Austin Mortgage Blog

Posts Tagged ‘FOMC’

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.

Stocks just can’t catch a break, slip slidding once again into negative territory

Stocks just can’t catch a break, slip slidding once again into negative territory.  Bonds, notes, and Austin mortgage pricing are the benefactors, continuing to push to lower yields.  The 10 year note is plus 20/32’s, trading at a yield of 3.17%.  Stocks are off 100 plus on the big board.  Also, we have broken out of the triangle pattern to the upside (bullish).  Need to close at current level or better and maintain into tomorrow’s trade.  Easier said than done with auctions and the FOMC on tap for tomorrow.  Meanwhile, Austin borrowers are encouraged to take advantage of the great Austin mortgage rates currently available.

Worries about European banks, UK austerity measures, US Housing, and the beginning of a two day FOMC meeting are all on today’s marquee

Worries about European banks, UK austerity measures, US Housing, and the beginning of a two day FOMC meeting are all on today’s marquee.  Stress tests and downgrades on banks across the pond got the early morning trade going.  Housing, as in Existing Home Sales, piled on to the gloom as the index fell to 5.66 million units, well below analysis’s expectations.  They were actually looking for an increase to 6.12 million.  Sales held steady in the Midwest, rose a touch in the South, jumped to 1.29 million in the West, and fell like a rock in the Northeast.  Pending Home Sales surprised on the upside, rising 6.0%.  New Home Sales (recorded at contract signing) jumped 14.8%, leaving many to scratch their heads wondering what happened to the Existing Sales numbers.  The divergence is most likely buried in the last dash for 8K buyers credit program which will shake out in the next 60 days.

FHFA (home price index) was plus .8% in April, reversing a two month slide.  On balance, housing looks to be stable but guarded.  Pimco strategist, Richard Clarida is on the wire talking about the Fed changing their language in tomorrow’s policy statement.  The change is regarding the economy as “sluggish” from stable, noting that since April, world and US economies have softened.  We have treasury paper coming to auction as well.  2’s today, 5’s tomorrow, and the 7 year note on Thursday.  Shouldn’t be a problem here.

We also got a peek at early predictions of month end extension needs.  Those are for money funds, etc. that much adjust to meet the Barclay’s index.  Extension needs for June look to be a bit larger than normal with the treasury complex needing to add .6 years and MBS .10 years.  In a nut shell, this will create buying in fixed income, adding support to Austin mortgage pricing.  Technically, the bias is neutral looking to buy weakness and sell strength.  Nothing new here as this has been the trend for the past several sessions.

The FOMC kept the short term Fed Funds rate unchanged (between 0% and .25%) with a 9 to 1 vote

The FOMC kept the short term Fed Funds rate unchanged (between 0% and .25%) with a 9 to 1 vote.  They also commented that economic conditions warrant exceptionally low levels of the Fed Funds rate for an extended period.  Kansas City Fed President Thomas Hoenig was the lone dissenter, citing against the policy believing that a repeated expectation could lead to the buildup of “financial imbalances” and run the risk of macroeconomic and financial instability.  Market reaction has been a positive for stocks (Dow up 77 points) and a not so positive for bonds (down 30/32’s), notes (down 19/32’s), and mortgage backs (down 11/32’s).  Keep your defense on the field.

42 billion of 5 year notes hit the screen to yield 2.54% with 49% going to the Indirect bidders

42 billion of 5 year notes hit the screen to yield 2.54% with 49% going to the Indirect bid.  Direct bidders (Wall Street) took 14% with a bid to cover of 2.75 to 1 (average is 2.69%).  Good news is that the yield came in on the screws (no tail),  bid to cover was above average, and Indirect buyers were strong.  Not so good news is that the “street” stayed away.  We’ll give it a B.  Market reaction has been one that has stabilized the down draft (stopped the selling).  Next market mover will be the FOMC.  Buckle up!

Seems like a good day to take advantage of the best Austin mortgage pricing in quite some time

While Goldman Sachs is getting grilled on the hill, stocks and bonds are putting on a show of their own.  Earlier today, the Case Shiller Home Price Index rose .6% for the first time since December 2006.  The number was however less than economists had expected (plus 1.2%) and reflect that the pace of decline is less severe than a year ago.  That point is confirmed as 11 of the 20 cities showed year over year declines but 18 of 20 cities show yearly improvement when matched again January of last year.  Las Vegas and Tampa are still taking it on the chin while San Francisco led the field with a 12% increase.

In other news, the Conference Board Consumer Confidence Index jumped 5.6 points to 57.9.  Both current and future expectations rose with the only drawback being concerns about income remaining weak.  The FOMC (Fed Open Market Committee) started their two day meeting today with little expected, except for some possible minor policy tweaking.  Results and/or changes are due out tomorrow at 1:15 pm cst.  The Fed is in the market today, peddling 44 billion of 2 year notes.  Results will be out at high noon cst today.

With all that’s going on, the stage stealer seems to be Greece and their two year note going over 15% and now a down grade to Portugal’s debt. S & P has cut Greek bond rating to junk, equivalent to subprime paper.  Flight to quality buying in treasuries has goosed the market high while punishing stocks in its wake.  Mortgage backs are along for the ride, up 14/32’s as we speak.  Stocks are in sea of red, down 140 something on the big board.  Technically, the stealth rally has taken us to major resistance, right at the low yield mark of 3.67%.  A break and close below 3.67% is needed to confirm the upside move and project that further gains (lower yields better mortgage pricing) is in the cards.  With most oscillators now neutral to bullish, the only fly in the ointment is growing overbought conditions on the chart.

Seems like a good day to take advantage of the best Austin mortgage pricing in quite some time.  More in a few.

New Home Sales gains also smell of the last mad rush for 8K in buyers credit money before we put that program to bed the end of next week

TGIF.  Bonds, notes, and mortgage back traders have all turned sellers today on a mixture of fundamental and technical data.  Word on the street has it that at least one half of the Fed Governors (FOMC) feel that the time is getting near to sell assets.  With 1.75 trillion dollars worth of mortgage backs, agency paper, and god knows what, unloading this on the market is not bond friendly.  Keep in mind that they are in unchartered policy territory, caught in their own wicked web of quantitative easing/zero interest rates and super hero inflation fighter/bloated balance sheet reducer.  Interesting as well that they are having the debate in a much more public forum right before next week’s FOMC meeting.

In other news, Durable Goods, items which are supposed to last 3 years or more, fell 1.3% yet ex-transportation, the index was plus 2.8%.  Orders for transportation equipment fell 12.9%, dragging the overall index into the red.  New Home Sales were also released, up 26.9% to 411K annual units.  The print blew away economists estimates of plus 330K.  Every region of the country rebounded with the “South rising again”, up 43% month on month.  Although the numbers were great, they are coming off the worst month (February) in 22 years.  The gains also smell of the last mad rush for 8K in buyers credit money before we put that program to bed the end of next week.

Given the fundamentals of the economy, bond pricing is very expensive, meaning that if that market was not being influenced by outside forces (global debt crisis, etc.) Austin mortgage rates would simply move higher.  That’s why borrowers need to be careful as every day is a new day and expecting the unexpected is more common place than you think.  We tipped you off to the technical trade that was developing yesterday and our bearish expectations.  It was a text book classic double top, fuel injected 6 speed and Hemi powered, convertible top with navigation and a kicker sound system.  Sorry, I got carried away.  The pattern did play out and added to the bond bearish news of the day, having pinched mortgage pricing for another .25 point.  Currently, the 10 year note is off 11/32’s (yield 3.82%), MBS off 8/32’s, and stocks up 9 points on the Dow.

We still feel that the trade is range bound between 3.75% and 3.83% so given our digits, additional selling is starting to lose favor.  Short term momentum is over sold in both notes and bonds which should give us a little support as well.  Call the market neutral with a little recovery due as we move into the last week of the month.  We’ll try to wrap this up later today.

Treasury Secretary Geithner is medium rare as the House Oversight Committee is grilling him on AIG

Treasury Secretary Geithner is medium rare as the House Oversight Committee is grilling him on AIG.  Undisclosed documents, backroom deals, maybe a cover up coordinated with Sir Bernanke, and the counter parties all paid off at par (by the taxpayers) are the hot topics.  As we speak, their search for a smoking gun continues.

The FOMC is finishing up their two day meeting with any change in short term rates and policy statement due out at 1:15 pm cst.  The consensus thinking is that they will continue their low interest rate policy for an “extended period of time”.  We also expect the FOMC to note that the economy still has “challenges” with some improvement seen within the economy.

Given today’s power packed agenda, the FOMC should not move the market.  Earlier this morning, New Home Sales dipped by 7.6% to 342K units.  Sales gains in the Northwest and West were over shadowed by losses in the Midwest and South.  Housing, along with employment, needs to be top priority for our country.  Let’s see what the CEO of the U.S. has to say tonight.

We also have 42 billion of 5 year notes on the auction block.  Results are due at high noon cst.  Given the anxiety in stocks and overseas markets, we expect the issue to go well.  Trouble with this call is that it is happening on a FOMC day and historically, only one out of the last five have come in on the screws.  The others had been sloppy.  Technically, the market is making higher highs and higher lows, holding the bullish regression line.

Once again we challenged the 3.56% yield level and have backed away.  Currently, the 10 year note is up 6/32’s (yield 3.61%), mortgage backs up 3/32’s, and stocks off 30 something on the big board.  Buckle up!

Daily oscillators are still posting positive readings and holding above midrange levels – all good things for those that want lower mortgages/better pricing

Results of the first leg of this week’s auctions (2 year note) just hit the tape.  Yield came in at .88%, Indirect Bidders took only 11%, and the bid to cover was 3.13 to 1.  The issue also had a 1 bp tail.  This was not an aggressive auction so we’ll give it a C.  Post results, the market pulled back and briefly when negative on mortgage backed securities.

Currently, the 10 year note is up 2/32’s (yield 3.62%), mortgage backs up 1/32^nd, and stocks plus 73 on the big board.  Trading is a little spooky right now as Wall Street dealers fear there might not be the sponsorship for Wednesday and Thursday’s longer duration auction paper ( 5’s and 7 year notes).  We also have the FOMC statement tomorrow and the State of the Union speech so buckle up, this thing could get slippery.  Earlier today, Consumer Confidence was out with a print of 55.9 (improvement) and the Case Shiller Home Price Index was down 5.3% (as expected).

Earlier than that, the wheels were churning across the pond as Italy, Greece, Spain, Portugal, and now Japan are struggling with their sovereign debt.  S&P just put Japan on the negative credit watch.  With China putting the brakes on bank lending, the mood outside the U.S. is tentative at best.  On the bright side, Barclay’s has issued their indices for month end extensions, a measure that fixed income funds must conform to per their filings.  The extensions are larger than expected so in English, this will be supportive of mortgage pricing until at least Thursday afternoon.  Technically, the high today approached the 62% retracement level of the November/December selloff (188 11 in futures/ 3.56% yield on the 10 year note).  We failed to take that level out and have now backed away.

Not to rain on your parade but this failure could be the start of a new corrective phase.  Your key will be if yields on the 10 year note print 3.65% or higher.  On the bright side, daily oscillators are still posting positive readings and holding above midrange levels.  All good things for those that want lower mortgages/better pricing.  Just want you to know that this baby is like herding cats so keep both hands on the leash!

Housing market is stabilizing but will need to content with another wave of foreclosures as homeowners remain underwater and the loan modification programs to date have been a bust

CPI, inflation at the consumer level, rose a meager .4% headline while the core index (ex-food and energy) remained unchanged.  Higher energy prices bumped the headline number, just like they did with yesterday’s PPI.  Food prices, especially dairy products and nonalcoholic beverages, took a dip, helping the core index to hold steady.  The results were in line to a touch better than expected, taking the sting out of yesterday’s jump in PPI.  Overall, renewed demand for energy products and the falling dollar will continue to nudge headline inflation numbers higher but will have little effect on Fed policy.

November Housing Starts were also on the calendar, rising 8.9% to 574K units.  Although the print was up from last month, it came in below economists’ estimates of 580K units.  Supply of existing homes fell to 7 months, a nice improvement from the peak of 11.3 months in 2008.  Overall, we feel that the housing market is stabilizing but will need to content with another wave of foreclosures as homeowners remain underwater and the loan modification programs to date have been a bust.

All eyes have now turned to the FOMC and any change in interest rates/policy statement.  Given Global uncertainty (think Dubai, Spain, Greece, etc.) and year end constraints, we see today’s FOMC as a carbon copy of last month’s release.  Technically, the combination of oversold conditions and good support at the 3.60% yield level has given life to our bond market.  Currently, the 10 year note is up 13/32’s (yield 3.55%), mortgage backs up 6/32’s, and stocks up 25 points on the big board.  Technically, the market is trading in a counter trend move (rally) within the larger bearish trend.  Good resistance remains overhead at the 40 day moving average (3.49% yield).  The limited range is forming a neutral, inside day with the bears still in control.  As much as we want to like this market, it is nothing more than putting “lipstick on a pig.”  Keep your defense on the field.