Friday, September 8, 2017

What's going on and why does it matter?

Mortgage pricing is at its best level since November of last year. Risk aversion in the financial markets seems to be in vogue as investors are favoring the safety of bonds vs. stocks in light of disappointing economic reports overnight in China and Japan, the hurricanes hitting the US, and concerns about another missile test from North Korea this weekend. 

The Fed is very supportive of the mortgage market today with a sizable purchase of up to $2.05 billion of 30-year conventional mortgage bonds. The economic calendar is light today, and there are two Fed policymakers who are scheduled to give speeches.

What should you do about it?
Watch for mortgage bonds to remain in positive territory above their 10-day moving average, which has been operating as a technical level of support. However, be prepared to lock your rate quickly if mortgage bonds fall back below that level.

Thursday, September 7, 2017

What's going on and why does it matter? Mortgage bonds opened higher this morning after bouncing off their 10-day moving average in yesterday's volatile day of trading. The European Central Bank (ECB) announced this morning that they will extend their massive bond buying program for a while longer, and so the bond market is rallying today. On the economic calendar, the jobless claims numbers jumped this week due to the initial economic impact from Hurricane Harvey. The Fed is scheduled to purchase up to $1.475 billion of GNMA mortgage bonds today, and a few Fed policymakers are scheduled to give speeches. What should you do about it? Watch for mortgage bonds to remain in positive territory above their 10-day moving average, which has been operating as a technical level of support. However, be prepared to lock your rate quickly if mortgage bonds fall back below that level.    Economic reports that may impact mortgage rates this week: Date Report Period Prior Est. Actual Tue 5 Sep Factory Orders Jul 3.0% -3.3% -3.3% Wed 6 Sep ISM Non-Mfg PMI Aug 53.9 55.4 55.3  Thu 7 Sep Initial Jobless Claims Week of Aug 28 236k 237k 298k Fri 8 Sep Wholesale Sales Jul 0.7% 0.4%

Wednesday, September 6, 2017

What's going on and why does it matter? Mortgage bonds opened slightly lower this morning after yesterday's massive "flight to safety" rally. Investors are favoring bonds in light of various risk events, including ongoing tensions between the US and North Korea, uncertainty about budget negotiations in Congress, category 5 Hurricane Irma plowing through the Caribbean, and cautiousness ahead of tomorrow's European Central Bank monetary policy meeting. Even so, bond investors may be reluctant to continue driving bond prices higher due to the "prepayment risk" of borrowers with higher-rate loans refinancing into loans with lower rates. Bond investors lose money when this happens, so this may put a damper on further mortgage price improvements.  Keep in mind that mortgage prices are currently at their best levels in over 10 months. The Fed's mortgage bond buying program today is limited to $600 million of 15-year conventional mortgages. What should you do about it?   Lock your rate to be safe.     ..... Economic reports that may impact mortgage rates this week: Date Report Period Prior Est. Actual Tue 5 Sep Factory Orders Jul 3.0% -3.3% -3.3% Wed 6 Sep ISM Non-Mfg PMI Aug 53.9 55.4   Thu 7 Sep Initial Jobless Claims Week of Aug 28 236k 237k   Fri 8 Sep Wholesale Sales Jul 0.7% 0.4%

Friday, September 1, 2017

The employment data out this morning underwhelmed. 156,000 non-farm jobs were created in July (Hurricane Harvey's impacts will show in next months' report). Economists were looking for at least 180,000. Unemployment came through at 4.4%, a touch higher than anticipated at 4.3%. Thus far into the trading session, markets seem to be somewhat ignoring the miss. Traders are tidying up their positions before they leave for the long holiday weekend. The 10-year is floating up slightly towards 2.16% and mortgage bonds are down -14 bps.