Friday's highly anticipated March nonfarm payroll report is dominating trading action in the mortgage market today - as it will likely do all week long. The consensus guesstimate of all economists is tilted in favor of a gain of 190,000 jobs. If this projection proves accurate -- it will mark only the second month of job growth since the recession began in December 2007, and the largest gain since March of last year. Government jobs are expected to account for the bulk of the job growth, as Uncle Sam hires hundreds of thousands of workers to assist in the once-in-a-decade headcount of all Americans. Look for some muddled reactions to this data.
· The mortgage market has currently priced in completely expectations that March payrolls grew by roughly 190,000 while the jobless rate remained steady at 9.7%. If the actual numbers match or exceed this expectation look for the stock market to rally at the expense of fractionally higher mortgage interest rates.
· On the other hand, should the actual headline payroll figure post a reading of 100,000 or less -- and/or should the national jobless rate climb to 9.8% or higher - there is a strong chance selling pressure in the equity markets will develop that will in turn produce a solid flow of "flight-to-quality" capital into the credit markets sufficient enough to be supportive of steady to fractionally lower rates. While such an outcome is certainly possible -- there is nothing in terms of current macro-economic data to indicate such a result is probable.
The Conference Board, a private non-profit global business organization, said its index of consumer attitudes rose to 52.5% in March from an upwardly revised 46.4% in February, driven by a slight increase in optimism about the labor market. The "jobs hard to get" component of this index declined to 45.8% from 47.3%, while the "jobs plentiful" component increased to 4.4% from 4.0%. The fractionally improvement in both of these measures of labor market conditions was more than enough to cause already skittish investors to nudge mortgage interest rates a touch higher.
If investors were to look at the consumer confidence numbers from a wider perspective -- they would quickly see that today's modest improvement still leaves the overall index almost perfectly flat over the past 10 months - certainly not worthy of the negative mortgage market response it generated earlier today. I wouldn't be surprised to see calmer, cooler headed mortgage-backed security investors move in before the end of the day and return the Fannie Mae 4.5% 30-year security back to roughly the point where it closed yesterday. That assessment is not in any way intended to suggest your rate sheets will look any better this afternoon - because as you well know the golden rule applies here -- "he/she who has the gold makes the rules." Look for the "rule makers" to be exceptionally stingy in front of Friday's nonfarm payroll report - even if underlying conditions in the mortgage-backed securities market improve.
Tuesday, March 30, 2010
Friday, March 26, 2010
Friday, March 26, 2010
Credit market participants are licking their wounds following two dismal Treasury note auctions earlier in the week.
News from the Commerce Department this morning showing the economy grew at a slightly less brisk pace in the fourth quarter than previously estimated went largely unnoticed by mortgage investors. Gross Domestic Product (a statistical measure of the total market value of all final goods and services produced in the country) expanded at a 5.6% annual rate, instead of the 5.9% pace estimated earlier.
The focus of all mortgage investors will shift to next Friday's release of the March nonfarm payroll figures. Most economists are calling for a strong 180,000 job gain in the headline number and a national jobless rate continuing to hover at 9.7%. If the actual numbers match or fall close to this consensus forecast, the impact on mortgage interest rates will likely be minimal -- since these numbers are already "priced-in" to most rate sheets. In the off-chance the actual headline payroll number exceeds 200,000 and/or the jobless rate falls to 9.6% or less -- the upward pressure on mortgage interest rates will increase noticeably.
The mortgage market will close early at noon ET (instead of the more traditional 2:00 p.m. ET) on Friday for the Good Friday Holiday. Friday's going into a holiday weekend historically had higher rates - just an FYI!
News from the Commerce Department this morning showing the economy grew at a slightly less brisk pace in the fourth quarter than previously estimated went largely unnoticed by mortgage investors. Gross Domestic Product (a statistical measure of the total market value of all final goods and services produced in the country) expanded at a 5.6% annual rate, instead of the 5.9% pace estimated earlier.
The focus of all mortgage investors will shift to next Friday's release of the March nonfarm payroll figures. Most economists are calling for a strong 180,000 job gain in the headline number and a national jobless rate continuing to hover at 9.7%. If the actual numbers match or fall close to this consensus forecast, the impact on mortgage interest rates will likely be minimal -- since these numbers are already "priced-in" to most rate sheets. In the off-chance the actual headline payroll number exceeds 200,000 and/or the jobless rate falls to 9.6% or less -- the upward pressure on mortgage interest rates will increase noticeably.
The mortgage market will close early at noon ET (instead of the more traditional 2:00 p.m. ET) on Friday for the Good Friday Holiday. Friday's going into a holiday weekend historically had higher rates - just an FYI!
Thursday, March 25, 2010
Thursday, March 25, 2010
Yesterday's 5-year note auction was a bust - which is making investors extremely skittish as Uncle Sam returns to the credit markets this afternoon looking to borrow $32 billion in the form of 7-year notes. The unbridled wave of federal spending is beginning to create anxiety and uncertainty among global investors about Uncle Sam's long-term ability to service his ballooning mountain of debt. Sensitivity levels are particular high as the debt crisis spasms of Greece and Portugal produce financial headlines around the world. The current credit market environment will make it particularly difficult for the Treasury Department to peddle today's $32 billion stack of 7-year notes without a substantial "mark-down" in the price of this instrument. If such an event occurs, the upward pressure on mortgage interest rates will not likely abate much today.
The Labor Department reported earlier this morning that the number of workers standing in line to file first-time claims for jobless benefits fell 14,000 to a seasonally adjusted 442,000 during the week ended March 20th. The four-week moving average of new claims, a process that irons out the week-to-week volatility of the raw data, fell 11,000 to 453,000. The number of people enrolled in the government's Emergency Unemployment Compensation program fell sharply as well. The employment sector appears to be showing some faint signs of life after lying comatose for the better part of two-years. Even so, until the total number of initial jobless claims falls below 400,000 on a week-over-week basis this data will generally continue to be viewed by most analysts as supportive of the prospects for steady to perhaps fractionally lower rates.
The Labor Department reported earlier this morning that the number of workers standing in line to file first-time claims for jobless benefits fell 14,000 to a seasonally adjusted 442,000 during the week ended March 20th. The four-week moving average of new claims, a process that irons out the week-to-week volatility of the raw data, fell 11,000 to 453,000. The number of people enrolled in the government's Emergency Unemployment Compensation program fell sharply as well. The employment sector appears to be showing some faint signs of life after lying comatose for the better part of two-years. Even so, until the total number of initial jobless claims falls below 400,000 on a week-over-week basis this data will generally continue to be viewed by most analysts as supportive of the prospects for steady to perhaps fractionally lower rates.
Wednesday, March 24, 2010
Wednesday, March 24, 2010
New orders for durable goods rose for the third straight month in February as businesses rebuilt inventories by the largest margin in a year. The government said orders for long lasting manufactured goods rose 0.5% last month while the January figure was revised sharply upward to show a 3.9% increase.
Mortgage investors view the durable goods orders data as a leading indicator of manufacturing activity, which in turn provides a good measure of overall business health. In the strange world of the credit markets -- signs of improving economic conditions tend to create upward pressure on mortgage interest rates as investors anticipate an increased demand for capital to fund growth. When the demand for capital rises -- the attendant interest rates rise as well.
In a separate report the Commerce Department said the pace of new home sales unexpectedly fell by 2.2% in February. Most analysts had anticipated new home sales last month would improve modestly in February. The weather may have been a significant factor behind the outsized drop in new home sales, as much of the decline was centered in the Northeast. The pace of new home sales in coming months will likely remain subdued as the high jobless rate and extremely tight credit conditions continue to restrict demand for a while longer yet.
As they do every Wednesday, the Mortgage Banker's of America released their mortgage application index for the week ended March 19th. According to MBA, overall application activity dropped 4.2% from week earlier levels. Purchase application requests were up 2.7% while refinance applications slumped 7.1%. Refinance requests accounted for 65% of all applications and refi's represent 64.8% of the prospective loan volume. Looking further into the late spring and early summer months there are a number of reasons to believe the momentum of mortgage loan demand will improve. The pace of employment will likely prove to be upbeat enough to allay consumers' concerns while record-high affordability and a slowdown in home price declines will probably spur a large number of current "fence-sitters" to jump on the home buying bandwagon.
Uncle Sam will be splashing around in the credit market again this afternoon - looking to borrow $42 billion in the form of 5-year notes. The price for this security has fallen almost 100 basis-points since last week Tuesday. Traders love a deal - and the chance to buy such a high-quality, low-risk security as the Treasury's 5-year note at a deeply discounted price will likely prove hard to pass up. If this assessment proves accurate, this event will not likely influence the trend trajectory of mortgage interest rates one way or the other today.
Mortgage investors view the durable goods orders data as a leading indicator of manufacturing activity, which in turn provides a good measure of overall business health. In the strange world of the credit markets -- signs of improving economic conditions tend to create upward pressure on mortgage interest rates as investors anticipate an increased demand for capital to fund growth. When the demand for capital rises -- the attendant interest rates rise as well.
In a separate report the Commerce Department said the pace of new home sales unexpectedly fell by 2.2% in February. Most analysts had anticipated new home sales last month would improve modestly in February. The weather may have been a significant factor behind the outsized drop in new home sales, as much of the decline was centered in the Northeast. The pace of new home sales in coming months will likely remain subdued as the high jobless rate and extremely tight credit conditions continue to restrict demand for a while longer yet.
As they do every Wednesday, the Mortgage Banker's of America released their mortgage application index for the week ended March 19th. According to MBA, overall application activity dropped 4.2% from week earlier levels. Purchase application requests were up 2.7% while refinance applications slumped 7.1%. Refinance requests accounted for 65% of all applications and refi's represent 64.8% of the prospective loan volume. Looking further into the late spring and early summer months there are a number of reasons to believe the momentum of mortgage loan demand will improve. The pace of employment will likely prove to be upbeat enough to allay consumers' concerns while record-high affordability and a slowdown in home price declines will probably spur a large number of current "fence-sitters" to jump on the home buying bandwagon.
Uncle Sam will be splashing around in the credit market again this afternoon - looking to borrow $42 billion in the form of 5-year notes. The price for this security has fallen almost 100 basis-points since last week Tuesday. Traders love a deal - and the chance to buy such a high-quality, low-risk security as the Treasury's 5-year note at a deeply discounted price will likely prove hard to pass up. If this assessment proves accurate, this event will not likely influence the trend trajectory of mortgage interest rates one way or the other today.
Tuesday, March 23, 2010
Trading activity in the mortgage market is thin and sporadic this morning. Uncle Sam is looking to borrow $44 billion in the form of 2-year notes today. The short duration of this investment vehicle and the lack of other competing high-quality, low-risk investment alternatives in the global marketplace should produce solid demand at this afternoon's debt auction. If so, this event will not exert any discernible influence on the trend trajectory of mortgage interest rates today.
As expected, mortgage investors gave the February Existing Home Sales report nothing more than a passing glance. The National Association of Realtors said existing home sales fell 0.6% on a month-over-month basis -- while the pace of existing homes sales is 7.9% higher compared to a-year-ago. The median sales price decreased to $165,000 from $168,200 last year. The Realtors said winter storms did not affect existing home purchases much, with the worst-hit regions of the country actually posting sales increases during the month.
Mortgage investors made note of the fact the government's extended tax credit program has not made an impact on existing home sales so far. The April 30th deadline to sign a sales contract in order for the homebuyer to be eligible for tax break is fast approaching -- and may yet push the pace of sales higher. The challenge here is that most households who already own a home and wish to take advantage of the government's tax incentive to purchase a new home will, by necessity, have to sell their existing property in one of the weakest real estate market in decades in order to complete their purchase transaction. I don't know about you - but this sounds like one of those -- "I want you to learn to swim but don't get in the water" things to me. I think it can probably be safely assumed the impact of the extended tax credit program will likely fall short of the lofty expectations government data wonks have projected.
So now what?
The pace of sales for both new and existing home sales is far more dependent on job creation -- and improved job security for those currently employed -- than it is on government tax incentives and progressively lower mortgage interest rates.
One needs to simply note than in January new home sales touched their lowest level since records began in 1963 -- while the pace of existing home sales is running at late 1990's levels. The "so what" factor here is that housing sales are not improving even though the interest rate on a 30-year fixed-rate more was 4.96% during the week ended March 18th -- not far from the 4.71% reached on December 3rd -- which marked the lowest mortgage interest rate level in Freddie Mac's history going back to 1972. At this juncture it is readily apparent to even casual observers the level of mortgage interest rates is certainly not a significant impediment to housing sector sales growth.
From this point forward a strengthening job market will be required to drive a notable acceleration in the pace of new and existing home sales. That's the bad news part of today's housing news. The good news is that most analysts broadly expect sustained job growth to will begin to materialize in the second-half of the year.
As expected, mortgage investors gave the February Existing Home Sales report nothing more than a passing glance. The National Association of Realtors said existing home sales fell 0.6% on a month-over-month basis -- while the pace of existing homes sales is 7.9% higher compared to a-year-ago. The median sales price decreased to $165,000 from $168,200 last year. The Realtors said winter storms did not affect existing home purchases much, with the worst-hit regions of the country actually posting sales increases during the month.
Mortgage investors made note of the fact the government's extended tax credit program has not made an impact on existing home sales so far. The April 30th deadline to sign a sales contract in order for the homebuyer to be eligible for tax break is fast approaching -- and may yet push the pace of sales higher. The challenge here is that most households who already own a home and wish to take advantage of the government's tax incentive to purchase a new home will, by necessity, have to sell their existing property in one of the weakest real estate market in decades in order to complete their purchase transaction. I don't know about you - but this sounds like one of those -- "I want you to learn to swim but don't get in the water" things to me. I think it can probably be safely assumed the impact of the extended tax credit program will likely fall short of the lofty expectations government data wonks have projected.
So now what?
The pace of sales for both new and existing home sales is far more dependent on job creation -- and improved job security for those currently employed -- than it is on government tax incentives and progressively lower mortgage interest rates.
One needs to simply note than in January new home sales touched their lowest level since records began in 1963 -- while the pace of existing home sales is running at late 1990's levels. The "so what" factor here is that housing sales are not improving even though the interest rate on a 30-year fixed-rate more was 4.96% during the week ended March 18th -- not far from the 4.71% reached on December 3rd -- which marked the lowest mortgage interest rate level in Freddie Mac's history going back to 1972. At this juncture it is readily apparent to even casual observers the level of mortgage interest rates is certainly not a significant impediment to housing sector sales growth.
From this point forward a strengthening job market will be required to drive a notable acceleration in the pace of new and existing home sales. That's the bad news part of today's housing news. The good news is that most analysts broadly expect sustained job growth to will begin to materialize in the second-half of the year.
Monday, March 22, 2010
Monday, March 22, 2010
As you are probably aware -- the House of Representatives passed a sweeping health care reform bill yesterday in a special weekend session. The overall cost of the new health care program is expected to be $940 billion over ten years to provide coverage to 32 million uninsured Americans. According to the government, the cost of the program will be completely covered by a new tax on the highest earners, fees on health-care companies and hundreds of billions of dollars in Medicare savings As far as credit market participants are concerned this morning -- the enormous cost of the health care legislation is not troubling -- at least not today anyway.
Repeat from Friday's commentary: To finance the expanding national deficit the government will sell $44 billion of 2-year notes on Tuesday, $42 billion of 5-year notes on Wednesday and a $32 billion batch of 7-year notes on Thursday. Barring a "surprise" news event, the credit markets will likely absorb this new supply with little trouble. The world is awash in excess capital and people are still aggressively seeking hi-grade, low-risk investment opportunities. Nothing currently fits that profile better than dollar denominated Treasury debt obligations and agency eligible mortgage-backed security. The absence of even a hint of inflation pressure within the general economy -- together with the Fed's pledge to keep their benchmark short-term rates low for an "extended period of time" -- should collectively prove to be "just-the-thing" to attract aggressive bidding for these three debt instruments. If this assessment proves accurate, next week's solid Treasury auction results will tend to be supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates.
The coming Treasury auctions will likely easily trump the release of the February home sales figures. The Existing Home sales numbers are due at 8:30 a.m. ET next Tuesday and the New Home sales report will follow at 8:30 a.m. ET on Wednesday. The consensus estimate among economists is currently calling for a 1.0% decline in the pace of Existing Home sales while New Home sales are expected to post a barely perceptible improvement of 0.03%. Look for mortgage investors to give this data nothing more than a passing glance.
For those interested in such things - as of last Thursday the Fed has just a little more than $14 billion left to spend of their original $1.25 trillion "war chest" set aside for the direct purchase of mortgage-backed securities. The Fed plans to conclude this program on March 31st as originally scheduled. The widespread worry that the end of the program would produce a sharp rise in mortgage interest rates will likely prove to be grossly overblown. It currently appears there is more than an adequate amount of cash on the sidelines to buy the smaller supply of mortgage-backed securities coming on line. Once mortgage demand picks up later this year the Fed's absence may be felt more acutely - but for the time being the end of their direct mortgage-backed security purchase program will likely pass with little visible evidence on most of your mortgage investors' rate sheets.
Repeat from Friday's commentary: To finance the expanding national deficit the government will sell $44 billion of 2-year notes on Tuesday, $42 billion of 5-year notes on Wednesday and a $32 billion batch of 7-year notes on Thursday. Barring a "surprise" news event, the credit markets will likely absorb this new supply with little trouble. The world is awash in excess capital and people are still aggressively seeking hi-grade, low-risk investment opportunities. Nothing currently fits that profile better than dollar denominated Treasury debt obligations and agency eligible mortgage-backed security. The absence of even a hint of inflation pressure within the general economy -- together with the Fed's pledge to keep their benchmark short-term rates low for an "extended period of time" -- should collectively prove to be "just-the-thing" to attract aggressive bidding for these three debt instruments. If this assessment proves accurate, next week's solid Treasury auction results will tend to be supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates.
The coming Treasury auctions will likely easily trump the release of the February home sales figures. The Existing Home sales numbers are due at 8:30 a.m. ET next Tuesday and the New Home sales report will follow at 8:30 a.m. ET on Wednesday. The consensus estimate among economists is currently calling for a 1.0% decline in the pace of Existing Home sales while New Home sales are expected to post a barely perceptible improvement of 0.03%. Look for mortgage investors to give this data nothing more than a passing glance.
For those interested in such things - as of last Thursday the Fed has just a little more than $14 billion left to spend of their original $1.25 trillion "war chest" set aside for the direct purchase of mortgage-backed securities. The Fed plans to conclude this program on March 31st as originally scheduled. The widespread worry that the end of the program would produce a sharp rise in mortgage interest rates will likely prove to be grossly overblown. It currently appears there is more than an adequate amount of cash on the sidelines to buy the smaller supply of mortgage-backed securities coming on line. Once mortgage demand picks up later this year the Fed's absence may be felt more acutely - but for the time being the end of their direct mortgage-backed security purchase program will likely pass with little visible evidence on most of your mortgage investors' rate sheets.
Friday, March 19, 2010
Friday, March 19, 2010
Ohio U really?? wow!!
The sell-off in the credit markets yesterday afternoon was largely a function of money-center banks and other major broker/dealers selling assets out of existing portfolios to make room in front of next week's $118 billion three-part Treasury auction.
To finance the expanding national deficit the government will sell $44 billion of 2-year notes on Tuesday, $42 billion of 5-year notes on Wednesday and a $32 billion batch of 7-year notes on Thursday. Barring a "surprise" news event, the credit markets will likely absorb this new supply with little trouble. The world is awash in excess capital and people are still aggressively seeking hi-grade low-risk investment opportunities. Nothing fits that profile better than dollar denominated Treasury debt obligations and agency eligible mortgage-backed security. The absence of even a hint of inflation pressure within the general economy -- together with the Fed's pledge to keep their benchmark short-term rates low for an "extended period of time" -- should collectively prove to be "just-the-thing" to attract aggressive bidding for these three debt instruments. If this assessment proves accurate, next week's solid Treasury auction results will tend to be supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates.
The coming Treasury auctions will likely easily trump the release of the February home sales figures. The Existing Home sales numbers are due at 8:30 a.m. ET next Tuesday and the New Home sales report will follow at 8:30 a.m. ET on Wednesday. The consensus estimate among economists is currently calling for a 1.0% decline in the pace of Existing Home sales while New Home sales are expected to post a barely perceptible improvement of 0.03%. Look for mortgage investors to give this data nothing more than a passing glance.
For those interested in such things - as of last Thursday the Fed has just a little more than $14 billion left to spend of their original $1.25 trillion "war chest" set aside for the direct purchase of mortgage-backed securities. The Fed plans to conclude this program on March 31st as originally scheduled. The widespread worry that the end of the program would produce a sharp rise in mortgage interest rates will likely prove to be grossly overblown. It currently appears there is more than an adequate amount of cash on the sidelines to buy the smaller supply of mortgage-backed securities coming on line. Once mortgage demand picks up later this year the Fed's absence may be felt more acutely - but for the time being the end of their direct mortgage-backed security purchase program will likely pass with little visible evidence on most of your mortgage investors' rate sheets
The sell-off in the credit markets yesterday afternoon was largely a function of money-center banks and other major broker/dealers selling assets out of existing portfolios to make room in front of next week's $118 billion three-part Treasury auction.
To finance the expanding national deficit the government will sell $44 billion of 2-year notes on Tuesday, $42 billion of 5-year notes on Wednesday and a $32 billion batch of 7-year notes on Thursday. Barring a "surprise" news event, the credit markets will likely absorb this new supply with little trouble. The world is awash in excess capital and people are still aggressively seeking hi-grade low-risk investment opportunities. Nothing fits that profile better than dollar denominated Treasury debt obligations and agency eligible mortgage-backed security. The absence of even a hint of inflation pressure within the general economy -- together with the Fed's pledge to keep their benchmark short-term rates low for an "extended period of time" -- should collectively prove to be "just-the-thing" to attract aggressive bidding for these three debt instruments. If this assessment proves accurate, next week's solid Treasury auction results will tend to be supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates.
The coming Treasury auctions will likely easily trump the release of the February home sales figures. The Existing Home sales numbers are due at 8:30 a.m. ET next Tuesday and the New Home sales report will follow at 8:30 a.m. ET on Wednesday. The consensus estimate among economists is currently calling for a 1.0% decline in the pace of Existing Home sales while New Home sales are expected to post a barely perceptible improvement of 0.03%. Look for mortgage investors to give this data nothing more than a passing glance.
For those interested in such things - as of last Thursday the Fed has just a little more than $14 billion left to spend of their original $1.25 trillion "war chest" set aside for the direct purchase of mortgage-backed securities. The Fed plans to conclude this program on March 31st as originally scheduled. The widespread worry that the end of the program would produce a sharp rise in mortgage interest rates will likely prove to be grossly overblown. It currently appears there is more than an adequate amount of cash on the sidelines to buy the smaller supply of mortgage-backed securities coming on line. Once mortgage demand picks up later this year the Fed's absence may be felt more acutely - but for the time being the end of their direct mortgage-backed security purchase program will likely pass with little visible evidence on most of your mortgage investors' rate sheets
Thursday, March 18, 2010
Thursday, March 18 - Let the Madness Begin!!
Before I get into the daily Market - Just an FYI - I am picking West Virginia to beat Kansas in the Championship Game of the NCAA Hoop Tourney - good luck with your brackets!!
Trading activity in the mortgage market is thin and sporadic in today's early going.
The Labor Department reported this morning that the number of workers filing first-time claims for unemployment benefits fell by 5,000 to 457,000 during the week ended March 13th. The number of workers collecting extended jobless benefits fell by a little more than 7,300. The story here is that the labor market is moving very slowly in the right direction -- but until the number of workers filing first-time jobless benefit claims below 400,000 on a week-over-week basis -- the Fed is unlikely to get serious about pushing their benchmark short-term interest rates higher. If the Fed is not poised to push short-term interest rates higher - mortgage interest rates are unlikely to make a sustained move to notably higher levels either. Don't misunderstand -- I am not saying rates will continue to fall - I am saying the pace of increase as it develops will likely be mild rather than a dramatic "sling-shot" move higher.
In a separate report, the Labor Department said its Consumer Price Index was unchanged in February from January, while the more important core rate (a measure that excludes the volatile food and energy components) inched up 0.1% after falling 0.1% in January. The majority of mortgage investors showed as much interest in this report as most college freshman show in a late afternoon world history class. The general assumption among market participants is that core inflation will remain comfortably low through the end of this year thanks to the lingering effects of the recession. If that assumption proves accurate - the upward pressure on mortgage interest rates that tends to come from rising inflation concerns will almost certainly remain muted - and that is a positive for the prospects for very modest mortgage interest rates through at least the end of 2010 (in my judgment we are talking 6.0% or less for a 30-year mortgage).
Trading activity in the mortgage market is thin and sporadic in today's early going.
The Labor Department reported this morning that the number of workers filing first-time claims for unemployment benefits fell by 5,000 to 457,000 during the week ended March 13th. The number of workers collecting extended jobless benefits fell by a little more than 7,300. The story here is that the labor market is moving very slowly in the right direction -- but until the number of workers filing first-time jobless benefit claims below 400,000 on a week-over-week basis -- the Fed is unlikely to get serious about pushing their benchmark short-term interest rates higher. If the Fed is not poised to push short-term interest rates higher - mortgage interest rates are unlikely to make a sustained move to notably higher levels either. Don't misunderstand -- I am not saying rates will continue to fall - I am saying the pace of increase as it develops will likely be mild rather than a dramatic "sling-shot" move higher.
In a separate report, the Labor Department said its Consumer Price Index was unchanged in February from January, while the more important core rate (a measure that excludes the volatile food and energy components) inched up 0.1% after falling 0.1% in January. The majority of mortgage investors showed as much interest in this report as most college freshman show in a late afternoon world history class. The general assumption among market participants is that core inflation will remain comfortably low through the end of this year thanks to the lingering effects of the recession. If that assumption proves accurate - the upward pressure on mortgage interest rates that tends to come from rising inflation concerns will almost certainly remain muted - and that is a positive for the prospects for very modest mortgage interest rates through at least the end of 2010 (in my judgment we are talking 6.0% or less for a 30-year mortgage).
Wednesday, March 17, 2010
Happy St. Patty's Day!!!
The Labor Department reported earlier this morning that prices at the farm and factory gate fell 0.6% last month. Excluding the volatile food and energy components, the more important "core" producer price index rose just 0.1%. Mortgage investors yawned. It is worth noting that about 90% of the decline in the overall index can be attributed to the gasoline costs which fell 7.4% during the reporting period. As any of us who have filled-up the 'ol jalopy within the last four-week can attest -- prices at the pump are rising sharply. Mortgage investors largely shrugged off the benign inflation news contained in this report because they can see the proverbial "handwriting-on-the-wall" -- the recent surge in fuel costs will undoubtedly show-up to push the coming March and April producer price index figures notably higher.
Separately, the applications for home loans fell 1.9% last week despite the lowest mortgage rates in more than three months, the Mortgage Bankers Association said. The decrease was attributable to a 2.3% decline in the component of index that measures demand for loans to purchase a home. The refinance request component of the index slipped 1.7% lower. Average 30-year fixed mortgage rates edged 10 basis-points lower to finish the week at 4.91%. Mortgage rates have not been lower since early December.
Separately, the applications for home loans fell 1.9% last week despite the lowest mortgage rates in more than three months, the Mortgage Bankers Association said. The decrease was attributable to a 2.3% decline in the component of index that measures demand for loans to purchase a home. The refinance request component of the index slipped 1.7% lower. Average 30-year fixed mortgage rates edged 10 basis-points lower to finish the week at 4.91%. Mortgage rates have not been lower since early December.
Tuesday, March 16, 2010
Tuesday, March 16, 2010
The mortgage market is idling this morning as investors nervously await the release of the Federal Open Market Committee's post-meeting statement scheduled for 2:15 p.m. ET this afternoon.
With a national jobless rate of 9.7% and inflation pressures not even registering a "blip" on policymakers' radars -- it is almost a certainty that the Fed will leave their benchmark short-term interest rates unchanged. That much is essentially a "given" as far as mortgage investors are concerned. The real question, and the major source of anxiety for some, revolves around the phrasing of the Fed's post-meeting statement.
The vast majority of market participants expect the members of the Federal Open Market Committee to repeat their pledge to keep their benchmark short-term interest rates exceptionally low for an "extended period". Mortgage investors interpret that phrase - which the Fed has used in every post-meeting statement since March 2009 - as a signal that the first rate-hike is still several months away. If the "extended period" phrase is still prevalent in the post-meeting communiqué from the Fed today - mortgage interest rates will likely show little reaction to this event.
It is worth noting some pressure is developing within the committee to temper the "extended period" language by substituting a more puzzling phrase like "near-term or sometime yet". All this fuss surrounding the phraseology of the Fed's post-meeting statement probably appears to be nothing more than an exercise in splitting hairs - especially if the central bankers do indeed leave their benchmark rates unchanged. Even so, you can be almost certain that the upward pressure on mortgage interest rates will increase notably if today's post-meeting statement from the Fed contains this otherwise small phrasing change.
Last but certainly not least, policymakers will likely use their post-meeting statement to remind market participants that March 31st is still the targeted end-point of the $1.25 trillion dollar direct purchase program for mortgage-backed securities. As of last Thursday the Fed had spent $1.22 trillion of this total allocation. The jury is still out on the question of how big an impact the conclusion of this program will have on the current level of mortgage interest rates - but most recent models suggest the direct consequence of this single event will probably be limited to an uptick in note rates of 25 basis-points or less.
After the greatest financial upheaval in nearly a century, the Fed is almost certain to go to great lengths to avoid agitating market participants with surprise shifts in their guidance regarding monetary policy - making a meaningful change to the primary text of today's post meeting statement a low probability outcome -- but not so small as to be discounted completely. Pay attention here.
Almost going unnoticed as mortgage investors focus on this afternoon's event was a report this morning from the Commerce Department indicating housing starts and building permits both fell last month - as a consequence of sharp decline in the multifamily sector. The government said overall housing starts were down 5.9% while building permits slumped 1.6%, dropping for a second straight month.
The news here is a bit deceptive -- on a year-over-year basis single-family housing starts are up 39% while single-family building permits are up 32.0% compared to February 2009. While the trend trajectory for homebuilders is headed in the right direction -- it is still going to be a slow recovery for new home construction until the economy begins creating jobs strongly and consistently enough to restore prospective homebuyers confidence in the overall sustainability of the economic recovery. And that is a condition experts suggest is unlikely to develop for another six to twelve months yet.
With a national jobless rate of 9.7% and inflation pressures not even registering a "blip" on policymakers' radars -- it is almost a certainty that the Fed will leave their benchmark short-term interest rates unchanged. That much is essentially a "given" as far as mortgage investors are concerned. The real question, and the major source of anxiety for some, revolves around the phrasing of the Fed's post-meeting statement.
The vast majority of market participants expect the members of the Federal Open Market Committee to repeat their pledge to keep their benchmark short-term interest rates exceptionally low for an "extended period". Mortgage investors interpret that phrase - which the Fed has used in every post-meeting statement since March 2009 - as a signal that the first rate-hike is still several months away. If the "extended period" phrase is still prevalent in the post-meeting communiqué from the Fed today - mortgage interest rates will likely show little reaction to this event.
It is worth noting some pressure is developing within the committee to temper the "extended period" language by substituting a more puzzling phrase like "near-term or sometime yet". All this fuss surrounding the phraseology of the Fed's post-meeting statement probably appears to be nothing more than an exercise in splitting hairs - especially if the central bankers do indeed leave their benchmark rates unchanged. Even so, you can be almost certain that the upward pressure on mortgage interest rates will increase notably if today's post-meeting statement from the Fed contains this otherwise small phrasing change.
Last but certainly not least, policymakers will likely use their post-meeting statement to remind market participants that March 31st is still the targeted end-point of the $1.25 trillion dollar direct purchase program for mortgage-backed securities. As of last Thursday the Fed had spent $1.22 trillion of this total allocation. The jury is still out on the question of how big an impact the conclusion of this program will have on the current level of mortgage interest rates - but most recent models suggest the direct consequence of this single event will probably be limited to an uptick in note rates of 25 basis-points or less.
After the greatest financial upheaval in nearly a century, the Fed is almost certain to go to great lengths to avoid agitating market participants with surprise shifts in their guidance regarding monetary policy - making a meaningful change to the primary text of today's post meeting statement a low probability outcome -- but not so small as to be discounted completely. Pay attention here.
Almost going unnoticed as mortgage investors focus on this afternoon's event was a report this morning from the Commerce Department indicating housing starts and building permits both fell last month - as a consequence of sharp decline in the multifamily sector. The government said overall housing starts were down 5.9% while building permits slumped 1.6%, dropping for a second straight month.
The news here is a bit deceptive -- on a year-over-year basis single-family housing starts are up 39% while single-family building permits are up 32.0% compared to February 2009. While the trend trajectory for homebuilders is headed in the right direction -- it is still going to be a slow recovery for new home construction until the economy begins creating jobs strongly and consistently enough to restore prospective homebuyers confidence in the overall sustainability of the economic recovery. And that is a condition experts suggest is unlikely to develop for another six to twelve months yet.
Monday, March 15, 2010
Monday, March 15, 2010
Mortgage investors are nervously awaiting tomorrow's Federal Open Market Committee meeting. In the run-up to this event traders' are once again engaged in the traditional handwringing and floor pacing - an exercise that will likely once again prove to be much ado about nothing.
With a national jobless rate of 9.7% and inflation pressures not even registering a "blip" on policymakers' radars it is almost a certainty that the Fed will leave their benchmark short-term interest rates unchanged. That much is essentially a "given" as far as mortgage investors are concerned. The real question, and the major source of anxiety for some, revolves around the phrasing of the Fed's post-meeting statement.
The vast majority of market participants expect the members of the Federal Open Market Committee to repeat their pledge to keep their benchmark short-term interest rates exceptionally low for an "extended period". Mortgage investors interpret that phrase - which the Fed has used in every post-meeting statement since March 2009 - as a signal that the first rate-hike is still several months away. If the "extended period" phrase is still prevalent in the post-meeting communiqué from the Fed - mortgage interest will likely show little reaction to this event.
It is worth noting some pressure is developing within the committee to temper the "extended period" language by substituting something vaguer like "near-term or sometime yet". All this fuss surrounding the phraseology of the Fed's post-meeting statement probably appears to be nothing more than an exercise in splitting hairs - especially if the central bankers do indeed leave their benchmark rates unchanged. Even so, you can be almost certain that the upward pressure on mortgage interest rates will increase notably if tomorrow's post-meeting statement from the Fed contains this otherwise small phrasing change.
After the greatest financial upheaval in nearly a century, the Fed is almost certain to go to great lengths to avoid agitating market participants with surprise shifts in their guidance regarding monetary policy - making a meaningful change to the primary text of the tomorrow's post meeting statement a low probability outcome -- but not so small as to be discounted completely. Pay attention here.
With a national jobless rate of 9.7% and inflation pressures not even registering a "blip" on policymakers' radars it is almost a certainty that the Fed will leave their benchmark short-term interest rates unchanged. That much is essentially a "given" as far as mortgage investors are concerned. The real question, and the major source of anxiety for some, revolves around the phrasing of the Fed's post-meeting statement.
The vast majority of market participants expect the members of the Federal Open Market Committee to repeat their pledge to keep their benchmark short-term interest rates exceptionally low for an "extended period". Mortgage investors interpret that phrase - which the Fed has used in every post-meeting statement since March 2009 - as a signal that the first rate-hike is still several months away. If the "extended period" phrase is still prevalent in the post-meeting communiqué from the Fed - mortgage interest will likely show little reaction to this event.
It is worth noting some pressure is developing within the committee to temper the "extended period" language by substituting something vaguer like "near-term or sometime yet". All this fuss surrounding the phraseology of the Fed's post-meeting statement probably appears to be nothing more than an exercise in splitting hairs - especially if the central bankers do indeed leave their benchmark rates unchanged. Even so, you can be almost certain that the upward pressure on mortgage interest rates will increase notably if tomorrow's post-meeting statement from the Fed contains this otherwise small phrasing change.
After the greatest financial upheaval in nearly a century, the Fed is almost certain to go to great lengths to avoid agitating market participants with surprise shifts in their guidance regarding monetary policy - making a meaningful change to the primary text of the tomorrow's post meeting statement a low probability outcome -- but not so small as to be discounted completely. Pay attention here.
Friday, March 12, 2010
Friday, March 12, 2010
As you probably know by now - retail sales came in surprisingly strong in February, raising 0.3% in total and 0.8% excluding autos despite the inclement weather that battered much of the country last month.
As usual the devil is in the detail, especially when cooler, calmer heads saw the major downward revisions that were made to the January figures - which originally indicated sales were up a robust 0.5% -- but audits of the data revealed overall sales were actually up a very modest 0.1%. Taken in a broader context these more experienced traders were quick to note that sales in February were below their February '08 and '07 levels. It remains abundantly apparent that as loan as high unemployment continues to squeezed household incomes, spending will remain constrained - and that is a condition that tends to be supportive of steady mortgage interest rates.
Looking ahead to next week mortgage investors will nervously await Tuesday's Federal Open Market Committee meeting. In the run-up to this event traders' traditional handwringing and floor pacing will likely once again prove to be much ado about nothing. With a national jobless rate of 9.7% and inflation pressures not even a "blip" on policymakers' radars it is almost a certainty that the Fed will leave their benchmark short-term interest rates unchanged. If this assessment proves accurate, the Fed's monetary policy position will continue to be supportive of steady to perhaps fractionally lower mortgage interest rates.
As usual the devil is in the detail, especially when cooler, calmer heads saw the major downward revisions that were made to the January figures - which originally indicated sales were up a robust 0.5% -- but audits of the data revealed overall sales were actually up a very modest 0.1%. Taken in a broader context these more experienced traders were quick to note that sales in February were below their February '08 and '07 levels. It remains abundantly apparent that as loan as high unemployment continues to squeezed household incomes, spending will remain constrained - and that is a condition that tends to be supportive of steady mortgage interest rates.
Looking ahead to next week mortgage investors will nervously await Tuesday's Federal Open Market Committee meeting. In the run-up to this event traders' traditional handwringing and floor pacing will likely once again prove to be much ado about nothing. With a national jobless rate of 9.7% and inflation pressures not even a "blip" on policymakers' radars it is almost a certainty that the Fed will leave their benchmark short-term interest rates unchanged. If this assessment proves accurate, the Fed's monetary policy position will continue to be supportive of steady to perhaps fractionally lower mortgage interest rates.
Thursday, March 11, 2010
Thursday, March 11, 2010
The mortgage market is drifting aimlessly this morning as investors await the details of this afternoon's $13 billion 30-year bond sale. The Treasury Department will conclude the sale promptly at 1:00 p.m. ET.
If this offering is aggressively bid by the global investment community - look for mortgage interest rates to remain very near current levels.
If the government finds it necessary to push the yield to investors up by accepting lower priced bids for this batch of 30-year bonds -- mortgage interest rates will almost certainly edge higher.
The number of workers filing new applications with the government for unemployment benefits fell by 6,000 to a seasonally adjusted 462,000 during the week ended March 6th. For the week ending February 20th, the latest period for which data is available, enrollment in extended benefits programs decreased by more than 15,000 while the number of people participating in the government's Unemployment Compensation Program fell by 159,000.
The weekly jobless claims data is not yet pointing to a meaningful labor market recovery - a condition that is unlikely to develop until the number of initial claims falls below 400,000 on a week-over-week basis. For the time being this data series remains supportive of steady to perhaps fractionally lower mortgage interest rates.
This week's economic calendar hasn't offered mortgage investors anything substantial to chew-on - but that will change tomorrow morning at 8:30 a.m. when the Commerce Department releases the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was 0.2% lower last month while sales excluding autos are expected to post a very modest gain of 0.1%.
If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.1% or more and the ex. auto component shows a gain 0.3% or more -- look for mortgage investors to push interest rates fractionally higher
If this offering is aggressively bid by the global investment community - look for mortgage interest rates to remain very near current levels.
If the government finds it necessary to push the yield to investors up by accepting lower priced bids for this batch of 30-year bonds -- mortgage interest rates will almost certainly edge higher.
The number of workers filing new applications with the government for unemployment benefits fell by 6,000 to a seasonally adjusted 462,000 during the week ended March 6th. For the week ending February 20th, the latest period for which data is available, enrollment in extended benefits programs decreased by more than 15,000 while the number of people participating in the government's Unemployment Compensation Program fell by 159,000.
The weekly jobless claims data is not yet pointing to a meaningful labor market recovery - a condition that is unlikely to develop until the number of initial claims falls below 400,000 on a week-over-week basis. For the time being this data series remains supportive of steady to perhaps fractionally lower mortgage interest rates.
This week's economic calendar hasn't offered mortgage investors anything substantial to chew-on - but that will change tomorrow morning at 8:30 a.m. when the Commerce Department releases the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was 0.2% lower last month while sales excluding autos are expected to post a very modest gain of 0.1%.
If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.1% or more and the ex. auto component shows a gain 0.3% or more -- look for mortgage investors to push interest rates fractionally higher
Wednesday, March 10, 2010
Wednesday, March 10, 2010
The mortgage market is drifting aimlessly this morning as investors await the details of this afternoon's $21 billion 10-year note sale. The Treasury Department will conclude the sale promptly at 1:00 p.m. ET. If this offering is aggressively bid by the global investment community - look for mortgage interest rates to remain very near current levels.
IF the government finds it necessary to push the yield to investors up by accepting lower priced bids for this batch of 10-year notes -- mortgage interest rates will almost certainly edge higher.
The Mortgage Bankers of America reported earlier today that its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loan requests, climbed 0.5% higher during the week ended March 5th. The component of the index that measures loan requests for home purchase increased 5.7%, while the demand for refi's dropped 1.5%. The MBA said borrowing costs for 30-year fixed rate mortgages, excluding fees, average 5.01% up 0.06% from the previous week.
The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was 0.2% lower last month while sales excluding autos are expected to post a very modest gain of 0.1%.
If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.1% or more and the ex. auto component shows a gain 0.3% or more -- look for mortgage investors to push interest rates fractionally higher.
IF the government finds it necessary to push the yield to investors up by accepting lower priced bids for this batch of 10-year notes -- mortgage interest rates will almost certainly edge higher.
The Mortgage Bankers of America reported earlier today that its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loan requests, climbed 0.5% higher during the week ended March 5th. The component of the index that measures loan requests for home purchase increased 5.7%, while the demand for refi's dropped 1.5%. The MBA said borrowing costs for 30-year fixed rate mortgages, excluding fees, average 5.01% up 0.06% from the previous week.
The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was 0.2% lower last month while sales excluding autos are expected to post a very modest gain of 0.1%.
If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.1% or more and the ex. auto component shows a gain 0.3% or more -- look for mortgage investors to push interest rates fractionally higher.
Monday, March 8, 2010
Monday, March 8, 2010
Mortgage investors have put the finishing touches on risk management positions and have moved to the sidelines in front of Uncle Sam's three-part borrowing spree that begins tomorrow with the sale of a $40 billion stack of 3-year notes, $21 billion of 10-year notes on Wednesday and concluding with a $13 billion batch of 30-year notes on Thursday.
The 10-year note and 30-year bond sales will exert the most influence on the trend trajectory of mortgage interest rates. If these two auctions are aggressively bid by the global investment community -- look for mortgage interest rates to remain very near current levels. If the government is forced to drop the price on one or both of these securities in order to attract the necessary capital -- mortgage interest rates will almost certainly edge higher.
The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was 0.2% lower last month while sales excluding autos are expected to post a very modest gain of 0.1%. If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.1% or more and the ex. auto component shows a gain 0.3% or more -- look for mortgage investors to push interest rates fractionally higher.
The 10-year note and 30-year bond sales will exert the most influence on the trend trajectory of mortgage interest rates. If these two auctions are aggressively bid by the global investment community -- look for mortgage interest rates to remain very near current levels. If the government is forced to drop the price on one or both of these securities in order to attract the necessary capital -- mortgage interest rates will almost certainly edge higher.
The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was 0.2% lower last month while sales excluding autos are expected to post a very modest gain of 0.1%. If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.1% or more and the ex. auto component shows a gain 0.3% or more -- look for mortgage investors to push interest rates fractionally higher.
Friday, March 5, 2010
Friday, March 5, 2010
The big news of the day is that winter storms evidently dampened payrolls much less than expected in February. According to the Labor Department the economy lost 36,000 more jobs than were created last month - with most of the losses concentrated in construction. Weather undoubtedly played a role here. January payrolls were revised down slightly to show a loss of 26,000 -- versus the 20,000 jobs lost as originally reported.
The big debate ranging between analysts right now revolves around the dynamic of weather distortions in today's headline nonfarm payroll numbers. One camp is arguing that the "blizzard-effect" caused job losses to be underestimated -- while the other group is flapping their arms and insisting that if it had not been for the impact of the "blizzard-effect" the economy would have experienced positive job growth in February.
According to research done by Bloomberg columnist Timothy Horman, the most recent storm of similar intensity occurring during a nonfarm payroll survey week was in January 1996. The data for payrolls that month showed a lost of 19,000 jobs -- followed by a gain of 434,000 in February. At this juncture it doesn't matter a twit whether next month's headline nonfarm payroll shows a substantial gain in job creation or not - the mere idea that historical data suggest such an outcome is possible will likely be enough to limit the ability of mortgage interest rates to move notably lower between now and Friday, April 2nd when the March payroll figures are released.
Looking ahead to next week Uncle Sam will be active in the credit markets from Tuesday through Thursday as he looks to borrow $85 billion in the form of 3- and 10-year notes and 30-year bonds. The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was flat last month while sales excluding autos are expected to post a very modest gain of 0.2%. If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.2% or more and the ex. auto component shows a gain 0.4% or more -- look for mortgage investors to push interest rates fractionally higher.
The big debate ranging between analysts right now revolves around the dynamic of weather distortions in today's headline nonfarm payroll numbers. One camp is arguing that the "blizzard-effect" caused job losses to be underestimated -- while the other group is flapping their arms and insisting that if it had not been for the impact of the "blizzard-effect" the economy would have experienced positive job growth in February.
According to research done by Bloomberg columnist Timothy Horman, the most recent storm of similar intensity occurring during a nonfarm payroll survey week was in January 1996. The data for payrolls that month showed a lost of 19,000 jobs -- followed by a gain of 434,000 in February. At this juncture it doesn't matter a twit whether next month's headline nonfarm payroll shows a substantial gain in job creation or not - the mere idea that historical data suggest such an outcome is possible will likely be enough to limit the ability of mortgage interest rates to move notably lower between now and Friday, April 2nd when the March payroll figures are released.
Looking ahead to next week Uncle Sam will be active in the credit markets from Tuesday through Thursday as he looks to borrow $85 billion in the form of 3- and 10-year notes and 30-year bonds. The economic calendar won't offer anything substantial for mortgage investors to chew-on until Friday's 8:30 a.m. release of the February Retail Sales figures. The consensus estimate is currently forecasting the pace of retail sales was flat last month while sales excluding autos are expected to post a very modest gain of 0.2%. If the consensus estimate is accurate, the February retail sales data will likely prove to be supportive of steady mortgage interest rates. Should the actual February retail sales headline figure post a gain of 0.2% or more and the ex. auto component shows a gain 0.4% or more -- look for mortgage investors to push interest rates fractionally higher.
Thursday, March 4, 2010
Thursday, March 4, 2010
Mortgage investors will spend the balance of the day putting the finishing touches on their risk management positions in front of tomorrow morning's (8:30 a.m. ET) release of the much anticipated February nonfarm payroll report. The consensus forecast among economists is calling for a drop of 60,000 jobs for the headline nonfarm payroll figure -- and an uptick in the national unemployment rate to 9.8% from January's 9.7% mark. Earlier this week the general view among economists was that Friday's headline nonfarm payroll would show 50,000 more jobs were lost last month than were created.
If the consensus forecast proves accurate, tomorrow's employment data will tend to be supportive of steady mortgage interest rates. The mortgage market has already priced-in the consensus estimate values for the nonfarm payroll data series - so it will likely take a slump in the headline number of 70,000 jobs or more and/or a surge in the national jobless rate to 9.9% or higher to fuel a rally strong enough to be supportive of fractionally lower mortgage interest rates. In the highly unlikely event the February nonfarm payroll data 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.
News early this morning that initial claims for unemployment declined 29,000 for the week ended February 27th garnered little more than a passing glance from mortgage investors. The upward revisions to fourth-quarter productivity and the attendant downward revision to fourth-quarter unit labor cost were noted - but otherwise had no discernable impact on the trend trajectory of mortgage interest rates today.
If the consensus forecast proves accurate, tomorrow's employment data will tend to be supportive of steady mortgage interest rates. The mortgage market has already priced-in the consensus estimate values for the nonfarm payroll data series - so it will likely take a slump in the headline number of 70,000 jobs or more and/or a surge in the national jobless rate to 9.9% or higher to fuel a rally strong enough to be supportive of fractionally lower mortgage interest rates. In the highly unlikely event the February nonfarm payroll data 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.
News early this morning that initial claims for unemployment declined 29,000 for the week ended February 27th garnered little more than a passing glance from mortgage investors. The upward revisions to fourth-quarter productivity and the attendant downward revision to fourth-quarter unit labor cost were noted - but otherwise had no discernable impact on the trend trajectory of mortgage interest rates today.
Wednesday, March 3, 2010
Wednesday, March 3, 2010
The private Institute of Supply management reported this morning that their index of service sector activity edged up to a reading of 53.0% in February from 50.5% in January. Readings above 50.0% indicate more firms said business conditions were getter better than said they were getting worse. Mortgage investors did take notice of the improved performance for this economic metric -- but did not move aggressively to nudge mortgage interest rates higher since the overall picture here is one of very modest manufacturing and service sector growth - a condition that tends to be supportive of steady mortgage interest rates.
The Mortgage Bankers of America said their application index, which measures requests for loans to buy homes and to refinance, rose by a seasonally adjusted 14.6% during the week ended February 26th. Purchase applications increased 9.0% while refinancing requests jumped 17.2% higher last week. Refinance requests represented about 69% of all applications taken last week.
Now the consensus forecast among economists in now calling for a drop of 60,000 jobs for Friday's much anticipated headline nonfarm payroll figure -- and an uptick in the national unemployment rate to 9.8% from January's 9.7% mark.
Just yesterday the general view among economists was that Friday's headline nonfarm payroll would show 50,000 more jobs were lost last month than were created. If the consensus forecast proves accurate, this data will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the highly unlikely event the February nonfarm payroll data 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.
The Mortgage Bankers of America said their application index, which measures requests for loans to buy homes and to refinance, rose by a seasonally adjusted 14.6% during the week ended February 26th. Purchase applications increased 9.0% while refinancing requests jumped 17.2% higher last week. Refinance requests represented about 69% of all applications taken last week.
Now the consensus forecast among economists in now calling for a drop of 60,000 jobs for Friday's much anticipated headline nonfarm payroll figure -- and an uptick in the national unemployment rate to 9.8% from January's 9.7% mark.
Just yesterday the general view among economists was that Friday's headline nonfarm payroll would show 50,000 more jobs were lost last month than were created. If the consensus forecast proves accurate, this data will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the highly unlikely event the February nonfarm payroll data 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.
Tuesday, March 2, 2010
Tuesday, March 2, 2010
Different day - same story.
Action in the mortgage market will likely be tightly range bound in advance of Friday's February payroll report. It's likely going to be difficult for mortgage interest rates to move significantly higher until we see a sustained improvement in job creation - and that's an outcome not expected for several months yet.
In addition, the Federal Reserve's pledge to keep its short-term benchmark interest rates low and the constantly changing headlines surrounding the debt crisis in Greece should keep global capital flowing steadily into the relative safe-haven of dollar denominated assets like Treasury obligation and mortgage-backed securities for at least the majority of the week.
The consensus forecast among economists calls for a drop of 50,000 jobs for Friday's 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 highly unlikely event the February nonfarm payroll data 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.
Action in the mortgage market will likely be tightly range bound in advance of Friday's February payroll report. It's likely going to be difficult for mortgage interest rates to move significantly higher until we see a sustained improvement in job creation - and that's an outcome not expected for several months yet.
In addition, the Federal Reserve's pledge to keep its short-term benchmark interest rates low and the constantly changing headlines surrounding the debt crisis in Greece should keep global capital flowing steadily into the relative safe-haven of dollar denominated assets like Treasury obligation and mortgage-backed securities for at least the majority of the week.
The consensus forecast among economists calls for a drop of 50,000 jobs for Friday's 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 highly unlikely event the February nonfarm payroll data 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.
Monday, March 1, 2010
Monday, March 1, 2010
Action in the mortgage market will likely be tightly range bound in advance of Friday's February payroll report. It's likely going to be difficult for mortgage interest rates to move significantly higher until we see a sustained improvement in job creation - and that's an outcome not expected for several months yet.
In addition, the Federal Reserve's pledge to keep its short-term benchmark interest rates low and the constantly changing headlines surrounding the debt crisis in Greece should keep global capital flowing steadily into the relative safe-haven of dollar denominated assets like Treasury obligation and mortgage-backed securities for at least the majority of the week.
Earlier this morning the Commerce Department reported consumer spending rose 0.5% in January even though incomes grew at a much more modest 0.1%. Mortgage investors were quick to shrug-off the uptick in spending since the numbers make it evident that consumers are dipping into savings for the money to make their purchases because income growth remains so weak. Without sustained improvement in personal incomes - the pace of spending on Main Street will fall sharply in coming months as consumers quickly burn through their limited savings.
The core personal consumption expenditure index component of this report showed that the Fed's preferred measure of inflation at the consumer level was unchanged in January and was up a very modest 1.4% from year earlier levels - a positive sign for the prospects of steady to perhaps fractionally lower mortgage interest rates ahead.
In a separate report the private Institute of Supply Management said its index of national factory activity declined to a reading of 56.5% in February from 58.4% in January. Readings over 50% indicate more firms said business was improving than said it was worsening. The employment index component of this report rose to 56.1% from 53.3%, its third month above 50.0%, an indication that more companies are adding workers than shedding them.
Analysts were quick to note the gap between new orders and inventories -- a good proxy for future production --is narrowing, which suggests that factory output will moderate over the next few months. With inventories no longer falling rapidly, production should grow more in line with final demand - and growth in final demand will require noticeable improvement in the employment picture. Most mortgage investors gave this data little more than a passing glance.
The consensus forecast among economists calls for a drop of 50,000 jobs for Friday's 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 highly unlikely event the February nonfarm payroll data 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.
In addition, the Federal Reserve's pledge to keep its short-term benchmark interest rates low and the constantly changing headlines surrounding the debt crisis in Greece should keep global capital flowing steadily into the relative safe-haven of dollar denominated assets like Treasury obligation and mortgage-backed securities for at least the majority of the week.
Earlier this morning the Commerce Department reported consumer spending rose 0.5% in January even though incomes grew at a much more modest 0.1%. Mortgage investors were quick to shrug-off the uptick in spending since the numbers make it evident that consumers are dipping into savings for the money to make their purchases because income growth remains so weak. Without sustained improvement in personal incomes - the pace of spending on Main Street will fall sharply in coming months as consumers quickly burn through their limited savings.
The core personal consumption expenditure index component of this report showed that the Fed's preferred measure of inflation at the consumer level was unchanged in January and was up a very modest 1.4% from year earlier levels - a positive sign for the prospects of steady to perhaps fractionally lower mortgage interest rates ahead.
In a separate report the private Institute of Supply Management said its index of national factory activity declined to a reading of 56.5% in February from 58.4% in January. Readings over 50% indicate more firms said business was improving than said it was worsening. The employment index component of this report rose to 56.1% from 53.3%, its third month above 50.0%, an indication that more companies are adding workers than shedding them.
Analysts were quick to note the gap between new orders and inventories -- a good proxy for future production --is narrowing, which suggests that factory output will moderate over the next few months. With inventories no longer falling rapidly, production should grow more in line with final demand - and growth in final demand will require noticeable improvement in the employment picture. Most mortgage investors gave this data little more than a passing glance.
The consensus forecast among economists calls for a drop of 50,000 jobs for Friday's 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 highly unlikely event the February nonfarm payroll data 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.
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