Market Update 03/01/2010
Market Comment
Mortgage bond prices rebounded last week pushing mortgage interest rates lower. The majority of the data came in bond friendly. Weaker than expected consumer confidence data Tuesday helped mortgage interest rates improve. The Treasury auctions showed decent foreign demand. The gross domestic product price deflator component showed a smaller price increase than expected while the consumer spending component also came in weaker than expected. Existing home sales fell a surprising 7.1%, considerably weaker than the expected 1% increase. Rates fell about 3/4 of a discount point for the week.
The employment report Friday morning will take center stage this week. Until then, look for the PCE inflation data to set the tone for the beginning of the week and the ADP employment report to set the tone for the mid portion of the week.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Personal Income and Outlays |
Monday, March 1, |
Income up 0.4%, |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Price Index |
Monday, March 1, |
Up 0.1% |
Important. An indication of inflationary pressures. Decreases may lead to lower rates. |
| Construction Spending |
Monday, March 1, |
Down 0.6% |
Low importance. An indication of economic strength. A significant decrease may lead to lower rates. |
| ISM Index |
Monday, March 1, |
58.0 |
Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates. |
| ADP Employment |
Wednesday, March 3, |
-15k |
Important. An indication of employment. Weakness may bring lower rates. |
| Fed “Beige Book” |
Wednesday, March 3, |
None | Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
| Revised Q4 Productivity |
Thursday, March 4, |
Up 6.2% |
Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Factory Orders |
Thursday, March 4, |
Up 1.2% |
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Employment |
Friday, March 5, |
Unemp. @ 9.8%, |
Very important. An increase in unemployment or a large decrease in payrolls may bring lower rates. |
| Consumer Credit |
Friday, March 5, |
Down $4.1 billion | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
Fundamental WeekThe abundance of fundamental data this week provides a good opportunity for mortgages to improve. If the data shows weakness in the economy with little or no inflationary pressures then it is possible for mortgage bonds to rally resulting in mortgage interest rate decreases. However, if the data shows that the economy is rebounding or any significant signs of inflation, mortgage bonds may fall pushing mortgage interest rates higher.
Mortgage interest rates remain favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility.
To unsubscribe, please hit “reply” and include unsubscribe in the subject line.
Market Update 02/22/2010
Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. The bond market took a hit as inflation concerns emerged after the stronger than expected producer price index data. Producer prices surged in January amid higher energy costs to almost double expectations. The Fed made a surprise rate hike to the discount rate that also resulted in mortgage rate increases. The only positive was the tame consumer inflation reading Friday morning but we were unable to rebound from the earlier losses. Unfortunately rates rose over a full discount point for the week.
The consumer confidence data Tuesday will set the tone for trading this week. New home sales, weekly jobless claims, and the gross domestic product data also may move the financial markets. The Treasury will auction $118B in 2/5/7-year notes starting Tuesday. The additional supply may cause interest rate volatility.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Consumer Confidence |
Tuesday, Feb. 23, |
55.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| 2-year Treasury Note Auction |
Tuesday, Feb. 23, |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| New Home Sales | Wednesday, Feb. 24, 10:00 am, et |
Up 2.3% | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| 5-year Treasury Note Auction | Wednesday, Feb. 24, 1:00 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Durable Goods Orders |
Thursday, Feb 25, |
Up 1.5% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Weekly Jobless Claims |
Thursday, Feb 25, |
460k | Important. Higher jobless claims may lead to lower mortgage interest rates. |
| 7-year Treasury Note Auction |
Thursday, Feb 25, |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Q4 GDP second estimate |
Friday, Feb. 26, |
Up 5.6% | Important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment |
Friday, Feb. 26, |
73.9 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| Existing Home Sales |
Friday, Feb. 26, |
Up 0.9% | Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates. |
Fed Action Causes Uncertainty
The Federal Reserve caught market participants by surprise with their 25 basis point discount rate hike last week. While analysts were split on whether the Fed would raise rates this year, that question has now been answered. The move resulted in volatility in most of the US financial markets.
The discount rate is the interest rate charged to commercial banks on loans they receive from the Fed. The rate hike is an effort to pull back the aid provided by extraordinary low rates amid the global economic decline. The Fed specifically noted the move was needed “in light of continued improvement in financial market conditions.” Many analysts noted the earlier warnings from Fed Bernanke that rate hikes were coming but very few, if any, expected the move this soon.
While the rate hike resulted in mortgage bond price weakness in the short-term, the long-term outlook is less certain. Most analysts believe inflation remains in check, but at the same time the Fed purchasing of MBS will soon be over. A cautious approach to “float” and “lock” decisions is prudent taking the current market conditions into consideration.
To unsubscribe, please hit “reply” and include unsubscribe in the subject line.
Market Update 02/15/2010
Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates slightly higher. The early part of the week saw a reversal of the recent flight to quality buying of US investments as talks hinted of a Greek bailout by Germany. German Chancellor Merkel dashed those hopes late in the week causing turmoil in the European Union. As a result global investor funds returned to the US bond market. Rates improved Friday morning, which helped recover some of the earlier losses. Unfortunately rates still rose overall for the week by about 1/8 of a discount point.
The consumer price index Friday will be the most important release this week. The other inflation data and the shortened trading week may also factor into mortgage interest rate changes. The typical back and forth movements of stocks and bonds will also likely take place as uncertainty continues to permeate the financial markets.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| Presidents Day |
Monday, Feb. 15 |
Important. Extended holiday weekend may result in volatility when trading resumes Tuesday. | |
| Housing Starts |
Wednesday, Feb. 17, |
Up 0.4% |
Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Industrial Production |
Wednesday, Feb. 17, |
Up 0.8% |
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization |
Wednesday, Feb. 17, |
72.2% |
Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| Producer Price Index |
Thursday, Feb. 18, |
Up 0.7%, |
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Leading Economic Indicators |
Thursday, Feb. 18, |
Up 0.5% | Important. An indication of future economic activity. Weakness may lead to lower rates. |
| Philadelphia Fed Survey |
Thursday, Feb. 18, |
17.5 |
Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Consumer Price Index |
Friday, Feb. 19, |
Up 0.3%, |
Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates. |
GlobalizationEconomic globalization is the increasing interdependence of national economies through trade, finances, and technology. While economists debate the pros and cons of globalization, the fact remains that globalization is not new and continues to expand.
As a driving force in the global economy, the US often benefits when foreign economies struggle. A prime example is the concern of a Greek economic collapse. Unlike a corporation, a country cannot file for bankruptcy when they can’t make debt payments. One remedy in situations like this has been restructuring the debt, which is mired in uncertainty for investors. The bigger global problem is the fear that a default by one member of the European Union could ripple throughout all the other eurozone countries. In times like this, investors often move funds to safe havens in what is called a “flight to quality.” This is exactly what we saw Friday morning as US debt instruments saw an influx of foreign investment. Bond prices rose which caused mortgage interest rates to fall that morning. From a short-term perspective that is great for homebuyers and those refinancing. The long-term effects are less certain. A reversal could easily take place if the EU can prevent a default. This is a prime reason to take advantage of rate dips when they occur.
To unsubscribe, please hit “reply” and include unsubscribe in the subject line.
Market Update 02/08/2010
Market Comment
Mortgage bond prices rose last week pushing mortgage interest rates slightly lower. Reignited fear of a global economic meltdown sent money into the mortgage bond market in flight to quality buying. The news reports were permeated with worries about European debt payment defaults. Greece and a few other countries were noted as specific concerns. The employment report Friday morning was mixed with unemployment not as bad as expected but a larger than expected drop in payrolls. For the week interest rates fell by about 1/4 of a discount point.
The record debt issuance continues with billions of dollars worth of notes and bonds set for auction this week. Strong foreign demand will likely help the entire bond market. With the recent “revisions” to employment data the weekly jobless claims data will carry a bit more weight than usual. Retail sales figures will be the headline figure this week.
LOOKING AHEAD
|
Economic |
Release |
Consensus |
|
| 3-year Note Auction |
Tuesday, Feb. 9, |
None | Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Trade Data |
Wednesday, Feb. 10, |
$35 billion deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| 10-year Note Auction |
Wednesday, Feb. 10, |
None | Important. $25 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Weekly Jobless Claims |
Thursday, Feb. 11, |
475k | Important. An indication of the employment situation. Higher claims could lead to lower rates. |
| Retail Sales |
Thursday, Feb. 11, |
Up 0.4% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| Business Inventories |
Thursday, Feb. 11, |
Up 0.4% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| 30-year Bond Auction |
Thursday, Feb. 11, |
None | Important. $16 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment |
Friday, Feb. 12, |
74.6 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Employment Revision
The employment report is one of the biggest, if not the biggest, data releases each month. Last week’s employment report came with more twists than usual. Unemployment came in at 9.7%, a sharp drop from the expected 10% mark. Payrolls fell 20,000, weaker than the expected 15,000 increase. This divergence happens from time to time with the data derived from two completely different surveys. One piece of the report that caused major concern was the annual benchmark update, which showed the economy lost 930,000 more jobs than previously estimated in the 12 months ended March 2009. The revised number was very large and basically indicates 2009’s employment situation was worse than most thought.
A few things that called into question the accuracy of the data influenced the report. Some analysts argued the hiring of temporary census workers threw the figures off. The data was received with a lot of uncertainty and resulted in some wild market swings immediately after the release. The initial reaction sent bond prices lower and interest rates higher. However, the bond market rebounded a bit after digesting the data for an hour or so. This was a prime example of the volatility that often occurs with major data releases.
To unsubscribe, please hit “reply” and include unsubscribe in the subject line.
 |
© Copyright 2008 Chateau Mortgage of Louisiana, Inc. All rights reserved. Web Site Design & Hosted by: Basix Design |  |