Market commentary

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!!

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!!

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.

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.

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.

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!!!

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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!?

Market commetnary

Tuesday’s data began with the Case/Shiller housing price index falling .08% in September from August, reflecting the housing market continues to struggle. Separately, the Conference Board told us their measure of consumer confidence rose from 49.9 in October to 54.1 in November, and the ISM Manufacturing index rose slightly from 60.6 in October to 62.5 in November.

These data have all been over powered by the contagion in the Euro zone after the agreement to bailout Ireland, on the heels of the Greece bailout. Markets are pushing Portuguese, Spanish and Italian debt to higher yields---meaning a greater perception of risk.

U.S. Treasuries are again benefiting from this turmoil and we see a slight follow-on in mortgages. Mortgage pricing is improved by approximately .25%.

Market commentary

With no economic data on the calendar today the markets continue to focus on the European bailout of Ireland and possibly Portugal and Spain. With an agreement reached with Ireland over the weekend the markets continue to be skeptical that the EU and Euro are out of the woods.

The reminder of this week is data heavy with housing data, the ISM manufacturing data, the Fed’s Beige Book and of course on the Friday the all important non-farm payroll data. Current estimates are for the unemployment rate to remain at 9.60% and payrolls to show zero growth.

Today we see the equity markets in sell mode and U.S. Treasuries with a small flight to quality bid; both based on the financial struggles in Europe. Mortgage pricing is improved from Friday by .375% to .50%!

Market commentary

Treasury yields rose sharply on Wednesday in a sell-off driven by strong economic data and a weak seven-year auction. As expected, trading was light ahead of the Thanksgiving holiday but still decent. The strong economic data was mostly on the consumer front as income and spending posted expectedly nice gains in October and the University of Michigan’s consumer confidence index rose above 70 (still a soft level) for the first time in since June. Most importantly, initial jobless claims plunged nearly 30,000 to 407,000, possibly breaking out of this year’s range.

This morning, there are no economic data releases to drive trading, however early reports of Black Friday retail sales are coming in strong. While the holiday shopping season is not just a one-day affair, the season appears to be off to a strong start as a combination of pent-up demand, higher stock prices, and improving confidence.
Meanwhile, Europe continues to be a source of concern as the contagion that has been feared for many months now appears to be taking hold. Even as the ink has yet to dry on Ireland’s bailout / support package, attention is turning to Portugal and Spain. This morning, there are denials from the EU and Portugal that the nation is being pressured to request financial aid.
Finally, that saber rattling from N. Korea continues, and that is what actually has bond prices slightly improved and stock prices lower.
The bond market will close early today and as is the HSOA rate lock desk. HSOA will be accepting rate locks until 12 noon, PT.

Market commentary

Weak demand at Tuesday’s 5 year note auction pushed bond prices lower as the market closed. This morning, Initial jobless claims plunged to 407,000 in the most recent week, the lowest level of job losses since the summary of 2008 and decidedly below the 2010 range. The four-week average also fell to its lowest level since 2008. This data was the most significant of the day and has pushed bond prices further down, meaning interest rates are higher.

In other data, October personal income slightly topped estimates while spending was a touch shy of forecasts and the always-volatile Durable Goods Orders were very weak in October across a range of sectors.
The FOMC released its November 2-3 meeting minutes yesterday afternoon and they reflected 1) a collectively weaker economic forecast than at the June meeting, 2) division among members on QE2, 3) and an inquiry into the effectiveness of the Fed’s public communications.
Finally, the Treasury will auction 7 year notes today, which given the weak demand for the 5 yr notes, could move interest rates even higher.

Market commentary

This morning’s economic data has been overshadowed by the North Korean attack on South Korea, and the subsequent response. U.S. Treasuries are seeing flight to safety bid and stock markets are down sharply.

In today’s economic releases, 3rd quarter GDP was revised higher than expected from 2.0% to 2.5%, however, existing home sales fell 2.2%. The decline in sales is being attributed to overly strict lending standards and unemployment, which makes sense, as interest rates are at half-century lows and home prices have fallen significantly the past two years. New regulations resulting from the Fed and Dodd-Frank Act will only worsen this scenario.

For today, mortgage prices are better by .10% to .20%.

Market commentary

No economic data on the calendar today, however, Tuesday and Wednesday will deluge the markets with information, i.e., GDP, existing home sales, new home sales, and consumer confidence to name a few of the reports that could have the most effect on the markets.

In addition to the economic data, the U.S. Treasury is auctioning $99 billion of 2y, 5yr and 7yr notes, beginning with today’s auction of $35 billion in 2 yr notes.

If all of the above were not enough, there is the ECB bailout of Ireland and possibly Portugal to add to the mix. Finally, the Fed will purchase $7 to $9 billion in Treasuries today with maturities from 2018 to 2020, as part of the QE2 program.

For the mortgage pricing, mortgage bonds are improving along with Treasuries this morning, pushing interest lower across the board. Pricing is .20% to .30% better than Friday.

Market commentary

There are no economic releases today. The Fed will purchase $1.5 to $2.5 billion in longer term bonds; however, recent bond purchases by the Fed, despite their size, have made little impact on intraday prices, and have not lowered yields.

Next week will be holiday light with many folks on vacation and the markets closed Thursday for the Thanksgiving Day Holiday. Early in the week the Treasury will auction 2 yr, 5 yr and 7 yr notes, and economic releases will include the minutes from the last Fed meeting, data on new and existing home sales and consumer sentiment.

Prices for mortgage bonds improved late Thursday afternoon and have remained steady this morning. Pricing is better .125% to .25%.

Market commentary

The market news today is all about the General Motors IPO, which has buoyed U.S. stock markets. Treasuries are faltering, so once again interest rates are climbing. The yield on the 10 year note hit 2.96% early this morning, but has since recovered to 2.93%. The bear attitude in the bond market does not appear to be going away anytime soon, but looking at the glass half full; one can still obtain a 30 year fixed rate mortgage at 4.50% or better.

Market commentary

Consumer prices, as measured by the Consumer Price index, were forecast to increase 0.3% in October but fell short, only increasing 0.2%. Excluding food and energy costs prices were unchanged from September, but were expected to have increased 0.2%. Year-over-year core inflation grew at the lowest rate on record in October at 0.6%. Commodity prices have traded lower the past few days, but one of the things I watch is the price of gasoline, which is over $3/gallon in south Orange County, CA. As we all know, higher gas prices are a direct reduction to consumers’ disposable income.

Stocks took it on the chin Tuesday and bonds rallied. This morning we see stocks flat and bond prices improving again, with mortgage prices better by 20 bps to 30 bps.

Market commentary

The Labor Department told this morning the Producer Price Index rose 0.4% in October versus the expectation of +.08%, while the core rate, less food and energy, fell 0.6%. The drop in the core rate was attributed to a decline in prices for new cars, trucks and computers. This data does tend to confirm the Fed’s point of view that inflation is not a problem.

The criticism the Fed has received regarding its 2nd round of quantitative easing has caused the markets to lose confidence that the Fed has enough commitment to keep interest rates low. The past two days have seen the biggest two-day decline in bond prices in almost two years. This morning bonds appear to have temporary support, but after declining early the yield on the 10 year note is stubbornly holding at 2.96%.

Mortgage prices worsened in lock step with treasury bonds, and you will note pricing for mortgages is worse than Monday. Keep in mind; however, one can still obtain a 30 year fixed rate loan at 4.50% with premium pricing, still a VERY good deal!!

Market commentary

There was blood in the streets for Treasuries last even though the Fed made its first QE2 purchases, $7.229 billion of 4- to 5.5-year maturities. Despite the Fed buying, Treasuries are got shellacked including the maturities the Fed bought. This is a strong signal that the effects of QE2 were already priced into the market. This will be the part of QE2 that is disconcerting for the Fed. If rates spike higher on the inflation concerns, the flow of credit becomes more expensive and not as simulative to the economy.

This week’s economic calendar is full of significant releases beginning with this morning’s October retail sales report. Sales rose much sharper-than-expected, led by auto sales. Excluding autos, October retail sales rose an as-expected 0.4%. In manufacturing, however, the news was not so good. The NY Feed’s Empire Manufacturing survey fell to -11.14 in November, its lowest level since April 2009. The remainder of the week will give us inflation data from the Producer and Consumer Price Indices, Housing Starts and Leading Economic Indicators.
Mortgage prices are another 20 bps to 30 bps worse in price from the market close on Friday, and the yield on the 10 year note has spike to 2.86%.

Market commentary

The increase in consumer sentiment, which is normally positive for stocks, was a non-event this morning. The markets instead are focusing news that China may continue to rein in economic growth and inflation by raising interest rates, and thus, slowing the global recovery.

Stocks, bonds, and commodities are all taking it on the chin, and we have seen the yield on the 10 year note climb to 2.75%. Mortgage prices are approximately .25% worse from the close on Wednesday---remember, the bond market was closed Thursday, Veteran’s Day.

Market commentary

The bond market is closed today in honor of the Veteran’s Day Holiday. The HSOA lock desk will be accepting locks until 12 noon, Pacific Time.

We at HSOA wish to honor and thank our veterans and active duty military!

Market commentary

Tuesday’s 10 year note auction was well bid, however, bond traders are trying to understand the effect QE2 will have on the market. That uncertainty led to more selling yesterday as traders believe the market was bid to high. These concerns remain in front of today’s auction $16 billion of 30 year bonds as yields are once again moving higher…prices worse. Mortgage prices are worse by approximately .250%.

Market commentary

Monday’s auction of $32 billion of 3 year notes went well and is followed today by $24 billion of 10 year notes. In addition to government borrowing, U.S. companies are also taking advantage of low interest rates as $20 billion of high grade debt was brought to market last week.

Back in the news are the countries of Ireland, Portugal and Greece and markets are again concerned about the debt of these countries. What is unclear this time around is if there is a confidence crisis will U.S. treasuries be the recipient of the flight to quality bid.

Bonds closed worse on Monday and are faltering again this morning as the yield on the 10 year note has pushed back up to 2.58%. Mortgage prices are worse by approximately .250%.

Market commentary

The economic calendar this week is very light; however, the US Treasury will fill in much of the void with its auction schedule. Today, Treasury is auctioning $32 billion of 3 year notes, followed by $24 billion of 10 year notes on Tuesday and $ $16 billion of 30 year bonds on Wednesday. Remember, Thursday the bond market will be closed in honor of the Veteran’s day holiday.

One item worthy of watching is the upcoming G20 summit. World opinion is lining up in criticism of U.S. monetary policy, with officials from many countries denouncing the Fed’s new quantitative easing program. Even Fed Governor Kevin Warsh in a WSJ op-ed piece stated the “Federal Reserve is not a repair shop for broken fiscal, trade, or regulatory policies”, a clear shot at the current administration and Congress.

The bond market is flat from the close on Friday with little change in mortgage pricing.

Market commentary

The final event in one of the week was the employment report, and it was a surprise. Nonfarm payrolls increased 151,000 in October and September’s figure was revised 54,000 better. In the private sector, 159k jobs were created and the September release was revised 43,000 higher. Average weekly hours increased from 34.2 to 34.3 and hourly earnings were up 0.2% month-over-month. The other piece of the report, household survey, tells a different story. The unemployment rate remained at 9.6% and the underemployment rate dropped slightly from 17.1% to 17.0%. The bond market immediately gave back most of Thursday’s gains on this stronger than expected data, however stocks are flat.

In reference to Wednesday’s Fed action, there is a growing chorus of frustration coming from other countries regarding the Fed’s monetary policies. According to the Financial Times, China, Brazil, and Germany all criticized the Fed action with Brazil’s finance minister commenting, “Everybody wants the U.S. economy to recover, but it does no good at all to just throw dollars from a helicopter.” The Brazilian Finance Minister continued saying, “You have to combine [monetary policy] with fiscal policy. Hmmm, what does this guy from Brazil know that our US politicians don’t know? Is it that increased government regulations and borrowing to support state and local governments does not actually create jobs?

Mortgage pricing is .20% to .30% worse from Thursday afternoon.

Market commentary

Stocks and bonds are in rally mode this morning on the news that the Fed is embarking on a second round of quantitative easing. The Fed will purchase approximately $75 billion of Treasuries per month until June 2011 for a total of $600 billion. They also quantified their expected reinvestment amounts from their MBS principal cash flows saying those reinvestments would total approximately $35 billion per month. In total, the Fed is expected to purchase approximately $110 billion per month for the next 8 months, almost as much as there will be Treasury supply. The average duration of purchases will be 5 to 6 years and 86% of all purchases will be between 2.5 years and 10 years in maturity.

As for Friday’s non-farm payroll data, expectations are for total payrolls to increase from -95k in September to +60k in October. The unemployment rate is expected to remain at 9.6%. With the news this morning that last week’s Initial jobless claims spiked back above 450, 000, coming in at 475,000, and given other recent employment indicators the +60,000 seems a reasonable expectation.

With the rally in mortgage bonds today, pricing is .375% to .50% better than Wednesday afternoon.

Market commentary

The mid-term elections overwhelmed this morning’s economic data, which was actually positive. ADP forecast the US added 43,000 private sector jobs in October compared to a loss of 2,000 in September, and the Institute for Supply Management reported its index of non-manufacturing business rose to 54.3 from 53.2.

The above data had no effect on the markets as the focus is now on the results of the Fed meeting, which will conclude this afternoon with the publication of Fed policy announcement. Expectations are for approximately $500 billion of new quantitative easing. Anything more or less will create significant volatility.

Bond prices are improved this morning on expectations the Fed will be more accommodating. Pricing for mortgages has improved by approximately .25%.

Market commentary

No economic data on the calendar, however, the polls are open for mid-term elections which will give the markets plenty on which to focus. The Federal Open Market Committee (FOMC) of the Federal Reserve begins a 2 day meeting at which the committee members will discuss the state of the US and global economies, and the amount of quantitative easing (QE2) that may or may not be appropriate.

Bond prices slipped on Monday, but have rebounded slightly this morning. I expect the markets will be fairly tame until the results of the elections are know late this evening, at which time the focus will shift to the Fed announcement Wednesday afternoon.

Market commentary

Today begins one of the most important weeks in recent memory for the financial markets as we have are scheduled to have historical mid-term elections, a Fed shifting its fight to the front of deflation, and a payroll report.
But first, today’s data from the Commerce Department showed consumer spending rose 0.2% in September, less than forecast, and incomes dropped for the first time in more than a year.
On a more positive note, manufacturing in the U.S. expanded more than forecast in October as the Institute for Supply Management’s factory index increased to 56.9, the highest since May.
Regarding the elections, the markets are expecting a Republican House, a Democratic Senate with less than a super-majority, and a tidal wave of Republican governorships. The markets, it seems, are eager for change in the political landscape and anything less than the above would disappoint equities and conceivably send bond prices higher (if it were not for the FOMC statement on Wednesday).
The market is expecting the FOMC to announce a second round of quantitative easing. Round two is expected to be $500 billion in size and include the purchase of Treasuries across the curve. If they surprise with something larger, this could send equities even higher and push bond yields lower.

Market commentary

Bond prices are lower this morning with the ten-year treasury’s price falling for the sixth straight day, pushing its yield up to nearly 2.70%. This is above the level at which it traded when Fed Chairman Bernanke spoke in Jackson Hole, WY about the options the Fed has to combat deflation and provide further "unconventional" accommodation. Expectations for QE2 have steadily built; however, this morning’s WSJ contains yet another article on the subject, saying the Fed "is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months." Such a move would fall on the light-end of market estimates, which will most likely push interest rates higher.
This morning it was reported durable goods orders for September rose 3.3%, beating estimates, but having little effect on the bond or stock markets.
Tuesday’s two-year auction found strong demand, and today, the Treasury will auction five-year notes. Mortgage pricing is .125% to .250% worse than Tuesday.

Market commentary

Low interest rates and declining home prices helped push existing home sales higher in September, for the second straight month. And for the first time ever, investors are paying the US Treasury for the privilege of buying US bonds---the 5 yr TIPS (Treasury Inflation Protected Securities) auction on Monday drew a yield of -.55%. This tells me investors are expecting the Fed will eventually be able to cause inflation, in a significant way.

Indeed, the markets have priced in at least $500 billion of additional asset purchases by the Fed, however, the bond market also seems tired of just hearing about the potential. The yield on the 10 year note rose to 2.59% Monday, and is currently trading at 2.60%.

Market commentary

Treasury prices are slightly improved early Monday morning with the yield on the 10 year note dropping from 2.55% to 2.54%. Fed Chairman Bernanke speaks at 8:30 AM, ET and existing home sales data will be released at 10:00 AM, ET. Keep in mind, the bond market is preparing for this week’s new supply as the U.S. Treasury will be issuing 2 yr, 5 yr and 7 yr notes.

Market commentary

Treasury prices fell on Thursday, pushing the yield on the 10 year note to 4.55%. With no data on the economic calendar for today, the bond market is preparing for next week’s new supply as the U.S. Treasury will be issuing 2 yr, 5 yr and 7 yr notes.

In addition to the continued release of third quarter earning, the markets will have data on existing and new home sales, consumer confidence, and the strength of the manufacturing sector.

Today, mortgage prices are worse by .125% to .250%.

Market commentary

This morning’s weekly jobless claims report essentially equaled expectations with new claims of 452,000 versus expectations of 455,000. The big news is the revision which pushed the prior week’s initial claims to 475,000. Wednesday’s release of the Feed’s Beige Book, prepared for the upcoming FOMC meeting, did not produce any surprises and did not alter expectations for QE2 of some sort.

Positive earnings announcements from McDonalds, Travelers, EBay, NetFlix and Amazon have stocks moving higher while bonds are trending lower. Mortgage prices are approximately .125% worse than Wednesday.

Market commentary

Stocks posted their biggest percentage losses in two months on Tuesday following a tightening move by the Peoples Bank of China which raised rates for the first time in three years. U.S. Treasuries and mortgage bonds benefited from stocks` weakness and continued expectations for low Fed-supported rates, with the five-year Treasury’s yield falling to a new record low of 1.10%.

This morning’s only economic release is the MBA mortgage applications index, which fell sharply in the most recent week with a major factor being the FHA’s increased fees which took effect with applications taken after October 4.
This afternoon, the Fed will release its Beige Book, prepared for the upcoming November 3 FOMC meeting. It could prove pivotal with division among Fed officials continuing about whether, when, and how to provide further accommodation

Market commentary

The Commerce Department reported housing starts increased slightly in September, however, building permits, a proxy for new construction decreased. It seems there is much uncertainty whether or not the housing market is stabilizing.

The U.S. Treasury market is trading flat from the close on Monday, however, stocks are trading lower as Bank of America announced a third quarter loss of $7.3 billion and China, in a surprise move, raised its benchmark lending rate—its version of the Fed funds rate.

Mortgage prices are steady from Monday’s rate sheet.

Market commentary

Treasury prices retreated on Friday, but have reversed course this morning after the Federal Reserve reported U.S. industrial production unexpectedly dropped in September by .02%. This is the first decline in this index in 8 months as U.S. companies had been rebuilding inventories and as overseas demand of U.S. goods had picked up.

Earnings news continues this week, with Citigroup announcing net income of $2.17 billion as the company reduced loan loss reserves from $11 billion to $7.66 billion. Tuesday we will see earnings from Bank of America and Wednesday Wells Fargo and US Bank report.

Market commentary

In the morning’s early releases, Core CPI came in at a year-over-year pace of 0.8%, the lowest level since 1961. Advanced retail sales, excluding autos, in August were revised higher to up 1.0% on strong back-to-school shopping but September’s figure only increased at a 0.4% pace.

Fed Chairman Bernanke was the center of attention for the markets today with a speech regarding monetary policy objectives. The Fed is clearly worried about a deflationary environment and Bernanke’s comments discussed the tools the Fed has at its disposal as well as the problems and unintended consequences of using those tools.

U.S. stock markets opened strong, buoyed by the data and Bernanke’s comments, while the treasury market retreated. The last piece of data for the day reversed the stock markets, as a measure of consumer confidence was reported lower than forecasted. While the stock markets reversed course, heading lower on the day, treasuries remain lower, with the yield on the 10 year note now standing at 2.53%. Mortgage prices are flat from the close on Thursday.

Market commentary

The treasury market and stock indices are flat this morning after early morning data that were offsetting. The Producer Price Index, a measure of inflation, rose 0.4%, a higher than expected increase, and typically not bond friendly. Offsetting the higher inflation data was news that weekly jobless claims rose to 462,000, indicating the weak labor market persists.

The 10 year note is stuck at 2.45% this morning while the DOW is lower by 7 points. Mortgage prices are slightly worse than where the market closed Wednesday.

Maarket commentary

JP Morgan Chase posted a 23% increase in quarterly profits; the first of the major banks to report third quarter results. U.S. equity markets are sharply higher on this positive news, while treasury prices are worsening.

The Fed minutes from September’s FOMC meeting showed a Fed divided over additional easing, but generally leaning in the direction of further action. The bond market has priced in another round of quantitative easing from the Fed, so any delay or additional dissent will cause interest rates to creep higher, as we saw Tuesday afternoon.

Finally, yesterday’s 3-year note auction left a bit to be desired as the indirect bid dropped to its lowest level in 2007. The indirect bid reflects foreign interest in the issue and could be problematic if demand weakens. Treasury will auction 10-year notes today and a repeat of yesterday’s weak auction could spook fixed income investors again.

Market commentary

The economic calendar is light today with the U.S. Treasury auctioning $32 billion in 3 year notes and at 1:00 PM, ET the minutes from the Fed’s September 21st meeting will be released. This meeting had the first discussions of QE2 and could provide some interesting color into what the various Fed officials are thinking.

Treasury and mortgage bond prices are slightly better today, with mortgages better by .125% to .250%.

Market commentary

Treasuries closed lower on Friday, and the bond market is closed today. The economic calendar is light the remainder of the week, except for Friday when we will see the Consumer Price Index and Retail Sales data for September. Also, remember the U.S. Treasury is auctioning 3 year notes, 10 year notes and 30 year bonds this week.

Market commentary

The U.S. economy lost 95,000 jobs last month versus the expectation of a loss of 5,000, reflecting the employment picture is weaker-than-expected Private payrolls were a bit better, increasing 64,000 in September (expected to be +75,000) and August’s figures were revised 27,000 higher. The pace of private job growth, however, has dropped from +117,000 in July to +93,000 in August to +64,000 in September. The government lost more jobs than expected; mostly census workers but some local and state government workers, and the unemployment rate remained unchanged at 9.6%.

According to a Bloomberg report, 41.8 million people in the U.S. are receiving food stamps, 13.5% of the population. Food stamps now account for 12% of all retail food and beverage sales, up from 6% three years ago. Mississippi, Tennessee, and Washington D.C. all have rates of use above 20%.

The bond market has improved slightly from the close on Thursday, and mortgage pricing is slightly better.

Remember, Monday is the Columbus Day holiday and will not count as a rescission day.

Market commentary

Initial jobless claims came in slightly better-than-expected at 445k this morning but remain in the 450k range that has come to define this recovery. Continuing claims rose slightly as unemployed persons find it difficult to obtain new work.
The growing consensus in the bond market is that more quantitative easing is imminent from the Fed, an idea clearly indicated in the rally we have seen in the 10 year note. Last Friday the 10 year closed at a yield of 2.51% and this morning is trading at 2.40%. A large part of this rally came after yesterday’s ADP report which pointed towards a weaker-than-expected payrolls report. Tomorrow’s payroll report is expected to reflect a slight loss of jobs in the overall economy, with a gain of 75,000 in private payrolls. The persistent weakness in the labor markets is very compelling to Fed policy makers, and this will be the last employment report before the Fed’s November meeting.
A couple of items to note: 1) We are coming up on a 3 day weekend, so volatility could be exaggerated after the early Friday morning release of the jobs data, and 2) next week the U.S. Treasury is auctioning an estimated $32 billion of 3 year notes, $21 billion of 10 year notes, and $13 billion of 30 year bonds.

Market commentary

Treasuries are in rally mode as the ADP employment report was released this morning showing a drop of 39k in jobs for the month of September. This report was expected to show an increase of 20k. In addition the Challenger job cuts report showed 37k job cuts announced in September, up 2.5k from July, most of which were seen in the West and Midwest.

The idea of the Fed implementing QE2 gained more traction yesterday when Chicago Fed Bank President Charles Evans said, "In the last several months I’ve stared at our unemployment forecast and come to the conclusion that it’s just not coming down nearly as quickly as it should.” He went on to say that he favors “much more [monetary] accommodation than we’ve put in place.”

Clearly today’s employment reports support the above statement from Chicago Fed President Evans, and the bond market is pricing in a weak number on Friday. Friday’s payroll data will need to be significantly worse than forecast for the bond market to maintain the rally. This could become a classic case of buy the rumor, sell the news.

Market commentary

Treasuries had a strong day yesterday and the 10-year is opening this morning at 2.45%, while the 2-year hit a new low and we are now sitting at 0.41%. Fed chairman Bernanke delivered comments yesterday that re-affirmed the market’s growing belief that he is leaning towards more quantitative easing. Answering a question about the effectiveness of additional QE at his speech yesterday in Rhode Island, Bernanke said “I do think that the additional purchases – although we don’t have precise numbers for how big the effects are – I do think they have the ability to ease financial conditions.” He also stated that it is “crucially important to put fiscal policy on a sustainable path” and that includes cutting our budget deficit. However, it would be more feasible to cut the deficit over the long-term than in the near-term. Translation: let’s stimulate the economy now and put in place some policies that will reduce the budget later.

Positive economic news came from the Institute for Supply Management as they reported their index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 53.2 from 51.5 in August.

The effect on the markets is a reversal for stocks as the DOW is currently higher by 120 points, while the bond market is flat from Monday’s close. Mortgage prices are slightly better, offering another good day to lock.

Market commentary

The bond market is "on alert for easing" according to this morning’s WSJ. As the FOMC (Fed) statements have said, consumer spending is being hindered by several variables but most importantly by the high rate of unemployment. This is why the labor statistics are so important at this juncture of the economic cycle. This week’s release of September’s non-farm payrolls will be the last payroll report before the November 2nd and 3rd Fed meeting. The recent jobless claims reports signal a slight improvement in the payroll data, but not enough improvement to change economists` perceptions of the strength of the labor market. Expectations are for total non-farm payrolls to improve from losing 54k jobs last in August to no jobs lost (no jobs gained) in September, while private payrolls are expected to increase from 67,000 to 77,000.
Helping bond prices today is the decline in U.S. stock markets, a result of analysts cutting the ratings on Microsoft and Alcoa. Mortgage prices have improved by approximately .250% from Friday.

Market commentary

Treasuries and mortgage bonds improved late Thursday afternoon and are flat this morning after absorbing a series of economic reports.

Manufacturing expanded in September at the slowest pace in 10 months, according to the Institute for Supply Management’s factory index which dropped to 54.4 from 56.3 in August.

Confidence among U.S. consumers declined less than forecast, as the Thomson Reuters/University of Michigan final index of consumer sentiment fell slightly to 68.2 from 68.9 in August.

Consumer spending in the U.S. rose more than forecast in August as incomes edged slightly higher. Wages and salaries increased 0.3% after a 0.4% increase the prior month, showing how the weak labor market is holding back paychecks.

All in all a mixed bag of reports indicating the U.S. economy is struggling to maintain positive growth.

Mortgage prices are better today by .125% to .250%.

Market commentary

Bonds sold off on Wednesday and are slightly worse in price again this morning. The yield on the 10 year note traded as low as 2.47% on Tuesday, and this morning it stands at 2.54%.

Economic data today was a non-event with second quarter GDP being revised upward 0.1% to an 1.7% annualized pace while personal consumption was revised up to 2.2% growth from the previously reported 2.0%. Initial jobless claims fell slightly last week, but remain at elevated levels.

Friday morning we will see another report on consumer confidence as well as data on the health of the manufacturing sector of the U.S. economy.

Mortgage prices are .250% to .375% worse than Wednesday morning.

Market commentary

Today has a light economic calendar, with the Mortgage Bankers Association reporting that mortgage applications dropped 0.8% for the week, however, applications for new purchases rose 2.3%. Later today the U.S. Treasury will auction $29 billion of 7 year notes, following Monday’s auction of 2 year notes and Tuesday’s auction of 5 year notes. The 2 year and 5 year note auctions went off extremely well, providing tough acts to follow for today’s 7 year note auction.

Bond prices are taking a breather after the early week rally pushed the yield on the 10 year note below 2.50%. Mortgage prices are .15% to .20% worse than Tuesday.

Market commentary

Treasury auctioned $36B 2-year notes yesterday and had excellent results. The auction stopped below the 1pm bid side of the market and the 3.78 bid/cover ratio was the best since 2007. The bond markets remained firm throughout Monday and are improving again this morning as the Conference Board reported its index of consumer confidence declined to 48.5, lower from 53.2 the prior month and less than the expected reading of 52.1.

The S&P/Case-Shiller index of property values reflected an increase of 3.2% from this time last year, giving homeowners some hope of a stabilization in prices.

Treasury is scheduled to auction $35B in new 5-year notes this afternoon, so we may see some volatility depending on how well the auction is received.

Market commentary

The Commerce Department reported durable goods orders surged in August, topping analysts’ estimates, and over-riding the disappointing new home sales data. U.S. stock indices are sharply higher on the durable goods data, with bond prices falling for a second day. There is additional pressure on the U.S. Treasuries as the market positions itself for next weeks’ auctions. The Treasury will auction $36 billion of 2 year notes, $35 billion of 5 year notes and $29 billion of 7 year notes.

This morning mortgage prices are .250% to .375% worse than the close on Thursday.

Market commentary

Initial jobless claims unexpectedly ticked higher this morning coming in at 465k for the previous week. Continuing claims were also slightly above estimates and the previous week’s releases of both measures were revised higher, indicating job growth remains anemic.

Two pieces of positive economic data came later in the morning with existing home sales in August rising 7.60% and Leading Economic Indicators posting an increase of 0.3%.

Bond prices rallied early on the report of increasing jobless claims, but have since pulled back with mortgage prices slightly worse than the close on Wednesday.

The Fed will be buying Treasuries in the 5 year range today as they continue to reinvest the cash flows from their MBS portfolio.

Market commentary

Treasuries rallied strongly following the release of the FOMC statement yesterday in which the Fed clearly acknowledged their concern about the economy and a lack of inflation but stopped short of taking action, yet. The 10-year Treasury traded at 2.70% just before the release and dropped shortly thereafter to 2.57%.

This morning the Mortgage Bankers Association stated mortgage applications fell 1.4% last week and applications for new purchases (excludes refinances) were down 3.3%. The pace of new purchase applications continues to be very low, the lowest they have seen since 1997.

The Treasury market is improving again this morning and mortgage pricing is better by .125% to .250%.

Market commentary

Housing starts were released this morning showing an increase of 57k (+10.5%) from July to August to a seasonally adjusted rate of 598k. This is a reasonable increase in starts but is still at a very low level, indicating housing remains in the doldrums.

The Fed is meeting today and will issue their FOMC statement at 2:15 p.m. ET. The running debate today is whether the Fed will embark on more quantitative easing. The recent bits of better economic data does give them some cover to delay action, but keep in mind we remain in uncharted territory, economically speaking.

Stock and bond markets put in a nice rally on Monday, and bond prices are improved again this morning. Mortgage prices are better by .125% to .250%.

Market commentary

This morning’s August CPI report came in a bit lower that expected, however, overall CPI rose 0.3% for the month and 1.1% year-over-year. The core CPI, which excludes food and energy, was unchanged in August and up a mere 0.9% year-over-year. It was the fifth straight month of sub 1% YOY increases and continued to tie the lowest YOY level since the early 1960`s. Bonds are nicely higher this morning, more than reversing yesterday’s sell-off on the long-end of the curve.
In addition to the CPI report, Reuters/University of Michigan reported its preliminary index of consumer sentiment fell to 66.6 from 68.9 in August. This month’s reading was less than the most pessimistic forecast in a Bloomberg News survey and has helped support the bond market. Mortgage pricing is approximately .125% better than the close on Thursday.

Market commentary

The producer price index increased 0.4%, the most in five months and twice the gain in July, according to Labor Department figures released this morning. Excluding the food and energy components the core index rose 0.3%, higher than the 0.1% forecast.
Initial jobless claims dropped by 3000 last week to 450,000, lower than the forecast of 459,000. While the pace of staff reductions has slowed, it is job creation that is needed to get the economy out of its slump.
Interestingly both stock and bond markets are reacting negatively to this morning’s data. U.S. stock indices are slightly lower; however, bonds are taking a beating with the yield on the 10 year note climbing back to 2.77%. This is on top of Wednesday’s drubbing, which has mortgage prices worse .50% to .625% from early Wednesday postings.

Market commentary

U.S. industrial output rose 0.2% in August, a slower pace that had been forecast. And the mortgage applications index declined 8.9% in the week ended September 10 and interest rates rose slightly from record lows.

The reaction in the markets is fairly muted with U.S. stock indices slightly higher and bond prices falling. Pricing for mortgage loans is flat to worse by .125%.

Market commentary

Monday’s bond market rally is continuing this morning with the yield on the 10 year note falling to 2.69% after hitting 2.84% on Friday. The August retail sales report was slightly better than expected as sales rose 0.4%, the second straight month of modest gains.

We have a full economic calendar the remainder of the week with Industrial Production, the Producer Price Index the Consumer Price Index and Consumer Confidence. As we have seen the past few days, expect continued volatility as the markets to trade on the data.

Mortgage prices have improved by approximately .25% this morning.

Market commentary

Bank stocks are driving equity markets higher today as a weekend meeting of world financial regulators gave large banks more time than had been expected to increase their capital. This rally in stocks may be short lived; however, as according to a WSJ survey of economists, optimism about the recovery is waning. Three in 5 economists surveyed said they expect that the Fed will eventually embark on additional quantitative easing. This comes on the same weekend that Goldman and Pimco both made headlines with their calls that the Fed will begin a second round of easing by Q1 of 2011. While economists believe this would be the wrong thing to do, clearly these folks are not confident in a continued U.S. economic recovery.

Bonds have improved slightly this morning with mortgage pricing better by approximately .125%.

Market commentary

Yesterday saw the convergence of a lower trade deficit, better jobless claims report, and a weak 30-year auction which pushed Treasury yields higher. The 10-year sold off almost 10 bps on the day to close at 2.76% and has opened weaker again this morning currently at 2.79%. Mortgage prices are worse by .250% to .50%.

Market commentary

A successful 10 year note auction on Wednesday lifted bond prices into the market close. This morning we see a reversal of that, with bond prices lower across the curve as initial jobless claims dropped from the 478,000 to 451,000, a positive sign for the job market.

Later today the U.S. Treasury will be auctioning $13 billion of 30 year bonds, which is expected to be well received. As of now the price for 30 year bonds is lower by over 1.00% and mortgage prices are worse by .25% to .375%.

Market commentary

The much anticipated release of employment figures came in stronger than expected this morning with slightly better numbers for August with notable revisions to June and July. The headline change in non-farm payrolls showed a loss of 54k jobs in August but a gain of 67k private payrolls. The headline drop still reflects the loss of temporarily hired census workers. June and July were collectively revised from a 351k loss to a 229k loss. Average hourly earnings were 0.3% higher and the average weekly hours were unchanged at 34.2.

The bond market immediately sold off on the higher than expected gain in private payrolls. The yield on the 10 year note spiked from 2.63% to 2.74% and mortgage bonds worsened in price over .50%. The markets have calmed slightly since the data, with the yield on the 10 year note falling back to 2.71% and mortgage bonds worse by .25% to .375%. Keep in mind many senior staff on the trading desks are on vacation in front of the Labor Day Holiday and volume is light.

Next week is light in terms of economic data; however, the U.S. Treasury will be auctioning 3yr and 10 yr notes and 30 yr bonds.

Enjoy you long, three day weekend!

Market commentary

The clarification of the Fed’s position on Quantitative Easing and the health of the economy (via their minutes and Bernanke’s statement from Jackson Hole) exposed Treasuries to the economic data with less support than they had just a week ago. Sure enough, the ISM report of manufacturing activity was stronger-than-expected yesterday sparking a rally in stocks and barrage of selling in bonds.

This morning new claims for unemployment benefits were reported as falling slightly last week, however, continuing claims remain at elevated levels. In addition to this report, worker productivity in the second quarter fell 1.8% while unit labor costs rose 1.1%. The Fed takes a keen interest in labor costs as these costs are a key measure of inflation.

The result of this weak data is unexpected as investors continue to sell bonds, driving the yield on the 10 year note back to 2.63%. Mortgage pricing is worse again by approximately .125% to .250%.

As usual, the first Friday of each month, the Labor Department releases the jobs data for the previous month. Tomorrow’s release is expected to show the labor market lost 100,000 jobs, while private sector hiring increased 41,000. The unemployment rate is forecast to rise from 9.50% to 9.60%.

Market commentary

The early releases this morning were mixed with ADP showing a slight decline in private payrolls of 10,000 for August while the Challenger Job Cut Announcements report showed the fewest corporate layoff announcements since June 2000. For August, Challenger shows 34,768 announced layoffs versus an average of 107,000 for all of 2009. Mortgage applications were up 2.7% for the week with purchase applications rising 1.8% according to the Mortgage Bankers Association.

The main data today was the ISM Manufacturing Index. This data was a huge surprise, jumping to 61.5 from 57.5. Expectations were for a dip to 55.3. In fact, given the fact that several of the regional surveys came up short recently, expectations may have been for a small miss to the downside.

Market commentary

Bond prices rose sharply, meaning interest rates fell, on Monday and stocks were lower as uncertainty over U.S. economic growth regained its footing. Stocks lost most of what they had gained on Friday, and bonds recouped about half of Friday’s losses.

This morning the Conference Board reported its Consumer Confidence index rose to 53.5 in August, up from 51.0 in July. In addition to this positive consumer confidence news, home prices in 20 U.S. cities, as measured by the S & P/Case-Shiller index, rose 4.29% from June 2009.

At 2:00 PM, ET today, the Fed releases its minutes from its August 10th meeting. Much has been made about the varying opinions at the Fed and these minutes will provide the only true insight we get into how adamant each member is and how persuasive their arguments are during FOMC meetings.

Both stock and bonds are improving this morning, with mortgage pricing better by .125% to .250%.

Market commentary

Fed Chairman Bernanke pulled the rug out from under the bond market on Friday during a speech at the Jackson Hole monetary symposium. Bernanke was more upbeat than many expected him to be, and his explanation of the Fed’s decision to re-invest cash flows from the Fed’s MBS portfolio told us the market had probably over-reacted. A second round a quantitative easing is further away than anticipated so rush into the U.S. Treasury market was a bit over done. Expect to see more volatility this week as a result, all leading up to Friday’s important release of nonfarm payrolls.

This morning’s release of Personal Income and Spending were largely in line with expectations. Spending was, however, up slightly which was seen in Friday’s GDP release. Inflation, as measured by Core PCE, was in line with expectations as well and reflected only a minor up tick in prices from the previous month – not nearly enough to signal a shift in inflation expectations.

U.S. Treasury prices are recovering from Friday’s sell off and mortgage prices are improved by approximately .25% .

Market commentary

In a speech from the Fed’s annual monetary symposium held in Jackson Hole, WY, Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery. The Fed chairman gave a detailed analysis of the economy and said growth during the past year has been “too slow” and unemployment “too high.” Bernanke also stated the Fed has several tools if prices decelerate, or job growth stagnates, including shifting the composition of its bond reinvestment strategy.

Earlier this morning the Commerce Department reported GDP for Q2 was revised lower from an initial estimate of 2.4% to 1.6%. This was better than the anticipated revision estimates that ranged from 1.00% to 1.40%. As a result, Treasuries sold off immediately following the release with the 10-year down half-a-point, while stocks moved higher. The sell off in Treasuries continues with the 10 year now lower in price by .875% at a yield of 2.575% and the 30 year bond is lower in price by 1.625% with the yield rising to 3.605%. Recall that as recently as Wednesday morning the yield on the 10 year note traded as low as 2.42%.

Market commentary

New claims for unemployment benefits fell to 473,000 from a revised 504,000 last week. While an improvement, a number at these elevated levels signals the labor market continues to be weak and will be an impediment to economic growth.

Many economists are now changing their view of economic growth in the U.S. with some giving the chance of a double-dip recession as high as 40%. Goldman Sachs economists also put out an investment note to customers yesterday saying they believe the recent host of negative headlines will force the Fed into further action before year-end.

The Fed is having its annual symposium in Jackson Hole beginning today. Fed Governor Hoenig put out the first sound-bite this morning saying that he still believes the economy is having a “modest recovery” but that “uncertainty is driving things”. I think you and I probably has this figured out, “uncertainty is driving things”, but it is nice to know a Fed governor concurs.
Treasury auctions $29B 7-year notes this afternoon and the Fed will be buying Treasuries. Yesterday’s auction of 5-year notes was decent with above average bid/cover and better indirect demand than we saw on the 2-year auction. Bond markets will continue to trade with their eyes glued to Jackson Hole and tomorrow’s release of GDP figures.
After a brief rally Wednesday morning, in which the 10 year note traded as low as 2.42%, bonds sold off sharply. As of this writing bond prices are flat to Wednesday’s close, with the yield on the 10 year note sitting at 2.55%.

Market commentary

Durable Goods Orders were released this morning and showed weaker activity than the expected 3.0% increase over June levels. Instead, Durable Goods Orders were only up 0.3% and Ex-Transportation they were down 3.8%. There is no silver lining inside the report.
The Commerce Department reported new home sales fell 12.4% in June, another disappointment in the housing sector. Hope that August would bring a respite from the negative economic data has not materialized, driving investors to the perceived safety of fixed income, particularly U.S. Treasuries. It will be difficult for the short maturities to rally, however, yields on the 30 year bond and 10 year note are falling, flattening the yield curve. The yield on the 10 year note has fallen below 2.50%, trading at 2.46%. Prices for mortgages have improved between .125% and .25%.

Market commentary

The National Association of Realtors reported existing home sales fell 27.2% in July to the lowest level in 15 years, with the supply of homes rising to 12.5 months at the current pace of sales. The weak state of the housing market is of great concern as it reflects deterioration in demand, which in turn affects prices.

As one should expect, stocks are being sold and U.S. Treasuries are rallying as investors flock to a safe harbor with most of the buying on the long end; the 30 year bond. The price of the 30 year is higher by 1.75% while shorter maturities such as the 5 year note are higher by only .30%. Mortgage prices have improved between .125% and .25% from the close on Monday.

One major item remains for today, and that is the Treasury auction of $37 billion of 2 year notes.

Market commentary

There are no economic releases scheduled for today, however, the remainder of the week we will see data on existing and new home sales, durable goods orders, with 2nd quarter GDP being the finale on Friday. The U.S. Treasury will also auction $102 billion of new debt beginning with $37 billion of 2 year notes on Tuesday, $36 billion of 5 year notes on Wednesday, and $29 billion of 7 year notes on Thursday.

Bond prices continue the decline from Friday with the yield on the 10 year note rising to 2.63%.

Market commentary

There are no economic releases scheduled for today but, luckily, yesterday’s were depressing enough to last two days. Initial Jobless Claims again put a sour tone on the employment picture and the Philly Fed indicator of manufacturing activity capped off the day with a much lower-than-expected reading sending investors flying for cover.

The Conference Board’s index of Leading Indicators was released yesterday as well showing a drop in the year-over-year figure from 8.3% to 7.1%. Investors flocked to Treasuries on the negative news driving the 2-year to another record-low close at .48% and dropping the yield on the 10-year by 6 more bps to close the day at 2.57%.

The U.S. Treasury announced the sale of $37B 2-year notes, $36B 5-year notes, and $29B 7-year notes next week. $102B of supply should adequately test investor’s resolve to stay in Treasuries at these low rates.

Market commentary

Initial Jobless Claims rose again last week continuing their disturbing trend. Claims rose from 488k last week (revised up 4k from 484k) to 500k. Survey expectations were for claims to come in 22k lower at 478k. This continues to bode poorly for the labor market. Ironically, this release comes out on the same day Intel announces that they are purchasing McAfee for $7.68B in cash.

The Fed finished their initial week of re-investing cash-flows from the MBS portfolio, so we can look for the markets to set-up for next week’s Treasury auctions of $36 billion or 2 year and 5 year notes and $28 billion of 7 year notes. Wednesday afternoon we saw the beginning of this as investors sold treasuries taking mortgage bonds down with them, and causing most lenders to re-price their rate sheets for the worse.

This morning U.S. stocks are trading lower in spite of the Intel acquisition news while the bond market is flat from the close on Wednesday.

Market commentary

There was no economic data released this morning, so the markets have little on which to focus. Bond prices are surging after a decline on Tuesday, with the yield on the 10 year note falling back to 2.60%. The stock markets are flat from the close, and mortgage prices are unchanged as well.

Market commentary

While not considered a major reading on inflation, the Producer Price Index released this morning reflected inflation is not a concern. July PPI rose 0.2%, and the core rate rose 0.3%, with a year over year reading of +1.15%. Additional good news for the stock markets came from the Federal Reserve with a report Industrial Production rose 1.0% last month, offering a glimmer of hope after the past two weeks of weak economic reports.

Bonds are giving back a small portion of Monday’s gains, however, not enough to consider the bull market over. Regarding bonds, specifically U.S. Treasuries, a report today stated China has reduced its holdings of U.S. debt for a second consecutive month. Potentially offsetting the lack of Chinese buying is the Federal Reserve as today the Fed will conduct its first Treasury purchase under its newly announced plan to reinvest its cash-flows from its mortgage bond holdings.

Market commentary

The past two weeks have witnessed a significant shift in the expectations for the U.S. economy. Prior to August, many observers and prognosticators were calling into question the pace of recovery. But the past thirteen days has seen an almost universal shift in expectations from not great to downright gloomy. Fixed income investors who had inflation as risk number one have now become focused on the threat of deflation.

This week the markets will see data on manufacturing and the housing market, which data was led off today with the Empire Manufacturing index. The index reflected expansion in the region, although not as much as expected. In addition to the U.S. data, weak economic reports from Japan are also supporting the case of slowing global growth.

Two important items on this week’s calendar are: 1) the Conference on the Future of Housing Finance, in which the future of the GSE’s (FNMA and FHLMC) will be discussed, and 2) the Fed will begin their first round of re-investing cash-flows from their portfolio of mortgage backed securities. The Fed will be buying U.S. treasuries with maturities in 4 – 6 years.

The market reaction to this morning’s data is a significant rally in the long end of the bond market. The price of the 30 year bond is improved by almost 2.00% and the price of the 10 year note is higher by .625%, dropping the yield to 2.60%. Mortgage bonds have improved by .125% to .25%.

Market commentary

This morning’s economic releases show core inflation coming in as expected with headline CPI (which includes food and energy prices) rising more than expected. Retail sales were slightly improved from June (+.2%) but ex autos and gas were actually down (-.1%). All of the numbers today confirm expectations that there is no inflation brewing and consumer spending is not accelerating. Yesterday’s $16B 30-year auction went extremely well with great demand from both direct and indirect bidders, stopping at 3.954%

Wednesday the yield on the 10 year note fell below 2.70% and has rallied back to that level this morning after Thursday bond sell off. Mortgage pricing is improved by .125% to .25%.

Market commentary

Initial jobless claims surprised to the high side again this morning. They were expected to be 465k for the previous week following last week’s surprisingly high 479k. In fact, last week’s numbers were revised higher to 482k and this week saw 484k new initial jobless claims.

The markets digested the Fed’s new assessment of the economy by selling stocks and moving into less risky assets, a.k.a., U.S. Treasuries. This morning stock and bond markets are taking a breather with both relatively flat from Wednesday afternoon’s close. Mortgage bonds are approximately .25% worse in price.

The remaining event for the day is the Treasury auction of $16 billion of 30 year bonds.

Market commentary

The FOMC statement released Tuesday afternoon ahs given investors plenty to think about. The Fed noted it sees a slowdown in output and employment, and announced it will reinvest cash flows from its mortgage bond holdings into longer term treasuries. You should know under normal conditions the Fed invests reserves in Treasury bills, maturities less than 1 year. So longer term treasuries for the Fed means 2 to 10 years, generally less than 10 years.

After sleeping on this information, the markets have reacted strongly today, with U.S. stocks sharply lower. Yields on Treasury notes and bonds are moving lower as we see the yield on the 10 year note fall to 2.71%. Keep in mind, the U.S. Treasury will auction $24 billion of 10 year notes today.

The Fed sent a clear message Tuesday, that interest rates will remain low for an extended period of time, until there is clear evidence the employment picture is improving and deflation is no longer a concern.

Market commentary

Bleak economic reports present a rather gloomy backdrop to today’s Fed meeting. In the 2nd quarter of 2010 U.S. business productivity fell 0.9% and labor costs remained flat. The decline in productivity was the first in 1 ½ years and suggests businesses may need to hire additional workers soon as the existing labor force is at maximum capacity. In addition to the decline in productivity business inventories rose as sales slumped.

Economists, analysts and investors are all focused on the language in today’s Fed announcement for any verbiage change that significantly alters the current position low rates and sitting on the bench waiting and hoping for a recovery.

As if there was not enough for the markets to digest this morning, the U.S. Treasury continues its task of issuing more debt for bureaucrats to spend. Today the Treasury will auction $34 billion of 3 year notes, followed by $24 billion of 10 year notes on Wednesday and $16 billion of 30 year bonds on Thursday.

Both bond and stock markets are sliding today, with mortgage prices worse by .125% to .250%.

Market commentary

Friday’s non-farm payroll report reflected the Federal Reserve’s view the U.S. economy is slowing, and it goes without saying, the lack of job growth will make the path to recovery long and hard. All the more reason Tuesday’s Fed meeting is gaining more and more attention. There have been a few discussions suggesting the Fed should re-enter the markets as a buyer, however, that is most likely not happening soon.

The Fed is concerned the U.S. could be entering a deflationary period similar to Japan---let’s hope that is not the case.

After Tuesday’s Fed decision the most important data remaining this week is the Consumer Price Index, Retail Sales, and Consumer Confidence, all schedule for Friday.

This morning, both stock and bond markets are relatively flat to their respective closes on Friday.

Market commentary

Non-Farm Payrolls dropped -131k for the month of July, exceeding the expectation of a decline in payrolls of -65k. Private Payrolls added +71k, slightly below expectations of +90k, while government payrolls dropped -202k which reflects a loss of census workers and, more importantly, an apparently larger-than-expected loss in state and local positions. Confirming earlier economic reports that showed the depth of the recession was deeper than originally believed, prior payroll reports were revised sharply lower. Overall payrolls in June were revised lower -96k, -52k lower in private and -44k for government payrolls.

This sets the stage for next week’s FOMC one day meeting and subsequent policy announcement. The Fed is deeply concerned the specter of deflation is rising. No job growth creates less demand for goods and services, and less demand usually equates to falling prices.

In reaction to this morning’s data, bonds are rallying with mortgage prices improved from Thursday by approximately .25%, and the U.S. equity markets are in sell mode.

Market commentary

U.S. Initial Jobless Claims were released this morning and reflected a larger-than-expected increase to 479k last week. Treasuries are rallying on the news, but any move today can quickly be undone tomorrow morning after the release of the jobs data.

The market will focus on private payrolls for which the consensus is that they will increase by 83k while the headline number, which includes government payrolls, is expected to drop by 125k (driven by declines in census workers). Employment reports released earlier in the week including ADP’s, Challenger’s, and Monster’s all reflected slightly better employment numbers allowing the markets to breathe a little bit easier going into tomorrow’s report.

The 10 year Treasury note is trading at 2.91% this morning, seemingly stuck in the range of 2.90% to 3.10%. This could all change tomorrow with any surprise in the jobs data.

Market commentary

The bond market has been a see-saw affair so far this week, and today we see that continue. After a nice price improvement Tuesday bonds are lower this morning as a result of two employment reports reflecting employers have slowed layoffs and there may be light at the end of the tunnel in terms of hiring. This is a precursor to Friday’s jobs report which is expected to show the U.S. lost 60,000 jobs in July.

Mortgage prices are approximately .125% worse than Tuesday; however, interest rates on mortgages remain near historic lows.

Maket commentary

This morning, markets are reacting to a report consumer spending and personal incomes were flat in June as well as the Fed’s recognition that the pace of recovery is weakening. The 10-year note has rallied overnight to its lowest open in over a year at 2.90%.

Fed Chairman Bernanke spoke yesterday in South Carolina in what has been characterized as a depressing event, and made two noteworthy comments. First, he reiterated his optimism that consumer spending would pick up in the 3rd quarter implying that he is leaning toward taking no new easing action in next week’s FOMC meeting. Second, he continued his advocacy of extending the Bush tax cuts (at least in part) saying that lawmakers need to be careful not to tighten, further slowing down the weak recovery.

The first Friday of each month the Labor Department releases the jobs data for the previous month. This Friday the expectation is another 60,000 jobs were lost in July after a decline of 125,000 in June.

Market commentary

Stock markets are rebounding sharply this morning as this morning’s data eased concern the economic expansion was slowing sharply. In the U.S., the Institute for Supply Management reported its manufacturing index fell slightly to 55.5 in July from 56.2 in June. Keep in mind a reading above 50 reflects expansion. In addition to this an index gauging economic activity across 24 developed nations rose 2.3% to its highest level since May.

As one would expect, the rally in stocks is causing a reversal in the bond market, although the yield on the 10 year Treasury note remains below 3.0%, currently trading at 2.94%. The significant decline in interest rates coupled with low home prices makes this a great time to buy a home. Please contact your Home Savings of America sales professional to review HSOA’s purchase incentives.

Market commentary

Weaker than expected growth in the U.S. economy as highlighted in today’s Gross Domestic Product report has created strong reactions in the U.S. stock and bond markets. Both markets are focusing on the consumption piece of the report, which shows consumer spending slowed dramatically. Stock prices are falling while we see a significant rally in treasuries and mortgage bonds.

Two post GDP reports, the Chicago Purchasing Managers Index and University of Michigan Consumer Confidence reflected strength in certain areas of manufacturing, although these reports were not enough to overcome the effect of the GDP report.

Market commentary

Wednesday’s 5 year note auction was well received and the Fed released its Beige Book which suggested weak economic growth in most areas of the U.S. These items allowed treasury and mortgage bond prices to firm late in the day.

This morning a decline in weekly jobless claims helped buoy the stock markets and pushed the yield on the 10 year note back to 3.04%. The only remaining item on today’s calendar is the Treasury’s $29 billion auction of 7 year notes.

Market commentary

New orders for U.S. manufactured goods such as cars, planes, and appliances, which are referred to in economic reports as Durable Goods; fell for a second straight month in June. This data coupled with other reports reflecting falling consumer confidence and anemic job suggest the economic growth is indeed slowing.

The market reactions have been fairly muted with U.S. stocks trading slightly lower, and bond prices lower as well. With falling bond prices we have seen interest rates move higher, with the yield on the 10 year note currently trading at 3.05%.

Tuesday’s $38 billion auction of 2 year notes was well received and investors are awaiting the results of today’s auction of $37 billion of 5 year notes.

Market commentary

Mixed economic data this morning with relatively good news for home prices as the S & P/Case-Shiller index of property values reflected a 4.6% year over year increase. This news was overshadowed by the Conference Board’s consumer confidence index which fell to 50.4, a five month low. Stocks turned lower after the consumer confidence data, and bonds are lower as well, nervously awaiting today’s auction of $38 billion in two year notes.

Market commentary

Bond prices declined on Friday on improved economic outlook and relief that only 7 of 91 European Banks failed their stress tests. While there is some concern the “stress” test was too lenient, the news was enough to move stock prices higher and bond prices lower.

This morning the Commerce Department announced new home sales for June rose 23.6%, although this was still the second slowest sales month since records keeping began in 1963. This data had little effect on the markets which are still trading from Friday’s news.

Bond prices are again falling with the yield on the 10 year note once again above 3%, trading at 3.03%, as the bond market prepares for this week’s Treasury auction of $104 billion; $38 billion of 2 year notes, $37 billion of 5 year notes and $29 billion of 7 year notes.

Market commentary

Bonds rallied sharply in the wake of Bernanke’s uncertain economic outlook on Wednesday, however, bond prices fell Thursday and are lower this morning as more positive corporate earnings reports have served to lift spirits and stock prices. Ford beat estimates nicely and is forecasting a continued steady rise in aggregate sales and profits. Verizon and McDonalds also beat. After digesting the morning’s earnings releases, the focus will be on the noon eastern release of the European stress tests of financial institutions. While subject to questions of transparency and severity, the stress tests are poised to answer some questions and remove some uncertainty from the Euro region. With US markets still open when released, the stress tests are poised to be market-moving.

Market commentary

Caterpillar, 3M, and UPS were among companies reporting strong second quarter earnings this morning, and the National Assn. of Realtors reported existing home sales fell only 5.3% in June. Many analysts had forecast a much steeper decline in home sales, so with the smaller than expected decline in housing and the strong earnings reports, U.S. stocks are rallying. Treasuries are giving back most of Wednesday afternoon’s gains, as are mortgage bonds.

Market commentary

Bond prices are improving slightly again today as stocks trade close to unchanged. Wells Fargo and Morgan Stanley both beat profit estimates and Wells indicated credit performance was improving. We have another day of bonds trading in a range with prices slightly improved.

Market commentary

Citi, Bank of America, and GE all beat earnings estimates, however, earnings are growing on cost cutting, not on demand for goods and services. Revenue expectations reflect this trend, and the result is a significant decline in U.S. stock prices.

Additional economic data shows inflation is not a threat as the Consumer Price Index fell 0.1% with the core rate rising 0.2%. Bond prices are in rally mode again, causing the yield on the 10 year note to fall to 2.935%.

Thursday afternoon the Senate passed the new financial regulatory bill, which will add over 5000 pages of new regulations to large banks, community banks, non-bank mortgage lenders and many other types of businesses that offer credit. In addition to the new regulations, the bill authorizes a new government agency that will cost billions to operate. We all know where that money will come from; yes, you and I. Between the massive health care reform and now the financial regulatory reform, the markets are sending a clear signal that the only growth in the U.S. will be in government and the U.S. economy and employment will be stagnant for years to come. One only has to look at the bond market and the extremely low yields to obtain confirmation.

Market commentary

Bond prices rose sharply on Wednesday as the FOMC’s June minutes showed more clearly the Fed’s downgraded economic view, as the Fed increasingly sees the economy as being years away from its long-term potential. The result of the minutes is a further extension of the “extended period” of low interest rates.

This morning U.S. stock markets are falling on reports that industrial production and manufacturing are slowing, causing bond prices to again improve with the yield on the 10 year note falling below 3%, to 2.99%.

Market commentary

Bond prices declined Tuesday after a poorly bid 10 year note auction. This morning, however, we see a reversal, with bond prices moving higher even as stocks perform well. Retail sales were reported mixed, but is was a strong earnings report from Intel that is driving equities higher today.

The markets still need to absorb today’s 30 year bond auction and the release of the minutes from the last Fed meeting.

Market commentary

Strong earnings reports form Alcoa and CSX are moving the U.S. stock markets sharply higher this morning. As one would expect with investors piling into stocks bond prices are falling with the yield on the 10 year note rising to 3.10%. Mortgage prices are approximately .25% worse than Monday.

Later today the U.S. Treasury will auction $21 billion of 10 year notes this afternoon, and Intel is among the companies reporting earnings after the stock market close.

Market commentary

Bond prices are slightly improved this morning as the economic calendar gets very busy this week. Three must-watch releases are the minutes of the June FOMC meeting, industrial production/capacity utilization, and the University of Michigan consumer confidence index. The June FOMC minutes are not likely to produce any insight that hasn’t already been discerned from the announcement and from comments by Fed officials since then. The minutes should reinforce expectations that the Fed will remain on-hold for quite some time focusing on economic growth, as inflation remains quite low, which is expected to show in the Consumer Price Index.

This week also features $68 billion of Treasuries including an estimated $34 billion of three-year notes, $21 billion of ten-year notes, and $13 billion of thirty-year bonds. Second quarter earnings season will also begin so, while last week was a fairly uneventful one for the markets and the outlook, the coming week should prove more interesting, reinforcing or refuting the double-dip concerns.

Market commentary

Bond prices fell Thursday causing the yield on the 10 year note to rise above 3% for the first time in many days, closing at 3.03%. Yields are slightly higher this again this morning, now trading at 3.055%. Mortgage prices fell Thursday as well, causing most lenders to re-price for the worse, and mortgage pricing is slightly worse again this morning.

In contrast to this week, next week will feature a busy calendar of economic releases, Treasury auctions and the beginning of earnings season. Keep in mind the bond market has priced in an Armageddon type economic collapse, so any positive news, including positive earnings announcements from corporate America could cause interest rates to move higher.

Market commentary

Given the lack of economic data and growing positive sentiment that 2nd quarter earnings were strong, gave the impetus for Wednesday’s stock market rally, and subsequent sell off in bonds. This scenario is playing out again this morning as U.S. stock markets are moving higher and bond prices lower. The yield on the 10 year note rose above 3%, currently trading at 3.035%.

Next week’s treasury auctions are putting additional pressure on the bond market with estimates of $34 billion of 3 year notes, $21 billion of 10 year notes, and $13 billion of 30 year bonds.

Interest rates on mortgages remain at 4.50% and below, so there is still opportunity for your home buyers and borrowers seeking to refinance to a lower rate.

Market commentary

U.S. stock markets began Tuesday morning with a surge that faded late in the day, resulting in a surge in bond prices. Mortgage bonds rallied along with treasuries as investors continue to seek risk adverse returns, even though those returns are sub 1.00%.

Today stocks are higher at the open with bonds flat from Tuesday’s close, but as we have seen in recent weeks the markets can be quite fickle. Mortgage prices are flat from Tuesday’s close, keeping in mind HSOA improved pricing mid-day.

Market commentary

Weak economic releases dominated last week’s news, supporting bond prices and low yields, and also driving down stock prices. With little data scheduled for release this holiday shortened week, stocks and bonds will trade on news related items, while keeping in mind the U.S. Treasury will auction 3 year and 10 year notes, and 30 year bonds the following week.

U.S. stock markets are rebounding this morning as are bonds. Mortgage pricing is .125% to .25% better than Friday.

Market commentary

Non-farm payrolls fell 125,000 as U.S. census workers were let go, however, the private sector hired 83,000 new workers reflecting the U.S. economy is treading water at best. Interestingly the unemployment rate fell to 9.50% as folks left the workforce.

The U.S. stock and bond market reactions have been muted, with both markets down slightly. The yield on the 10 year note rose slightly to 2.98%, while mortgage prices are approximately .125% than Thursday. The bond market has a full trading session today, and the HSOA lock desk will be open normal hours---until 4:00 PM, PT.

Have a safe and happy Independence Day celebration!

Market Commentary

Believe it or not, bond prices are moving higher again today, mostly at the long end with the yield on the 10 year note holding at 2.90%. Stock markets are falling again based on continued weak economic data, including and increase in weekly jobless claims and a decline in manufacturing.

Other weak data driving investors into U.S. Treasuries came from Europe and China as they reported declining economic activity based on a decline manufacturing activity, and Spain was put on credit watch.

Mortgage prices are flat this morning from the close on Tuesday, but remember, trading will be very light as we head into the Independence Day Holiday weekend, so we could see some volatility.

HSOA would like to thank all of our partners and associates for making June a terrific month! Loan volume continues to be high, so please do not delay in submitting your loan files and conditions to ensure timely July closings.

Market commentary

Tuesday, U.S. Treasuries closed at their lowest yields since April 2009, with the yield on the benchmark 10 year note briefly touching 2.95%. This morning bond prices have backed off, however, the 10 year note yield remains below 3% at 2.99%.

The ADP employment survey was released this morning and it reflected slowing job growth. You will recall this is the precursor to Friday’s government report on job creation, which for the month of June is expected to reflect job losses of approximately 110,000.

Mortgage prices are approximately .125% to .25% worse than Tuesday.

Market Commentary

The relentless bond rally continues this morning as U.S. and global stock markets sink as the Conference Board, an economic and industry group, reported its index of consumer confidence fell to 52.9 in June from a reading of 62.7 in May. In addition to slipping consumer confidence, the Conference Board also reported that growth in China is slowing. The combination of these two reports layered on top of continued concerns regarding the sovereign debt of many European countries has investors fleeing to the perceived safety of U.S. treasuries. The yield on the 10 year note fell below 3% this morning, and traded as low as 2.95%. As of this writing the 10 year note yield stands at 2.99%, while U.S. stock markets are selling off.

Mortgage prices have improved between .125% and .25% from the close on Monday.

Market commentary

Bond prices rose on Friday and are moving higher this morning after the markets had a chance to review the financial regulatory bill moving through Congress and the comments from the G20 meeting in Toronto.

The consensus regarding the financial regulatory bill is that it will create two new government agencies and impose new fees and taxes to pay for these agencies. While the fees and taxes are on banks, hedge funds and other financial businesses, we all know these will be passed along to the end user, i.e., the consumer---you and me. In addition, as with any government regulation, economic growth will be stymied at a time when the U.S. economy can least afford it.

Over the weekend the Group of 20 largest industrialized nations met in Toronto to discuss global economic growth and the ballooning government deficits. The U.S. called for more stimulus while the European Union suggested austerity, so the end result, as is reflected in the bond and stock markets today, is that global growth will be limited. Slow economic growth supports the bond market.

Market commentary

U.S. Senate, House and White House conferees reached agreement on final amendments to what is called the “Wall Street” reform bill. Unfortunately this bill does little to reform Wall Street, but it will put a further tightening on credit availability while imposing fees to pay for the additional government agencies it establishes. The imposition of fees and taxes on banks to pay for the new bureaucrats, as we all know, will be paid by the consumer in the end. At a time when the economy can least afford it credit will become harder to obtain.

If there is good news to be derived from this, it is the market “vote”. And the vote today is a decline in stocks and an improvement in bond prices. Investors feel this legislation will place a further drag on the U.S. economy and therefore reduce corporate profit growth---meaning lower stock valuations. For those of us in mortgage land, the good news is interest rates will remain at low levels as long as investors feel economic growth will be hindered.

Market commentary

Bonds received a boost on Wednesday from the FOMC (Fed) announcement which downgraded slightly its assessment of the U.S. economy. As expected, the Fed will not be raising interest rates anytime soon.

The 5 year note auction was a horrible affair, one of the weaker sales reported in many months. Keep in mind today the U.S. Treasury will sell $30 billion of 7 year notes, so keep a watchful eye on the markets.

The bond market opened strong this morning, but has since faded to unchanged on the day, while stocks are lower. Take advantage of the rates sooner rather than later.