Austin Mortgage Blog

Posts Tagged ‘Continuing Claims’

With the market being so psycho and at historic lows in Austin mortgage rates, best to be careful

In the “Strange Case of Dr Jekyll and Mr Hyde”, Robert Louis Stevenson wrote about a London lawyer who investigates the strange occurrences between Dr. Jekyll and Mr Hyde.  The tale is one of a split personality, one that has both good and evil which are quite distinctive of each other.  If Robert Stevenson were alive today, he could write the same piece as an op-ed for the Wall Street journal.  Yesterday, the stock market’s personality was one of fear and confusion when Fed Chief Bernanke opened his mouth, calling the economy “unusually uncertain.”  The results produced a 100 plus point selloff.

Today, the good personality appears, as the Fed Chief stuck to yesterday’s script and Big Caps like Caterpillar and 3M wacked it out of the park (better bottom line earnings and top line revenue stronger than expected).  Results, Dow up over 200 points as if everything in the economy is all right.  Euro zone manufacturing numbers were better than expected, adding a little icing on the cake.  The point I’m trying to make here is that volatility is at all time highs.  This is a product of an economy that is slowly coming out of a recession, showing bright spots from time to time while evil in the form of housing and employment woes let their personality loose just the same.  Expect this type of market trashing until a clear direction can be found.  One that points to a double dip or one that points to a more sustained recovery.  We believe the latter has the highest percentage outcome.

Reasons being are that the Euro zone appears to be stabilizing (tomorrow’s stress test results will be key), large blue chip companies are doing pretty well despite the gloom and doom, and interest rates, both by the Fed and the market (mortgage backs) will be low until the aforementioned bias is intact and investor sentiment turns bullish.  Just the same, do not take anything for granted.  Earlier today, Weekly Unemployment Claims jumped 37K to 464K while Continuing Claims fell 223K.  Distortions here are huge, maybe Consensus worker layoffs and long term claimants felling off the table.  Time will tell.  June Existing Home Sales took a dip as well, down 5.1%, the second consecutive month of declines.  The number was actually better than economists expected.  Wow, great news, their only down 5.1%.  Let’s call the Claims and Existing Sales today’s evil twins.

All of the above has pinched the 10 year note and mortgage pricing but to no great degree.  10 year down 10/32’s, MBS off 4/32’s.  The selling has not hurt the chart, just neutralized conditions a bit.  We see neither bull nor bear in control or as we like to call it, a Goldilocks market (just right).  With the market being so psycho and at historic lows in Austin mortgage rates, best to be careful.  You never know if tomorrow will be Dr Jekyll or Mr Hyde.

Austin borrowers are advised to lock in their Austin mortgage interest rates and step aside as we’re not sure whether the light in the tunnel is the end or a train

Weekly Unemployment Claims hit the tape plus 13K this morning while Continuing Claims jumped 43K to 4.62 million.  The rise canceled out last week’s drop and brings the 4 week moving average to 466K.  Not the type of print that notates a recovery in jobs.  Pending Home Sales didn’t do us any favors, falling 30%.  This level was last visited in May of 2009 and in our opinion, represents much more than losing the 8K tax credit program.  Construction Spending completed the bearish economic trifecta, falling .2% as private spending did the damage, down .5% month on month.

In the glass half full category, Ford, Chrysler, and GM all posted sales gains as that sector starts to stabilize.  Currently, stocks are off 61 points on the big board, 10 year note is plus 8/32’s, and mortgage backs are off 2 to 5/32’s, depending on the interest rate.  As I have talked about in the past, money flows are coming out of foreign sovereign debt and into treasuries.  Trouble is, that’s as far as the money goes.  Risk/reward is moving more and more towards risk in MBS, corporate paper, and anything other than an instrument backed by the full faith of Uncle Sam.  With stocks trading firmly below 1040 on the S&P chart, investors are net bearish, looking for a pull back to 940/970.  That would clip the Dow for 1 large.  Add to it the uncertainty of tomorrow’s Employment Report and all you see is traders with a fist full of scared money.

Speaking of the jobs number, the call is for job losses of 100K.  We’ll preview the report later today.  Given what we know, we see the pull back in mortgage paper (higher Austin mortgage rates,  lower pricing) as nothing more than consolidation, expecting that it will not become a major reversal.  However, we are seeing a divergence set up on the daily chart, telling you that a least a pause is in order until tomorrow’s fireworks begin (7:30 am cst).

With risk reward not in your favor, Austin borrowers are advised to lock in their Austin mortgage interest rates and step aside as we’re not sure whether the light in the tunnel is the end or a train.

Not to say we will not see lower Austin mortgage rates and better pricing but for that to come to fruition, we’ll need a major catalyst

Initial Weekly Claims fell 19K, Continuing Claims dropped 45K, and Durable Goods dropped 1.1%.  Month end hedge fund extensions and risk related worried and still in play as well.  Taking the big picture view, Austin mortgage interest rates have adopted a soft housing and employment situation stateside, along with global debt and growth issues that just won’t go away.

With the 10 year note now trading at 3.09%, a level not seen since last April, many are talking about our market being “bubble-ishous”.  The other contingent thinks bond prices are just “insane”.  With the 10 year yield at levels not seen since 2008 and 1962, one would think that a correct is imminent.  Quite possible but not a given.  Technically, our chart work makes a case for 2.92% to 2.78% on the 10 year note.  All depends on stocks and the economy.  Even the FOMC “downgraded” the economy to underperform.

Early buying today has started to show signs of a new bullish trend, endorsed by almost every oscillator.  The key to a new trend will be a close below 3.09% on the 10 year note.  This will activate a break of the major double top which has been in place for over a year.  “If” this happens, the next target will be 2.88%.  Not to throw cold water on the bulls but we think this market is a little long in the tooth, pricing in as much bad news as one could imagine.

Not to say we will not see lower Austin mortgage rates and better pricing but for that to come to fruition, we’ll need a major catalyst.  Something like a stock market rout or collapse of Greece.  In English, the smart money will bet against this, at least for a corrective trade that could take the 10 year note back to 3.25%.  Pricing was struck with MBS unchanged, now down 5/32’s. Trigger fingers are getting twitchy.

With Austin mortgage rates at or near historic lows, best bet is to take a little off the table before the market “potentially” picks your pocket. Careful out there.

Expect Austin mortgage rates to stay low for some time to come

Just when you thought the economy was doing a little better……. someone throws cold water on it. The chill came via Weekly Unemployment Claims which jumped 12K to 472K. The higher than expected claims number was largely the result of new filers from manufacturing, construction, and educational services.

Continuing Claims rose as well, up 88K on the week. CPI, inflation at the consumer level fell .2% with the core index up .1%. Just like PPI, nothing in the cards here to rattle the Fed. Philly Fed was also on tap, falling like a rock from 21.4 to 8. Employment indicators within the index did the damage, falling 1.7 points.

Last but not least, Leading Indicators rose .4% in May. Nothing special here as this index is widely treated as “rear view mirror” data and typically kicked to the curb. Overall, what is starting to take shape is a weakening situation in both housing and employment, coupled with falling consumer confidence. The BP mess doesn’t help either as the sickening scene from continued oil flowing does nothing for one’s psyche.

Market’s are red hot for bond bulls and woe is me for stock holders. Dow off 50 points has led the 10 year note higher by 20/32’s (yield 3.21%). Mortgage backs are plus 11/32’s, having a nice day as well. Technically, prices are nearing the best levels of the year (3.14% yield). Bulls will need to close below that level (3.13% or lower) to break out of the triangle pattern we’ve had in place since May. Daily oscillators however are bearish so overall, we do not have all time frames in harmony.

In English, it will become more and more difficult to improve Austin mortgage pricing/ lower yields without new fuel (catalyst). At the same time, the economic fundaments do not support higher Austin mortgage rates or worsening mortgage pricing. So, expect Austin mortgage rates to stay low for some time to come. Stay tuned for tomorrow.

With Austin mortgage rates/pricing at the best levels of the year and the 10 year note hitting 2010 low yields, the time is right for borrowers to lock in their Austin mortgage rates

Just another day at the office; Dow off 250 points, Naz down 68 points, 10 year note up 1 point, and mortgage backs up 8/32’s. The markets are anything but normal.

Take for example this morning’s release of Weekly Unemployment Claims which rose 25K. Most thought the jobs situation was stabilizing. China seemed as though it’s growth would never slow. Now their slowdown is very real and the Shanghai Index chart (Chinese Stocks) has turned bearish. Greek’s have once again taken to the streets, looking for another bank to burn. Seems as though they are not in love with the austerity plan. When will Europe and our country for that matter figure out that when more people are riding in the wagon than pulling it, we have a problem. Off the soap box, on to the news.

The Weekly Claims number was a shocker. Analysts had expected a drop to 440K, not the 471K print. Continuing Claims dipped however, but not to the levels we were looking for. Not so good for the economy but good for Austin mortgage rates. Stocks are now in 10% correction mode from the highs. Another 5% is certainly possible. Leading Economic Indicators for April were also released, down .1%. The index fell for the first time in a year, adding insult to injury as far as stocks are concerned.

Last but not least, the Philly Fed Manufacturing Index rose 1.2% to 21.4. Looks like things are improving in the city of brotherly love. With Austin mortgage rates/pricing at the best levels of the year and the 10 year note hitting 2010 low yields, the time is right for borrowers to lock in their Austin mortgage rates.

We feel the market has priced in a ton of bad news. Not that it can’t get worse because we all know that’s possible. Just the same, it will take more and more negative news to drive the trade to lower yields. Given all of our oscillator work, we see a very overbought market. One that’s ripe for a correction. At the same time, until investors feel certain that the world will not come to an end, yields will not rise much. Perfect time for Austin borrowers to use the exclusive float down program offered by Max Leaman at PrimeLending Austin. Call Max at (512) 293-1239.

The trend is changing and even though we don’t like it, a “new normal” for Austin mortgage rates is in the works

The morning after continues towards the path of least resistance, that being higher yields and worsening Austin mortgage pricing.  Certainly the economic fundamentals of a recovering economy, continiously evolving fiscal policy which we feel is more borrowing and less monetary stimulus, and a reluctance of our foreign partners to take on our debt/risk are the heavy weights in this move to higher yields.

In this current enviornment, markets are more complex than ever and the flow of money with it’s associated risk can be powerful and detrimental.  The trend is changing and even though we don’t like it, a “new normal” for Austin mortgage rates is in the works.

The large channel dating back to last year, which gave us a series of lower highs and lower lows in yield has now been breached.  Phase two was the triangle formation that was trapped between 3.29% and 3.81%, winding itself tighter and tighter headed for a breakout.  That breakout happened yesterday and if you remember our comments a couple of weeks ago, our bias carried a high probability of that breakout leading to higher yields.  Wished we were wrong.

Damage done, it’s time to move on and get back to business.  Earlier today, Weekly Unemployment Claims fell 14K to 422K.  Continuing Claims also fell.  Both are not indicative of a trend but a better reflection of improving weather across the country and government consensus hiring.  Bill Gross, often refered to as the “bond god”, is talking about how he’s bearish on bonds and feels that stocks are a better buy.  He also commented that he expects to see the 1 year TBill rate at 1.25% to 1.50% within a year.  Today’s rate is .41%.

Currently, the 10 year note is off 14/32’s (yield 3.87%), mortgage backs are off 16/32’s, and stocks are on fire, up 100 points on the big board.   With the upward trend gaining momentum, the 10 year note is on a clear path towards 4.0% plus.  Best case on any rebound/reflex rally is back to 3.75%/3.77%.

We all know why the trend is higher but here’s some of the factors that could stop the selling and improve Austin mortgage pricing:

• One would be a good 7 year note auction today (12:00 cst).
• Two is month-end buying by hedge funds and money managers to extend duration.
• Three being weaker than expected Employment Report next week.  The market is looking for a gain of 200K.

Markets like this are very dangerous.  They can travel to higher yields beyond where you think they can.  They can stay over sold for long periods of time.  The bottom will not be put in until the last person sells.  On the bright side, markets do not go down forever, it just feels like it.  Hang in there.

A mortgage price change for the worse is right around the corner

CPI, inflation at the consumer level, was unchanged for February with the core index up .1%.  Moderating energy prices along with a weak jobs market and not so confident consumer sentiment has made the inflation picture a non issue.  Weekly Unemployment Claims were also released, falling 5K to 457K.  Continuing Claims jumped another 12K but the most startling print came via the number of people who have used all their traditional benefits and are now collecting extended payments.  That number jumped 352K.

Leading Indicators for the month of February were also on the docket, rising .1% but still point to a slow recovery.  Only 4 of the 10 components showed signs of improvement.  Last but not least was the Philly Fed Survey which improved 1.3 points to 18.9. However,  New orders declined from 22.7 to 9.3 and Capital Expenditures fell from 16.3 to 9.7.  The news does not bode well for business investment in the first quarter.  I’m going to cut this short as the market is starting to slip.  Currently, the 10 year note is off 9/32’s (yield 3.68%) and mortgage backs are off 4/32’s.  A mortgage price change for the worse is right around the corner.  More in a few.

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

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.

What is catching trader’s eyes this morning is China and their latest release of GDP

Weekly Unemployment Claims jumped unexpectedly by 36K to 482K.  Continuing Claims came in at 4.599 million, nearly unchanged over the past two weeks.  Dow Jones reported that the spike in Weekly Claims was due in part to a backlog of Christmas and New Year’s filings.  They are calling it an “administrative thing, not an economic thing”.  I’m not so sure about that when you look at Emergency Claims jumping 652K.  They continue to soar due to recent extension changes (new claimants) while those already on emergency benefits are not coming off the roles.

Leading Economic Indicators were also released, up 1.1% versus the expected plus .9%.  8 of the 10 components indicated growth via month on month comparisons.  The trouble with this data is that it is rear view mirror stuff, information that we already know and is priced into the market.  When its release, the market blinks and moves on.

What is catching trader’s eyes this morning is China and their latest release of GDP.  The plus 10.7% has the Dragon breathing fire and Wall Street worried about overheating.  Given the data, China will need to curb growth sooner than later which will certainly have an effect on our economy.  Stocks are taking a beating, down over 200 points.  Metals, oil, commodities, and financials are all to the downside.  Financials are really spooked as the Prez just held a news conference about limited bank risk taking.

The good news is that for every stock market whipping, money always runs for cover in the bond market.  Even though the 10 year note looks a little tired, given the rally over the past few days and upcoming auction supply next week, the 10 year has powered through resistance and now trades a 3.61% yield.  Mortgage backs have had a good day as well, up 5/32’s on the current coupon.  Bullish signals are still active on daily charts but open interest has been falling.  This means that as we advance (rally), volume is declining, usually a sign that a top or at least a stall is near.  Makes sense into next week’s auction supply.

The other component that has kept mortgage pricing from any radical improvement is that spreads between our paper and the 10 year note are widening.  Underlying reason here is the backlog of foreclosed homes that is overshadowing a recovery in housing.  Servicers are holding inventory or renting it, reluctant to push it on the market for fear of further depressing values.  We’re going to deal with this throughout 2010.

From our view, employment is still our economic priority and not going anywhere fast

Weekly Unemployment Claims hit the tape up 11K to 444K. Economist were looking for a much smaller gain of plus 3K. Continuing Claims fell 141K to 5.002 million. The trouble with both of the indexes is that seasonal adjustments can skew the numbers. Taking a deeper look at the “unadjusted” continuing claims number, we find that they rose 185K. Expectations are for the seasonal factors to work their way out of the system over the next few weeks. From our view, employment is still our economic priority and not going anywhere fast.

Retail Sales also disappointed, falling .3% with the ex-autos component down .2%. Gasoline station receipts were the only positive, up 1.0%. The market was looking for a better number, given high hopes of a better holiday season. We see the negative December reading as unsettling, reflecting a consumer that has started to spend but at a snail’s pace.

Results of 30 year bond auction just hit the tape. 4.64% yield, 2.68 to 1 bid to cover, Indirect bidders took 41%, and best of all, the issue was bid 4 bps “through” the screen, telling us that demand was very good. Looks to us like a good technical setup along with bond bullish data (early today) helped to support the auction. Give it an A-.

Currently, the 10 year note is up 18/32’s (yield 3.71%), mortgage backs are plus 7/32’s on the lower interest rates but only up 3/32’s on the premium priced loans. Mortgage pricing stuck at plus 3/32’s on FNMA 4.50% securities. We’ll become more friendly to the market if we can close at this level or better (3.71% yield or lower) as the technicals will support a more neutral chart with a bullish bias. Keep in mind that the winds on Wall Street can change very quickly.