Austin Mortgage Blog

Posts Tagged ‘MBS’

Short term, Austin mortgage borrowers are encouragerd to stay defensive

It’s early on Monday morning and the market already looks like Ventura Highway.  Stocks were lower in pre-market trading (bonds higher) until Fed Ex came out and revised 3^rd quarter earnings (quarter ending 8/31) up 20 cents a share and pushed guidance higher for the remainder of the year.  Stocks turned around, going positive and as a consequence, bonds, notes, and mortgage backs took a dip.

Then along came New Home Sales, expected to be 320K annualized units.  The print was much better than that, up 24% to 330K units.  Stocks got another boost (now up 68 on the big board) as fixed income instruments (such as mortgage backs) dipped a little deeper.  Currently, the 10 year note is off 10/32’s (yield 3.03%) while MBS are off 4/32’s (tighter spreads which is good).  We also had the Chicago Fed National Activity Index out, which dropped .94 to its worst level since October.  Manufacturing output, or the lack thereof, did the trick.

Fast money is selling the long end of the curve, dragging the 10 year note along with it.  Not a lot of downside is expected from here.  The week ahead will feature Case Shiller Home Prices, Consumer Confidence, Durable Goods, Weekly Claims, and GDP on Friday.  Good week for data and market moving volatility.  For the week ahead, we see the market weaving and bobbing with a neutral/bearish type bias as investors will be looking to buy treasuries at yields slightly higher than current.  We still like the market long term as the detours are everywhere.

Short term, Austin mortgage borrowers are encouragerd to stay defensive.

Austin Mortgage rates moved even lower during the week

Austin Mortgage rates moved even lower during the week, as uncertainty about the pace of the economic recovery has increased investor demand for relatively safer assets such as government guaranteed mortgage-backed securities (MBS). The Fed Chairman acknowledged during the week that the economic outlook is even more difficult than usual to predict right now. Uncertain economic growth with low inflation is a favorable environment for Austin mortgage rates.

In his semi-annual testimony to Congress, Fed Chief Bernanke described the economic outlook as “unusually uncertain”. According to Bernanke, this is the worst labor market since the Great Depression, and it is recovering more slowly than expected. Still, the Fed forecasts modest economic growth in 2010 with low inflation. Important for mortgage rates, Bernanke expressed reluctance to provide further monetary stimulus, unless the economy falters badly. He suggested that the upside of additional Fed actions may be limited, while the downside is that it would raise future inflation expectations.

In the housing sector, June Existing Home Sales declined 5% from strong May levels to an annual rate of 5.37M units, which was well above the consensus forecast of 5.10M. Existing sales were 10% higher than one year ago. First-time buyers accounted for 43% of existing home sales in June. Existing home sales have been helped in recent months by the homebuyer tax credit. Even with the end of the tax credit, though, the National Association of Realtors (NAR) expects annual existing home sales to increase in 2010 and to rise further in 2011.

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.

Good time for Austin mortgage borrowers to put both hands on the wheel

Stocks put in a pretty good showing today, considering the soft earnings/revenue picture on a number of Big Cap companies.  Even Housing Starts, or the lack thereof, have been taken in stride.  Stocks which at one time were off nearly 200, reversed course, closing up 75 points on the day on the Dow.  Nasdaq traders had similar results with a plus 24 point gain as the gun sounded.  Technical structure on both equity platforms charted what we call an “outside day up”.  Bullish all the way.

Treasuries and mortgage backs hung in there, yet pared their gains to present levels of plus 4/32’s (10 year note) and plus 1/32^nd MBS.  Nothing huge to read into but just the same, the follow through buying in stocks is worth notice.  10 year notes will retain their bullish edge (day end trading) but are starting to lack a trend reading.  This typically will tell us that buyers of treasuries still have the advantage but will need a little giddy up go to stay at these levels.  Good time for Austin mortgage borrowers to put both hands on the wheel.

Slow U.S. Growth, Low Austin Mortgage Rates

Weaker than expected economic data and continued low inflation helped Austin mortgage rates move a little lower from last week. In recent weeks, investors have modified their consensus outlook to reflect weaker economic growth during the second half of the year. The manufacturing and retail sales data released during the week reinforced this view. Lending further support, the Fed revised its forecast for 2010 economic growth lower as well. Meanwhile, this week’s CPI and PPI data continued to show that inflation is not a concern in the short term. Uncertainty about the pace of the economic recovery has made investors willing to purchase safer assets such as government guaranteed mortgage-backed securities (MBS) at these relatively low yields.

Congress passed the comprehensive Financial Regulations bill and President Obama will sign it into law soon. The bill provides a framework for oversight of the financial services industry, and certain aspects of the bill will affect mortgage lending and the home buying process. The bill calls for various regulatory agencies, some of which will be newly created, to determine the details. Implementation of most of the new mortgage-related rules is expected to take 18 to 24 months to complete.

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.

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.

Global Economic News Pushes Up Mortgage Rates

Global economic news influenced United States mortgage markets this week. While the domestic data released during the week was mixed, an improved economic outlook in many other countries was unfavorable for bond markets. As a result, Austin mortgage rates ended the week a little higher. In recent weeks, Austin mortgage rates have fallen to the lowest levels in decades. This has occurred, in part, due to the economic troubles in Europe, which reduced the willingness of investors to hold risky assets such as stocks. During periods of uncertainty, it’s common for investors to seek a higher level of relatively safer assets, including United States mortgage backed securities (MBS). On Thursday, however, a series of global headlines from Europe, Asia, and Australia contained positive news for economic growth, which caused investors to move back toward riskier assets and out of bonds. The stock market rallied, and Austin mortgage rates moved higher. On Thursday, lawmakers introduced a proposal which, if passed, will extend the “close-by” deadline to receive the home buyer tax credit from June 30 to September 30. The legislation doesn’t affect who may qualify for the tax credit. To qualify, you still must have signed a contract by April 30, but it will relieve some of the pressure to close by June 30. Buyers who had not expected to close by June 30 may now be able to qualify.

If there is a silver lining, you’ll find it in low Austin mortgage rates today, tomorrow, and well into the 3rd quarter

This one, the jobs report for May took most by surprise.  Even Pimco’s Bill Gross was “shocked”, not expecting the lack of job growth.  For the record, Nonfarm payrolls rose 431K while the unemployment rate fell to 9.7%.  The disappointment came from the number of census workers (411K) making up most of the jobs gain.  Doing the math, that leaves private payrolls rising only 20K, well below expectations.  Construction jobs fell by 35K, manufacturing increased 29K, and private services employment rose by 37K.  I missed that number (services jobs) by a smooth 100K.

Overall, the report does nothing to instill confidence in economic growth.  Matter of fact, it’s started a new group of traders and investors fanning the fires of a double dip recession.  Bill Gross is now calling for unemployment to go over 10% in the coming months.  If there is a silver lining, you’ll find it in low Austin mortgage rates today, tomorrow, and well into the 3^rd quarter.

Adding to the feeding frenzy in treasuries are stories out of Hungary (bad debt jitters), rumors that French Bank Societe Generale has a book of undisclosed bad derivative positions, oil on or near the Florida coast in what is to be the worst oil spill in history, and the Euro hitting new four year lows.  Adding insult to injury, French Prime Minister Fillon is saying he saw only “good news” in parity between the Euro and the dollar.  He must have had a nip of the grape for breakfast.

Cutting to the chase, bonds, note, and mortgage backs are in rally mode, up a point of the 10 year and plus 12 to 14/32’s on MBS.  From an interest rate perspective, buying overnight and post employment report has taken the market above former resistance (119 21 futures/3.34% yield). Daily charts however, have yet to endorse the bullish move and must close above the 8 day moving average and resistance at the old high ( late May level).

Key for you to watch will be a close on cash 10 year notes of 3.26% or lower (currently at 3.24%).  Given a close that betters the 3.26% mark, the bulls will have their way with a new target of 3.09%.  A close at 3.27% or higher will most likely reverse the trend and send us into a consolidation trade.  We’ll try to make “cents” of it later today.