasonal effect as post-holiday layoffs of temporary employees are not usually announced. Remember this report is a count of announcements only. Challenger suggests that the retail layoffs reflect restructurings and/or store closures or other cost-cutting measures in the retail sector. (Bloomberg)
The remainder of the day is likely to be quiet with Jan employment out tomorrow morning. The report is expected to show non-farm jobs increased 135K overall; non-farm private jobs are seen at +170K. The unemployment rate is expected unchanged at 8.5%. The real unemployment rate is about 16.0% if those that have stopped looking are added back. Usually the report sets off a lot of volatility as it rarely matches estimates.
Fed chief Bernanke is about to testify in Congress; grilling’s frm Congress are commonplace, likely nothing will emerge that will move markets in any substantive way.
Generally a quiet open this morning with treasuries fractionally weaker but MBS prices with a minor improvement. At 9:00 the 10 yr -1/32 at 1.84% and MBSs +2/32 (.06 bp). 8:30 data; weekly jobless claims were expected to increase a few thousand, as released claims fell 12K to 367K; continuing claims at 3.437 mil frm 3.567 mil last week. Continuing claims the lowest since Sept 6th 2008. Q4 non-farm productivity was right on +0.7%, Q3 productivity was revised from +2.3% to +1.9%. The dip in productivity in Q4 implies higher prices to some extent, however that isn’t likely with the US economy soft. Also at 8:30 Q4 unit labor costs were expected +0.7% but increased 1.2%; again implying higher end costs for some goods; also again, there is no pricing power in the economy now.
At 9:30 the DJIA opened +11, the 10 yr -2/32 at 1.84% +0.5% and MBSs +2/32 (.06 bp).
Still waiting; the world is waiting patiently for how Greece will dodge the default bullet. Greece and its creditors are locked in talks over a debt-swap deal for the nation. Bondholders last week lowered their demands for an average coupon on the new debt they would get after European officials demanded they take steeper losses. The ECB is likely to refuse to show its hand on how it will help cut Greece’s debt burden until the deal is reached. Two weeks ago Greece officials were saying a deal would be finalized quickly, now as it continues to drag on with nothing resolved we have to question just how close a deal is. Close is good in horseshoes but is a little tenuous when nothing happens day in and day out.
Earlier this morning the Challenger jobs report on layoffs was worse than expected. Layoff announcements rose to 53,486 in January from 41,785 in December in what is not a good signal for tomorrow's employment report. At 12,426, announcements were heaviest by far in the retail sector which the report stresses is probably not a seasonal effect as post-holiday layoffs of temporary employees are not usually announced. Remember this report is a count of announcements only. Challenger suggests that the retail layoffs reflect restructurings and/or store closures or other cost-cutting measures in the retail sector. (Bloomberg)
The remainder of the day is likely to be quiet with Jan employment out tomorrow morning. The report is expected to show non-farm jobs increased 135K overall; non-farm private jobs are seen at +170K. The unemployment rate is expected unchanged at 8.5%. The real unemployment rate is about 16.0% if those that have stopped looking are added back. Usually the report sets off a lot of volatility as it rarely matches estimates.
Fed chief Bernanke is about to testify in Congress; grilling’s frm Congress are commonplace, likely nothing will emerge that will move markets in any substantive way.
Wednesday, February 1, 2012
Mortgage Rates
At 8:15 ADP reported its private jobs data for Jan; forecasts were for an increase of 200K jobs, as reported +170K. ADP revised Dec job growth from 325K to 292K. Prior to the rep[ort the 10 yr note traded lower by 8/32, the reaction to the weaker report briefly back to unchanged but by 9:00 back to -6/32 with MBS prices at 9:00 -1/32 (.03 bp). US equity market trading prior to the open at 9:30 had indexes trading higher in line with better markets in Europe. On Friday A the BLS report is forecast to show the U.S. added 145,000 jobs, according to 81 economists in a separate survey, compared with 200,000 the previous month. The unemployment rate is forecast to remain steady 8.5%.
China reported an unexpected increase in manufacturing today; that spurred rallies in Europe’s markets. Borrowing costs in Italy fell slightly on sales to the lowest since October as stock gains spurred demand for riskier assets. Portugal’s notes rose as borrowing costs declined at bill sales. The German 10-year yield rose two basis points, or 0.02 percentage point, to 1.81% at 1:52 p.m. London time after falling to 1.78% yesterday, the lowest since Jan. 18, and the same yield as US 10 yr notes.
At 9:30 the DJIA opened +75, the 10 yr note -10/32 back to 1.83% +3 bp, and MBS prices -3/32 (.09 bp).
Weekly MBA mortgage applications for last week out at 7:00 this morning. Mortgage applications decreased 2.9% from one week earlier, for the week ending January 27, 2012. The Refinance Index decreased 3.6% from the previous week. The seasonally adjusted Purchase Index decreased 1.7% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 4.11 percent. The four week moving average is up 2.48% for the seasonally adjusted Purchase Index, while this average is up 4.22 % for the Refinance Index. The refinance share of mortgage activity decreased to 80.0% of total applications from 81.3% the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.09% from 4.11%, with points decreasing to 0.41 from 0.47 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.33% from 4.39%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.96% from 3.97%, with points increasing to 0.61 from 0.57 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.36% from 3.40%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.94% from 2.91%, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80% loans.
Next up, at 10:00, Jan ISM manufacturing index, expected at 54.5 frm 53.9; as reported 54.1 frm a revised 53.1 in Dec; new orders index 57.6 frm 54.8. employment at 54.3 frm 54.8 and prices pd at 55.5 frm 47.5. Not much of an initial reaction in either stock indexes of the bond and mortgage markets.
Finally today, Dec construction spending was expected up 0.4%, as reported +1.5% but Nov was revised lower to +0.4% frm +1.2% originally reported.
Treasury announced next week’s quarterly refunding details this morning; a total of $72B, $3B more than last month al on the 30 yr bond.
Technically, the 10 yr has once again found resistance at 1.80% for the moment. The overall low yield was 1.70% back on Sept 23, 2011. At the present level on the 10 yr and MBSs are looking a little overbought based on momentum oscillators. If the bond market has run out of fuel now, technically we would continue a bullish outlook as long as the 10 yr doesn’t move above 1.93%. MBSs have support at 103.08 bp, presently at 103.25 bp
At 8:15 ADP reported its private jobs data for Jan; forecasts were for an increase of 200K jobs, as reported +170K. ADP revised Dec job growth from 325K to 292K. Prior to the rep[ort the 10 yr note traded lower by 8/32, the reaction to the weaker report briefly back to unchanged but by 9:00 back to -6/32 with MBS prices at 9:00 -1/32 (.03 bp). US equity market trading prior to the open at 9:30 had indexes trading higher in line with better markets in Europe. On Friday A the BLS report is forecast to show the U.S. added 145,000 jobs, according to 81 economists in a separate survey, compared with 200,000 the previous month. The unemployment rate is forecast to remain steady 8.5%.
China reported an unexpected increase in manufacturing today; that spurred rallies in Europe’s markets. Borrowing costs in Italy fell slightly on sales to the lowest since October as stock gains spurred demand for riskier assets. Portugal’s notes rose as borrowing costs declined at bill sales. The German 10-year yield rose two basis points, or 0.02 percentage point, to 1.81% at 1:52 p.m. London time after falling to 1.78% yesterday, the lowest since Jan. 18, and the same yield as US 10 yr notes.
At 9:30 the DJIA opened +75, the 10 yr note -10/32 back to 1.83% +3 bp, and MBS prices -3/32 (.09 bp).
Weekly MBA mortgage applications for last week out at 7:00 this morning. Mortgage applications decreased 2.9% from one week earlier, for the week ending January 27, 2012. The Refinance Index decreased 3.6% from the previous week. The seasonally adjusted Purchase Index decreased 1.7% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 4.11 percent. The four week moving average is up 2.48% for the seasonally adjusted Purchase Index, while this average is up 4.22 % for the Refinance Index. The refinance share of mortgage activity decreased to 80.0% of total applications from 81.3% the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.09% from 4.11%, with points decreasing to 0.41 from 0.47 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.33% from 4.39%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.96% from 3.97%, with points increasing to 0.61 from 0.57 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.36% from 3.40%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.94% from 2.91%, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80% loans.
Next up, at 10:00, Jan ISM manufacturing index, expected at 54.5 frm 53.9; as reported 54.1 frm a revised 53.1 in Dec; new orders index 57.6 frm 54.8. employment at 54.3 frm 54.8 and prices pd at 55.5 frm 47.5. Not much of an initial reaction in either stock indexes of the bond and mortgage markets.
Finally today, Dec construction spending was expected up 0.4%, as reported +1.5% but Nov was revised lower to +0.4% frm +1.2% originally reported.
Treasury announced next week’s quarterly refunding details this morning; a total of $72B, $3B more than last month al on the 30 yr bond.
Technically, the 10 yr has once again found resistance at 1.80% for the moment. The overall low yield was 1.70% back on Sept 23, 2011. At the present level on the 10 yr and MBSs are looking a little overbought based on momentum oscillators. If the bond market has run out of fuel now, technically we would continue a bullish outlook as long as the 10 yr doesn’t move above 1.93%. MBSs have support at 103.08 bp, presently at 103.25 bp
Tuesday, January 31, 2012
Watch, listen an learn from home! First Time Home Buyer and Down Payment Assistance Seminar.
http://ping.fm/OB10l
http://ping.fm/OB10l
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