Austin Mortgage Blog

Archive for August, 2009

If we close the day at 3.53% or lower, the monthly bearish trend cycle will have been broken, adding another layer of support for fixed income and Austin mortgage pricing

Stocks have gotten off on the wrong foot, starting in China as their index dropped nearly 7% and closed the month with its first loss in four months.  China is now down 23% from the August 4^th peak.  Sour stocks carried through to Europe and across the pond as stateside traders pressed the market on the open.  The Dow is currently off 80 points.  Bonds and mortgage backs have been the benefactor but ever so slightly.  Currently, the 10 year note is up 5/32’s (yield 3.43%) and mortgage backs plus 2/32’s.

Month end fixed income extensions will support the market as well, even though fixed income funds need to extend duration by only .14 years.  Chicago Purchasing Managers report hit the tape a couple of hours ago, up 6.6 point to 50.  The better than expected rise puts the index at exactly break even, one in which the economy is neither contracting or expanding (Chicago area).  Mild improvement within the employment component, due to inventory rebuilding, did the trick.

The week ahead will provide plenty of data, starting with Construction Spending and Pending Home Sales tomorrow and finishing the week with a holiday shorten trading session featuring the Mother of all data points, the Employment Report for August.

Today’s 10 year note chart pattern is directionless, backing and filling within a narrow range.  With low volume and the Employment Report due out on Friday, the market seems to be in “value” with a supportive bias.  Another positive note will be if we close the day at 3.53% or lower, the monthly bearish trend cycle will have been broken, adding another layer of support for fixed income and Austin mortgage pricing.

Just a heads up as the market has started to slip

Just a heads up as the market has started to slip.  For some reason, maybe auction indigestion, the 10 year has dropped 12/32’s and MBS off 6/32’s.  Stocks have turned positive, up 30 points on the Dow.  Expect those who improved pricing to take it back any minute.  Really, not a lot going on.  Just volatile in a low volume market.

Looks like the Treasury scored a hat trick with this week’s auctions

If you were holding your breath, it’s ok to exhale.  The paper crossed the screen at 3.092% with only a baby tail of .03 bps.  Indirect bidders took 61.2% of the issue, a very strong number.  The bid to cover was also decent at 2.74 to 1.  Overall, let’s give it an A-.  Looks like the Treasury scored a hat trick with this week’s auctions.  From our speculative bias, we see investors looking for a correction in stocks as all the good news this week has done little to spark a continued rally.  With valuations (stocks) below current S & P levels, it’s hard to find a reason for stocks to do better.  If our bias is true, look for treasuries to be a safe haven investment and Austin mortgage pricing to improve in its wake.   Could be the reason that 109 billion in paper has been sold without a hitch.  Still a tricky call so be careful out there.  Currently, the 10 year note is unchanged, mortgage backs down 1/32^nd, and stocks down 3 points on the day.

This could be pre-auction hedging pressure or the makings of a poor auction. Heads Up!

Weekly Unemployment Claims hit the tape this morning down 10K to 570K.  Continuing Claims also dropped to 6.133 million (down 119K).  The drop on both indexes does little to brighten the employment picture as claims remain high and continuing benefits run out for those in that period of Feb 08 to March 09.  For the most part, the market continues to be quiet.  Traders seem to have tons of opinions but very little conviction.  Something like Yogi’s line “when you come to a fork in the road, take it”.  We do have a 7 year note auction that will hit the tape in 10 minutes.  Watch this one as it can be a market mover.  In front of the print, the 10 year is slipping (off 3/32’s to yield 3.45%), mortgage backs off 2/32’s, and stocks down 3 points on the big board.  This could be pre-auction hedging pressure or the makings of a poor auction.  Heads Up!

One of our loan officers asked if the re-appointment of Gentle Ben to a second term has affected the market. Answer is, not really.

Currently, the 10 year note is down 1/32^nd (yield 3.45%), mortgage backs unchanged, and stocks up a baker’s dozen.  Typically, this week and next trade the least amount of volume of the year.  Reason is it’s the last time to take vacation before the kids go back to school (most of the country starts 9/8).  The 5 year note auction just hit the tape.  Give it a B+ as 39 billion hit the screen at 2.494% with strong indirect demand of 56%.  Bid to cover was 2.51 to 1 and the only negative was a 1.4 basis point tail (difference between the screen price and the last bid to be filled).

Tomorrow’s 7 year note auction will be the true test for the market.  One of our loan officers asked if the re-appointment of Gentle Ben to a second term has affected the market.  Answer is, not really.  Most expected it and in our opinion, it was the only choice the administration had.  Since the Fed Chief did a decent job of keeping the country from depression number two, President Obama felt that any change would be disruptive to the markets.  What if he changed leadership at the Fed and things went south again?  The Prez would take all the heat and probably be four and out.  So to be on the safe side, why not let the Fed Chief who built the bomb be the one to dismantle it (Fed Deficit).

Technically, the chart still looks bullish but is starting to tire.

Unless something is way out of whack with the 2 year auction, expect Austin mortgage pricing to stay close to home

Just a quick note before the results of today’s 42 billion in 2 year notes (auction).  Results will hit the tape at 12:00 pm cst.  Last month, this auction did not go well, sending yields higher on poor investor interest.  Given the positive economic news (Case Shiller and Consumer Confidence), you will want to stay tuned for the results.  Technically, yesterday’s rally was nice but did little to eliminate Friday’s outside day down chart formation.  Pricing  is now in the in the middle of a three day range which will keep strong directional moves from happening.  Unless something is way out of whack with the 2 year auction, expect Austin mortgage pricing to stay close to home.  Currently, the 10 year note is down 3/32’s (yield 3.51%), mortgage backs off 2/32’s, and stocks up 80 on the big board.

English translation is that the rally could be short lived in front of 109 billion in paper and a stock market that just won’t break

Strange start to the week as stocks opened on the positive side, following through as Asian and Europe all posted gains to their indices.  Bonds and mortgage backs were on the soft as fast money seller continued Friday’s trade and pressed the market lower (higher yields).  Then, a funny thing happened on the way to the forum, Retail buying (banks and money funds) stepped in the buy the dip.  That support, along with very oversold conditions on the 10 year chart, has given us a nice reversal.

The week ahead could be bumpy however, as 109 billion of 2’s, 5’s, and 7 year notes come to market.  Auction supply always puts a cap on rallies so keep it in mind as the week moves on.  No news today but the ball gets rolling tomorrow with the Case Shiller Housing Index, Consumer Confidence, FHFA Housing Price Index.  Wednesday’s treat will be Durable Goods and New Home Sales.  Thursday’s child is Weekly Unemployment Claims and GDP (Preliminary Q3).  Friday will close out the week with Personal Income and Outlays.

Not a bad idea to take advantage of any positive price changes today.  Reason being is that we formed an outside day down on Friday (bearish formation) yet selling was limited (today) to the 40 day moving average.  The bounce (current rally) has not been enough to offset Friday’s move and while intraday studies are oversold, daily signals are neutral.  English translation is that the rally could be short lived in front of 109 billion in paper and a stock market that just won’t break

Extremely low Austin mortgage rates on the horizon

Monday is shaping up to be a good days for us Austin mortgage types.  Stocks are on the run, starting in Asia, China, and London with state side traders picking up the ball on the open.  Currently, the Dow is off 170 points, focusing on a  soft consumer and a GDP miss in China.  Many feel that China has been cooking the books all along, creating further skepticism about the health of their economy.  Keep in mind that for China to grow, they need the U.S. to buy their products.  With the U.S. consumer holding tightly to their wallets, it’s tough to find any growth around the globe.

The New York Manufacturing index posted a 13 point rise to 12.1, the highest level since November 2007.  Although it is a positive growth number, we see it as a rebuilt of inventories.  Restocking the shelves will put a kick in our GDP but, with today’s consumer be willing to take it home?  We shall see.  I have been asked the question, why are we not getting  much bang for the buck out of MBS when the 10 year treasury rallies.  This is all about spreads which have widened on consumer concerns, escalating foreclosures, and investor appetite for anything related to credit (tied to the consumer).

Case in point is today’s move; 10 year note plus 17/32’s (yield 3.49%), MBs plus 6/32’s.  Good news is that we are 6/32’s better than Friday’s close and if you haven’t looked lately, Austin mortgage pricing looks pretty good.  Time to wake up those Austin refinance people who missed the last bus.

The week ahead will feature PPI, inflation at the wholesale level and New Residential Construction tomorrow, zippo on Wednesday, Weekly Claims and Leading Indicators on Thursday, and Existing Home Sales on Friday to close out the week.  Plenty to give us volatility.  Stocks will be the main driver as we need to see if this is just minor consolidation or something bigger in the making.  Say a 10% to 15% correction.

Austin Mortgage Rates Move Lower

Tame inflation data, strong demand for the Treasury auctions, and a lack of surprises from the Fed were all positive for Austin mortgage markets, and Austin mortgage rates ended the week lower.

As expected, the Fed held the fed funds rate steady on Wednesday, and its statement contained few changes. The Fed suggested that economic activity is “leveling out”, rather than continuing to decline, and the Fed expects that inflation will remain subdued due to unused capacity in the economy. Of note, the Fed decided not to increase its $300 billion Treasury purchase program, which will end in October. No changes were announced for the $1.25 billion mortgage-backed securities (MBS) purchase program, which is set to conclude at the end of the year. Austin mortgage rates are largely determined by MBS prices, and the added Fed demand for MBS has helped keep Austin mortgage rates low. Investors will soon need to hear what the Fed plans to do with the MBS purchase program. The direction the Fed chooses could have a significant impact on Austin mortgage rates later in the year.

The economic data released during the week was favorable for mortgage rates. The July Consumer Price Index (CPI) inflation data was unchanged from June, and Core CPI, which excludes food and energy, rose at a tame 1.5% annual rate. Current inflation levels are not a cause of concern for investors. July Retail Sales dropped slightly from June. Excluding autos, the results fell well short of expectations.

One in every 355 U.S. homes are in some stage of foreclosure, a new record.

Both Weekly Unemployment Claims and Retails sales missed expectations as Claims rose 4K and Retail Sales fell .1%.The market had been looking for a drop in Weekly Claims of 9K.  Continuing Claims fell 141K to the lowest level since April.  Thoughts here are that the majority within that number depleted benefits instead of being called back to work.  Retails Sales were a big disappointment, falling .1% headline and down .6% ex-autos.  Analysis’s were looking for plus .7% print.  The only sector that got a boost was auto sales as the “cash for clunkers” pushed a 2.4% gain into motor vehicle sales.  Trouble is, that program will be out of money within a week.  Gas station sales were the major drag in today’s report, down 2.1%.  Building materials, electronics, sporting goods, and department store sales did not fare much better.

Our housing industry got an eye opener as well this morning as foreclosures rose 7.0% month on month and 32% year on year.  One in every 355 U.S. homes are in some stage of foreclosure, a new record.  Until we put people back to work, we will not see the end of this trend.  On the bright side, it should give Congress all the ammo they need to continue the $8,000.00 1^st time home buyer credit into 2010.  Stocks dipped on the news and bonds reversed early losses.  Currently, the 10 year note is up 7/32’s (yield 3.68%), mortgage backs are plus 5/32’s, and stocks up a baker’s dozen.  Overall, we see the three bears market to be just right, not to hot or not to cold.  Stocks holding their gains (on what I don’t know) and bonds challenging down trend resistance (good for mortgage pricing) are both working together.  This decoupling is good to see as instruments, no matter what sector, trade on value instead of anxiety.  Let’s call the market neutral/bullish as we are cautiously optimistic.