Market commentary

Good news for us in mortgage land today as we see bond prices, including mortgage bonds, improving. Economic data has driven some of the improvement in bonds, as first quarter GDP was reported at 3.2%, lower than expectations. In addition, the consumer sentiment index, a monthly measurement by the University of Michigan, declined from the March reading.

The SEC investigation and now, the criminal probe of Goldman Sachs, as well as the seemingly endless turmoil in the European debt markets remain as the main headlines. It has been reported again today the EU and IMF should reach an accord on a bailout of Greece this weekend, although, we have heard this for the past several weeks.

Mortgage interest rates remain at sub 5% levels and the home buying season is here. The combination of low interest rates and low home prices should motivate folks as the economy slowly recovers.

Have a great weekend!

Market commentary

The potential for contagion in the Euro zone remains a headline today as the EU continues to develop a resolution to the debt issues of Greece, Portugal, possibly Spain, and a few other countries.

The main event on Wednesday was the fed announcement reassuring the markets that interest rates would remain low for an extended period of time. Bond prices declined on the news, however the U.S. bond market is steady this morning with mortgage prices about .125% better.

The last scheduled item of the day that could be market moving is the $30+ billion of 7 year notes will be auctioned by the U.S. Treasury today, the last leg of this week’s auctions.

Market commentary

Flight to quality was the theme of Tuesday, as investment downgrades of Greece and Portugal caused investors to dump those bonds in favor of U.S. treasuries. The rally in the U.S. bond market peaked mid-day Tuesday, with treasury and mortgage bond prices ending the day well of the highs. The decline in bond prices is continuing this morning which will translate into worse pricing---.375% to .50% worse than Tuesday’s mid-day improvement.

Two important items remaining on today’s calendar---the U.S. Treasury auctions $42 billion of 5 year notes, and the end of the Fed’s two day meeting, with the policy announcement scheduled for approximately 11:15 AM, PT.

Market commentary

Wow! Great day for the U.S. treasury market has the Senate hammers Goldman Sachs executives. The Senate panel actually had the audacity to say Goldman inflated the housing bubble. Clearly these senators have forgotten the Federal Reserve sets interest rate policy and Congress themselves forced Fannie Mae and Freddie Mac to make loans to borrowers who were, well, let’s just say they were subprime borrowers.

In addition to this, Standard and Poor’s downgraded Greek debt to junk status, and lowered the rating on debt issued by Portugal. These downgrades have caused a decline across the board in European bonds.

The rally in U.S. bonds will likely help with today’s $44 billion of 2 year treasury notes. These results will be announced at approximately 10:00 AM, PT.

For now, take advantage of the rally in mortgages, which are well over .50% in price better from Monday’s bond market close.

Market commentary

This morning’s improvement in bond prices is directly attributable once again to the uncertainty of an EU/IMF bailout of Greece. That potential crisis as well as the much anticipated testimony of Goldman Sachs executives to congress will capture today’s headlines.

Don’t forget the U.S. Treasury is auctioning a record amount of debt this week, beginning today with $11 billion of 5 yr TIPS, followed by $44 billion of 2 yr notes on Tuesday, $42 billion of 5 year notes on Wednesday, and $32 billion of 7 year notes on Thursday.

The Federal Open Market Committee (FOMC) will begin a two day meeting tomorrow to discuss interest rate policy and economic activity. CNBC reported Friday there may be at least six FOMC members interested in selling assets as well as eliminating the “extended period” language, which references how long the Fed will keep the Fed funds rate at .25%. The Fed’s policy statement will be delivered at the close of the meeting on Wednesday, usually at 2:00 PM, ET.

Given the opposing forces pushing on interest rates you can expect increase volatility this week. A resolution to the Greek debt crisis and any significant policy change by the Fed will have a negative affect on interest rates—especially given the new supply coming to market.

Market commentary

The U.S. Treasury’s announcement of the details of next week’s debt auctions brought on a swift reaction in the bond market Thursday afternoon. The auction schedule is comprised of $11 billion of 5 yr TIPS, $44 billion of 2 yr notes, $42 billion of 5 year notes, and $32 billion of 7 year notes, to run on consecutive days beginning Monday, April 26, 2010. The result of the announcement was an immediate decline in treasury and mortgage bond prices, causing many lenders to worsen prices mid-day. The decline in prices continues this morning, with mortgage bonds worse by another .25%.

Next week the Federal Open Market Committee (FOMC) will meet for two days to discuss interest rate policy and economic activity. CNBC reported this morning there may be at least six FOMC members interested in selling assets as well as eliminating the “extended period” language, which references how long the Fed will keep interest rates---the Fed funds rate---at .25%.

Neither of the above topics bodes well for lower interest rates---next week could be quite volatile.

Market commentary

Two key pieces of key data released this morning have had little effect on the markets. Existing home sales rose 6.8% in March as buyers rush to take advantage of the home buyer tax credit that expires at the end of April. And, the Producer Price Index rose 0.7% on higher energy and food prices, although excluding these items the index was higher by only 0.1%.

The key factor affecting bond and stock markets today is the deepening financial crisis in Greece, which if not resolved, will have significant impact on European financial institutions. U.S. stock markets are declining in tandem with the European markets; however, this has been somewhat positive for U.S. treasuries. Mortgage bonds are slightly improved from Wednesday’s market close, but by only a few basis points.

Next week the U.S. Treasury will auction a record amount of 2yr, 5yr and 7yr notes, and the Federal Reserve begins a two day policy meeting on Tuesday, with a rate decision and policy statement coming Wednesday afternoon. The looming crisis in Greece, the huge supply of new U.S. debt coming to market, and some uncertainty surrounding the Fed policy statement could cause significant volatility in the markets, and it is difficult to determine if that will be positive or negative for mortgage prices.

Market commentary

The continued mess in Europe—meaning will Greece actually default on its obligations and now Portugal is a concern. European banking stocks are under pressure as these institutions hold billions of dollars of Greek debt. This is good news for the U.S. bond market as the flight to quality is giving a lift to U.S. treasuries and subsequently mortgage bonds. Pricing is better from Tuesday by .125% to .250%.

Thursday is a full economic calendar with the Producer Price Index (PPI), existing home sales, and durable goods orders. PPI is expected to reflect inflation remains tame, and home sales are expected to reflect the spring buying season has begun.

Market commentary

Mortgage bond prices fell on Monday and are declining again this morning as investors seem to taking more interest in stocks. Strong earnings from the financial sector and from a few of the big tech names have propelled the DOW past 11,000. The key of course, is what effect high unemployment and the continued slump in residential and commercial real estate will have on economic growth the remainder of this year and in 2011. So far, the minimal increase in interest rates has slowed mortgage applications, however, the spring and summer buying season are upon us. The steep decline in housing prices, the excess inventory and mortgage rates still below 5% still make this a buyers market.

Market commentary

The equity markets are still reeling from Friday’s announcement by the SEC that Goldman Sachs did not play fair when it came to packaging and marketing instruments tied to subprime mortgages. This was evidenced this morning as Citi announced stronger than expected earnings and Leading Indicators (LEI) rose 1.4%. As a reminder, the LEI is a composite of several economic measurements that are forward looking, so a rise in the index portends a growth in economic activity over the next 3 to 6 months.

So, the good news for us today is that mortgage prices are only slightly worse than where the market closed Friday, a day in which we saw a nice rally.

Market commentary

Consumer sentiment fell in March according to the Reuters/University of Michigan folks who measure this. The index for March came in at a reading of 69.5, down from 73.6 the previous month. And in earnings news, Bank of America and GE reported stronger earnings than had been estimated, however, revenue and new orders were down at both companies.

Greece is in the news again today as the European bailout seems to be unraveling. This news coupled with the earnings reports has the U.S. stock markets trading lower, which is giving a lift to bond prices. Mortgage bond prices are improved by .125% to .25%, so this is another good day to take advantage of very aggressive pricing.

Market commentary

Bond prices sank on Wednesday as the market faced signs of improved economic growth. Comments from Fed Chairman Bernanke and the release of the Fed’s Beige Book suggested the U.S. economy was gaining footholds, however, weakness remains in both residential and commercial real estate.

This morning we saw a report telling us new claims for jobless benefits rose sharply last week, although this was downplayed to due to the Good Friday and Easter holidays. In addition the jobs data, the Philadelphia Federal Reserve released their month factory index which rose to 20.2 from 18.9 the previous month. Keep in mind a reading above zero indicates expansion of manufacturing activity.

U.S. treasuries and mortgage bonds have improved slightly this morning; however, they remain well below where the market opened on Wednesday. Keep in mind, HSOA did not go through a price change for the worse on Wednesday and we thank all of you folks who delivered and locked your loans with HSOA!

Market commentary

Inflation, as measured by the Consumer Price Index (CPI), remains tame as the CPI increased only 0.1% in March, and excluding food and energy was unchanged. In addition to the CPI the markets saw strong earnings reports from Intel and JP Morgan Chase, which has moved the U.S. stock markets higher.

Federal Reserve Chairman Ben Bernanke stated in testimony to congress this morning the U.S. economy will see moderate recovery, however, the headwinds of high unemployment, continued weakness in residential and commercial real estate, and the poor condition of many state and local governments will retard growth. It seems clear the Fed is in no hurry to increase interest rates.

Bond prices have moved lower today, mostly the result of investors moving into the stock market. Mortgage prices are approximately .125% worse than Tuesday.

Market commentary

Monday was a good day for the U.S. bond market with a nice rally in both treasuries and mortgages. The positive sentiment is subdued this morning; however, mortgage prices remain a few basis points higher from the close on Monday.

For the remainder of the week bonds will take their cue from the stock market as earnings season kicks off in full force this week. Intel will report after the market closes today and GE and Bank of America will report on Friday.

Market commentary

A Euro zone deal to support Greece gave a lift to the U.S. equity markets this morning. How the deal will actually be implemented is still in the discussion phase, but early on this news had the U.S. bond market lower.

The market will focus on inflation this week, as well as earnings reports from Alcoa, Bank of America, and JP Morgan Chase. The Fed has continuously stated inflation is not a concern in the near term, and the Fed has been reducing its market support mechanisms.

Regarding the bank stocks, the market will focus on the balance sheets---mainly on reserves taken for loan losses. If provisions for loan loss reserves fall significantly this will be a positive sign that losses have peaked and are now trending lower.

Since the lower open, bond prices have turned higher, with the yield on the 10 year note dropping to 3.85% after touching 3.92% early this morning.

Market commentary

The U.S. bond market has slipped this morning, dragging down mortgage prices. It seems the specter of Greece defaulting on its debt is fading, taking away the flight to quality bid we saw this week in U.S. Treasuries.

Next week is another light week in terms of economic data with the exception of Wednesday and Thursday. Wednesday we will see the Consumer Price Index and Retail Sales and Thursday the markets will get a read on Industrial Production. The take aways from these reports will be the pace of inflation and the strength of any recovery among consumers and manufacturers.

Have a great weekend!