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Thursday, May 3, 2012
Mortgage Rates
A little weaker in the bond market early this morning with weekly jobless claims declining more than expected; forecasts were for claims to fall about 13K. As reported weekly claims declined 27K to 365K after last week’s claims were revised up by 4K from what was reported. Continuing claims fell a little at 3.276 mil frm 3.329 mil; the four week average increased to 388,50 frm 382,750 as claims increased the past few weeks. The decline in claims makes it more likely that the surge over the past three weeks was caused by the timing of the Easter holiday rather than a deterioration in employment. On the release the 10 yr note lost 7/32 to 1.95% +2 bp, mortgage prices opened unchanged then dropped 3/32 (.09 bp) at 8:45.
Q1 productivity was -0.5% as expected and Q1 unit labor costs were up 2.0% less than +2.8% expected. The productivity of U.S. workers fell indicating businesses are reaching the limit of how much efficiency they can wring from the workforce.
At 9:30 the DJIA opened fractionally higher, up 4 points even with Europe’s markets rallying and the better claims report. The 10 yr at 9:30 =6/32 at 1.95% +2 bp and MBS 30 yr prices -3/32 (.09 bp).
Nothing significant from the ECB meeting; European Central Bank President Draghi said policy makers didn’t discuss cutting interest rates today, and the economic outlook has become more uncertain. He spoke at a press conference after the ECB kept its main rate at 1.0%. Draghi is taking lessons from Bernanke on central bank speak; saying the economic outlook in Europe is uncertain suggests he has been sleeping recently, the outlook for Europe’s economy is clear, it is in recession and likely to decline further. Draghi said at a press conference in Barcelona today that there has been “significant progress” on the fiscal front. ?
At 10:00 the very key ISM services sector index, expected at 55.5 frm 56.0, immediately prior to the data the 10 yr, mortgages and the stock indexes traded unchanged. The index was weaker at 53.5; new orders at 53.6 frm 58.8, employment 54.2 frm 56.7 and prices pd at 53.6 frm 63.9. The immediate reaction to the weak report (the lowest index this year) pushed stock indexes down, the 10 yr came back to unchanged and MBS prices -3/32 (.09 bp) at 9:30 climbed to +2/32 (.06 bp), increasing .15 bp frm where morning prices were trading.
Tomorrow the April employment data is likely to keep UIS financial markets in check with not much change by the end of the day. Positioning ahead of employment data is a risky situation given the volatility and many times the data is well off what was thought. Traders usually don’t initiate new trades ahead of employment and investors normally don’t buy or sell much the day before the data.
The 10 yr note still unable to break 1.90% but not looking like rates want to increase. MBS prices also holding under their resistance at 104-3/32 (104.09 bp). (currently at 103-29/32, (103.90 bp)
A little weaker in the bond market early this morning with weekly jobless claims declining more than expected; forecasts were for claims to fall about 13K. As reported weekly claims declined 27K to 365K after last week’s claims were revised up by 4K from what was reported. Continuing claims fell a little at 3.276 mil frm 3.329 mil; the four week average increased to 388,50 frm 382,750 as claims increased the past few weeks. The decline in claims makes it more likely that the surge over the past three weeks was caused by the timing of the Easter holiday rather than a deterioration in employment. On the release the 10 yr note lost 7/32 to 1.95% +2 bp, mortgage prices opened unchanged then dropped 3/32 (.09 bp) at 8:45.
Q1 productivity was -0.5% as expected and Q1 unit labor costs were up 2.0% less than +2.8% expected. The productivity of U.S. workers fell indicating businesses are reaching the limit of how much efficiency they can wring from the workforce.
At 9:30 the DJIA opened fractionally higher, up 4 points even with Europe’s markets rallying and the better claims report. The 10 yr at 9:30 =6/32 at 1.95% +2 bp and MBS 30 yr prices -3/32 (.09 bp).
Nothing significant from the ECB meeting; European Central Bank President Draghi said policy makers didn’t discuss cutting interest rates today, and the economic outlook has become more uncertain. He spoke at a press conference after the ECB kept its main rate at 1.0%. Draghi is taking lessons from Bernanke on central bank speak; saying the economic outlook in Europe is uncertain suggests he has been sleeping recently, the outlook for Europe’s economy is clear, it is in recession and likely to decline further. Draghi said at a press conference in Barcelona today that there has been “significant progress” on the fiscal front. ?
At 10:00 the very key ISM services sector index, expected at 55.5 frm 56.0, immediately prior to the data the 10 yr, mortgages and the stock indexes traded unchanged. The index was weaker at 53.5; new orders at 53.6 frm 58.8, employment 54.2 frm 56.7 and prices pd at 53.6 frm 63.9. The immediate reaction to the weak report (the lowest index this year) pushed stock indexes down, the 10 yr came back to unchanged and MBS prices -3/32 (.09 bp) at 9:30 climbed to +2/32 (.06 bp), increasing .15 bp frm where morning prices were trading.
Tomorrow the April employment data is likely to keep UIS financial markets in check with not much change by the end of the day. Positioning ahead of employment data is a risky situation given the volatility and many times the data is well off what was thought. Traders usually don’t initiate new trades ahead of employment and investors normally don’t buy or sell much the day before the data.
The 10 yr note still unable to break 1.90% but not looking like rates want to increase. MBS prices also holding under their resistance at 104-3/32 (104.09 bp). (currently at 103-29/32, (103.90 bp)
Wednesday, May 2, 2012
Mortgage Rates
April ADP non-farm private jobs estimated at +186K yesterday, as reported at 8:15 jobs increased just 119K. Another huge miss by analysts and those that make those forecasts. The reaction is as you would expect, the 10 yr note rallying taking the interest rate to 1.90% at 9:00 this morning and mortgage prices +4/32 (.12 bp). Stock indexes, also as you would expect, down point to a weaker open at 9:30. According to ADP small businesses added 58K, medium size businesses +57K and large businesses -4K (small is 1 to 49 employees, medium 50 to 499K and large over than 499). Goods producing jobs declined 4K, services +123K , manufacturing -5K.
Prior to the ADP data the consensus estimates for Friday’s non-farm private jobs was +178K with a broad range as usual. Now what will estimates be for Friday’s BLS employment report? Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in October, when it overstated the gain in jobs by 6,000. The estimate was least accurate in December, when it overestimated the employment gain by 113,000.
The jobless rate in the 17-nation euro currency area increased to 10.9% in March from 10.8% in February, the European Union statistics office in Luxembourg said today. That’s the highest since April 1997. Separate reports showed euro-area manufacturing contracted more than initially estimated in April and unemployment in Germany, the region’s largest economy, unexpectedly increased. German unemployment unexpectedly rose in April as the debt crisis in the euro area constrained growth and hiring in Europe’s biggest economy. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Federal Labor Agency in Nuremberg said today. The German jobless rate was unchanged at 6.8%, still a two-decade low, after the agency revised up figures for February and March.
Europe continues to drag the world down economically; the austerity plans jammed down the throats of countries with sovereign debt problems is back-firing in terms of economic health. Before it is over we expect huge push-backs from citizens as wages and jobs are falling like leaves in October. Germany continues to control the situation for now, protecting its wealth and not willing to allow itself to be dragged into the problem to deeply. Germany is the key to re-structuring what was said to be cast in stone a few months ago. It isn’t working though, and in the end the EU, ECB and IMF will have to re-think the debt issues otherwise Europe is headed to depression and likely riots in the streets across the region.
The MBA applications report. The Market Composite Index increased 0.1% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 0.7% from the previous week. The seasonally adjusted Purchase Index increased 2.9% from one week earlier. The refinance share of mortgage activity decreased to 72.6% of total applications from 73.4% the previous week. The government share of purchase applications remained steady at 37.0%. The government share of purchase applications over the last three weeks has been at the lowest level since 2009. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.05% from 4.04%, with points increasing to 0.44 from 0.40 (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) increased to 4.32% from 4.27%, with points decreasing to 0.38 from 0.44 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.80%, the lowest rate in the history of the survey, from 3.81%, with points decreasing to 0.50 from 0.52 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.31%, the lowest rate in the history of the survey, from 3.32%, with points decreasing to 0.41 from 0.41 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened -56, the US 10 yr at 1.91% and mortgage prices +5/32 (.15 bp).
At 10:00 March factory orders were expected to have declined 1.8% after increasing 1.3% in February. As released orders
The bellwether 10 yr still testing 1.90%, unable to break it so far. If the 10 does decline below 1.90% on strong volume, and is able to hold below for three days (something it has been unable to do since the recent rate declines that began last September), the next technical resistance is at 1.80%, then 1.70% the absolute low seen on Sept 23rd.
April ADP non-farm private jobs estimated at +186K yesterday, as reported at 8:15 jobs increased just 119K. Another huge miss by analysts and those that make those forecasts. The reaction is as you would expect, the 10 yr note rallying taking the interest rate to 1.90% at 9:00 this morning and mortgage prices +4/32 (.12 bp). Stock indexes, also as you would expect, down point to a weaker open at 9:30. According to ADP small businesses added 58K, medium size businesses +57K and large businesses -4K (small is 1 to 49 employees, medium 50 to 499K and large over than 499). Goods producing jobs declined 4K, services +123K , manufacturing -5K.
Prior to the ADP data the consensus estimates for Friday’s non-farm private jobs was +178K with a broad range as usual. Now what will estimates be for Friday’s BLS employment report? Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in October, when it overstated the gain in jobs by 6,000. The estimate was least accurate in December, when it overestimated the employment gain by 113,000.
The jobless rate in the 17-nation euro currency area increased to 10.9% in March from 10.8% in February, the European Union statistics office in Luxembourg said today. That’s the highest since April 1997. Separate reports showed euro-area manufacturing contracted more than initially estimated in April and unemployment in Germany, the region’s largest economy, unexpectedly increased. German unemployment unexpectedly rose in April as the debt crisis in the euro area constrained growth and hiring in Europe’s biggest economy. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Federal Labor Agency in Nuremberg said today. The German jobless rate was unchanged at 6.8%, still a two-decade low, after the agency revised up figures for February and March.
Europe continues to drag the world down economically; the austerity plans jammed down the throats of countries with sovereign debt problems is back-firing in terms of economic health. Before it is over we expect huge push-backs from citizens as wages and jobs are falling like leaves in October. Germany continues to control the situation for now, protecting its wealth and not willing to allow itself to be dragged into the problem to deeply. Germany is the key to re-structuring what was said to be cast in stone a few months ago. It isn’t working though, and in the end the EU, ECB and IMF will have to re-think the debt issues otherwise Europe is headed to depression and likely riots in the streets across the region.
The MBA applications report. The Market Composite Index increased 0.1% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 0.7% from the previous week. The seasonally adjusted Purchase Index increased 2.9% from one week earlier. The refinance share of mortgage activity decreased to 72.6% of total applications from 73.4% the previous week. The government share of purchase applications remained steady at 37.0%. The government share of purchase applications over the last three weeks has been at the lowest level since 2009. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.05% from 4.04%, with points increasing to 0.44 from 0.40 (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) increased to 4.32% from 4.27%, with points decreasing to 0.38 from 0.44 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.80%, the lowest rate in the history of the survey, from 3.81%, with points decreasing to 0.50 from 0.52 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.31%, the lowest rate in the history of the survey, from 3.32%, with points decreasing to 0.41 from 0.41 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened -56, the US 10 yr at 1.91% and mortgage prices +5/32 (.15 bp).
At 10:00 March factory orders were expected to have declined 1.8% after increasing 1.3% in February. As released orders
The bellwether 10 yr still testing 1.90%, unable to break it so far. If the 10 does decline below 1.90% on strong volume, and is able to hold below for three days (something it has been unable to do since the recent rate declines that began last September), the next technical resistance is at 1.80%, then 1.70% the absolute low seen on Sept 23rd.
Tuesday, May 1, 2012
Mortgage Rates
Very early this morning the 10 yr traded unchanged but as the clock ticked some buying in the bond and mortgage markets with the stock indexes holding steady. At 9:00 the 10 yr at 1.90% +4/32, mortgage prices +3/32 (.09 bp). 1.90% on the 10 yr represents resistance based on past performance; the 10 has found difficulty at that level since last October. Only 10 days since then has the 10 traded below 1.90%.
For the first time since the start of 2008, bonds were the only investments to provide positive returns amid renewed concern the global economy is slowing and as widening deficits in Europe threaten contagion. Investors sought the perceived safety of fixed-income investments after U.S. job growth in March failed to meet economists’ forecasts and amid growing concerns that European leaders will fail to manage their debt loads. Austerity forced on governments in Europe is deepening the recession in the region. It forced Italy to delay its goal of balancing the budget by one year to 2014, joining Spain in missing fiscal targets amid a worsening recession. The IMF said in a recent report that the world economy will expand 3.5% this year, down from 3.9% in 2011, as growth in Europe shrinks 0.3%.
Everything looks positive for the US interest rate markets at the moment but most economists surveyed are forecasting the 10 yr note yield will be at 2.25% by the end of June; if they are correct, which can be debated, the mortgage market is at or close to its best levels for months to follow. Regardless of the forecasts, the present level of interest rates remains the best in 60 years. We hear a lot of talk that potential buyers of homes or those wanting to re-finance are waiting for rates to fall more. While anything in this climate is possible, the likelihood of substantially lower mortgage rates is remote. Mainly because at some point at these levels investors will realize that investing in very low interest rates is difficult to justify. The support in bonds now is two-fold; safety as Europe could blow up at any time and what looks like a decline in stocks is increasingly likely.
At 9:30 the DJIA opened generally unchanged from yesterday’s close ahead of the key ISM data and construction spending. The 10 yr +3/32 1.91% -.5 bp; mortgage prices +2/32 (.06 bp).
At 10:00 the April ISM manufacturing index was expected at 53.0 frm 53.4. The index jumped to 54.8 countering the various regional data frm Fed regions; employment increased to 57.3 frm 56.1, new orders increased to 58.2 frm 54.5 and prices pd was unchanged at 61.0. A minute before the 10:00 release the 10 yr note traded briefly at 1.90%, at 10:05 at 1.93% down 3/32 with mortgage prices -2/32 (.09 bp) and down 4/32 (.12 bp) frm 9:30. The key stock indexes were flat prior to the report, now up and improving. March construction spending didn’t meet forecasts, up 0.1% against estimates of +0.5%; residential construction up 0.7% after declining 2.2% in Feb. Government spending was weaker dragging spending lower, construction spending.
Earlier this morning two retail sales reports; Redbook's year-on-year rate is showing its steepest slowdown since early in the year, at plus 2.9% in the April 28 week with the four-week average down four tenths to plus 3.2%. But the downdraft reflects comparison distortions tied to the Easter shift, and a look at March and April together comes out to plus 3.4% which shows acceleration compared to plus 2.9% in February and plus 2.7% in January. The second report focuses on weather; cool temperatures and heavy weather through much of the country cut into store sales during the April 28 week, according to ICSC-Goldman whose same-store index slipped 0.3% in the week. Yet ICSC-Goldman's year-on-year rate remains firm, up six tenths to plus 4.2%. The four-week average is at plus 3.9% for the best rate since early in the year. Consumers still out there spending, although not heavily but with gasoline prices high we see the two reports as decent news.
April auto and truck sales are out through the day; expectations are for sales to have been up, some say as much as 10%.
So far this morning the 10 yr tested 1.90% and again failed to break it. At 10:10 1.94% +2 bp. The remainder of the day will be directed by how the stock market goes. Up a little on the 10:00 data but stalling out for the moment.
Very early this morning the 10 yr traded unchanged but as the clock ticked some buying in the bond and mortgage markets with the stock indexes holding steady. At 9:00 the 10 yr at 1.90% +4/32, mortgage prices +3/32 (.09 bp). 1.90% on the 10 yr represents resistance based on past performance; the 10 has found difficulty at that level since last October. Only 10 days since then has the 10 traded below 1.90%.
For the first time since the start of 2008, bonds were the only investments to provide positive returns amid renewed concern the global economy is slowing and as widening deficits in Europe threaten contagion. Investors sought the perceived safety of fixed-income investments after U.S. job growth in March failed to meet economists’ forecasts and amid growing concerns that European leaders will fail to manage their debt loads. Austerity forced on governments in Europe is deepening the recession in the region. It forced Italy to delay its goal of balancing the budget by one year to 2014, joining Spain in missing fiscal targets amid a worsening recession. The IMF said in a recent report that the world economy will expand 3.5% this year, down from 3.9% in 2011, as growth in Europe shrinks 0.3%.
Everything looks positive for the US interest rate markets at the moment but most economists surveyed are forecasting the 10 yr note yield will be at 2.25% by the end of June; if they are correct, which can be debated, the mortgage market is at or close to its best levels for months to follow. Regardless of the forecasts, the present level of interest rates remains the best in 60 years. We hear a lot of talk that potential buyers of homes or those wanting to re-finance are waiting for rates to fall more. While anything in this climate is possible, the likelihood of substantially lower mortgage rates is remote. Mainly because at some point at these levels investors will realize that investing in very low interest rates is difficult to justify. The support in bonds now is two-fold; safety as Europe could blow up at any time and what looks like a decline in stocks is increasingly likely.
At 9:30 the DJIA opened generally unchanged from yesterday’s close ahead of the key ISM data and construction spending. The 10 yr +3/32 1.91% -.5 bp; mortgage prices +2/32 (.06 bp).
At 10:00 the April ISM manufacturing index was expected at 53.0 frm 53.4. The index jumped to 54.8 countering the various regional data frm Fed regions; employment increased to 57.3 frm 56.1, new orders increased to 58.2 frm 54.5 and prices pd was unchanged at 61.0. A minute before the 10:00 release the 10 yr note traded briefly at 1.90%, at 10:05 at 1.93% down 3/32 with mortgage prices -2/32 (.09 bp) and down 4/32 (.12 bp) frm 9:30. The key stock indexes were flat prior to the report, now up and improving. March construction spending didn’t meet forecasts, up 0.1% against estimates of +0.5%; residential construction up 0.7% after declining 2.2% in Feb. Government spending was weaker dragging spending lower, construction spending.
Earlier this morning two retail sales reports; Redbook's year-on-year rate is showing its steepest slowdown since early in the year, at plus 2.9% in the April 28 week with the four-week average down four tenths to plus 3.2%. But the downdraft reflects comparison distortions tied to the Easter shift, and a look at March and April together comes out to plus 3.4% which shows acceleration compared to plus 2.9% in February and plus 2.7% in January. The second report focuses on weather; cool temperatures and heavy weather through much of the country cut into store sales during the April 28 week, according to ICSC-Goldman whose same-store index slipped 0.3% in the week. Yet ICSC-Goldman's year-on-year rate remains firm, up six tenths to plus 4.2%. The four-week average is at plus 3.9% for the best rate since early in the year. Consumers still out there spending, although not heavily but with gasoline prices high we see the two reports as decent news.
April auto and truck sales are out through the day; expectations are for sales to have been up, some say as much as 10%.
So far this morning the 10 yr tested 1.90% and again failed to break it. At 10:10 1.94% +2 bp. The remainder of the day will be directed by how the stock market goes. Up a little on the 10:00 data but stalling out for the moment.
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