More of the same.
In the absence of any economic data to guide sentiment - most mortgage investors will likely spend the balance of the day putting the finishing touches on their risk management strategies in front of this week's $99 billion, three-part Treasury debt auction. Uncle Sam will be peddling $35 billion of 2-year notes tomorrow, $35 billion of 5-year notes on Wednesday and $29 billion of 7-year notes on Thursday. Given the recent increased volatility surrounding domestic and global headlines from the financial markets -- investors are very uncertain about what the correct levels for yields should currently be. Investor nervousness in front of the coming Treasury auctions seems unusually high. The "so what" factor is direct and straightforward -- nervous investors are not normally inclined to push mortgage rates notably lower. Heads up.
Monday, May 23, 2011
Monday, May 9, 2011
Uncle Sam will be in the credit markets looking to sell $32 billion of three-year notes, $24 billion of 10-year notes, and $16 billion of 30-year bonds on Tuesday, Wednesday and Thursday. The Fed has been the dominant buyer of Treasuries sold at recent auctions. Fed Chairman Bernanke has about $75 billion of his original $600 billion "QE2" stimulus allocation left in his checkbook - a sum he intends to spend before the program ends next month. Most observers expect the Fed will use whatever amount is required to "crease-the-wheels" at this week's government debt sale. If so, the upcoming round of auctions will likely have little, if any discernible impact on the trend trajectory of mortgage interest rates.
Not much in the way of economic news is on the docket until Thursday when investors will react to the inflation data contained in the April Producer Price Index and we will get a chance to see how big a hunk, if any, higher energy prices took out of the April Retail Sales numbers. The second part of the inflation story will be told on Friday with the release of the April Consumer Price Index. As long as the core rates (a value that excludes the more volatile food and energy price components) of both the Producer and Consumer Price Indexes remain at 0.2% or below these two data series will likely have little influence on the level of mortgage interest rates. In the off-chance one or both of the core indexes of these two primary measures of inflation post a reading of 0.3% or more -- look for mortgage rates to make a noticeable move to higher levels.
Not much in the way of economic news is on the docket until Thursday when investors will react to the inflation data contained in the April Producer Price Index and we will get a chance to see how big a hunk, if any, higher energy prices took out of the April Retail Sales numbers. The second part of the inflation story will be told on Friday with the release of the April Consumer Price Index. As long as the core rates (a value that excludes the more volatile food and energy price components) of both the Producer and Consumer Price Indexes remain at 0.2% or below these two data series will likely have little influence on the level of mortgage interest rates. In the off-chance one or both of the core indexes of these two primary measures of inflation post a reading of 0.3% or more -- look for mortgage rates to make a noticeable move to higher levels.
Thursday, May 5, 2011
News from the Labor Department earlier this morning indicating the number of Americans filing first-time claims for jobless benefits rose to an eight-month high last week did nothing but add support to the current rally in the mortgage market. Initial claims for state unemployment benefits rose 43,000 during the week ended April 30th to a seasonally adjusted 474,000, the highest mark since mid-August 2010. Applications for unemployment benefits have topped the key 400,000 level in each of the past four weeks. Requests for jobless benefits usually fall below 400,000 per week during periods of strong economic growth.
A Labor Department spokesperson said a spring break holiday in New York, a new emergency benefits program in Oregon, and auto shutdowns caused by the effects of the disaster in Japan were the main reasons for the outsized surge in claims.
This week's initial claims numbers fell outside of the survey period for tomorrow's much more important April Nonfarm Payroll report. Even so, based on today's surprisingly soft weekly claims data, many traders will be "penciling in" expectations the April Nonfarm Payroll figures will indicate growth in the labor sector has stalled. Look for mortgage interest rates to continue to creep lower should headline job creation for April fall below 180,000 and/or the national jobless rate climbs to 8.9% or higher.
A second report from the Labor Department this morning showed first-quarter nonfarm productivity increased at a 1.6% annual rate, braking sharply from the 2.9% pace set during the last three months of 2010. Most mortgage investors were so busy responding to the big surge in the weekly claims data they had little time to give this second report anything more than a passing glance.
A Labor Department spokesperson said a spring break holiday in New York, a new emergency benefits program in Oregon, and auto shutdowns caused by the effects of the disaster in Japan were the main reasons for the outsized surge in claims.
This week's initial claims numbers fell outside of the survey period for tomorrow's much more important April Nonfarm Payroll report. Even so, based on today's surprisingly soft weekly claims data, many traders will be "penciling in" expectations the April Nonfarm Payroll figures will indicate growth in the labor sector has stalled. Look for mortgage interest rates to continue to creep lower should headline job creation for April fall below 180,000 and/or the national jobless rate climbs to 8.9% or higher.
A second report from the Labor Department this morning showed first-quarter nonfarm productivity increased at a 1.6% annual rate, braking sharply from the 2.9% pace set during the last three months of 2010. Most mortgage investors were so busy responding to the big surge in the weekly claims data they had little time to give this second report anything more than a passing glance.
Wednesday, May 4, 2011
This morning's news that the Institute of Supply Management's index of activity in the service sector of the economy slumped a surprising 4.5% in April has proven supportive of fractionally higher mortgage prices in today's early trading.
Most investors appear to view today's sharp drop in the ISM service sector index a bit skeptically. The swoon in this economic benchmark stemmed from the largest decline in the new orders component of this data set since the ISM first began compiling this index 13 years ago. The April decline for new orders is larger than after 9/11, and larger than the mark set following Hurricane Katrina. Just two months ago this index hit a six-year high. While a plunge of the magnitude registered in today's report is certainly possible - most investors will likely need to see other separate but validating reports before beginning to aggressively price-in the likelihood the economy is slipping back into a recession.
In a separate report the Mortgage Bankers of America said the mortgage loan applications rose 4.0% on a week-over-week basis. Refinance applications rose 6.0% during the week ended April 29th while purchase money requests were up a modest 0.3%. Six out of every ten loan applications taken last week were for refi's. The average national contract rate for 30-year fixed-rate mortgages finished the week at 4.76%, down 17 basis points from four weeks ago, down by 26 basis points from the month-ago mark, and down 26 basis points from year-ago levels.
Most investors appear to view today's sharp drop in the ISM service sector index a bit skeptically. The swoon in this economic benchmark stemmed from the largest decline in the new orders component of this data set since the ISM first began compiling this index 13 years ago. The April decline for new orders is larger than after 9/11, and larger than the mark set following Hurricane Katrina. Just two months ago this index hit a six-year high. While a plunge of the magnitude registered in today's report is certainly possible - most investors will likely need to see other separate but validating reports before beginning to aggressively price-in the likelihood the economy is slipping back into a recession.
In a separate report the Mortgage Bankers of America said the mortgage loan applications rose 4.0% on a week-over-week basis. Refinance applications rose 6.0% during the week ended April 29th while purchase money requests were up a modest 0.3%. Six out of every ten loan applications taken last week were for refi's. The average national contract rate for 30-year fixed-rate mortgages finished the week at 4.76%, down 17 basis points from four weeks ago, down by 26 basis points from the month-ago mark, and down 26 basis points from year-ago levels.
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