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.
Monday, May 9, 2011
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.
Friday, April 29, 2011
Mortgage investors gave this morning's March Personal Income and Spending data and the first-quarter Employment Cost Index figures nothing more than a passing glance. Both sets of numbers fell roughly inline with the majority of economists' expectations and therefore had already been priced into the market.
Mortgage investors' attention is keenly focused on the upcoming battle developing between the White House and congressional leaders as the clock tick downs on the mid-May deadline to raise the $14.3 trillion cap on government borrowing. Default, even if temporary, could have long-term adverse effects for Treasury debt sales - and by extension - the trend trajectory of mortgage interest rates.
Even if those in power reach an agreement to raise the debt ceiling -- but in the process choose to engage in another round of political brinkmanship that pushes the financial debate down to the wire - you can bet the upward pressure on mortgage interest rates will rise as both domestic and global market participants are forced to prepare for a potential debt default by the United States government. Most observers believe an accord will be reached -- but the timing of such an event is still in question.
The coming week will be a busy one with respect to potentially market moving economic reports. Things kick-off on Monday when the Institute of Supply Management releases their April manufacturing activity index at 10:00 a.m. ET. The Institute's April Service Sector Index will take center-stage on Wednesday morning at 10:00 a.m. ET and the grand finale will occur on Friday with the release of the April Nonfarm Payroll stats at 8:30 a.m. ET. All three major reports are currently expected to prove supportive of steady to perhaps fractionally lower mortgage interest rates.
Mortgage investors' attention is keenly focused on the upcoming battle developing between the White House and congressional leaders as the clock tick downs on the mid-May deadline to raise the $14.3 trillion cap on government borrowing. Default, even if temporary, could have long-term adverse effects for Treasury debt sales - and by extension - the trend trajectory of mortgage interest rates.
Even if those in power reach an agreement to raise the debt ceiling -- but in the process choose to engage in another round of political brinkmanship that pushes the financial debate down to the wire - you can bet the upward pressure on mortgage interest rates will rise as both domestic and global market participants are forced to prepare for a potential debt default by the United States government. Most observers believe an accord will be reached -- but the timing of such an event is still in question.
The coming week will be a busy one with respect to potentially market moving economic reports. Things kick-off on Monday when the Institute of Supply Management releases their April manufacturing activity index at 10:00 a.m. ET. The Institute's April Service Sector Index will take center-stage on Wednesday morning at 10:00 a.m. ET and the grand finale will occur on Friday with the release of the April Nonfarm Payroll stats at 8:30 a.m. ET. All three major reports are currently expected to prove supportive of steady to perhaps fractionally lower mortgage interest rates.
Thursday, February 17, 2011
Wednesday, February 16, 2011
The Labor Department reported this morning that inflation pressures at the wholesale level shot up again in January as energy and food costs continued to rise. The seasonally adjusted 0.8% gain in January follows a 0.9% gain in December and marks the seventh consecutive monthly increase in raw material prices for manufacturers. Even more of a concern than the surge in the headline producer price index, at least from a mortgage investor's perspective, is the fact that the core producer price index, a value which excludes the volatile food and energy costs, spiked 0.5% higher last, marking the largest month-over-month gain for this component since October 2008
Up to this point in the recovery from the Great Recession producers have not had the pricing-power necessary to push through much, if any, of the increases in their raw material costs to the consumer. That story could change quickly. Investors will scrutinize the details of tomorrow morning's January consumer price index (8:30 a.m. ET) for any sign that inflation pressures on Main Street are ramping up.
Most analysts believe the core rate of the consumer price index (a value excluding the more volatile food and energy costs) for January will not post a gain of more than 0.1%. If so, look for mortgage interest rates to move sideways to perhaps slightly lower - but be ready - a core consumer price index of 0.2% or higher will likely send mortgage interest rates sharply higher before the day is over. And here is the "kicker" - even if tomorrow's core rate of inflation posts a reading of 0.1% -- fixed-income investors will likely begin to anticipate an upward trajectory for next month's core consumer price index value.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey data for the week ended February 11th. The overall index fell 9.5% for the week with purchase applications down by 5.9% and refinance requests lower by 11.4%. The average national contract rate for 30-year fixed-rate mortgages finished at 5.12%, down by 2 basis points from the prior week, up by 35 basis points from four weeks ago, and up by 17 basis points from the year ago mark. Six out of every ten applications taken last week were refinance loan requests.
Up to this point in the recovery from the Great Recession producers have not had the pricing-power necessary to push through much, if any, of the increases in their raw material costs to the consumer. That story could change quickly. Investors will scrutinize the details of tomorrow morning's January consumer price index (8:30 a.m. ET) for any sign that inflation pressures on Main Street are ramping up.
Most analysts believe the core rate of the consumer price index (a value excluding the more volatile food and energy costs) for January will not post a gain of more than 0.1%. If so, look for mortgage interest rates to move sideways to perhaps slightly lower - but be ready - a core consumer price index of 0.2% or higher will likely send mortgage interest rates sharply higher before the day is over. And here is the "kicker" - even if tomorrow's core rate of inflation posts a reading of 0.1% -- fixed-income investors will likely begin to anticipate an upward trajectory for next month's core consumer price index value.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey data for the week ended February 11th. The overall index fell 9.5% for the week with purchase applications down by 5.9% and refinance requests lower by 11.4%. The average national contract rate for 30-year fixed-rate mortgages finished at 5.12%, down by 2 basis points from the prior week, up by 35 basis points from four weeks ago, and up by 17 basis points from the year ago mark. Six out of every ten applications taken last week were refinance loan requests.
Monday, February 7, 2011
There is nothing in the way of economic news for mortgage investors to consider today as they brace for this week's upcoming barrage of Treasury auctions.
Uncle Sam will be in the credit markets looking to borrow $72 billion in the form of $32 billion of 3-year notes on Tuesday, $24 billion of 10-year notes on Wednesday, and $16 billion of 30-year bonds on Thursday. Macro-economic news will be limited to Thursday's 8:30 a.m. ET initial weekly jobless claims report and the December Wholesale Inventory data at 10:00 a.m. ET the same day. If yields across the whole spectrum of the credit market have risen to high enough levels that these three offerings should draw decent demand. If so, look for mortgage interest rates to move sideways with a slight potential to creep fractionally lower should bidding at the auctions prove stronger-than-expected.
Uncle Sam will be in the credit markets looking to borrow $72 billion in the form of $32 billion of 3-year notes on Tuesday, $24 billion of 10-year notes on Wednesday, and $16 billion of 30-year bonds on Thursday. Macro-economic news will be limited to Thursday's 8:30 a.m. ET initial weekly jobless claims report and the December Wholesale Inventory data at 10:00 a.m. ET the same day. If yields across the whole spectrum of the credit market have risen to high enough levels that these three offerings should draw decent demand. If so, look for mortgage interest rates to move sideways with a slight potential to creep fractionally lower should bidding at the auctions prove stronger-than-expected.
Wednesday, February 2, 2011
Trading activity in the mortgage market is light this morning as inclement weather --together with limited risk taking in front of Friday's much anticipated January nonfarm payroll data -- kept most investors on the sidelines. The selling pressure in today's early going is not so much a story about large numbers of traders looking to off-load mortgage-backed securities as it is about a shortage of buyers willing to stick their financial neck-out before a big event like the upcoming jobs number.
A report shortly after the market open by payroll processor ADP Employer Services suggesting the private sector added a stronger-than-expected 187,000 last month was largely discounted by most investors. The one consistent thing about this data set is that it substantially under- or over-shoots the more important numbers from the government.
The key question on the minds of all credit market participants is whether anything but weak hiring will be evident in Friday's nonfarm payroll report. Most investors anticipate the economy created 150,000 more jobs in January than were lost -- while the national jobless rate is expected to tick up to 9.5% from December's 9.4%. Numbers that match or fall below these projections will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the unlikely case the actual numbers are stronger than currently projected -- look for your investors to push mortgage rates higher.
Payrolls are harder to judge this time around given the incessant weather disruptions that have blanketed the nation. Raymond Stone, managing director and economists at Stone & McCarthy Research Associates points out that over the past seven years, the initial print on January payrolls has come in consistently below market expectations. In addition, December payrolls have been revised down 23 times over the past 31 years (75% of the time), with the average revision amounting to about 36,000 jobs. The "so what" factor attached to all this statistical mumbo jumbo is that while it is possible Friday's nonfarm payroll data will prove strong enough to push mortgage interest rates rudely higher from current levels - it is not a very probable outcome.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey figures for the week ended January 25th. The MBA said mortgage applications were up a collective 11.3% during the period - with refinance demand up by 11.7% and purchase loan requests up 9.5%. The average contract rate for 30-year fixed-rate mortgages finished up at 4.81%, up by 1 basis point from the prior week, down by 1 basis point from the month-ago mark and down 19 basis points from the year-ago level. Seven out of every ten loan applications taken last week were refinance requests.
A report shortly after the market open by payroll processor ADP Employer Services suggesting the private sector added a stronger-than-expected 187,000 last month was largely discounted by most investors. The one consistent thing about this data set is that it substantially under- or over-shoots the more important numbers from the government.
The key question on the minds of all credit market participants is whether anything but weak hiring will be evident in Friday's nonfarm payroll report. Most investors anticipate the economy created 150,000 more jobs in January than were lost -- while the national jobless rate is expected to tick up to 9.5% from December's 9.4%. Numbers that match or fall below these projections will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the unlikely case the actual numbers are stronger than currently projected -- look for your investors to push mortgage rates higher.
Payrolls are harder to judge this time around given the incessant weather disruptions that have blanketed the nation. Raymond Stone, managing director and economists at Stone & McCarthy Research Associates points out that over the past seven years, the initial print on January payrolls has come in consistently below market expectations. In addition, December payrolls have been revised down 23 times over the past 31 years (75% of the time), with the average revision amounting to about 36,000 jobs. The "so what" factor attached to all this statistical mumbo jumbo is that while it is possible Friday's nonfarm payroll data will prove strong enough to push mortgage interest rates rudely higher from current levels - it is not a very probable outcome.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey figures for the week ended January 25th. The MBA said mortgage applications were up a collective 11.3% during the period - with refinance demand up by 11.7% and purchase loan requests up 9.5%. The average contract rate for 30-year fixed-rate mortgages finished up at 4.81%, up by 1 basis point from the prior week, down by 1 basis point from the month-ago mark and down 19 basis points from the year-ago level. Seven out of every ten loan applications taken last week were refinance requests.
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