Monday, July 3, 2017

Eary End-of-Trading Day: Risk was on in today's abbreviated trading session. Markets closed early for the holiday. The ISM and construction numbers both surprised to the upside, pushing equities higher and bonds lower. The 10-year yield jumped to 2.34% and MBS was pushed down -22 bps. The end of the week is nothing to wink at with payrolls and oil still in turmoil. We'll see where Wednesday takes us. Note: After initial post, I received two alerts before the markets closed (early) that the FNMA 30-YR 3.5% coupon is -15 BP (-30 BP for the day, currently 102.375). This could lead to unfavorable re-pricing (higher interest rates). What's going on and why does it matter? Mortgage bonds are starting to rebound after bouncing off their 100-day moving average on Friday.  The market closes early today and it's closed tomorrow for Independence Day. We may see a quiet start to this week because many market participants are out on an extended break. The Fed is not scheduled to buy any mortgage bonds today, but they'll be back in the market on Wednesday with a $1.05 billion purchase of GNMA mortgage bonds.  The market may get volatile starting on Wednesday because the minutes from last month's Federal Reserve meeting will be released on Wednesday afternoon.  We also have the ADP employment numbers on Thursday, and the all-important non-farm payrolls report on Friday.  As for today, the ISM manufacturing index and some construction spending numbers are scheduled to be released later this morning. What should you do about it? Watch for bond prices to continue rebounding from these levels, but be prepared to lock your rate if bond prices break below their 100-day moving average. ..... Economic reports that may impact mortgage rates this week: Date Report Period Prior Estimate Actual Mon 3 Jul Construction Spending May -1.4% 0.3% Mon 3 Jul ISM Mfg. PMI June 54.9 55.2 Mon 3 Jul Total Vehicle Sales June 16.66M 16.55M Wed 5 Jul Factory Orders May -0.2% -0.5% Wed 5 Jul Fed Minutes June - - Thu 6 Jul ADP National Employment June 253,000 188,000 Thu 6 Jul Initial Jobless Claims Week of June 26 244,000 242,000 Thu 6 Jul ISM Non-Mfg PMI June 56.9 56.5 Fri 7 Jul Non-Farm Payrolls June 138,000 180,000 Fri 7 Jul Average Earnings June 0.2% 0.3%

Thursday, June 29, 2017

What's going on and why does it matter?

Mortgage pricing is continuing to deteriorate as the global bond market continues to react to recent comments made by various central bankers from across the world. The final GDP estimates for the first quarter of 2017 came out this morning stronger than expected, which may add fuel to the market's expectations that interest rates are likely to move higher.  Mortgage bonds are trading firmly below their 200-day moving average, and it seems like the next hard stop on the way down could be the 100-day moving average.  The Fed is scheduled to purchase up to $1.05 billion of GNMA mortgage bonds today, and they'll be back in the market tomorrow buying some 30-year conventional mortgages.

What should you do about it?

Lock your rate to be safe.

Wednesday, June 28, 2017

What's going on and why does it matter? Mortgage bonds opened lower today in continuation of yesterday's sell-off.  Mortgage bonds are trading firmly below their 200-day moving average, which is now operating as a technical ceiling of resistance.  The recent decline in bond prices was triggered yesterday after President Draghi of the European Central Bank signaled that it may be time to start increasing interest rates in Europe.  Combine that with recent comments from the Fed, and it seems like global interest rates may finally start to move higher.  The Fed is scheduled to purchase up to $1.625 billion of 30-year conventional mortgages today, which may help. What should you do about it? Lock your rate to be safe, especially while mortgage bonds continue to trade below 200-day moving average. Economic reports that may impact mortgage rates this week: Date Report Period Prior Estimate Actual Mon 26 Jun Durable Goods May -0.9% -0.6% -1.1% Tue 27 Jun Consumer Confidence Jun 117.9 116.0 118.9 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 19 241,000 240,000 Fri 30 Jun Personal Income May 0.4% 0.3% Fri 30 Jun Core PCE Price Index May 0.2% 0.1% Fri 30 Jun Chicago PMI June 59.4 58.0 Fri 30 Jun U of Mich. Consumer Sentiment Jun 97.1 94.5

Tuesday, June 27, 2107 End of Trading Day

Minneapolis Fed's Kashkari said raising rates in the face of weak inflation data would be a mistake.

Bond prices went lower throughout the day following Mario Draghi's comments about raising interest rates and adjusting monetary policy pending inflation data in the months to come.  

Debt traders took note amidst a large Treasury auction of $34 billion in 5-year notes. The 10-year yield jumped to 2.21% and mortgages didn't fare any better, closing down 27 bps in the afternoon.

As markets were closing, news broke from Washington that the GOP is going to delay the vote on the health-care bill until after the July 4thholiday. Now investors may go into the long weekend wondering how to manage their risk.

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.

Economic reports that may impact mortgage rates this week:

Date	Report	Period	Prior	Estimate	Actual
Mon 26 Jun	Durable Goods	May	-0.9%	-0.6%	-1.1%
Tue 27 Jun	Consumer Confidence	Jun	117.9	116.0
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	241,000	240,000
Fri 30 Jun	Personal Income	May	0.4%	0.3%
Fri 30 Jun	Core PCE Price Index	May	0.2%	0.1%
Fri 30 Jun	Chicago PMI	June	59.4	58.0
Fri 30 Jun	U of Mich. Consumer Sentiment	Jun	97.1	94.5

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.