Mortgage Market Blog
Here is the Mortgage Market Update for the week of August 18, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK
Last week mortgage bonds ended the week were they began leaving mortgage rates nearly unchanged. The ride for bonds was not smooth. They reacted negatively early in the week due to inflation fears when crude oil shipments was halted coming out of Georgia due to the Russian bombardment of the country. Some bad economic news helped when Macy’s and John Deer reported poor earnings, remember bad news usually helps bonds and mortgage rates improve. The CPI report was reported much hotter than expected showing consumer prices increase 5.6% over the last year. The bond market did not react as negatively as expected since the CPI reported was when oil prices were $147 per barrel and have now come down off their highs. This drop in oil process made traders think next months CPI report will be much tamer. Tame inflation reading came out of the Empire State Index Report on Friday helping bonds end the week at nearly unchanged levels. Other than economic reports mortgage bonds are fighting tough overhead resistance provided by the 25-day and 50-day moving average. These averages can cap advances when they are above the current bond pricing just as they can lend support if they are underfoot. I will be watching these moving averages and bond this week to see if they can break through and close above these averages.
THIS WEEK
This week there are not many high impact reports to move the markets. We will get a read on the health of the housing sector with reports out on building permits and housing starts. We will also a look at inflation at the producer level with the Producer Price Index (PPI). Last months PPI report came in much higher than expectations. It will be interesting to see if the inflationary pressures at the producer level subside. The Philadelphia Fed Index is the only high impact report for the week. The Philly Fed Index gives a read on manufacturing activity in the tri-state area on Pennsylvania. This is one of the most carefully watch manufacturing reports. If it shows manufacturing activity is stronger than expected stocks could move higher at the expense of bonds and mortgage rates could worsen.
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Here is the Mortgage Market Update for the week of August 4, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK
Last week was a good week for mortgage bonds and mortgage rates overall as they slightly improved. It was a good week thanks in part to negative economic news that was released. Second Quarter GDP was released and was worse than expected. It even revised Q4 2007 GDP to negative growth. The GDP for Q2 2008 consensus estimate was 2.3% and was reported only at a growth rate of 1.9%. The inflation measure is closely watched by the bond markets and the inflation-measuring GDP Price Index fell to an annualized rate of 1.9% and below expectations of 2.3%. The bond market liked the GDP report overall and reacted favorably. The big report of the week was the employment numbers released Friday. The Labor Dept. reported a monthly loss of 51,000 jobs but less than the -75,000 predicted. It was the 7th consecutive monthly decline in job formation and the unemployment rate rose to 5.7% from 5.5% and was higher than the forecast of 5.6%. The action in the bond market was mixed on this report. While they did not like the job creation portion of the report beating expectations they look closely at the unemployment rate increasing overall and liked that portion of the report. a closely watched segment of the employment report is The Employment Cost Index. This attempts to measure wage based inflation. This Index matched estimates at 0.7% indicating employment costs are holding steady and reducing the risks of labor-based inflation.
THIS WEEK
This week we have two big economic release and events to keep an eye on. The first report already released was the Personal Consumption Expenditures Index (PCE). This is the Federal Reserves favorite inflation gauge. This report is not as widely reported by the media as the CPI but more closely watch by the Fed. The PCE, like the Consumer Price Index (CPI) has a headline (overall) inflation number and a core number which excludes Energy and food costs. The headline PCE number grew extremely quickly to a towering 4.1% year of year inflation rate. The core PCE came in at a hot 2.3% year over year inflation reading. Both of these numbers show inflation is quickly on the rise. This puts the core rate outside the Fed’s comfort zone of 1-2%. This point towards a Fed Rate hike, the primary tool the Fed has to moderate inflation. Speaking of Fed rate hikes, that is the other big event this week. Tuesday morning the Fed meeting will adjourn with an interest rate decision and policy statement. The markets do not expect the Fed to raise rates this week. The HOT PCE numbers reported will put additional pressure on the Fed to moderate inflation. It will be interesting to see what the Fed’s interest rate decision will be and how many Fed members agree or disagree with the decision. This weeks Fed meeting will be highly debated and giving the current inflation readings and the soft stock markets.
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Here is the Mortgage Market Update for the week of July 28, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK
There was plenty of volatility in the bond market last week. After the horribly week the week before the market began to stabilize. The frst half of the week the bond market stayed steady despite fro Fed members speaking of increasing inflation. The bond market mounted a rebound on Thursday with a flood on negative economic news, remember when the bond market and mortgage bonds specifically increase it helps mortgage rates improve. Then Friday’s news smacked the market right back down. Positive news shocked the market and money flowed out of bonds into the stock market worsening mortgage rates. Friday’s reports on Consumer Confidence, New Home Sales and Durable Goods Orders were far better than the market was expecting.
THIS WEEK
This week we have quit a bit on news for the markets to digest. Many of the repots could have a high impact on the markets. Wednesday, ADP will release there Nation Employment Report. This report can move the markets because the markets see it as an indicator to the Bureau of Labor Statistics unemployment report which is the big report of the week released Friday. Thursday the Bureau of Economic Analysis will release second quarter Gross Domestic Product (GDP). GDP is a measure of the total production and consumption of goods and services in the U.S. GDP components like consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's behavior. This report and all of the different components are carefully watched by the markets. Remember two negative growth quarters measured by GDP indicate we are in a recession. Chicago PMI will also be released on Thursday which will give us insight in to the heath of the manufacturing sector. I think Thursday and Friday are going to be the big days to watch in the markets. With GDP and the Unemployment numbers being released.
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Here is the Mortgage Market Update for the week of July 21, 2008 brought to you by Larry Iest of Hemet Mortgage.LAST WEEK
The word or threat of the week was inflation. You know the bond market hate inflation so when inflation is in the air the bond market is in trouble. That is exactly what happened last week. After Mondays news about the Fed’s helping Fannie and Freddie the wave of inflationary news hit the wires. Tuesday the Producer Price Index (PPI) came it at the highest year-over-year level since 1981. That news started the bond market tumbling. Wednesday we got the report on Consumer Price Index (CPI) this year-over-year level came in at 5% which was another historic rise. All of this inflation news sent the bond market diving lower and mortgage rates increasing.
THIS WEEK
This week we have a light economic calendar. We will have reports on the consumer, Durable Goods and a read on the housing market. New and Existing home sales reports will be released and sales are expected to be sluggish. Consumer sediment will be released on Friday. The consumer has been extremely resilient in the face of higher food and oil process so this will be an interesting report. Also on Friday we are expecting the durable goods orders report which measures orders for items that will last longer than three years. We are also in the middle on earnings season for public companies. During earning season the stock market can change direction on a dime and add volatility to the bond market. we are all hoping the bond market can fight back this week and lift of itself from the lows we saw last week.
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Here is the Mortgage Market Update for the week of June 30, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK
The big news last we was the action, or inaction, of the Federal Reserve. The Fed decided to leave their Fed Funds rate unchanged at 2%. The Fed is fighting between a weakening dollar and a slowing economy against ever increasing energy prices. The DOW was in a free fall last week ending the week under 11,400 as oil topped $140 per barrel. With the DOW dropping this caused some money to flow out of stocks into the bond market helping mortgage rates improve slightly for the week.
THIS WEEK
This week we have a holiday shortened week with the market closed Friday in observance of the Independence Day holiday. All eyes this week will be on the Department of Labors jobs report for June. Traders will be watching all aspects of this report and the bond market paying close attention to the inflationary components. The other important reports this week will be Monday’s Chicago PMI and Tuesday’s ISM index. Both of these reports attempt to measure the strength or weakness of the manufacturing sector.
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Here is the Mortgage Market Update for the week of June 2, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK
The theme we saw last week in the market was inflation. There was a felling in the market of global inflation and it spilled into our markets. The inflation theme began Tuesday when the Consumer Confidence Report indicted that the consumer feels that inflation is a threat to their own financial situation. Wednesday the Durable Goods orders report came in hotter that expectations. On the heals of all the inflation talk pushing down the bond market the Treasury Department added additional supply selling 2-year and 5-year notes. This additional supply put further downward pressure on the Bond Market pushing mortgage backed securities below the 200-day moving average. This is a very important technical support for bond pricing and they have only fallen below this technical level three times in the past three years. This will be crucial to watch, if the bind cannot muster enough to close convincingly above this level this week that could mean we would have higher mortgage rates in the near future. The good news of the week came Friday when the Fed favorite measure of inflation the Core Personal Consumption Expenditure (PCE) Index showed that inflation remained within the Feds Comfort zone.
THIS WEEK
This week will be critical to mortgage rates in the near future. Besides watching the technical 200-day moving average in relation to where the bond closes we do also have the market moving Employment report being released on Friday. Last months jobs report indicated 20,000 jobs were lost in April which was better than the expectations and mortgage bonds fell 134 bp in the minutes following the news as funds were pulled from bonds and put into the stock market.. This caused a quick worsening on mortgage rates. This weeks report could also send shock waves through the bond market if it does not come close to the expectations.
Here is the Mortgage Market Update for the week of May 19, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK
Last week was another volatile week in the bond market. As you know generally good news is bad news for the bond market and that is how we began the week. Tuesday retail sales came is stronger than expected and on top of that many Fed Officials were speaking on Tuesday afternoon and they were speaking about the threat of inflation. Better than expected news on the economy and the Fed Members speaking about inflation the bond market ended the day lower than it began. The tables turned on Wednesday when the Consumer Price Index was reported below expectations showing inflation was not a problem. The CPI measures inflation at the consumer level of the economy. Thursday gave us two bond friendly pieces of data with a week job market report and the Philly Fed index showing weak manufacturing in the East. Bad news is good for the bond market and the market reacted favorably to the news. The tables turned again on Friday with the release of better than expected reports on the housing market. With all of the back and fourth action during the week the bond market was basically unchanged for the week.
THIS WEEK
This week we do not have many reports being released. On weeks were the news is limited the bond market gathers it direction from the movements in the stock market. if the stock market is doing well, money generally flows out of the bond market into the stock market and the bond market drops. We will get a read on inflation at the manufacturing level with the report being released on Tuesday Producer Price Index. Wednesday is the most important day with the release of the Federal Reserve Minutes from their last meeting. The markets will dissect the minutes looking for clues as to what the Fed’s next move may be.
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Here is the Mortgage Market Update for the week of May 12, 2008 brought to you by Larry Iest of Hemet Mortgage.
LAST WEEK
After a volatile week of bond prices moving every which way mortgage backed securities ended the week about where they began. Action does remain volatile but the current bond pricing is above dual layers of support, the 50 and 100 day moving average. If these support levels can hold through this weeks news that would be great for rates and show how powerful these layers of support really are. Remember mortgage rates and mortgage backed securities (bonds) have an inverse relationship. Meaning if bonds increase for the week mortgage rates will improve.
THIS WEEK
This week is filled with high impact reports and in addition several key Federal Reserve members will be giving speeches. Federal Reserve Chairman Ben Bernanke will be among the Fed Speakers giving speeches Tuesday and Thursday. Given the volatility in the markets and the uncertainty his speeches regarding stabilizing the credit markets could be market movers. In addition to the speeches we have high impact market reports. Retail sales will be released on Tuesday followed by Wednesday’s release of Consumer Price Index (CPI). CPI is critical because it attempts to measure inflation at the consumer level of the economy. Since inflation erodes away the income from bonds, this is a closely watched report and if it comes in very differently from the estimates can cause quick shifts in the markets. Thursday we will get a read on the beaten down housng market with a look at housing stated and building permits. Lately the housing starts numbers have been way down, which is a big help in trying to shrink the ever increase housing inventory. On Friday consumer sediment for May will be released. It will be interesting to see how the consumer is holding up in the face of rising food costs and $125 per barrel oil.
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