The mortgage bond market is mostly flat this morning, after gaining 18 bps yesterday. Today is the last day of the 4th quarter, so many traders are sitting on the sidelines until tomorrow.
Consumer Confidence was reported this morning slightly worse than expected at 26.0 versus 28.0, though this is an improvement from last month’s numbers. In addition, the Chicago Purchasing Managers Index (PMI) came in low at 31.4 versus estimates of 34.4. This is the worst number is over 29 years, and it illustrates just how much the manufacturing sector is suffering.
Mortgage Backed Securities are currently up 3 bp from yesterday’s close. With little else in economic news today, we are carefully floating for now. If anything changes, we will send out an alert.
Mortgage Backed Securities are up in the positive again today, though they are off earlier highs from the opening. Much of this morning’s gains come as the stock market struggles with news on the auto front. In addition, the bond market is getting a premature boost as the Fed plans to purchase longer term Treasuries later today.
The Obama Administration’s report on GM and Chrysler this morning was quite clear. Neither company has taken the necessary steps to warrant further bailout assistance without sweeping changes. In addition, Obama raised the real possibility of using a controlled bankruptcy “in a quick and surgical way” to help these companies “emerge stronger”. It appears that the administration has forced the departure of GM’s CEO Rick Wagoner by threatening to pull future bailout funds should he fail to step down.
The mortgage bond market just fell to their lowest level of the day. For now, we are holding on to see if the market can push back into the positive. Though you might float for now, be mindful that we are close to pricing highs from December and January. It might be best to take a conservative stance and lock if your lenders are providing the pricing.
Mortgage Backed Securities have been playing on a layer of support this morning at $101.56. Bonds had broken below this floor earlier, but have since been able to regain footing slightly above that level.
Durable Goods Orders climbed to their highest level in six months with a reading of 3.4%, which was better than expectations. This is a good sign for the economy, though the report is quite volatile. It does come off the heals of two straight days of positive economic news, and it appears that with the credit markets starting untangle, this number could continue to show positive increases.
Also coming in on a positive note was today’s release of New Home Sales, which were reported at 337,000 versus expectations of 300,000. In addition, the inventory of unsold homes dropped slightly to a 12.2 month supply. These are very encouraging reports that might signal the beginning to the bottoming of the housing market.
The Mortgage Banker Association released its Weekly Mortgage Application Survey for last week indicating applications rose 32.2% from the week prior. This is no doubt a result of the drop in rates from the pricing high reached in the bond market on Wednesday. Unfortunately, much of that gain has been lost in the last four days of trading. In addition, lenders who were already backed up in loan submissions are now receiving even more. This has kept a lid on rates, as lenders have been unwilling to pass on much of the gains to borrowers in an attempt to slow down loan volume.
The FNMA 4.5% bond is currently down slightly by -3.0 bps, but they have managed to stay above the nearest floor of support. Make sure to pay attention to this layer, as the next support level is a full 60 bps below. For now we are cautiously floating to see if this floor can maintain. Of course, it might be most prudent to lock even on the minimal gains we have received.
What a day for the stock market yesterday, and surprisingly mortgage backed securities also saw some positive movement. This came off the heals of the Treasury’s announcement of their “Public-Private” program to get toxic and illiquid debts off of struggling financial institution’s books. This is yet another attempt to get credit flowing steadily again, though we will see how confident the private sector is in our government after this AIG bonus fiasco. Ben Bernanke and Timothy Geithner are actually speaking currently to the House Financial Services Committee regarding this matter.
There are no major economic reports to be released today, though there is a large Treasury auction of 2-Year Notes later this morning. This could weigh on bond prices, but for now we will see if we can maintain above our current level of support at $101.71.
Stocks are soaring this morning in reaction to the Treasury’s announcement of a program designed to remove toxic assets from banks and financial institutions. This new plan will encourage private investors to participate in the program by offering them low interest rate loans through the FDIC and the Federal Reserve that are to be used for the purchases, and thus the government will mitigate some of the risk to those investors should the value of those assets continue to drop.
Existing Home Sales came in much better than expected, mostly the result of great deals in the foreclosure and short sale markets, as well as by the low interest rate environment we have been experiencing since the beginning of the year. The Inventory of Unsold Homes, though, came in slightly higher than the previous month, rising to a 9.7 month supply. With all of the other announcements and releases this morning, these reports were largely ignored by traders.
Mortgage Backed Securities are pretty much flat today, after coming off the pricing high established on Wednesday with declines both Thursday and Friday. Currently, the FNMA 4.5% bond is trading slightly lower from earlier highs this morning, but are a tad bit higher than Friday’s close. For now we are floating to see is we can gain back some of the losses from Thursday and Friday. Should anything change, we will let you know.
Just as expected, Mortgage Backed Securities have fallen from the pricing high reached Wednesday after the release of the FMOC Policy Statement. The selloff was precipitated by inflationary worries due to these aggressive moves from the Feds and the government, to falling dollar, and to rising oil and energy costs. This has no doubt weighed on the bond markets recent gains.
There were no major economic reports released today, and for the most part both the bond and the stock markets have remained relatively flat. Ben Bernanke is scheduled to speak further about the financial crisis later this morning at the Independent Community Bankers of America convention in Phoenix. This could have potential market moving comments, though it appears thus far this morning that investors have decided head out for an early weekend.
Currently the FNMA 4.5% Mortgage Bond is trading down -3.1 bps. After a nice shot higher Wednesday, protecting your gains is probably the best advice at this point. Should anything change, we will let you know.
What a difference a day can make! Mortgage Backed Securities (MBS) jumped to their highest level in 3 months yesterday on the heals of the release of the Fed’s Monetary Policy Statement. The Fed announced that they plan to extend their MBS purchase program, while at the same time expanding the available funds to $750 Billion. In addition, they also plan to buy up $300 Billion in Treasury Notes in an attempt to keep the spread between Treasuries and Mortgage Backed Securities from increasing, as they can have a very negative effect on the mortgage bond market. Though pricing has become better, rates are still only slightly lower than they were prior to yesterday’s run.
Here is the catch. The lending environment has not changed since the last pricing peak. If you remember, lenders were not able and/or willing to pass these gains on to the consumer through rates. Banks are still not staffed to accommodate the large influx of loans that occur when we see these spikes in pricing. In addition, many lenders are suffering from cuts in their warehouse lines, which has effected their abilities to fund loans. Thus in an attempt to slow down loan submissions, lenders will hold off on providing the better rates. Also, if you look at the coupons that the Fed has been buying and plans to continue to buy you will see that their intent is to keep a lid on rates, not necessarily drive them lower. I know the media is spinning this differently, but that just shows how out of touch they are with the actual markets. I even heard on “reporter” say last night that the Feds dropped mortgage rates to 0.0%!!! I believe they meant short term rates, which have little to do with the long term mortgage rates.
Many people might be tempted to remain on a fence to see if rates get any better. This is not only unwise, but is also flat out foolish. Rates are at historic lows no matter what, and these windows do not last very long. Eventually, the stock market will rally back, and there is no doubt that rates will increase dramatically (and fast). Currently, Mortgage backed Securities are flat on the day. Though you can safely float for now, it might be prudent to lock in your loans to protect the gains we received from yesterday’s rally in the bond market.
Mortgage Backed Securities are up slightly on the day as traders await the Fed’s policy statement that will be released at 12:15pm MST. Though there is no room for any further drops in short term and discount rates, their comments on the economy and its recovery will no doubt move investor sentiment.
The Consumer Price Index came in this morning a tad bit better than expected, with a reading of .4% versus .3%. The Core CPI, which strips out food and energy, indicated a reading of .2%. Though this is better than expected, it still signals a tame inflation reading, and the bond market had little reaction to the news.
Mortgage Bonds have just ticked above the 50-Day Moving average, which has successfully held back bond pricing for the better part of the last two weeks. If the market can sustain these gains, then we could see a potential reprice for the better. Of course, everything can quickly change depending upon the FMOC statements. There has been mention that the Feds might announce an extension to their Mortgage Backed Securities purchase program that ends in June, though it appears the 30 Year rate will bottom out at 5% rather than the 4.5% that we are all hearing about in the media. We will keep you posted of any changes.
Sideways trading continues in the bond market today, with mortgage backed securities slightly up on the day at +10 bps. Bonds have tested the floor of support at the 25-Day Moving Average several times in the last week, and it has proven to be pretty a pretty solid layer. Conversely, every time bonds have tried to break over the 50-Day Moving Average they have been forced back down creating this sideways trading pattern.
Housing Starts and Building Permits both came in higher than expected today, which caught most investors by surprise. It will be interesting to see if this positive trend continues, and though this is typically unfriendly news for the bond market, it can signal the beginning chances of economic recovery. Also reported this morning was the Producer Price index which came in lower than expected at .1% versus estimates of .4%. This leaves the Core PPI at .2%, slightly higher but still a very tame inflation reading.
The FMOC starts their policy meeting today, which will continue again tomorrow. Statements from these meetings typically have heavy influentail effects on the markets, so we will be waiting to see just what is disclosed. For now we are floating to see if bonds can make a break from the current trading pattern. Listen carefully tomorrow when the Fed releases their policy statement at 12:15pm MST. This will no doubt have dramatic effects trading.
Mortgage Backed Securities are all over the board once again, already testing both the ceiling of resistance at the 50-Day Moving Average and the floor of support at the 25-Day Moving Average this morning. This is the same window that bonds traded in for most of last weeke as well, and it will take some solid movement in either direction to break through one of these layers. Even still, pricing and rates are the best they have been in almost a month. So far, rates sheets seem to be holding on to those gains.
Stocks have been able to sustain last weeks gains on positive financials from Barclays Bank. In addition, Ben Bernanke in an unprecedented public interview on 60 Minutes stated that he felt confident about the long term economic piture, and most importantly, he felt that we should start seeing the end to this current recession by the end of this year. Ben was very emphatic that if the Reserve did not take the aggressive actions they did starting last year, then the situation would be much more grim then it is presently.
There were few market moving economic reports this morning. The New York State Manufacturing Index came in at its worst level on record with a reading of -38.2 versus the expected -32.0. Also, Capacity Utilization and Industrial Production both came in very close to expected. Traders have all but ignored these reports, as they await more news on the hearings regarding Mark to Market accounting and on the circus invloving AIG and their executive bonus pay.
With the bond market having rallied to levels not seen in over a month, it might be prudent to lock on the gains we have received. If you have a tough stomach though, you might want to float to see if mortgage backed securities can break through the layer of resisitance overhead. There are several factors that do create concern about the long term rate picture. First, eventually the goverment will stop their program for purchasing mortgage bonds. In addition, there will be further Treasury Auctions to pay for all of the government expenses which will weigh on mortgage backed securities. Finally, the tension between the US and China over trade has been building. With China being the single largest holder of US Debt, should they start to sell some the Treasuries that they own and also back off continued purchases of long term debts, our mortgage backed securities market could take a dramatic hit. This is definately something to watch and be prepared for in case the bond market takes a sudden swing in the wrong direction. We will keep you informed of any developments.
Posted by themortgagedesign 
Posted by themortgagedesign 
Posted by themortgagedesign 