Volume in the mortgage market is very light today as another blizzard blankets the Northeastern part of the country. Buyers are currently dominating what little trading action there is - resulting in slightly improved mortgage interest rates.
The Commerce Department revised higher their guesstimate of the pace of economic growth in the last three months of 2009. According to government figures economic activity actually hummed along at a 5.9% pace in the fourth-quarter of 2009 - slightly ahead of the 5.7% rate initially reported. Most of the growth was a result of inventory rebuilding and business investment in machinery and technology. Most analyst view the current pace of economic growth as unsustainable without a marked gain in final demand from the consumer to generate a drawdown of inventories and to create a rate-of-return on the investment businesses have made in new machinery and technology. Since positive and sustainable job growth is not likely to manifest itself until sometime in 2011 - a meaningful uptick in final demand from consumers remains a long way off - and that is a condition that tends to be supportive for steady to perhaps fractionally lower mortgage interest rates.
The National Association of Realtors reported earlier today that sales of existing homes fell by an unexpected 7.0% from month earlier levels. The extension and expansion of the government's homebuyer tax credit programs along with still low mortgage interest rates and the prospects of improved weather conditions as spring approaches should help sales pick up in the coming months. If the pace of exiting housing sales continues to decline in March and April -- the implications for the economy will be of greater concern to investors.
Looking ahead to next week every economic report from Monday's release of January personal income and spending figures through Thursday's revised fourth-quarter productivity and unit labor costs data will be overshadowed by the drama of Friday's February nonfarm payroll stats. The consensus forecast calls for a drop of 30,000 jobs from the headline nonfarm payroll figure and an uptick in the national unemployment rate to 9.8% from January's 9.7% mark. If the consensus forecast proves accurate, this data will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the unlikely event the February nonfarm payroll shows a loss of 10,000 or fewer jobs and/or the national jobless rate posts a reading of 9.7% or lower -- look for mortgage investors to push mortgage interest rates higher from current levels.
Friday, February 26, 2010
Thursday, February 25, 2010
Thursday, February 25, 2010
The mortgage market got a friendly boost to slightly higher prices this morning from a mixed-bag of economic news and a resurgence of fears about possible sovereign credit defaults in the euro-zone that is once again producing some "flight-to-quality" buying of dollar denominated assets like Treasury debt obligations and mortgage-backed securities.
The government said new orders for long-lasting manufactured goods rose a stronger than expected 3.0% in January -- driven exclusively by a major increase in new orders for commercial aircraft. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending, fell 2.9% in January. The message buried in all this statistical mumbo-jumbo is actually very straightforward - the pace of economic recovery is currently loosing momentum.
The initial claims data for the week ended February 20th reinforced the message contained in the durable goods order data. The number of workers standing in line to collect first-time unemployment benefits rose by a surprising 22,000 claimants last week. There is justification to the argument currently being made by some analysts that the latest rise in the weekly jobless claims figures was at least partially due to processing the backlog of applications accumulated during the recent snowstorms through the Northeast. The bottom line is that this data series is being temporarily distorted by a degree of noneconomic factors. If initial claims do not begin to turn lower before mid-March - investors will likely increasingly view weak initial jobless claims data as signaling the economy is beginning to tumbling back into a recession.
In the strange world of the credit markets and mortgage interest rates - slumping economic activity reduces the overall demand for capital which in turn tends to reduce interest rates in general and mortgage rates in particular. If this condition were to develop the goods news is that mortgage interest rates would almost certainly move lower - the bad news is that the pool of eligible borrowers begins to shrink as the ravages of job destruction takes its toll on the workforce.
Uncle Sam will conduct the last of his four-part borrowing spree this week when he sells $32 billion of 7-year notes. The auction will conclude at 1:00 p.m. ET. Solid demand at today's Treasury note sale will tend to support steady to lower mortgage interest rates while a poorly bid sale will almost surely push mortgage interest rates higher.
The government said new orders for long-lasting manufactured goods rose a stronger than expected 3.0% in January -- driven exclusively by a major increase in new orders for commercial aircraft. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending, fell 2.9% in January. The message buried in all this statistical mumbo-jumbo is actually very straightforward - the pace of economic recovery is currently loosing momentum.
The initial claims data for the week ended February 20th reinforced the message contained in the durable goods order data. The number of workers standing in line to collect first-time unemployment benefits rose by a surprising 22,000 claimants last week. There is justification to the argument currently being made by some analysts that the latest rise in the weekly jobless claims figures was at least partially due to processing the backlog of applications accumulated during the recent snowstorms through the Northeast. The bottom line is that this data series is being temporarily distorted by a degree of noneconomic factors. If initial claims do not begin to turn lower before mid-March - investors will likely increasingly view weak initial jobless claims data as signaling the economy is beginning to tumbling back into a recession.
In the strange world of the credit markets and mortgage interest rates - slumping economic activity reduces the overall demand for capital which in turn tends to reduce interest rates in general and mortgage rates in particular. If this condition were to develop the goods news is that mortgage interest rates would almost certainly move lower - the bad news is that the pool of eligible borrowers begins to shrink as the ravages of job destruction takes its toll on the workforce.
Uncle Sam will conduct the last of his four-part borrowing spree this week when he sells $32 billion of 7-year notes. The auction will conclude at 1:00 p.m. ET. Solid demand at today's Treasury note sale will tend to support steady to lower mortgage interest rates while a poorly bid sale will almost surely push mortgage interest rates higher.
Wednesday, February 24, 2010
Wednesday, February 24, 2010
Fed Chairman Bernanke likely "greased-the-skids" for this afternoon's $42 billion 5-year Treasury note sale when he told Congress and the world that a weak job market and low inflation will allow the central bank to keep their benchmark interest rates at very low levels for a long time. Mr. Bernanke characterized the economy as weak and indicated that the Fed's projections indicate unemployment will likely remain exceptionally high well into 2012. Credit market investors were quick to boil all of Mr. Bernanke's rhetoric down to its bare essence - inflation pressures will almost surely remain well contained for the foreseeable future -an assessment that tends to be supportive of the prospects for steady to perhaps fractionally lower interest rates for government debt obligations as well as mortgage-backed securities.
This morning's soothing words from Fed Chairman Bernanke and stellar results from yesterday's two-year note auction should support aggressive bidding at today's 5-year note auction. If so, this event will likely have little, if any noticeably impact on the trend trajectory of mortgage interest rates.
The Commerce Department reported earlier today that it appears sales of new homes fell 11.2% in January while the December sales figure was revised 1.75% higher. Mortgage investors gave the data little more than a passing glance. The confidence level in the validity of this data is exceptionally low - even for the government data wonks charged with collecting and reporting the numbers. The standard error reported for the January new home sales figures is plus or minus 14% -- which means January sales might have actually been up 2.8% from month earlier levels - or dramatically lower than today's headline number suggest. The five month trend showing sales drifting lower at a 5.7% pace is probably a far better representation of conditions in the new home market.
In other news, the Mortgage Bankers of America have released their mortgage application index for the week ended February 19th. The overall demand for mortgage loans fell by 8.5% last week with purchase applications slipping 7.3% lower and refinance loan demand falling 8.9% lower. The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.03%, up 0.9 percentage points from the prior week. Last week's average rate was above the all-time low of 4.61% set in the week ended March 27th, but below the year-ago level of 5.07%
Tuesday, February 23, 2010
Tuesday, February 23, 2010
Three separate Treasury auctions and two days of Congressional testimony by Fed Chairman Bernanke will dominate the mortgage market for the balance of the week.
Uncle Sam will be in the credit market today peddling a $44 billion stack of 2-year notes. He will be back looking to sell a $42 billion pile of 5-year notes tomorrow followed by a $32 billion bundle of 7-year notes on Thursday. This onslaught of supply will test demand, particularly among foreign investors, who have started to show signs of moving away from short-term U.S. debt into higher-yielding assets.
The continuing debt crisis in Europe, especially as it relates to the sovereign debt of Greece, could bring jittery euro investors back to the relatively safe-haven of Treasury debt obligations and mortgage-backed securities. A well bid auction series this week will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates.
Pay attention here -- weakness in any one of this week's debt sales will push government debt yields higher - a condition almost certain to shove mortgage interest rates higher as well.
The other "wild card" event of the week for the mortgage market comes in the form of Fed Chairman Ben Bernanke's semi-annual monetary policy testimony before the House Financial Services Committee on Wednesday followed by a repeat performance in front of the Senate Banking Committee on Thursday. Mr. Bernanke will undoubtedly be grilled by the members of these two committees for the detail behind the surprise decision to raise the discount rate by 25 basis points. The move itself will likely not draw as much question and answer focus as will the timing of the move. Why did the Fed deem it necessary to raise the discount rate last week? Couldn't the move wait until the FOMC's next scheduled meeting on March 16th? And if not, why didn't the Fed make the move at its January 27th meeting? The probabilities are high that Mr. Bernanke's answer will be viewed as acceptable in the context of the Fed's overall plan to wrap up a number of stimulus programs scheduled for expiration in the next few months. If so, this event will undoubtedly draw a lot of attention -- but in the end the chances are high it will ultimately prove to have little bearing on the near-term direction of mortgage interest rates.
Uncle Sam will be in the credit market today peddling a $44 billion stack of 2-year notes. He will be back looking to sell a $42 billion pile of 5-year notes tomorrow followed by a $32 billion bundle of 7-year notes on Thursday. This onslaught of supply will test demand, particularly among foreign investors, who have started to show signs of moving away from short-term U.S. debt into higher-yielding assets.
The continuing debt crisis in Europe, especially as it relates to the sovereign debt of Greece, could bring jittery euro investors back to the relatively safe-haven of Treasury debt obligations and mortgage-backed securities. A well bid auction series this week will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates.
Pay attention here -- weakness in any one of this week's debt sales will push government debt yields higher - a condition almost certain to shove mortgage interest rates higher as well.
The other "wild card" event of the week for the mortgage market comes in the form of Fed Chairman Ben Bernanke's semi-annual monetary policy testimony before the House Financial Services Committee on Wednesday followed by a repeat performance in front of the Senate Banking Committee on Thursday. Mr. Bernanke will undoubtedly be grilled by the members of these two committees for the detail behind the surprise decision to raise the discount rate by 25 basis points. The move itself will likely not draw as much question and answer focus as will the timing of the move. Why did the Fed deem it necessary to raise the discount rate last week? Couldn't the move wait until the FOMC's next scheduled meeting on March 16th? And if not, why didn't the Fed make the move at its January 27th meeting? The probabilities are high that Mr. Bernanke's answer will be viewed as acceptable in the context of the Fed's overall plan to wrap up a number of stimulus programs scheduled for expiration in the next few months. If so, this event will undoubtedly draw a lot of attention -- but in the end the chances are high it will ultimately prove to have little bearing on the near-term direction of mortgage interest rates.
Monday, February 22, 2010
Monday, February 22, 2010
A record four-part Treasury auction and two days of Congressional testimony by Fed Chairman Bernanke will dominate the mortgage market this week.
The $126 billion debt auction will be composed of $8 billion of 30-year inflation-index bonds today, a $44 billion stack of 2-year notes on Tuesday, a $42 billion pile of 5-year notes on Wednesday and wrapping up with a $32 billion bundle of 7-year notes on Thursday. This onslaught of supply will test demand, particularly among foreign investors, who have started to show signs of moving away from short-term U.S. debt into higher-yielding assets.
The continuing debt crisis in Europe, especially as it relates to the sovereign debt of Greece, could bring jittery euro investors back to the relatively safe-haven of Treasury debt obligations and mortgage-backed securities. A well bid auction series this week will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. Weakness in any one of this week's debt sales will push government debt yields higher - a condition almost certain to shove mortgage interest rates higher as well.
The other "wild card" event of the week for the mortgage market come in the form of Fed Chairman Ben Bernanke's semi-annual monetary policy testimony before the House Financial Services Committee on Wednesday followed by a repeat performance in front of the Senate Banking Committee on Thursday.
Mr. Bernanke will undoubtedly be grilled by the members of these two committees for the detail behind the surprise decision to raise the discount rate by 25 basis points. The move itself will likely not draw as much question and answer focus as will the timing of the move. Why did the Fed deem it necessary to raise the discount rate last week? Couldn't the move wait until the FOMC's next scheduled meeting on March 16th? And if not, why didn't the Fed make the move at its January 27th meeting?
The probabilities are high that Mr. Bernanke's answer will be viewed as acceptable in the context of the Fed's overall plan to wrap up a number of stimulus programs scheduled for expiration in the next few months. If so, this event will undoubtedly draw a lot of attention -- but in the end the chances are high it will ultimately prove to have little bearing on the near-term direction of mortgage interest rates.
The $126 billion debt auction will be composed of $8 billion of 30-year inflation-index bonds today, a $44 billion stack of 2-year notes on Tuesday, a $42 billion pile of 5-year notes on Wednesday and wrapping up with a $32 billion bundle of 7-year notes on Thursday. This onslaught of supply will test demand, particularly among foreign investors, who have started to show signs of moving away from short-term U.S. debt into higher-yielding assets.
The continuing debt crisis in Europe, especially as it relates to the sovereign debt of Greece, could bring jittery euro investors back to the relatively safe-haven of Treasury debt obligations and mortgage-backed securities. A well bid auction series this week will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. Weakness in any one of this week's debt sales will push government debt yields higher - a condition almost certain to shove mortgage interest rates higher as well.
The other "wild card" event of the week for the mortgage market come in the form of Fed Chairman Ben Bernanke's semi-annual monetary policy testimony before the House Financial Services Committee on Wednesday followed by a repeat performance in front of the Senate Banking Committee on Thursday.
Mr. Bernanke will undoubtedly be grilled by the members of these two committees for the detail behind the surprise decision to raise the discount rate by 25 basis points. The move itself will likely not draw as much question and answer focus as will the timing of the move. Why did the Fed deem it necessary to raise the discount rate last week? Couldn't the move wait until the FOMC's next scheduled meeting on March 16th? And if not, why didn't the Fed make the move at its January 27th meeting?
The probabilities are high that Mr. Bernanke's answer will be viewed as acceptable in the context of the Fed's overall plan to wrap up a number of stimulus programs scheduled for expiration in the next few months. If so, this event will undoubtedly draw a lot of attention -- but in the end the chances are high it will ultimately prove to have little bearing on the near-term direction of mortgage interest rates.
Friday, February 19, 2010
Friday, February 19, 2010
A quick word about yesterday's 25 basis-point increase in the Federal Reserve Bank's discount rate.
In case you are wondering - the discount rate is the interest rate the Federal Reserve Bank charges member banks for short-term loans normally overnight but terms had been extended out 30-days during the height of the financial crisis. A fed funds transaction involves a bank lending funds they have on deposit at the Federal Reserve to another bank. The term of the transaction is limited to overnight and is designed specifically to enable the borrowing bank to meet its reserve requirements.
Before the credit crisis began in 2007, the discount rate was typically a full percentage point above the fed funds rate. Yesterday's decision by the Fed to move the discount rate back to its traditional premium over the fed funds rate certainly surprised mortgage market participants - and created some rather dramatic knee-jerk selling pressure in the mortgage market. But as the dust settles here -- the expectation is that calmer, cooler heads will prevail and the modest increase in the rate of interest the Federal Reserve Bank charges member banks for overnight loans will once again have an almost imperceptible influence on the rates investors charge for multi-year mortgage loans.
The Labor Department reported this morning that the Consumer Price Index rose a less than expected 0.2% in January, while prices excluding food and energy fell 0.1%, the first decline in this metric since 1982, supporting the Federal Reserve's contention it will keep its benchmark fed fund rate low for an "extended period" of time. The Fed's quarterly economic forecast contained in Wednesday's minutes of last month's Open Market Committee's meeting showed policymakers expect inflation pressures on the consumer level to remain muted through 2012.
Prices at the manufacturing level may increase but until the employment picture brightens considerably - final demand will remain so anemic that businesses will find it difficult it not impossible to push price increase through to the consumer - and that's good news for the probabilities that 30-year fixed-rate mortgages will remain below 6.0% this year.
Looking ahead to next week -- Uncle Sam's four-part $126 billion Treasury debt auctions together with Fed Chairman Ben Bernanke's semi-annual monetary policy "show-and-tell" before House and Senate committees on Wednesday and Thursday will easily trump the coming week's lineup of economic news that includes January New Home sales figures on Wednesday and Existing Home sale stats on Friday. The path-of-least-resistance for mortgage interest rates will likely favor steady to fractionally higher levels through the conclusion of the government's debt sales on Thursday afternoon at 1:00 p.m. ET
In case you are wondering - the discount rate is the interest rate the Federal Reserve Bank charges member banks for short-term loans normally overnight but terms had been extended out 30-days during the height of the financial crisis. A fed funds transaction involves a bank lending funds they have on deposit at the Federal Reserve to another bank. The term of the transaction is limited to overnight and is designed specifically to enable the borrowing bank to meet its reserve requirements.
Before the credit crisis began in 2007, the discount rate was typically a full percentage point above the fed funds rate. Yesterday's decision by the Fed to move the discount rate back to its traditional premium over the fed funds rate certainly surprised mortgage market participants - and created some rather dramatic knee-jerk selling pressure in the mortgage market. But as the dust settles here -- the expectation is that calmer, cooler heads will prevail and the modest increase in the rate of interest the Federal Reserve Bank charges member banks for overnight loans will once again have an almost imperceptible influence on the rates investors charge for multi-year mortgage loans.
The Labor Department reported this morning that the Consumer Price Index rose a less than expected 0.2% in January, while prices excluding food and energy fell 0.1%, the first decline in this metric since 1982, supporting the Federal Reserve's contention it will keep its benchmark fed fund rate low for an "extended period" of time. The Fed's quarterly economic forecast contained in Wednesday's minutes of last month's Open Market Committee's meeting showed policymakers expect inflation pressures on the consumer level to remain muted through 2012.
Prices at the manufacturing level may increase but until the employment picture brightens considerably - final demand will remain so anemic that businesses will find it difficult it not impossible to push price increase through to the consumer - and that's good news for the probabilities that 30-year fixed-rate mortgages will remain below 6.0% this year.
Looking ahead to next week -- Uncle Sam's four-part $126 billion Treasury debt auctions together with Fed Chairman Ben Bernanke's semi-annual monetary policy "show-and-tell" before House and Senate committees on Wednesday and Thursday will easily trump the coming week's lineup of economic news that includes January New Home sales figures on Wednesday and Existing Home sale stats on Friday. The path-of-least-resistance for mortgage interest rates will likely favor steady to fractionally higher levels through the conclusion of the government's debt sales on Thursday afternoon at 1:00 p.m. ET
Thursday, February 18, 2010
Thursday, February 18, 2010
The mortgage market got off to a weak start this morning as stronger that expected inflation news from the producer sector trumped weaker than expected news from the labor sector.
The headline producer price index posted a gain of 1.4% last month - double the consensus forecast of most economists for a gain of 0.7%.
The lion's share of the big jump in the headline number is attributable to a 5.1% surge in energy prices as gasoline and heating oil prices rose. The more important core rate of the producer price index, a value that excludes the more volatile food and energy components, posted a surprising strong gain of 0.3% compared with no change in December. One month does not a tend make. The probabilities are high that calmer cooler heads will soon come to realize that the firming of prices at the producer price level will be sharply constrained as final demand remains soft due to exceptionally high unemployment rates.
In a separate report the Labor Department announced the number of workers filing first-time jobless benefits rose by a surprising 31,000 during the week ended February 13th. Most mortgage investors appear to have completely discounted this otherwise mortgage market friendly news -- reasoning that a combination of factors were likely at play during the period. Snow storms may not have limited the ability of a large number of those newly unemployed to reach the government offices to file their claims as had been expected - and there may also have been more fallout from the temporary shutdown of Toyota's production lines than was originally projected. In any case, the majority of mortgage investors shrugged this report off.
Most of the selling pressure in the mortgage market this morning has probably been created by the Treasury Department's announcement that they intend to sell a total of $126 billion of government debt obligations in a four-part auction starting next week Monday. The incoming supply is more than many market participants had anticipated to see - so the scramble is now on to sell existing assets from portfolios to make room for this new supply.
The headline producer price index posted a gain of 1.4% last month - double the consensus forecast of most economists for a gain of 0.7%.
The lion's share of the big jump in the headline number is attributable to a 5.1% surge in energy prices as gasoline and heating oil prices rose. The more important core rate of the producer price index, a value that excludes the more volatile food and energy components, posted a surprising strong gain of 0.3% compared with no change in December. One month does not a tend make. The probabilities are high that calmer cooler heads will soon come to realize that the firming of prices at the producer price level will be sharply constrained as final demand remains soft due to exceptionally high unemployment rates.
In a separate report the Labor Department announced the number of workers filing first-time jobless benefits rose by a surprising 31,000 during the week ended February 13th. Most mortgage investors appear to have completely discounted this otherwise mortgage market friendly news -- reasoning that a combination of factors were likely at play during the period. Snow storms may not have limited the ability of a large number of those newly unemployed to reach the government offices to file their claims as had been expected - and there may also have been more fallout from the temporary shutdown of Toyota's production lines than was originally projected. In any case, the majority of mortgage investors shrugged this report off.
Most of the selling pressure in the mortgage market this morning has probably been created by the Treasury Department's announcement that they intend to sell a total of $126 billion of government debt obligations in a four-part auction starting next week Monday. The incoming supply is more than many market participants had anticipated to see - so the scramble is now on to sell existing assets from portfolios to make room for this new supply.
Wednesday, February 17, 2010
Wednesday, February 17, 2010
The sense of uncertainty that has enveloped Europe's fiscal outlook since Greece's elevated public debt levels first surfaced a week or so ago is still taking "center-stage" in the mortgage market - easily trumping today's other U.S. economic news. European leaders have been quick to voice support for Greece, but slower to provide details on how they will help restore Athens to fiscal health.
A very successful 15-year euro-bond auction by Spain earlier this morning and a report indicating Greek budget revenues in January exceeded the indebted country's target -- was soothing enough to global market participants that they chose to fractionally reduce their multi-week "flight-to-quality" buying spree favoring dollar-denominated assets like Treasury obligations and mortgage-backed securities - a condition almost exclusively responsible for this morning's upward pressure on mortgage interest rates.
News from the Commerce Department earlier today highlighting a 2.8% surge in housing starts last month has been largely shrugged off as more a function of the scramble to beat the closing deadline for those participating in the government's homebuyer tax credit programs. Building permits, a sign of future construction, fell 4.9%.
Mortgage investors also gave this morning's report from the Federal Reserve showing a 0.9% increase in industrial output for January nothing more than a passing glance. Almost all of the increase in activity at the nation's factories is a function of inventory rebuilding. If final demand does not increase soon - inventory levels will stabilize - resulting in a major slump for overall industrial production. Capacity utilization, a measure of slack in the economy, rose to 72.6% from 71.9% in December. No big whoop here either - the January gain still leaves this measure 8 percentage points below its average from 1972 to 2009.
The Mortgage Bankers of America have released their mortgage application survey index for the week ended February 12th. The overall index fell 2.1% from the prior week. Refinance applications were lower by 1.2% while loan requests for home purchases slumped 4.0%. Fixed 30-year mortgage rates averaged 4.94% and were unchanged from the prior week.
A very successful 15-year euro-bond auction by Spain earlier this morning and a report indicating Greek budget revenues in January exceeded the indebted country's target -- was soothing enough to global market participants that they chose to fractionally reduce their multi-week "flight-to-quality" buying spree favoring dollar-denominated assets like Treasury obligations and mortgage-backed securities - a condition almost exclusively responsible for this morning's upward pressure on mortgage interest rates.
News from the Commerce Department earlier today highlighting a 2.8% surge in housing starts last month has been largely shrugged off as more a function of the scramble to beat the closing deadline for those participating in the government's homebuyer tax credit programs. Building permits, a sign of future construction, fell 4.9%.
Mortgage investors also gave this morning's report from the Federal Reserve showing a 0.9% increase in industrial output for January nothing more than a passing glance. Almost all of the increase in activity at the nation's factories is a function of inventory rebuilding. If final demand does not increase soon - inventory levels will stabilize - resulting in a major slump for overall industrial production. Capacity utilization, a measure of slack in the economy, rose to 72.6% from 71.9% in December. No big whoop here either - the January gain still leaves this measure 8 percentage points below its average from 1972 to 2009.
The Mortgage Bankers of America have released their mortgage application survey index for the week ended February 12th. The overall index fell 2.1% from the prior week. Refinance applications were lower by 1.2% while loan requests for home purchases slumped 4.0%. Fixed 30-year mortgage rates averaged 4.94% and were unchanged from the prior week.
Tuesday, February 16, 2010
Tuesday, February 16, 2010
Global credit markets are locked in a state of suspended animation as investors anxiously await reassurance from European finance ministers that a viable plan has been developed to contain Greece's sovereign debt debacle. The great fear in the marketplace is that Greece's fiscal problems could spread rapidly through the global economy if a working anecdote is not developed soon. As long as this issue remains unresolved - capital will continue to flow to the relative safe-haven of Treasury debt obligations and agency eligible mortgage-backed securities.
That is certainly good news for the prospect of steady to perhaps fractionally lower mortgage interest rates. The bad news is that the capital currently pouring into dollar-denominated assets is "hot money" - subject to immediate deployment to riskier but higher yielding investment vehicles as soon as the European credit crisis shows signs of abating.
With nothing in the way of meaningful economic data to serve as a guide -- mortgage investors will likely look to the stock markets to provide directional cues for mortgage interest rates today. Higher stock prices will tend to nudge mortgage interest rates higher while lower stock prices will likely support steady to perhaps fractionally lower rates.
That is certainly good news for the prospect of steady to perhaps fractionally lower mortgage interest rates. The bad news is that the capital currently pouring into dollar-denominated assets is "hot money" - subject to immediate deployment to riskier but higher yielding investment vehicles as soon as the European credit crisis shows signs of abating.
With nothing in the way of meaningful economic data to serve as a guide -- mortgage investors will likely look to the stock markets to provide directional cues for mortgage interest rates today. Higher stock prices will tend to nudge mortgage interest rates higher while lower stock prices will likely support steady to perhaps fractionally lower rates.
Thursday, February 11, 2010
Thursday, February 11, 2010
Different day - same story.
Mortgage investors are once again taking a cautious "wait-and-see" attitude in front of the Treasury Department's $16 billion 30-year bond sale this afternoon. Tuesday's 3-year note offering and yesterday's 10-year note sale were ugly - which does not bode well for the prospects of robust bidding at today's 30-year bond offering. If this assessment proves accurate, look for upward pressure on mortgage interest rates to prevail for most of the day.
The Labor Department announced this morning that initial weekly jobless benefit claims for the week ended February 6th dropped 43,000 to a seasonally adjusted 440,000. For the week ended January 23rd , enrollment in extended benefits programs increased by 13,208 to 236,041 while enrollment in the government's Emergency Unemployment Compensation program fell by 184,627 to 5.448 million.
Boiling all this statistical mumbo-jumbo down the indications are growing that the labor market is improving - at a just barely perceptible pace. First-time filings for unemployment benefits were kept artificially low in late December and early January because of the holidays and then were biased to the high side in late January as the Labor Department caught up on their claims processing. Mortgage investors essentially shrugged the whole thing off - reasoning that until initial weekly jobs claims stabilize around the 400,000 per week level - net month-over-month job creation will not be strong enough to exert significant upward pressure on mortgage interest rates.
The Commerce Department has postponed the release of the much anticipated January Retail Sales report until 8:30 a.m. ET tomorrow. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Mortgage investors are once again taking a cautious "wait-and-see" attitude in front of the Treasury Department's $16 billion 30-year bond sale this afternoon. Tuesday's 3-year note offering and yesterday's 10-year note sale were ugly - which does not bode well for the prospects of robust bidding at today's 30-year bond offering. If this assessment proves accurate, look for upward pressure on mortgage interest rates to prevail for most of the day.
The Labor Department announced this morning that initial weekly jobless benefit claims for the week ended February 6th dropped 43,000 to a seasonally adjusted 440,000. For the week ended January 23rd , enrollment in extended benefits programs increased by 13,208 to 236,041 while enrollment in the government's Emergency Unemployment Compensation program fell by 184,627 to 5.448 million.
Boiling all this statistical mumbo-jumbo down the indications are growing that the labor market is improving - at a just barely perceptible pace. First-time filings for unemployment benefits were kept artificially low in late December and early January because of the holidays and then were biased to the high side in late January as the Labor Department caught up on their claims processing. Mortgage investors essentially shrugged the whole thing off - reasoning that until initial weekly jobs claims stabilize around the 400,000 per week level - net month-over-month job creation will not be strong enough to exert significant upward pressure on mortgage interest rates.
The Commerce Department has postponed the release of the much anticipated January Retail Sales report until 8:30 a.m. ET tomorrow. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Wednesday, February 10, 2010
Mortgage investors are taking a cautious "wait-and-see" attitude in front of the Treasury Department's $25 billion 10-year note auction this afternoon. The ongoing saga surrounding the fiscal crisis in Greece initially sparked demand for dollar-denominated Treasury debt obligations as European investors looked for a safe-placed to park their capital to avoid getting caught in a potential meltdown of the European economy. The massive inflow of capital helped hold not only the yields on Treasury debt obligations down - but mortgage interest rates as well.
There is growing speculation that euro zone countries are on the verge of cobbling together a rescue package that will, at least temporarily, ensure that Greece averts financial disaster. The uncertainty swirling around this event will make it difficult for investors to know exactly how to bid at today's 10-year note auction. If a viable rescue plan is announced the international capital markets will breathe a sigh of relief and the safe haven appeal of dollar-denominated assets will fade - resulting in slumping prices. That's a condition that suggests investors should avoid bidding aggressively for today's offering from Uncle Sam. If that scenario plays out look for additional upward pressure on mortgage interest rates to develop this afternoon.
On the other hand - if it becomes apparent conditions within the structure of the European Union are going to prove to be an impediment to any bailout attempt (as some analysis are currently suggesting) - the prospects are high than massive amounts of additional capital will flow out of Europe into the relatively safe haven of dollar-denominated assets like Treasury obligations - a very strong argument for aggressively bidding at today's auction. If this scenario plays out look for mortgage interest rates to move sideways to perhaps fractionally lower by the end of the day.
In any case, I think you can bet your bottom-dollar that the majority of mortgage investors will choose to remain safely on the sidelines awaiting further developments regarding the attempts to rescue the sovereign debt of Greece from the clutches of default.
Fed Chairman Ben Bernanke and members of the House Financial Services Committee slogged through a blizzard to meet to discuss the Fed's strategies for winding down the multitude of fiscal stimulus programs currently under its control. Bernanke make it clear from the outset that the time for tightening monetary policy is still months away. Chairman Bernanke indicated when the time comes to beginning reducing the massive amount of stimulus that was injected into the financial system the Fed will likely move to increase the interest rate it pays on reserves member banks hold at the Federal Reserve.
Raising the interest rates on these deposits would encourage banks to park funds with the Fed, effectively taking the money out of circulation. Capital market participants appear to believe this first-move to be reasonable and functional judging by the relatively calm pace of trading during and following Mr. Bernanke's testimony. As this juncture I think it is safe to consider this event to be mortgage market neutral.
The only major economic report on tap this week will arrive tomorrow morning at 8:30 a.m. ET with the release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
There is growing speculation that euro zone countries are on the verge of cobbling together a rescue package that will, at least temporarily, ensure that Greece averts financial disaster. The uncertainty swirling around this event will make it difficult for investors to know exactly how to bid at today's 10-year note auction. If a viable rescue plan is announced the international capital markets will breathe a sigh of relief and the safe haven appeal of dollar-denominated assets will fade - resulting in slumping prices. That's a condition that suggests investors should avoid bidding aggressively for today's offering from Uncle Sam. If that scenario plays out look for additional upward pressure on mortgage interest rates to develop this afternoon.
On the other hand - if it becomes apparent conditions within the structure of the European Union are going to prove to be an impediment to any bailout attempt (as some analysis are currently suggesting) - the prospects are high than massive amounts of additional capital will flow out of Europe into the relatively safe haven of dollar-denominated assets like Treasury obligations - a very strong argument for aggressively bidding at today's auction. If this scenario plays out look for mortgage interest rates to move sideways to perhaps fractionally lower by the end of the day.
In any case, I think you can bet your bottom-dollar that the majority of mortgage investors will choose to remain safely on the sidelines awaiting further developments regarding the attempts to rescue the sovereign debt of Greece from the clutches of default.
Fed Chairman Ben Bernanke and members of the House Financial Services Committee slogged through a blizzard to meet to discuss the Fed's strategies for winding down the multitude of fiscal stimulus programs currently under its control. Bernanke make it clear from the outset that the time for tightening monetary policy is still months away. Chairman Bernanke indicated when the time comes to beginning reducing the massive amount of stimulus that was injected into the financial system the Fed will likely move to increase the interest rate it pays on reserves member banks hold at the Federal Reserve.
Raising the interest rates on these deposits would encourage banks to park funds with the Fed, effectively taking the money out of circulation. Capital market participants appear to believe this first-move to be reasonable and functional judging by the relatively calm pace of trading during and following Mr. Bernanke's testimony. As this juncture I think it is safe to consider this event to be mortgage market neutral.
The only major economic report on tap this week will arrive tomorrow morning at 8:30 a.m. ET with the release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Tuesday, February 9, 2010
Tuesday, February 9, 2010
Different day - essentially the same story. The economic calendar is vacant once again today - leaving mortgage investors with little more than trading activity in the stock markets from which to take their directional cues for mortgage interest rates - at least through the conclusion of Uncle Sam's $40 billion 3-year note auction this afternoon at 1:00 p.m. ET. Look for higher stock prices to drag mortgage interest rates higher while lower stock prices will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates.
Uncle Sam will kick-off a three-day borrowing spree today with the sale of $40 billion worth of 3-year notes. The relatively short duration of these notes should draw strong participation levels from domestic as well as foreign investors. If so, this event will likely prove supportive of steady mortgage interest rates. Casting a shadow over the prospects for notably lower mortgage interest rates this week is tomorrow's $25 billion 10-year note auction followed by Thursday's $13 billion 30-year bond sale.
Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole - has the potential to create solid "flight-to-quality" demand for these two offerings. If so, this deluge of incoming longer-term debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other. There is a chance that prior to one or both of these sales the European Central Bank may announce a viable financial rescue plan has been developed for Greece and Portugal. If so, the immediate threat of a major upheaval in the collective European economy will fade - reducing the massive "flight-to-quality" buying spree currently supporting the Treasury market. If such a scenario develops - expect upward pressure on mortgage interest rates to increase.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members. For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Uncle Sam will kick-off a three-day borrowing spree today with the sale of $40 billion worth of 3-year notes. The relatively short duration of these notes should draw strong participation levels from domestic as well as foreign investors. If so, this event will likely prove supportive of steady mortgage interest rates. Casting a shadow over the prospects for notably lower mortgage interest rates this week is tomorrow's $25 billion 10-year note auction followed by Thursday's $13 billion 30-year bond sale.
Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole - has the potential to create solid "flight-to-quality" demand for these two offerings. If so, this deluge of incoming longer-term debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other. There is a chance that prior to one or both of these sales the European Central Bank may announce a viable financial rescue plan has been developed for Greece and Portugal. If so, the immediate threat of a major upheaval in the collective European economy will fade - reducing the massive "flight-to-quality" buying spree currently supporting the Treasury market. If such a scenario develops - expect upward pressure on mortgage interest rates to increase.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members. For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Monday, February 8, 2010
Monday, February 8, 2010
The economic calendar is vacant today - leaving mortgage investors with little more than trading activity in the stock markets from which to take their directional cues for mortgage interest rates. Higher stock prices tend to push mortgage interest rates higher while lower stock prices are usually supportive of steady to perhaps fractionally lower mortgage interest rates.
Uncle Sam will be in the credit markets for three successive days beginning tomorrow -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole -- is almost certain to create solid "flight-to-quality" demand at this week's three-part Treasury auction. If so, the deluge of incoming debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members.
For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way appears to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
The only major economic report on tap this week is Thursday's 8:30 a.m. ET release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Uncle Sam will be in the credit markets for three successive days beginning tomorrow -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. Persistent concerns over potential sovereign debt defaults by Greece and other debt-laden European nations - together with worries about the "contagion effect" such an event might create for the global economy as a whole -- is almost certain to create solid "flight-to-quality" demand at this week's three-part Treasury auction. If so, the deluge of incoming debt supply from Uncle Sam will not likely move mortgage interest rates much one way or the other.
Fed Chairman Bernanke is scheduled to testify before the House Financial Services Committee on Wednesday at 10:00 a.m. ET. The broad topic has to do with publicly exploring the Fed's wind-down plans for a number of existing stimulus programs - not the least of which is the Fed's direct mortgage-backed security purchase initiative set to expire at the end of March. Mortgage market participants will be listening intently for anything market moving - but they will likely hear little more than political posturing from committee members.
For his part, Chairman Bernanke can be expected to do his level best to prevent monetary policy and the related strategies from becoming politicized. He is keenly aware history is strewn with lessons about the financial catastrophes that have befallen nations that travelled down the slippery slope of allowing politically motivated parties to set monetary policy. If the Fed appears in any way appears to be losing its independence -- expect mortgage investors to register their concern by pushing mortgage interest rates higher.
The only major economic report on tap this week is Thursday's 8:30 a.m. ET release of the January Retail Sales figures. Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December. The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal. If so, this event will tend to be mortgage interest rate neutral.
Friday, February 5, 2010
Friday, February 5, 2010
Some poems don't rhyme, some stories don't have a clear beginning, middle and end, and some economic reports are completely buggered up. Today's January nonfarm payroll is an excellent example of economic data that leaves everybody scratching their head in confusion.
As you undoubtedly know by now the Labor Department reported the economy shed 20,000 jobs last month after losing a revised 150,000 jobs in December. That's bad. November's headline payroll data was revised to a show a gain of 64,000, up from the originally reported gain of 4,000. That's good. Annual benchmark revisions to the payroll data showed job losses since the recession began were much deeper than originally thought. In all, according to government data wonks the economy has lost 8.4 million jobs since the start of the recession in December 2007. That's bad. But don't despair, the unemployment rate, based on a separate survey of households, fell to 9.7% in January from 10.0% in December - and that's very good.
Confused? Yeah - you're not the only one. It appears the Labor Department is taking a page from history and following former President Harry Truman's advice suggesting, "If you can't convince 'em - confuse em." If so -- kudos to the folks at the Labor Department for a job extremely well done. It appears mortgage investors and other capital market participants have also decided to throw their hands up and completely discount today's employment report -- rather than sort out its many possible nuances.
Looking ahead to next week Uncle Sam will be in the credit markets for three successive days beginning on Tuesday -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. It will be a relatively light week in terms of economic reports but you can bet traders will pay attention when the January Retail Sales figures are released on Thursday. The consensus estimate is currently projecting a strong 0.5% gain for retail sales last month. If the consensus estimate proves accurate, look for mortgage interest rates to edge fractionally higher.
As you undoubtedly know by now the Labor Department reported the economy shed 20,000 jobs last month after losing a revised 150,000 jobs in December. That's bad. November's headline payroll data was revised to a show a gain of 64,000, up from the originally reported gain of 4,000. That's good. Annual benchmark revisions to the payroll data showed job losses since the recession began were much deeper than originally thought. In all, according to government data wonks the economy has lost 8.4 million jobs since the start of the recession in December 2007. That's bad. But don't despair, the unemployment rate, based on a separate survey of households, fell to 9.7% in January from 10.0% in December - and that's very good.
Confused? Yeah - you're not the only one. It appears the Labor Department is taking a page from history and following former President Harry Truman's advice suggesting, "If you can't convince 'em - confuse em." If so -- kudos to the folks at the Labor Department for a job extremely well done. It appears mortgage investors and other capital market participants have also decided to throw their hands up and completely discount today's employment report -- rather than sort out its many possible nuances.
Looking ahead to next week Uncle Sam will be in the credit markets for three successive days beginning on Tuesday -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. It will be a relatively light week in terms of economic reports but you can bet traders will pay attention when the January Retail Sales figures are released on Thursday. The consensus estimate is currently projecting a strong 0.5% gain for retail sales last month. If the consensus estimate proves accurate, look for mortgage interest rates to edge fractionally higher.
Thursday, February 4, 2010
Thursday, February 4, 2010
This morning's rally in the mortgage market probably has far more to do with stock market weakness and "flight-to-quality" issues created by growing concerns about national debt defaults by Greece and Portugal -- than it has to do with investors' expectations for a super-weak January nonfarm payroll figure from the Labor Department tomorrow morning.
The European Commission is highly likely to find viable mechanisms to bolster the credit worthiness of these two financial distressed members of the Euro-zone - if for no other reason than the consequences of failure would be extremely onerous for all the members of the confederation.
From a technical perspective I see reason to believe the DOW will likely put in a short-term low between tomorrow, Friday, February 5th and Monday, February 8th in a range between 10064 on the high side and 9994 on the low end. If this assessment proves accurate, the "flight-to-quality" buying spree that has contributed to this morning's nice rally in the mortgage market will fade sharply as money returns to the riskier -- but higher yielding stock markets.
Tomorrow morning's January nonfarm payroll report could miss forecasts currently calling for a headline job gain of 8,000 and a national jobless rate of 10.1% by a wide margin, because of the impact of one-time factors including annual statistical benchmark revision and the direct impact of colder-than-normal winter temperatures on construction and other outdoor employment categories.
Government data wonks are going to make statistical revisions to the number of jobs they guesstimated were lost in 2009 - and the number of jobs the year-end hard figures reflect. Most analysts believe this "adjustment" will result in an increase in the number of job lost for the calendar 2009 of 824,000. This "adjusted" number has been kicked around by market participants for the past couple of weeks -- so as long as the actual value matches up reasonably close -- it probably won't cause much of a reaction among investors.
As the final hours tick down ahead of tomorrow's much anticipated January nonfarm payroll report -- a growing number of analysts are adjusting their forecast to suggest the economy added just 8,000 more jobs than it lost last month - a rather sharp revision from the call for a gain of more than 20,000 jobs that was broadly popular as late as yesterday afternoon. Any positive improvement in the pace of job creation will be a boost for the prospects of further economic recovery - and will tend to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
In the convoluted world of the mortgage market lousy jobs reports are almost always supportive of steady to perhaps fractionally lower rates. This time around it will likely take a surprisingly dismal jobs report showing a loss of 15,000 or more jobs together with a national unemployment rate exceeding 10.1% to power a notable move to lower mortgage interest rates.
The European Commission is highly likely to find viable mechanisms to bolster the credit worthiness of these two financial distressed members of the Euro-zone - if for no other reason than the consequences of failure would be extremely onerous for all the members of the confederation.
From a technical perspective I see reason to believe the DOW will likely put in a short-term low between tomorrow, Friday, February 5th and Monday, February 8th in a range between 10064 on the high side and 9994 on the low end. If this assessment proves accurate, the "flight-to-quality" buying spree that has contributed to this morning's nice rally in the mortgage market will fade sharply as money returns to the riskier -- but higher yielding stock markets.
Tomorrow morning's January nonfarm payroll report could miss forecasts currently calling for a headline job gain of 8,000 and a national jobless rate of 10.1% by a wide margin, because of the impact of one-time factors including annual statistical benchmark revision and the direct impact of colder-than-normal winter temperatures on construction and other outdoor employment categories.
Government data wonks are going to make statistical revisions to the number of jobs they guesstimated were lost in 2009 - and the number of jobs the year-end hard figures reflect. Most analysts believe this "adjustment" will result in an increase in the number of job lost for the calendar 2009 of 824,000. This "adjusted" number has been kicked around by market participants for the past couple of weeks -- so as long as the actual value matches up reasonably close -- it probably won't cause much of a reaction among investors.
As the final hours tick down ahead of tomorrow's much anticipated January nonfarm payroll report -- a growing number of analysts are adjusting their forecast to suggest the economy added just 8,000 more jobs than it lost last month - a rather sharp revision from the call for a gain of more than 20,000 jobs that was broadly popular as late as yesterday afternoon. Any positive improvement in the pace of job creation will be a boost for the prospects of further economic recovery - and will tend to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
In the convoluted world of the mortgage market lousy jobs reports are almost always supportive of steady to perhaps fractionally lower rates. This time around it will likely take a surprisingly dismal jobs report showing a loss of 15,000 or more jobs together with a national unemployment rate exceeding 10.1% to power a notable move to lower mortgage interest rates.
Monday, February 1, 2010
Monday, February 1, 2010
The Commerce Department reported earlier this morning that consumer spending rose 0.2% in December, a less-than- expected pace as savings jumped to a six-month high. The tightening of the American purse strings developed even as incomes rose 0.4% last month. For the whole of 2009, spending fell 0.4%, the largest drop since 1938.
Boosting consumer spending is critical to putting the economy on a sustainable path to recovery. Until the national jobless rate is driven below 10% -- it will probably be easier to convince a 7th grade boy to walk up to a 7th grade girl talking with her friends and ask her to dance - than it will be to induce American households to ramp up spending. Granted, there are a few that will jump out there and begin spending as if money grows on trees - but like the majority of 7th grade boys - the rest of the American households will be content to wait a couple more years before they even consider anything so foolish. If this dramatized scenario proves more accurate than not, the sustainability of the economic recovery remains in jeopardy - and that is a condition that will tend to limit the upward pressure on mortgage interest rates.
As expected, the private Institute of Supply Management report on activity levels in the manufacturing sector rose sharply in January. The overall index climbed to 58.4 from December's 54.9. Any reading over 50 is deemed to be an indication of growth in the sector. Measures of orders, production and employment all increased as well. Drilling deeper into the detail of this report it becomes abundantly apparent that a significant part of the surge in the hustle-and-bustle on factory floors last month was more a result of inventory rebuilding following the huge draw-downs of the stock on the shelves of businesses during the depths of the recession last year -- than it was a function of a sharp increase in final demand.
Mortgage investors will keep a close eye on this data series in the months to come - but they are currently willing to discount a large part of the big headline number this time around as a "one-off" event.
Look for volatility in the mortgage market to increase as the week progresses and we get closer to Friday morning's release of the January nonfarm payroll report. Mortgage investors will likely approach this big jobs report from a "better-safe-than-sorry" perspective. A growing number of analysts are suggesting the headline jobs report will show the economy added more than 20,000 jobs than it lost last month. While such a number will be a definite positive for the prospects of further economic recovery - it will almost certainly serve to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
Boosting consumer spending is critical to putting the economy on a sustainable path to recovery. Until the national jobless rate is driven below 10% -- it will probably be easier to convince a 7th grade boy to walk up to a 7th grade girl talking with her friends and ask her to dance - than it will be to induce American households to ramp up spending. Granted, there are a few that will jump out there and begin spending as if money grows on trees - but like the majority of 7th grade boys - the rest of the American households will be content to wait a couple more years before they even consider anything so foolish. If this dramatized scenario proves more accurate than not, the sustainability of the economic recovery remains in jeopardy - and that is a condition that will tend to limit the upward pressure on mortgage interest rates.
As expected, the private Institute of Supply Management report on activity levels in the manufacturing sector rose sharply in January. The overall index climbed to 58.4 from December's 54.9. Any reading over 50 is deemed to be an indication of growth in the sector. Measures of orders, production and employment all increased as well. Drilling deeper into the detail of this report it becomes abundantly apparent that a significant part of the surge in the hustle-and-bustle on factory floors last month was more a result of inventory rebuilding following the huge draw-downs of the stock on the shelves of businesses during the depths of the recession last year -- than it was a function of a sharp increase in final demand.
Mortgage investors will keep a close eye on this data series in the months to come - but they are currently willing to discount a large part of the big headline number this time around as a "one-off" event.
Look for volatility in the mortgage market to increase as the week progresses and we get closer to Friday morning's release of the January nonfarm payroll report. Mortgage investors will likely approach this big jobs report from a "better-safe-than-sorry" perspective. A growing number of analysts are suggesting the headline jobs report will show the economy added more than 20,000 jobs than it lost last month. While such a number will be a definite positive for the prospects of further economic recovery - it will almost certainly serve to put additional upward pressure on mortgage interest rates as capital sources see an opportunity to demand a higher yield for their available investment dollars.
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