Source: Ken Mason, Mortgage California
Wednesday’s bond market has opened in negative territory following slightly stronger than expected economic data and a positive open for stocks. The stock markets are extending yesterday’s afternoon rally, but to a much less degree. The Dow is currently up 44 points while the Nasdaq has gained 12 points. The bond market is currently down 9/32, but we may still see a slight improvement in this morning’s rates compared to yesterday’s morning pricing due to strength in bonds late yesterday.
This morning’s first piece of economic data was January's Housing Starts. It revealed a larger than expected increase in starts and an upward revision to December’s starts, hinting that the housing sector may be stronger than thought. Rising starts of new homes indicates more sales or stronger levels of optimism by builders. But, this data is not considered to be highly important to the markets or to mortgage rates. It is the week’s least important data and has not had much of an influence on this morning’s mortgage pricing.
Also posted this morning was January's Industrial Production data. It showed a 0.9% increase in output at U.S. factories, mines and utilities that exceeded forecasts. That indicates a level of manufacturing sector strength that is considered bad news for bonds and mortgage rates. However, this data is considered only moderately important, so it has not hurt mortgage rates this morning.
The third event of the day will be the release of the minutes from last FOMC meeting later today. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. I am expecting some volatility in the markets after the minutes are released.
The Labor Department will post January’s Producer Price Index (PPI) early tomorrow morning. It measures inflationary pressures at the producer level of the economy and is considered to be an important measurement of inflation. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. It is expected to show an increase of 0.8% in the overall reading and a 0.1% rise in the core data.
Good news for bonds would be a decline in both readings, particularly the core data. Also tomorrow morning will be the release of the Leading Economic Indicators (LEI) for January. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.5% increase, meaning that economic activity may rise in the near future. A smaller than expected rise would be good news for the bond market and mortgage rates.
Showing posts with label California Mortgage. Show all posts
Showing posts with label California Mortgage. Show all posts
Wednesday, February 17, 2010
Monday, January 25, 2010
Daily Mortgage Commentary
Monday’s bond market has opened down slightly despite a much weaker than expected housing report. The stock markets are posting minor gains with the Dow up 25 points and the Nasdaq up 5 points. The bond market is currently down 2/32, but we will still likely see an increase in this morning’s mortgage rates of approximately .125 - .250 of a discount point due to weakness late Friday.
The National Association of Realtors reported late this morning that home resales fell a whopping 16.7% last month. Analysts were expecting to see a sizable decline in sales, but this was much larger than thought. The surprising drop indicates that the housing sector still is not stable, which is good news for the bond market and mortgage rates. Some of the loss is being attributed to the initial expiration of the home buyer tax credit, but I don’t believe many analysts are blaming the entire loss on that factor. This raises further concerns about the housing sector and makes a broader economic recovery less likely to be in the near future.
The rest of the week is extremely busy in terms of economic data scheduled for release and will likely be an active week for mortgage rates. There are six more relevant economic releases scheduled for the week in addition to a Federal Open Market Committee (FOMC) meeting.
January’s Consumer Confidence Index (CCI) will be released late tomorrow morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 53.5 would be ideal for the bond market and mortgage rates.
And if we didn’t have enough to watch already, there are two relatively important Treasury auctions for the markets to digest. The Fed will auction 5-year and 7-year Treasury Notes Wednesday and Thursday, respectively. If they are met with a strong demand from investors, the broader bond market may rally during afternoon hours those days. However, a lackluster interest in the sales could lead to bond selling and higher mortgage rates.
Source: Ken Mason, Mortgage California
The National Association of Realtors reported late this morning that home resales fell a whopping 16.7% last month. Analysts were expecting to see a sizable decline in sales, but this was much larger than thought. The surprising drop indicates that the housing sector still is not stable, which is good news for the bond market and mortgage rates. Some of the loss is being attributed to the initial expiration of the home buyer tax credit, but I don’t believe many analysts are blaming the entire loss on that factor. This raises further concerns about the housing sector and makes a broader economic recovery less likely to be in the near future.
The rest of the week is extremely busy in terms of economic data scheduled for release and will likely be an active week for mortgage rates. There are six more relevant economic releases scheduled for the week in addition to a Federal Open Market Committee (FOMC) meeting.
January’s Consumer Confidence Index (CCI) will be released late tomorrow morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 53.5 would be ideal for the bond market and mortgage rates.
And if we didn’t have enough to watch already, there are two relatively important Treasury auctions for the markets to digest. The Fed will auction 5-year and 7-year Treasury Notes Wednesday and Thursday, respectively. If they are met with a strong demand from investors, the broader bond market may rally during afternoon hours those days. However, a lackluster interest in the sales could lead to bond selling and higher mortgage rates.
Source: Ken Mason, Mortgage California
Tuesday, November 17, 2009
Daily Mortgage Commentary
Monday’s bond market opened in positive territory despite early stock gains and mixed economic news. The stock markets are kicking the week off in positive ground with the Dow up 119 points and the Nasdaq up 27 points. The bond market is currently up 5/32, which with Friday’s late gains should improve this morning’s mortgage rates by approximately .250 of a discount point.
The Commerce Department reported this morning that October’s Retail Sales rose 1.4%, exceeding forecasts of a 0.9% increase. At first look, this headline number is bad news for bonds. However, two factors prevented the bond market from selling. The first was a sizable downward revision to September’s sales that indicated consumers were spending even less than previously thought. Last month’s estimate was a decline of 1.5% in sales, but it now believed that sales fell 2.3% that month. The second piece of positive news was the reading that excludes October’s more volatile auto sales. With those transactions excluded, sales rose only 0.2%, which was weaker than the 0.4% that was expected. So, today’s report can’t really be considered favorable or negative for bonds and mortgage rates. Its impact has been fairly neutral.
Fed Chairman Bernanke is making a lunchtime speech to the Economic Club of New York today. I don’t believe that we will see too much reaction to his speech, but the possibility always exists whenever he speaks. Therefore, we should not ignore it, but if we see the markets move noticeably between noon and 12:30 PM ET, it likely is a result of something he said.
There are two reports scheduled to be posted tomorrow morning. The first is October's Producer Price Index (PPI) that is one of the two key inflation readings this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and should drive mortgage rates higher. If we see in-line or weaker than expected numbers, mortgage rates should fall tomorrow. Current forecasts are calling for an increase of 0.5% in the overall reading and a 0.1% increase in the core reading.
Tomorrow’s second report is October's Industrial Production data. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the PPI readings are.
Source: Ken Mason, California Mortgage
November 16, 2009
The Commerce Department reported this morning that October’s Retail Sales rose 1.4%, exceeding forecasts of a 0.9% increase. At first look, this headline number is bad news for bonds. However, two factors prevented the bond market from selling. The first was a sizable downward revision to September’s sales that indicated consumers were spending even less than previously thought. Last month’s estimate was a decline of 1.5% in sales, but it now believed that sales fell 2.3% that month. The second piece of positive news was the reading that excludes October’s more volatile auto sales. With those transactions excluded, sales rose only 0.2%, which was weaker than the 0.4% that was expected. So, today’s report can’t really be considered favorable or negative for bonds and mortgage rates. Its impact has been fairly neutral.
Fed Chairman Bernanke is making a lunchtime speech to the Economic Club of New York today. I don’t believe that we will see too much reaction to his speech, but the possibility always exists whenever he speaks. Therefore, we should not ignore it, but if we see the markets move noticeably between noon and 12:30 PM ET, it likely is a result of something he said.
There are two reports scheduled to be posted tomorrow morning. The first is October's Producer Price Index (PPI) that is one of the two key inflation readings this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and should drive mortgage rates higher. If we see in-line or weaker than expected numbers, mortgage rates should fall tomorrow. Current forecasts are calling for an increase of 0.5% in the overall reading and a 0.1% increase in the core reading.
Tomorrow’s second report is October's Industrial Production data. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the PPI readings are.
Source: Ken Mason, California Mortgage
November 16, 2009
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