No economic data this morning and the 10-year Treasury note trading at 3.325% after hitting 3.47% late Wednesday. It appears that traders are getting long Treasuries before the holiday weekend as a customary hedge.
The bond market will close early today and the HSOA lock desk will close at 12 noon, Pacific Time. Remember, the HSOA pricing specials expire today, so do not miss out!!
Friday, December 31, 2010
Wednesday, December 29, 2010
Maarket commentary
Bond prices are bouncing back today after Tuesday’s “stinker”, as Bill Gross of PIMCO put it, 5 year note auction that drove bond yields higher. This auction saw the weakest demand since June of this year, and we have $29 billion of 7 year notes being auctioned today.
Remember, trading desks are lightly staffed, volume is thin, and obtaining bids for MBS is interesting with bids coming back with wide spreads.
Remember, only two (2) more days to take advantage of the HSOA purchase special and 30 day lock special! Call your HSOA sales professional for details!!
Remember, trading desks are lightly staffed, volume is thin, and obtaining bids for MBS is interesting with bids coming back with wide spreads.
Remember, only two (2) more days to take advantage of the HSOA purchase special and 30 day lock special! Call your HSOA sales professional for details!!
Monday, December 27, 2010
Market commentary
Trading desks are typically thinly staffed the week between Christmas and New Year’s Day, and with the blizzard that hit the northeast this weekend, the staffing is even lighter. This will make trading that much more volatile with a short trading week and little economic data.
The news focus today was the People’s Bank of China hiking the one-year lending rate on Saturday by 25 bps to 5.81%. They also raised the one-year deposit rate by 25 bps to 2.75%. Chinese officials are trying to curb growth and inflation, especially considering their inflation measured 5.1% in November. In the U.S. an inflation number that high would send interest rates soaring.
Finally, the U.S. Treasury will auction $35 billion of 2 year notes today, $35 billion of 5 year notes Tuesday and $29 billion of 7 year notes on Wednesday.
The news focus today was the People’s Bank of China hiking the one-year lending rate on Saturday by 25 bps to 5.81%. They also raised the one-year deposit rate by 25 bps to 2.75%. Chinese officials are trying to curb growth and inflation, especially considering their inflation measured 5.1% in November. In the U.S. an inflation number that high would send interest rates soaring.
Finally, the U.S. Treasury will auction $35 billion of 2 year notes today, $35 billion of 5 year notes Tuesday and $29 billion of 7 year notes on Wednesday.
Thursday, December 23, 2010
Market commentary
The market had several economic data releases this morning, most of which indicate an economy beginning to reflect some growth, but at a tepid pace. The weekly initial jobless claims came in right on top of estimates at 420,000. Claims are showing signs of stability in the new range of 410 to 440, having come in within the range for seven consecutive weeks.
Durable goods orders dropped 1.3% in November, a larger drop than expected, however, ex-transportation, orders rose a healthy 2.4%. The main reason for the overall decline was the drop in aircraft orders as nondefense aircraft orders were down 53.1% for the month.
Moving on to consumers, personal income rose 0.3% in November while October’s report was revised down to 0.4%. However, with personal spending coming in at a 0.4% growth rate, the pace of spending has increased more than income, causing the savings rate to fall to 5.3%.
Finally, the Thomson Reuters/University of Michigan index of consumer sentiment rose to 74.5 from 71.6 in November, a move in the right direction. Keep in mind this index averaged 89 in the five years leading up to the recession that began December 2007.
One other topic that has not been in the headlines is the steadily increasing price of oil; trading at over $90/bbl this morning. Those of you in southern California, where I reside, have been paying north of $3/ gal for gasoline for the past few weeks. So, with that in mind, Six Gulf Arab nations voted Wednesday to pursue the creation of a regional central bank and single currency with Saudi Arabia, Kuwait, Qatar, and Bahrain. Now, at what point do U.S. citizens realize it is in their best interest to use U.S. oil versus sending billion of dollars a month to the above mentioned folks? Of course one cannot blame these folks for wanting their own currency bloc given the U.S. and European strategy of debasing the dollar and the euro.
Remember, the bond market closes early today, but the HSOA lock desk will be open normal hours, until 4:00 PM, PT.
Durable goods orders dropped 1.3% in November, a larger drop than expected, however, ex-transportation, orders rose a healthy 2.4%. The main reason for the overall decline was the drop in aircraft orders as nondefense aircraft orders were down 53.1% for the month.
Moving on to consumers, personal income rose 0.3% in November while October’s report was revised down to 0.4%. However, with personal spending coming in at a 0.4% growth rate, the pace of spending has increased more than income, causing the savings rate to fall to 5.3%.
Finally, the Thomson Reuters/University of Michigan index of consumer sentiment rose to 74.5 from 71.6 in November, a move in the right direction. Keep in mind this index averaged 89 in the five years leading up to the recession that began December 2007.
One other topic that has not been in the headlines is the steadily increasing price of oil; trading at over $90/bbl this morning. Those of you in southern California, where I reside, have been paying north of $3/ gal for gasoline for the past few weeks. So, with that in mind, Six Gulf Arab nations voted Wednesday to pursue the creation of a regional central bank and single currency with Saudi Arabia, Kuwait, Qatar, and Bahrain. Now, at what point do U.S. citizens realize it is in their best interest to use U.S. oil versus sending billion of dollars a month to the above mentioned folks? Of course one cannot blame these folks for wanting their own currency bloc given the U.S. and European strategy of debasing the dollar and the euro.
Remember, the bond market closes early today, but the HSOA lock desk will be open normal hours, until 4:00 PM, PT.
Wednesday, December 22, 2010
Market commentary
It should come as no surprise that the Mortgage Banker’s Association reported its weekly reading on mortgage applications dropped 18.6% for the week ending December 17th. Purchase applications dropped 2.5% while applications for refinances plunged 24.6%.
In conjunction with this, the National Assn. of Realtors reported existing home sales rose 5.6% in November with approximately 1/3 of these being distressed sales; foreclosure or short sale. For the year, existing home sales are down 27.9% as high unemployment and tight lending standards hamper the housing recovery.
The final revision of GDP for the 3rd quarter shows that the economy grew at a slower-than-expected pace of 2.6%, but still above the 2nd quarter’s growth rate of 2.5%. Personal consumption was believed to have increased from 2.8% in Q2 to 2.9% but actually slowed to 2.4%.
This data had little effect on the markets with stocks flat and bonds prices slightly lower. Be sure to check out the year-end pricing specials being offered by Home Savings! With the holiday season in full swing it is easy to procrastinate, so don’t miss out!
Tomorrow will be a short day for the bond market and both stock and bond markets will be closed Friday, December 24, 2010.
In conjunction with this, the National Assn. of Realtors reported existing home sales rose 5.6% in November with approximately 1/3 of these being distressed sales; foreclosure or short sale. For the year, existing home sales are down 27.9% as high unemployment and tight lending standards hamper the housing recovery.
The final revision of GDP for the 3rd quarter shows that the economy grew at a slower-than-expected pace of 2.6%, but still above the 2nd quarter’s growth rate of 2.5%. Personal consumption was believed to have increased from 2.8% in Q2 to 2.9% but actually slowed to 2.4%.
This data had little effect on the markets with stocks flat and bonds prices slightly lower. Be sure to check out the year-end pricing specials being offered by Home Savings! With the holiday season in full swing it is easy to procrastinate, so don’t miss out!
Tomorrow will be a short day for the bond market and both stock and bond markets will be closed Friday, December 24, 2010.
Tuesday, December 21, 2010
Market commentary
There are no major economic releases again this morning, as this week the data are bunched into Wednesday and Thursday. Monday, U.S. Treasuries benefited from tension between South and North Korea, as well as concerns regarding the European sovereign debt mess. While concerns remain about the possible ratings downgrade of countries such as Portugal and Spain, U.S. Treasuries are flat from Monday’s close.
Trading will be light as the Christmas holiday approaches so volatility could seep back into the market.
HSOA is offering year-end pricing incentives, so be sure you contact your HSOA sales professional for details. Do not miss out!!!
Trading will be light as the Christmas holiday approaches so volatility could seep back into the market.
HSOA is offering year-end pricing incentives, so be sure you contact your HSOA sales professional for details. Do not miss out!!!
Friday, December 17, 2010
Market commentary
Bonds rallied Thursday, finally, and we have seen 10-year trade back down to a 3.39% this morning, 17 bps lower than it traded yesterday morning. This rally is in spite of good economic data from the Conference Board as it reported its index of U.S. leading economic indicators increased in November by 1.1%, the most in eight months, a signal that the U.S. economic recovery will strengthen early next year.
The House passed the tax cut extension bill late yesterday with a surprising amount of support and a final vote tally of 277 to 148. The bill will now makes its way to the President’s desk for signature at which point we can rest assured our paychecks will not be cut by an increase in tax rates on January 1st.
Mortgage pricing has improved this morning by .375% to .50%, and I would consider this an excellent day to lock and take advantage of this brief rally.
The House passed the tax cut extension bill late yesterday with a surprising amount of support and a final vote tally of 277 to 148. The bill will now makes its way to the President’s desk for signature at which point we can rest assured our paychecks will not be cut by an increase in tax rates on January 1st.
Mortgage pricing has improved this morning by .375% to .50%, and I would consider this an excellent day to lock and take advantage of this brief rally.
Thursday, December 16, 2010
Market commentary
The 10-year Treasury burst through 3.50% yesterday and traded as high at 3.55%. It rallied back briefly this morning, but is now trading at 3.54%.
Economic data this morning included housing starts for November which increased to 555k, but remained below the 2010 average of 592k, and reflecting a housing market that remains in the doldrums. Initial jobless claims for last week fell 3,000 coming in at 420,000 for the week ending December 11th. Initial jobless claims are improving in the sense they having dropped from their obscenely discouraging levels but not enough to signal a real decline in the unemployment rate.
And finally, the Federal Reserve Bank of Philadelphia’s general economic index rose to 24.3 from 22.5 last month, signaling growth in the manufacturing sector of the U.S. economy.
If you are looking for good news this morning regarding interest rates it is this; so far today interest rates are flat from Wednesday’s market close. However, we have seen this many times in the past two weeks, and then the bottom falls out intraday and rates move higher.
Economic data this morning included housing starts for November which increased to 555k, but remained below the 2010 average of 592k, and reflecting a housing market that remains in the doldrums. Initial jobless claims for last week fell 3,000 coming in at 420,000 for the week ending December 11th. Initial jobless claims are improving in the sense they having dropped from their obscenely discouraging levels but not enough to signal a real decline in the unemployment rate.
And finally, the Federal Reserve Bank of Philadelphia’s general economic index rose to 24.3 from 22.5 last month, signaling growth in the manufacturing sector of the U.S. economy.
If you are looking for good news this morning regarding interest rates it is this; so far today interest rates are flat from Wednesday’s market close. However, we have seen this many times in the past two weeks, and then the bottom falls out intraday and rates move higher.
Wednesday, December 15, 2010
Market commentary
Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed.
The above was the opening paragraph from the FOMC (Fed) announcement post Tuesday’s meeting. The bond market is in clear disagreement with the Fed policy of QE2 and keeping interest rates low, however, depressed housing and labor markets are the over-riding concerns of the Fed.
This morning the Labor Department reported consumer prices rose less-than-forecast in November with both the headline rate of inflation and the core rate (which excludes volatile food and energy prices) rising 0.1%. Car prices fell 0.4%, the most since January. Housing prices were unchanged and represent 42% of the CPI index. All-in-all, this report confirms the weak pricing power in the economy as the headwinds to consumer demand continue. Despite the recent increases in producer prices, as reported Tuesday, those increases are not making their way down to consumers yet.
The U.S. Treasury market was caught in a whirlpool after Tuesday’s Fed announcement, with the yield on the 10 year note rising to 3.47%, a full .20% in rate from the morning open! Mortgage prices sank as well, with a slight recovery this morning.
The above was the opening paragraph from the FOMC (Fed) announcement post Tuesday’s meeting. The bond market is in clear disagreement with the Fed policy of QE2 and keeping interest rates low, however, depressed housing and labor markets are the over-riding concerns of the Fed.
This morning the Labor Department reported consumer prices rose less-than-forecast in November with both the headline rate of inflation and the core rate (which excludes volatile food and energy prices) rising 0.1%. Car prices fell 0.4%, the most since January. Housing prices were unchanged and represent 42% of the CPI index. All-in-all, this report confirms the weak pricing power in the economy as the headwinds to consumer demand continue. Despite the recent increases in producer prices, as reported Tuesday, those increases are not making their way down to consumers yet.
The U.S. Treasury market was caught in a whirlpool after Tuesday’s Fed announcement, with the yield on the 10 year note rising to 3.47%, a full .20% in rate from the morning open! Mortgage prices sank as well, with a slight recovery this morning.
Tuesday, December 14, 2010
Market commentary
U.S. Treasuries are falling in price, rising in yield, again this morning as producer prices rose more-than-expected in November. Prices jumped 0.8% after two consecutive months of 0.4% increases. Higher energy and food prices pushed the headline increase in prices, so excluding food and energy prices, finished goods rose 0.3%. This illustrates the problem producers and/or retailers are having in increasing prices of finished goods, as competitive pressures keep the lid on price increases to the consumer, so the majority of the higher costs reduce profit margins.
Speaking of consumers, Retail Sales rose more-than-expected in November rising 0.8%, and October sales figures were also revised higher from 1.2% to 1.7%. One of the biggest drivers of headline growth was the increased sales of gas stations, which translated means we are paying higher prices for gas. Analysts will be watching to see if the increased consumer spending continue through the beginning of 2011 before they will be comfortable that it is sustainable, i.e., related to the holiday season.
Finally today, the FOMC is holding its final meeting of 2010 and is expected to release its official statement at 2:15 p.m. ET. The statement is expected to be little changed from November, and the markets will be watching closely to see if the recent improvement in some of the economic figures or the unexpected rise in interest rates will cause the Fed to make any minor alterations to their verbiage.
Speaking of consumers, Retail Sales rose more-than-expected in November rising 0.8%, and October sales figures were also revised higher from 1.2% to 1.7%. One of the biggest drivers of headline growth was the increased sales of gas stations, which translated means we are paying higher prices for gas. Analysts will be watching to see if the increased consumer spending continue through the beginning of 2011 before they will be comfortable that it is sustainable, i.e., related to the holiday season.
Finally today, the FOMC is holding its final meeting of 2010 and is expected to release its official statement at 2:15 p.m. ET. The statement is expected to be little changed from November, and the markets will be watching closely to see if the recent improvement in some of the economic figures or the unexpected rise in interest rates will cause the Fed to make any minor alterations to their verbiage.
Monday, December 13, 2010
Market commentary
There are no economic releases today, no auctions and Treasuries are weaker again with the 10-year trading at 3.37%. There are important economic data releases this week, including the inflation measures of the Producer and Consumer Price Indices, Industrial Production and of course we cannot forget the Fed meeting that is scheduled for tomorrow (Tuesday).
The market is clearly focused on the positive signs of economic growth, highlighted by GE’s dividend hike on Friday. GE’s action suggests its balance sheet has mended, cash flow is strong and business prospects are improving. Also keep in mind GE is a global business with many facets including financial and manufacturing.
Other factors that will continue to affect the markets are the financial events that will continue to unfold in Europe and Chinese inflation numbers due out later this week.
The market is clearly focused on the positive signs of economic growth, highlighted by GE’s dividend hike on Friday. GE’s action suggests its balance sheet has mended, cash flow is strong and business prospects are improving. Also keep in mind GE is a global business with many facets including financial and manufacturing.
Other factors that will continue to affect the markets are the financial events that will continue to unfold in Europe and Chinese inflation numbers due out later this week.
Thursday, December 9, 2010
Market commentary
The bond market continued its astounding sell-off yesterday with the 10-year reaching 3.33% before closing at 3.27%, 15 bps above Tuesday’s close and 35 bps above Monday’s close. This type of sell-off is not unprecedented in the bond market. The past two days of trading are only the 10th worst two days for the 10-year Treasury since 2000. It is, however, unexpected and borrowers and loan officers who were floating are not happy. Although in reality, while one may not be able to lock at 4% for 30 years, 4.625% or 4.75% for a 30 year fixed are interest rates that have not been seen for nearly 5 decades. I think folks need to see this as the glass is more than half-full as apposed to bemoaning that 4% is no longer available.
The bond market is opening up slightly better this morning in what, so far, looks like a dead cat bounce rather than genuine strength in bonds. The 10-year is up almost half-a-point and its yield is down to 3.22%.
Initial jobless claims dropped 17,000 last week from 438,000 (revised up from 436,000) to 421,000 (versus estimates of 425,000). The jobless claim data have repeatedly confirmed that layoffs have slowed with the 4-week average dropping from 488,000 in August to 427,000 now. The problem facing the labor market now is that while people are not losing as many jobs, the unemployed are still not finding new jobs.
The last item to note is the U.S. Treasury will auction $23 billion of 30 year bonds today. With the recent increase in interest rates the belief is there will be decent demand for this debt. Stay alert, the auction results will be know at approximatley 1:00 P.M., ET.
The bond market is opening up slightly better this morning in what, so far, looks like a dead cat bounce rather than genuine strength in bonds. The 10-year is up almost half-a-point and its yield is down to 3.22%.
Initial jobless claims dropped 17,000 last week from 438,000 (revised up from 436,000) to 421,000 (versus estimates of 425,000). The jobless claim data have repeatedly confirmed that layoffs have slowed with the 4-week average dropping from 488,000 in August to 427,000 now. The problem facing the labor market now is that while people are not losing as many jobs, the unemployed are still not finding new jobs.
The last item to note is the U.S. Treasury will auction $23 billion of 30 year bonds today. With the recent increase in interest rates the belief is there will be decent demand for this debt. Stay alert, the auction results will be know at approximatley 1:00 P.M., ET.
Tuesday, December 7, 2010
Market commentary
This morning the news is all about compromise as the President announced the framework for a compromise on tax rates and unemployment benefits. This bodes well for the economy and the markets are responding as such. Treasuries have given back their gains from yesterday, and then some with the 10-year note rocketing to 3.09%! Mortgage bonds are worse in price from .50% to 1.00% for lower note rates.
Later today the U.S. Treasury will begin the first leg of this week’s auctions with $32 billion of 3 year notes. Hopefully at these levels demand will be strong.
As part of QE2 the Fed will be buying $6 to $8 billion of Treasuries maturing between 12/2014 and 5/2016.
Later today the U.S. Treasury will begin the first leg of this week’s auctions with $32 billion of 3 year notes. Hopefully at these levels demand will be strong.
As part of QE2 the Fed will be buying $6 to $8 billion of Treasuries maturing between 12/2014 and 5/2016.
Monday, December 6, 2010
Market commentary
Comments from Fed Chairman Bernanke and resurfacing Euro zone concerns are giving the U.S. Treasury market a lift this morning. There was no economic data scheduled for today and the remainder of the week will be light as well, so expect the markets to remain focused on the European situation.
Mortgage prices have improved .20% to .30% this morning, so another good day to lock for a year end closing.
Mortgage prices have improved .20% to .30% this morning, so another good day to lock for a year end closing.
Friday, December 3, 2010
Market commentary
November’s payroll numbers were not even close to expectations, coming in at +39,000, while the unemployment rate rose to 9.8%. Economists had forecast job growth to be +140,000 to +160,000.
Treasuries were weak this morning as if the jobs data were rumored to be better than expected. The 10-year traded at 3.03% going into the 8:30am ET release. Shortly afterwards, the 10-year traded as low as a 2.92% yield and has currently settled in at 2.96%. Mortgage prices are better by .25% to .30%.
Given the weakness of the jobs report many market observers expected a much stronger reaction in both bonds and stocks---a strong rally in bonds and steep decline in stocks. Neither has happened, so the improvement in pricing we have today is most likely the best chance to lock your loans for December fundings.
Treasuries were weak this morning as if the jobs data were rumored to be better than expected. The 10-year traded at 3.03% going into the 8:30am ET release. Shortly afterwards, the 10-year traded as low as a 2.92% yield and has currently settled in at 2.96%. Mortgage prices are better by .25% to .30%.
Given the weakness of the jobs report many market observers expected a much stronger reaction in both bonds and stocks---a strong rally in bonds and steep decline in stocks. Neither has happened, so the improvement in pricing we have today is most likely the best chance to lock your loans for December fundings.
Thursday, December 2, 2010
Market commentary
Bonds were bludgeoned Wednesday on better economic news and more confidence coming out of Europe, although this morning the ECB poured a little cold water on the euphoria by refusing to expand a bond buying program.
Also this morning the ADP employment report got things started coming in better-than-expected and possibly foreshadowing another good nonfarm payrolls report on Friday.
Initial jobless claims rose from 410k to 436k last week, slightly above expectations. This is still below 450k confirming the better trend that the labor market has established in the past month.
And finally, pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October fueled by the drop in interest rates.
Treasury bonds have found support this morning after the 10 year note hit a yield of 3.01%. The 10 year yield is currently at 2.95% and mortgage prices are slightly worse than Wednesday’s market close.
Also this morning the ADP employment report got things started coming in better-than-expected and possibly foreshadowing another good nonfarm payrolls report on Friday.
Initial jobless claims rose from 410k to 436k last week, slightly above expectations. This is still below 450k confirming the better trend that the labor market has established in the past month.
And finally, pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October fueled by the drop in interest rates.
Treasury bonds have found support this morning after the 10 year note hit a yield of 3.01%. The 10 year yield is currently at 2.95% and mortgage prices are slightly worse than Wednesday’s market close.
Wednesday, December 1, 2010
Market commentary
The U.S. Treasury market is selling off sharply this morning on better than expected economic data and indications the ECB will step up efforts to bailout floundering EU economies.
In a precursor to Friday’s employment data, ADP released its report reflecting private job growth of 93,000 in November, while revising October by + 50,000. The news from the mortgage sector was not so good as the Mortgage Bankers Association reported mortgage applications fell 16.50%, driven mostly by a 21.6% drop in refinance activity.
It seems folks have been spoiled by mortgage rates at 4% or slightly lower, but keep in mind interest rates at 4.375% or 4.50% are not that bad, right!?
In a precursor to Friday’s employment data, ADP released its report reflecting private job growth of 93,000 in November, while revising October by + 50,000. The news from the mortgage sector was not so good as the Mortgage Bankers Association reported mortgage applications fell 16.50%, driven mostly by a 21.6% drop in refinance activity.
It seems folks have been spoiled by mortgage rates at 4% or slightly lower, but keep in mind interest rates at 4.375% or 4.50% are not that bad, right!?
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