Monday, June 26, 2017

What's going on and why does it matter?
Mortgage bonds opened this week in positive territory and they are trading above all their major moving averages.  Mortgage pricing should remain favorable as long as bonds continue to trade at or above these levels.  The economic calendar this week includes some important economic reports, most notably the core PCE inflation numbers.  Core PCE is the Fed's favorite measurement of inflation. Also of importance to the bond market this week, is whether the Senate's health care bill advances. The Fed is scheduled to purchase up to $1.35 billion of 30-year conventional mortgage bonds today.

What should you do about it?
Watch for mortgage bond prices to continue higher, but be prepared to lock your rate quickly if bond prices start heading south.

MBS Chart
Economic reports that may impact mortgage rates this week:

DateReportPeriodPriorEstimateActual
Mon
26 Jun
Durable
Goods
May-0.9%-0.6%-1.1%
Tue
27 Jun
Consumer
Confidence
Jun117.9116.0 
Wed
28 Jun
Pending
Home Sales
May-1.3%0.8% 
Thu
29 Jun
GDP
final est.
Q1
2017
2.1%1.2% 
Thu
29 Jun
Core PCE
Prices
Q1
2017
1.3%2.1% 
Thu
29 Jun
Initial Jobless
Claims
Week of
June 19
241,000240,000 
Fri
30 Jun
Personal
Income
May0.4%0.3% 
Fri
30 Jun
Core PCE
Price Index
May0.2%0.1% 
Fri
30 Jun
Chicago PMIJune59.458.0 
Fri
30 Jun
U of Mich.
Consumer
Sentiment
Jun97.194.5 

June 23,2017 End of Trading Day

MBS rallied to close out one of the least active trading weeks we have seen since last summer. The 10-year government bond yield finished at 2.14%, still well within the recent tight range, and mortgage closed up 6 bps.

Next week starts with the important Durable Goods Orders on Monday and GDP on Thursday. Markets will continue to keep one eye on Washington though to see if the GOP can muster the votes to get the health care bill through.

Wednesday, June 21, 2017

It will be interesting to see if bond prices can break above this critical level, or if they'll get turned down.

What's going on and why does it matter?

Mortgage bonds are trading at an important crossroad as their 10-day, 30-day, and 200-day moving averages are all getting ready to converge.   

The Fed is scheduled to purchase a very sizable $2.05 billion of 15-year and 30-year conventional mortgage bonds today, so that may help.  Later this morning we have the existing home sales report; but other than that, the economic calendar is relatively quiet.

What should you do about it?

Watch and see if mortgage bonds can break out of this narrow trading range, but be prepared to lock your rate quickly if bond prices start heading south.

Danny Smith, CMPS
NMLS #138873
512-773-6528

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Tuesday, June 20, 2017



What's going on and why does it matter?

Mortgage bonds are continuing to trade between their 30-day and 200-day moving averages.  The economic calendar is quiet again today, although there are a few Fed policy-makers who are scheduled to give speeches. The Fed is scheduled to purchase up to $900 million of GNMA mortgage bonds today, but they'll be back in the market tomorrow with a sizable purchase of 15-year and 30-year conventional mortgage bonds.

What should you do about it?
Lock your rate to be safe; especially as mortgage bonds struggle to break above their 200-day moving average.

MBS Chart
























Wednesday, June 14, 2017

What's going on and why does it matter?

Mortgage bonds are drifting between their 30-day and 200-day moving averages as the market awaits the Fed's interest rate decision and monetary policy statement, which is scheduled for release at 2pm ET this afternoon. Although the market is anticipating that the Fed will hike short-term interest rates, all eyes will be focused on the Fed's statement and Fed Chair Janet Yellen's press conference afterward.  Bond investors will be looking for clues as to when the Fed may stop or slow down its massive bond-buying program. The risk for mortgage pricing is that the Fed may be further along in their exit plans than was previously anticipated. The Fed won't be buying any mortgage bonds today due to their meeting.

What should you do about it?

Watch for mortgage bonds to rebound off their 30-day moving average, but be prepared to lock your rate quickly if bonds break below that critical level of support.
.....
MBS Chart

Monday, June 12, 2017



What's going on and why does it matter?

This is a big week for the financial markets with a packed economic calendar and a Fed meeting scheduled for Tuesday and Wednesday. The market is anticipating that the Fed will hike short-term interest rates on Wednesday by 0.25%. More importantly, though, the market will be watching the Fed's statement very closely to get a glimpse into their future plans. Keep in mind that mortgage rates aren't directly impacted when the Fed changes short-term interest rates. In fact, mortgage pricing may actually improve if the bond market thinks that the Fed will be less aggressive with future rate hikes and/or extend their massive bond buying program.

Over the past 9 years, the Fed has been the largest buyer of mortgage bonds in the market, and that has been a large contributing factor to low mortgage rates.  For example, average supply of new mortgage bonds has been just over $2 billion per day, while Fed purchases have averaged roughly $1 billion per day. In fact, the Fed is scheduled to purchase up to $1.625 billion of 30-year conventional mortgage bonds today. In other news, a large supply of US Treasuries is scheduled to hit the bond market this week, so that may dampen the market's appetite for mortgage bonds.

What should you do about it?
Watch for mortgage bonds to bounce around between their 30-day and 200-day moving averages, but be prepared to lock your rate quickly if bonds break below their 30-day moving average.

.....
MBS Chart

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Economic reports that may impact mortgage rates this week:
Date
Report
Period
Prior
Estimate
Actual
Tue
13 Jun
PPI
final demand
May
0.5%
0.0%

Wed
14 Jun
Core CPI
May
0.1%
0.2%

Wed
14 Jun
Real Weekly
Earnings
May
0.4%
0.0%

Wed
14 Jun
Retail
Sales
May
0.4%
0.1%

Wed
14 Jun
Business
Inventories
Apr
0.2%
-0.2%

Wed
14 Jun
Fed Funds
Target Rate
Jun
1.0%
1.25%

Thu
15 Jun
NY Fed
Mfg. Index
Jun
-1.0
3.75

Thu
15 Jun
Initial Jobless
Claims
Week of
June 5
245,000
242,000

Fri
16 Jun
Industrial
Production
May
1.0%
0.2%

Fri
16 Jun
Capacity
Utilization
May
76.7%
76.8%

Fri
16 Jun
Manuf.
Output
May
1.0%
0.2%

Fri
16 Jun
Building
Permits
May
1.23M
1.25M

Fri
16 Jun
Housing
Starts
May
1.17M
1.22M

Fri
16 Jun
U of Mich.
Consumer
Sentiment
Jun
97.7
97.0