Austin Mortgage Blog

FOMC left interest rates unchanged and did not remove the statement, “low interest rates for and extended period of time”

March 16, 2010

FOMC left Austin interest rates unchanged and did not remove the statement, “low interest rates for and extended period of time”.  Treasuries and stocks have improved on the news yet mortgage backed securities are only 1/32^nd better.  Market looks OK but still is tough to trust.  Full press release below.

Release Date: March 16, 2010

For immediate release

Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.

Our best case is for Austin mortgage rates to hold steady so use this time to be a little defensive

Earlier this morning, Housing Starts fell 5.9% to 575 thousand units while Building Permits dropped 1.6% to 612K.  The data was close to economist’s expectations.  Regions were mixed with the Northeast declining 9.6% and the South down 15.5%.  The Midwest however jumped 10.6% and the West was up 7.9%.  Multifamily units fell 76K.

The big story of the day will be front and center at 1:15 pm cst.  That being the FOMC one day meeting to determine short term interest rates and make any changes to the policy statement.  For the most part, it looks like they could have mailed this one in with the only possible change coming in policy language regarding “low interest rates for an extended period of time”.  Some analysts are looking for the word “extended” to be dropped.  We see no change to rates or policy as we view the Fed to be “out of bullets” given zero percent interest rates and quantitative easing bloated balance sheet issues.  In our opinion, all they can do is manage expectations until the economy starts to pick up and then shift to an exit strategy.

What happens if all of the above is true?  The most likely outcome will be stocks doing better as they view “cheap’ money to continue.  That could put pressure on our mortgage pricing.  If they remove the “extended” language, both stocks and our Austin mortgage pricing would most likely suffer as traders attention would turn to Fed Funds rate hikes being priced in (in the near future).  As you can see, our best case is for Austin mortgage rates to hold steady so use this time to be a little defensive into the announcement.

Currently, the 10 year note is up 6/32’s (yield 3.68%), mortgage backs unchanged to off 1/32^nd (widening spreads), and stocks up a baker’s dozen on the big board.

Even though this morning’s calendar has had its fair share of data, most markets have been quite with little volatility

March 15, 2010

Even though this morning’s calendar has had its fair share of data, most markets have been quite with little volatility.  Earlier today, the New York Fed’s Empire Manufacturing Index fell 2.05 points to 22.86.  The print was close to expectations with new orders up nearly 17 points and shipments plus 10 points.  Inventory rebuilding supported the number with unfilled orders, inventories, and employment all showing positive gains.  The proof will be if buyers take the new merchandise off the shelves.

Industrial Production/Capacity Utilization were also on the menu, up .1% and .2% in February.  This release had a heavy dose of weather related slow down, affecting construction and other outdoor occupations in its wake.  We would expect a much stronger number for March.

One of indexes we follow is the Treasury International Capital Flows or TIC data.  The index measures net acquisition of securities by foreign parties.  The data shows a slowdown of 33.4 billion in purchases for January.  This lagging indicator is important to our industry and to Uncle Sam’s debt.  China is till the top purchaser so let’s hope our Treasury Secretary and Google don’t tick em’ off too bad.

Technically, we are trading near the upper end of a narrow range.  The trade is constructive, holding gains of late last week.  With the FOMC meeting tomorrow ( 1 day meeting), we expect the market to stay quiet until the policy statement is released (1:15 pm cst tomorrow).  Currently, the 10 year note is off 3/32’s (yield 3.72%), mortgage backs off 2/32’s, and stocks off 35 points on the big board.

Austin Mortgage Market Update – For the week of March 15, 2010

For the week of March 15, 2010 – Vol. 8, Issue 11

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE There wasn’t a ton of housing news last week, but one can always find a few significant items. For example, foreclosure filings in February were down 2% from January and up just 6% from a year ago — their smallest increase in four years. Most significantly, in the six states that made up 61% of the national total for February, foreclosure filings were down 15% from a year ago. We’re definitely heading in the right direction. On the mortgage front, the Mortgage Bankers Association reported applications for purchase loans were up a seasonally adjusted 5.7% from the week before. It looks like people are trying to take advantage of today’s historically low rates before the end of the month. That’s when the Fed stops buying mortgage bonds, which has helped keep rates low, and no one knows what will happen once that Fed buying program ends. Mortgage applicants also have their eye on the homebuyer’s tax credit, which requires a signed contract by April 30. Finally, current buyers are getting today’s great prices, which may not be headed much lower. One property search site announced that sellers had lowered prices on less than 20% of their listed homes, for the first time since they started tracking price reductions last April. >> Review of Last Week SLOWLY RISING… Like bread dough in the pan, the markets kept rising, though ever so slowly, last week. Basically, investors remained positive if not exactly exuberant. There were no big market moves to speak of, the result of no big news coming out of a fairly sparse economic calendar. Economic readings included January’s trade deficit shrinking to $37.3 billion, with the total volume of imports plus exports finally falling after months of rebounding. But experts weren’t worried, since this happens in normal times and total trade volume remains up at a 26% annual rate since last Spring’s bottom. We had new unemployment claims down by 6,000 last week. Continuing claims increased 37,000, but the four-week average stayed at its lowest level in around fourteen months. Some observers expect a large payroll increase in March. Let’s hope they’re right. Friday’s February Retail Sales report was a stunner. Overall retail sales were UP 0.3% — way better than expected — and sales excluding autos were UP 0.8% — way WAY better than expected! These are amazingly strong numbers, considering they’re for the year’s shortest month, whose shopping days were shortened even more by record snow storms and other forms of harsh weather in several regions of the country. Those worried about the consumer’s participation in this recovery, please take note! For the week, the Dow headed UP 0.6% to 10624.69; the S&P 500 hiked UP 1.0%, to 1149.99; while the Nasdaq climbed UP 1.8%, to 2367.66. A ton of supply hit the bond market last week, but demand was pretty strong too. Treasuries did well selling at lower-than-expected yields. There were also successful offerings in the municipal and corporate markets. The FNMA 30-year 4.5% bond we watch ended the week down just a tad, 31 basis points, closing at $100.88. On average, mortgage rates remain at their historically low levels, dipping slightly in last week’s Freddie Mac Survey. >> This Week’s Forecast HOME BUILDING, MANUFACTURING, INFLATION AND, OH YES, THE FED… A few useful economic indicators this week, highlighted by the Fed’s latest pronouncement on the funds rate come Tuesday. No one expects any movement on the rate just yet. Also Tuesday will be another take on the mindset of homebuilders, with Housing Starts and Building Permits. Lots of data on the manufacturing sector that’s been leading the recovery, with the Empire State and Philadelphia Fed indexes bracketing Industrial Production and Capacity Utilization. Finally, let’s keep an eye on inflation, with PPI wholesale numbers on Wednesday and CPI consumer figures the next day. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of March 15 – March 19 Date Time (ET) Release For Consensus Prior Impact M Mar 15 08:30 Empire State Manufacturing Index Mar 21.45 24.91 Moderate M Mar 15 09:15 Industrial Production Feb 0.0% 0.9% Moderate M Mar 15 09:15 Capacity Utilization Feb 72.6% 72.6% Moderate Tu Mar 16 08:30 Housing Starts Feb 570K 591K Moderate Tu Mar 16 08:30 Building Permits Feb 602K 622K Moderate Tu Mar 16 14:15 FOMC Rate Decision 3/16 0%-0.25% 0%-0.25% HIGH W Mar 17 08:30 Producer Price Index (PPI) Feb -0.2% 1.4% Moderate W Mar 17 08:30 Core PPI Feb 0.1% 0.3% Moderate W Mar 17 10:30 Crude Inventories 3/13 NA 1.43M Moderate Th Mar 18 08:30 Initial Unemployment Claims 3/13 450K 462K Moderate Th Mar 18 08:30 Continuing Unemployment Claims 3/6 4.500M 4.558M Moderate Th Mar 18 08:30 Consumer Price Index (CPI) Feb 0.1% 0.2% HIGH Th Mar 18 08:30 Core CPI Feb 0.1% 0.2% HIGH Th Mar 18 10:00 Leading Economic Indicators (LEI) Feb 0.1% 0.3% Moderate Th Mar 18 10:00 Philadelphia Fed Index Mar 18.0 17.6 HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months Coming out of the Fed meeting on Tuesday, virtually no economists expect to see a hike in the benchmark Fed Funds Rate. With inflation always a concern, some experts are beginning to think we may see a hike in the rate in the second half of the year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Mar 16 0%–0.25% Apr 28 0%–0.25% Jun 23 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Mar 16 <1% Apr 28 <1% Jun 23 5%

Best advice is to use any rally to lock your interest rate in!

March 12, 2010

Retail Sales jumped .3% and .8% ex-autos, well above economists’ expectations.  Gains in food, beverages, and gasoline station receipts led the way.  Auto sales pulled down the headline print, falling 2.0%.  Traffic was higher for most Retail Stores as well, with notable gains in women’s apparel outlets like Ann Taylor.

Given the wicked weather in February, the numbers are impressive but suspect.  Is the consumer coming out of a two-year shell or is it just time to replace some items that have simply worn out?  Time will tell.  If you’re looking to Consumer Sentiment for the answer, look again.  The index fell in this morning’s release, down 1.1 points to 72.5.  Both current conditions and future expectations fell with the latter down only slightly.  The index is moving sideways, a mirror image of our employment situation.  As employment goes, so will our feelings about how fat your wallet is.  Reaction to all of the above has been somewhat of a whipsaw.

Post Retail Sales, treasuries and mortgage backs fell like a rock with the 10 year note down 14/32’s at one time.  Mortgage backs were off 11/32’s at the same time.  Stocks as one would expect, were up 20 something and looking to breakout of upper part of the range on S & P’s (1150).  Once Consumer Confidence was released, traders threw cold water on stocks and our fixed income paper started a comeback.  Currently, the 10 year note is up 1/32^nd but mortgage backs are still off 7/32’s (we priced down 8/32’s).  Technically, the early selling triggered a new bearish trend (higher interest rates) but 10 year notes and 30 year bonds remain neutral on this study.  Given the volatile trading conditions, a bullish divergence has come into play with the chart now working on an outside day up (bullish formation).

Given the trading dynamics of late, we expect any rally to be muted.  Over the past week or so, I’ve talked about the triangle formation on the 10 year note daily chart.  Looking at that chart below, you can see how the formation is “winding itself” tighter and tighter and will eventually “breakout” into a major trend move.  3.89% and 3.43% mark the extremes (currently trading 3.72%).  Until this happens, we expect the market to be range bound between the two extremes.  Given the stabilization in the economy and slowly improving data, the higher percentage odds will be towards higher yields.  Time frame on this is tough to call with our most likely guess being the second half of the year.

With so many variables to consider – employment, sovereign debt, political rang lings’, and on and on – managing interest rate risk and helping our borrowers with their decisions on Austin mortgage rates is very hard to handicap.  Best advice is to use any rally to lock your interest rate in!

We’ll try to wrap it up for the week later today.

Quiet Week for Austin Mortgage Markets

During a very light week for economic news, the economic data and Treasury auctions contained few surprises and produced little reaction in mortgage markets. Mortgage rates ended the week nearly unchanged.

In early 2009, the Fed embarked on a $1.25 trillion mortgage-backed securities (MBS) purchase program to help keep mortgage rates low and stimulate the economy. The amount purchased varied from week to week, reaching a peak of $33.2 billion in the week of March 25, 2009. The Fed has been gradually reducing the size of its purchases at a pace consistent with a March 31 conclusion of the program, and the most recent weekly purchases have been down to around $10 billion.

As the date nears, the big question is what will happen when the MBS purchase program ends. This program is unprecedented, making the outcome difficult to predict, and forecasts vary widely. Estimates for the impact on mortgage rates from the conclusion of the program vary from an increase of one percent to no change. Those who predict higher mortgage rates point to a basic change in the fundamental supply and demand. The added demand from the Fed was widely credited with moving rates lower, and a decrease in demand would typically push rates higher. However, other economists argue that investors respond only to unexpected news. In this view, since the Fed has telegraphed the end of the program for months, there should be little reaction around March 31. The Fed itself has indicated that they expect a modest increase in Austin mortgage rates due to the end of the program.

Week Ahead

The big story next week will be Tuesday’s Fed meeting. No change in the fed funds rate is expected, but any surprises in the Fed’s statement could produce a large reaction. The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Industrial Production, an important indicator of economic activity, will be released on Monday. Housing Starts are scheduled for Tuesday. Import Prices, Leading Indicators, and Philly Fed will round out a busy week.

Best to take advantage of current mortgage pricing with such low odds of improvement in the cards

March 11, 2010

Market action today has been like watching paint dry.  Up a tick, down a tick, just not much volatility.  Earlier today, Weekly Unemployment Claims fell 6K to 462K.  Continuing Claims went the other way, up 37K to 4.558 million.  Both prints were close to economists’ expectations.  At high noon, the Treasury auctioned 13 billion of 30 year bonds.  The issue flew off the shelves at a yield of 4.679% with 23.6% going to Indirect Bidders and 29.6% taken by Direct Bidders.  The direct bid was huge, showing tremendous interest by domestic investors.  Bid to cover came in at 2.89% compared to an average of 2.51% (very good) but the best part was that the auction was taken at a yield that was under the yield trading at deadline (4.71%).  Traders call this “bidding through the screen” or a “bullet auction”.  Overall, give it an A.

Even with the great auction, nothing happened with pricing on 2 year through 10 year notes.  The 30 year bond has all the action, going from down 2/32’s to up 14/32’s in a nanno second (flatter yield curve).  Currently, both the 10 year note and mortgage backed securities are off 1/32^nd.   Technically, strong auctions this week have not rallied the market but have kept prices above major support, the 40 day moving average, and above the daily trend line.

The problems for bond bulls is that almost all daily oscillators show little upside potential (not much chance of a rally).  Mortgage backs do however have added support with traders and FNMA/FHLMC continuing to buy back positions.  Looks like a tug of war that no one wins.  Best to take advantage of current mortgage pricing with such low odds of improvement in the cards.  Currently, we’re trading 3.73% with the extremes at 4.62% and 2.0%.  Lots of room to run (either way) as the economic picture changes.

Business Economists See Fed Rate Hike in 6 Months

March 8, 2010

Most U.S. business economists expect the Federal Reserve to raise benchmark interest rates within six months by between a quarter and a half percentage point, according to a survey released on Monday.

A majority of economists in the National Association of Business Economists’ semiannual survey found the Fed’s current stance of rates near zero percent is appropriate. A growing number, however, believe the U.S. central bank’s policy’s are too stimulative, according to a poll of 203 members taken Feb. 4-22.

“A majority believes that a rise in interest rates is both likely and appropriate in the next several months,” said NABE President Lynn Reaser.

Click here to read the full article.

Austin Mortgage Market Update – For the week of March 8, 2010

For the week of March 8, 2010 – Vol. 8, Issue 10

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE Last week’s one housing report gave us the National Association of Realtors Pending Home Sales index, down 7.6% for January. But year over year, the NAR index is up 12.3%. Also, it’s now at 90.4 and a score of 100 equals the average level of contract activity for 2001, the base year, when activity was at a record high. So pending sales are still in pretty good territory. Meanwhile, a quarterly report from a builders group and a major bank revealed that home prices are at near record levels of affordability. In the last three months of 2009, a family making the median income of $64,000 a year could afford to buy 70.8% of all homes sold during that time! According to this report, a home is affordable if a family making the metro area’s median income would have to spend no more than 28% of their take-home pay for housing. Of course, there are variations in affordability around the US, but this is a great overall trend. Buyers, however, shouldn’t expect great affordability to last forever. According to a Freddie Mac index, in the last quarter of 2009 four out of nine regions showed home price gains! And the NAR’s monthly market forecast, out last Thursday, projected the median price of existing homes UP 2.8% for 2010 with the new home median price UP 2.0%. In addition, no one knows what will happen to mortgage rates once the Fed stops buying mortgage bonds at the end of this month. Smart buyers shouldn’t drag their feet, especially those wanting the tax credit, which requires a signed contract by April 30. >> Review of Last Week IN LIKE A LION… March came in and the markets roared, as the Dow clawed its way up to a 2.3% gain for the week that brought it to its highest level for the year. Investors were basically pleased with a slew of encouraging economic data that came in ahead of expectations, while credit market conditions continue to improve. That’s not to say there weren’t a few disappointments, starting with the dip in pending home sales covered above. ISM Manufacturing for February also came in below estimates, at 56.5, but, hey, that’s still comfortably above the 50 level that signals expansion. On the other hand, ISM Services bested expectations, reporting a 53.0, its best reading since 2007. Friday we had an employment report some experts feel shows an economy that’s poised to start adding jobs. Nonfarm payrolls were still down by 36,000 in February, but this was way better than expected. Even better than that, the unemployment rate held at 9.7%, avoiding an expected increase. And some observers feel the underlying data is pointing to job creation. We’ll see. For the week, the Dow headed UP 2.3% to 10566.20; the S&P 500 hiked UP 3.1%%, to 1138.69; while the Nasdaq soared UP 3.9%, to 2326.35. Bond prices came under a lot of pressure from the better than anticipated jobs report, a ton of supply coming next week and soaring stocks distracting investors from seeking a safe haven in bonds. But the FNMA 30-year 4.5% bond we watch held on, to end the week UP 10 basis points, closing at $101.19. Mortgage rates dipped a bit nationally, according to Freddie Mac’s weekly survey, and remain at very low levels. >> This Week’s Forecast HELLO AGAIN, CONSUMERS… It’s a fairly quiet week for economic news with the sole exception being the February Retail Sales reports on Friday. It’s been a business-led recovery so far, but the consumer is still a big part of the economy, so every month we all take a good hard look at Retail Sales. Friday we’ll also have Michigan consumer sentiment. And weekly unemployment numbers will continue to be an important focus. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of March 8 – March 12 Date Time (ET) Release For Consensus Prior Impact W Mar 10 10:30 Crude Inventories 3/6 NA 4.03M Moderate Th Mar 11 08:30 Initial Unemployment Claims 3/6 460K 469K Moderate Th Mar 11 08:30 Continuing Unemployment Claims 2/27 4.495M 4.500M Moderate Th Mar 11 08:30 Trade Balance Jan –$41.0B –$40.2B Moderate F Mar 12 08:30 Retail Sales Feb 0.2% 0.5% HIGH F Mar 12 08:30 Retail Sales ex-auto Feb 0.0% 0.6% HIGH F Mar 12 09:55 Univ. of Michigan Consumer Sentiment Index Mar 73.8 73.6 Moderate F Mar 12 10:00 Business Inventories Jan 0.2% –0.2% Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months The economy appears to be recovering, inflation remains in check and the Fed has said it expects to keep the rate down for an extended period of time. Economists do not expect a rate hike in the first half of the year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Mar 16 0%–0.25% Apr 28 0%–0.25% Jun 23 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Mar 16 <1% Apr 28 <1% Jun 23 2%

Using one standard deviation and a dart board, our bias is for 100k in job losses and a 9.9% unemployment rate

March 4, 2010

Let’s see what we have to deal with today; Sovereign debt problems in Greece continue to hold Euro zone hostage, massive short in our mortgage backed securities paper has traders scrambling, economic news such as Productivity, Factory Orders, Unemployment Claims, and Pending Home Sales, Treasury auction supply coming next week, and tomorrow’s weather skewed Employment Report due out at 7:30 am cst.  Just another day at the salt mine.

Weekly Unemployment Claims fell 27K to 469K as seasonal factors and the weather related snafu has everyone guessing is this real or Memorex.  The big picture points to the percentage of eligible people receiving unemployment benefits being 3.5%, well above the reading that creates jobs.  Seems to us that unemployment is stabilizing albeit at higher levels.  Not the makings of a vibrant economy.

Pending Home Sales looked like a Rottweiler as well, falling 7.6% in January.  Economists were looking for a plus 1.0% print.  Once again, the NAR Chief Lawrence Yun blames the weather for affecting home shopping.  Maybe we’ll get a clear read in July.  For the record, all regions were in the red with the West falling 13.2%.  Did it snow in California?

Factory Orders were up 1.7% with the ex-transportation up .1%.  A 15% gain in transportation orders did this trick for this number.  Maybe new accelerator parts for Toyota.  Productivity gains were off the chart, rising 6.9%.  The flip side was a drop in labor costs of 5.9%.  We are putting computers to work, not Joe the Plumber.  All of the above has flattened the yield curve with the 10 year note up 4/32’s and the bond plus 13/32’s.

One positive here is that until we work through this massive off sides market position in MBS, mortgage pricing will be supported, helping to keep pricing stable.  I’m going to give you our best guess on tomorrow’s jobs data.

Expectations for the February Employment Report are as follows;

1)      Non-Farm Payrolls – Minus 50K

2)      Unemployment – Rate 9.8%

3)      Hourly Earning – Plus .2 month on month

4)      Average Work Week – Minus .2

As we have been talking about, the weather is going to make a mess of the numbers.  We expect continued job losses in manufacturing, construction, and private services payrolls.  Construction should be hit the hardest, probably losing another 50K.  Consensus workers are a wild card as the government is expected to ramp up hiring, adding 1.2 million short term workers over time.

Using one standard deviation and a dart board, our bias is for 100k in job losses and a 9.9% unemployment rate.  JPMorgan has the call at minus 90K and 9.9%, Barclays at Minus 75K and 9.8%, Wells Fargo at minus 80k and 9.7%, and Credit Suisse the outlier at minus 125K and 9.9%.  If there is a miss, it will be towards more job losses than less.  You may recall that I wrote about John Ryding call that job losses would be minus 250K.  Don’t know if he is right but I do know he’s a pretty sharp dude.  What will the market do?  Most likely blow the numbers off due to distortions in the weather but trade nonetheless in a volatile fashion.  Once the dust settles, we would expect that pricing will be close to today’s levels “unless” the number is below expectations.

Let’s say we see a -25K or unchanged print.  We feel the market would interpret that to be much better than expected once you factor in the weather distortion.  Really, this one is a crap shoot.  Technically, we’re not getting much help as the 10 year note chart has formed a triangle pattern on the daily time frame.  We would need to close below 3.45% to turn this into a raging  bull (currently 3.61%) so not much help there.  Triangle patterns typically wind themselves up, tighter and tighter before a break out occurs.  Given the distance in basis points for a bullish outcome, we would side with a break out to higher yields/ worsening mortgage pricing to coincide with the ending of the short squeeze in the MBS market.  To put this in English and cut to the chase, be careful out in the days ahead.