Austin Mortgage Blog

Posts Tagged ‘trading’

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!

Expecting the market to move much in any direction is possible but probably not in the cards

Just a quick note before the day slips away.  Not much to report as both the 10 year note and mortgage backed securities waffle around, trading on both sides of unchanged.  Currently, the note is unchanged and MBS off 2/32’s.  As you can see from the calendar, tomorrow will be this week’s main event.  PPI, inflation at the wholesale level, Industrial Production/Capacity Utilization, NAHB Housing Index, and the one day FOMC meeting/announcement will all be in play.  For the record, the Fed (FOMC) is expected to leave everything the same, from interest rates to the policy statement at the 1:15 pm cst release.  CPI, inflation at the consumer level, will be Wednesday’s treat, along with New Residential Construction.  Thursday’s plate will feature Weekly Claims, Leading Economic Indicators, and the Philly Fed Index.  With trading volume starting to fall off a cliff, expecting the market to move much in any direction is possible but probably not in the cards.  Next week will be worse.

University of Michigan’s final October consumer confidence index was a touch higher than expected, but remains at recessionary levels

Bond prices rose on Friday as stocks sank in trading that was driven more by stock market technicals and concerns than by any other factor. Stocks had their worst week since early July. The University of Michigan’s final October consumer confidence index was a touch higher than expected than September’s level, but remains at recessionary levels. The Chicago purchasing managers’ index rose sharply to its highest level since December 2007 and beat expectations. The report is closely watched for clues to the national ISM index which was released today at a print of 55.7.  This number was 3.1 points higher than the previous month’s reading and was higher than economists expected.

Stocks have taken wings off that number combined with Construction Spending released up .8%.   Pending Home Sales were also on the board this morning posting a jump of 6.1%, reaching its highest level since December of 2006.  All of these numbers combined have sent mortgage pricing to slightly lower levels than where most investors priced this morning.  Stocks have some legs again trading up 98 points or so on the DOW.  Also to note, over the weekend, CIT filed bankruptcy following its failure to receive bondholder approval for an exchange offer. Many analysts have described the filing as being a positive for bond holders who could now recover more than was being offered.

This week will feature Wednesday’s FOMC meeting sandwiched between numerous important economic reports (most notably being today’s ISM release and Friday’s October employment data). The FOMC meeting comes to the forefront with growing division inside and outside the Fed over the proper timeline for tightening and other programs.  For now, the pullback this morning has taken us back into the high volume levels that formed on Friday, ranging from a 118-035 to 118-16.  Currently, the 10yr note is hovering around the 118-195 level, trading at 3.405, along with mortgage backs down a couple of ticks.

Austin Mortgage Market Update For the week of October 26, 2009

For the week of October 26, 2009 – Vol. 7, Issue 43

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE The week ended with the terrific news that Existing Home Sales shot UP 9.4% in September to a 5.57 million annual rate. This was almost twice the increase the consensus expected and a nice boost coming off the slight drop we saw in August. Best of all, the inventory is now down to a 7.8 month supply, getting us closer and closer to the 6-month level of a normal housing market. Earlier in the week, Housing Starts for September were UP 0.5% to an annual rate of 590,000 units. The consensus expected more, but the drag on the number all came from a drop in those volatile multi-unit starts. Single-family starts were up a strong 3.9%, their sixth gain in the last seven months and UP 40.3% since the January-February bottom. The rate of building is well below underlying demand, which some put at about 1.6 million units per year, based on population growth and the need for replacement because of fires, disasters and knock-downs. The Mortgage Bankers Association reported that for 30-year fixed-rate mortgages, the average contract interest rate was 5.07% with 1.13 points (including the origination fee) for 80% loan-to-value ratio loans to borrowers with good credit. First time buyers have just five weeks to get in on these still great rates AND the $8,000 tax credit set to go away at the end of November. >> Review of Last Week CAN’T STAY ABOVE 10,000… It was a strange week in the stock markets, as the Dow shot past the “magic” 10,000 mark two days in a row, but a freaky Friday hammered that benchmark back down below 10,000. All three major indexes saw modest drops for the week. Some analysts said the seven-month rise in stock prices made us ready for a dive. Even analysts who are bullish long-term hinted we were due for a temporary pullback. We can be grateful these experts’ wishes were fulfilled in such a modest way. The negative yak was extra strange because Q3 corporate earnings continued to impress investors. We saw what some called “blowout results” from Apple and Amazon.com, while a long list of companies had very nice upside surprises — outfits like American Express, AT&T, Capital One, Caterpillar, McDonald’s, Texas Instruments, UPS and Yahoo! And let’s not forget the strong single-family Housing Starts and very strong Existing Home Sales that show the housing recovery is moving along. Initial Unemployment Claims inched up a bit last week, but Continuing Claims continue to fall, now down to 5.9 million. Gloomy pundits say this just shows people’s unemployment benefits are expiring, but a few folks surely must be getting jobs to support the now recovering and growing economy! These pundits might want to consider Treasury Secretary Tim Geithner’s prediction that we’ll see “…positive growth in 2010 at a level that will begin to gradually bring down the unemployment rate.” For the week, the Dow ended down 0.2%, to 9972.18; the S&P 500 was down 0.7%, to 1079.60; while the Nasdaq fell just 0.1%, to 2154.47. It was an up-and-down week in the bond market, which ultimately ended down. Friday, investors were anticipating this week’s record auctions, which could squeeze prices some more. The FNMA 30-year 4.5% bond we watch fell again from the previous week’s close, ending at $100.59. Still, mortgage rates stay in historically low territory. >> This Week’s Forecast HOUSING? GDP? INFLATION?… We’ll have new answers to all three questions, beginning Wednesday with New Home Sales, then Thursday we get our initial look at GDP for Q3, the first quarter that’s expected to show the economy expanding again. Friday we get numbers for PCE and Core PCE, which are the Fed’s favorite inflation indicators. >> 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 October 26 – October 30 Date Time (ET) Release For Consensus Prior Impact Tu Oct 27 09:00 Consumer Confidence Oct 53.5 53.1 Moderate W Oct 28 08:30 Durable Goods Orders Sep 1.0% -2.4% Moderate W Oct 28 08:30 New Home Sales Sep 440K 429K Moderate W Oct 28 10:30 Crude Inventories 10/23 NA 1.31M Moderate Th Oct 29 08:30 Initial Unemployment Claims 10/24 525K 531K Moderate Th Oct 29 08:30 Continuing Unemployment Claims 10/10 5.915K 5.923M Moderate Th Oct 29 08:30 GDP-Advanced Q3 3.2% –0.7% Moderate Th Oct 29 08:30 GDP Chain Deflator-Advanced Q3 1.3% 0.0% Moderate F Oct 30 08:30 Personal Income Sep 0.0% 0.2% Moderate F Oct 30 08:30 Personal Consumption Expenditures (PCE) Sep –0.5% –0.5% HIGH F Oct 30 08:30 Core PCE Sep 0.2% 0.1% HIGH F Oct 30 09:45 Chicago PMI Oct 48.7 46.1 HIGH F Oct 30 09:55 Univ of Michigan Consumer Sentiment–Revised Oct 70.0 69.4 Moderate F Oct 30 10:00 Employment Cost Index Q3 0.4% 0.4% HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months. Last week the Producer Price Index (PPI) fell 0.6% for September. This tells the Fed that wholesale prices appear to be safe from inflation for now. As the recovery builds, rates should stay down unless inflation bubbles up. 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 Nov 4 0%–0.25% Dec 15 0%–0.25% Jan 27 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Nov 4 1% Dec 15 3% Jan 27 11% This blog entry is an advertisement for Max Leaman. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is copyrighted by PrimeLending, A PlainsCapital Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of PrimeLending, A PlainsCapital Company. Š 2009 PrimeLending, a PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, a PlainsCapital Company is exempt from licensing in the following states: AL, AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NC, NE, NV, NY, OH, OK, OR, PA, SC, SD, TX, UT, VA, WV, WY. 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We’ll stick with our neutral call, keeping one eye on a stock chart and the other on MBS

Quiet start to the week as stocks trade higher on grand expectations for Apple and others while bonds, notes, and MBS are treading water near unchanged.  The week ahead will be a busy one from the data front starting today (1:00 pm cst) with the NAHB Housing Index.  PPI, inflation at the wholesale level will be tomorrow’s headliner followed by New Residential Construction.  Wednesday’s “Beige Book” will provide a look at how each of the Fed’s 12 districts are doing (economy, employment, etc.) followed by Weekly Claims, Leading Economic Indicators, and FHFA House Price Index on Thursday.  Friday will clean up the week with Existing Home Sales.  Technically, the market found a bottom last week and has now moved into the center of the range.  With most chart time frames in harmony, the future of interest rates will most likely follow the stock market’s lead.  We’ll stick with our neutral call, keeping one eye on a stock chart and the other on MBS.

Potential rate lock selling to hedge upcoming corporate bond issues could weigh on the market, effecting Austin mortgage pricing in a negative way

Just a thought or two before the day slips away.  Unlike yesterday, it’s been a fairly quiet market with stocks down 61 on the Dow and MBS flat to up 2/32’s.  Option expiration has ruled the day in stocks with a little added volatility due to poor earnings reported by B of A and GE.  IBM disappointed as well.  Mid-day, trading has ground to a halt as fast money traders have already started their weekend.  Little is seen to change the afternoon trade with the exception of potential rate lock selling to hedge upcoming corporate bond issues.  If this occurred, it would weigh on the market, effecting Austin mortgage pricing in a negative way.  Most likely, we will continue to hold the range of the past few days as traders sell strength and buy weakness.  The only thing we don’t like is the fact that as stocks trade lower (at one time down over 100 points), mortgage backs and the 10 year note fail to rally.  Currently, the 10 year note is up 8/32’s (yield 3.44%), MBS up 2/32’s, and stocks off 61 on the big board.  Caution is still advised as we button up the week.

By nature the pattern is bearish and suggests higher interest rates, worsening Austin mortgage pricing presents the higher probability

The market has been choppy all day with stocks and bonds trading on both sides of unchanged. Earlier today, CPI, inflation at the consumer level, rose .2% while the core (ex-food and energy) was up .2% as well. Overall, the print is not inflationary and shouldn’t give the Fed heartburn. Weekly Unemployment Claims were also released, down 10K to 514K. Continuing Claims fell 75K to 5.99 million, a level not seen since March. The gradual drop in claims is a welcome sign that life may be returning to the labor market. Trouble is, 500K plus is a very high number and Continuing Claims are skewed by many that have run out of benefits. We still have a long way to go on the labor front.

In the FOMC minutes released yesterday, you will find that the Fed expected the Unemployment Rate to be at 8% or below by this time next year. We shall see. The last piece of economic news for the day came via the New York State manufacturing report which jumped to 34.57 from 18.88. New orders, shipments, and inventories all posted positive adjustments while prices paid fell slightly. That’s the best of both worlds.

Market action, as I mentioned earlier has been a two way street. With earning season (stocks) in full swing, volatility has really picked up in both equities and bonds. Mortgage backs have been the worst performer on the day with spreads to treasuries widening as sellers continue to lean on the market. Currently, the 10 year note is off 7/32’s (yield 3.45%), MBS off 9/32’s, and stocks off only 1 point on the big board. Technically, we are trading a lower lows, lower highs type of pattern. By nature it is bearish and suggests higher interest rates, worsening Austin mortgage pricing present the higher probability. We will want to pay close attention the 10 year yield as it approaches 3.48% – 3.50%. That level is key support and “should” provide a near term bottom, followed by a rebound. If that level does not hold, MBS could feel another ½ point of pain. Play defense as the trend is not your friend!

Earlier today, Consumer Income hit the skids, falling 1.3% while Spending rose .4%. The Income component was the largest monthly decline since January 2005. Pure and simple, it reflects declining wage and salary disbursements.

After a positive open (bonds) on soft stocks, Pending Home Sales hit the tape and spoiled the party.  The Index rose 3.6%, much higher than expected.  On an annual basis, the index was up 6.7%, showing signs of a bottoming in housing.  Sales rose in every region of the country with the South leading the way, up 7.1%.  While analysts’ talk about stabilization and a bottoming process, we see this as more bottom fishing on cheap prices due to foreclosure inventory.  Earlier today, Consumer Income hit the skids, falling 1.3% while Spending rose .4%.  The Income component was the largest monthly decline since January 2005.  Pure and simple, it  reflects declining wage and salary disbursements.

The week ahead is chocked full of data, culminating with Friday’s Employment Report for July.  Early call here is  for a loss of 300K jobs and the unemployment rate to reach 9.6%.  Our analysis will be out Thursday afternoon.  Tomorrow the ADP Employment Report will make its best guess on Friday’s numbers along with Factory Orders and ISM Non-manufacturing data.  Thursday’s Unemployment Claims will take a back seat to Friday’s Big Daddy release.  The Treasury will also release details of the Quarterly Refunding package that will come to market next week.  More supply will hit the market in the form of 3 year notes, 10 year notes, and 30 year bonds.

From our technical view, the chart looks more like “crack the whip” than any type of symmetrical trading.  Last Friday caught a bid from month end buying (portfolio extension needs), Monday gave it all back as stocks traded and closed above 1000 on the S & P chart, and today’s rally has been derailed by Pending Home Sales.  Tough to trust this market.  Currently, the 10 year note is off 13/32’s (yield 3.69%), mortgage backs off 7/32’s, and stocks up a nickel.

It’s been all about stocks today as earnings season (Q2) is in full swing

It’s been all about stocks today as earnings season (Q2) is in full swing. Earlier Today, bank analyst Meredith Whiney, raised her outlook on most banks due to interest rate spreads, mortgage originations, and Safe Harbor loan modifications. She call them good buys in the short run due mainly to the “mother of all mortgage quarters”. After that, the long term outlook for the economy, consumer, and employment component looks murky. That was all Goldman, B of A, Wells Fargo, and JPMorgan traders needed to hear as buy orders hit the screen.

Currently, the Dow is up 151 points with most banks up 3% to 6%. Mortgage backs opened on the soft side but only down a few 32’s. Currently, we’re fading a touch, off 7/32’s and teetering on a worsening price change. The 10 year note tells the tale of the tape, opening at 3.30% and now trading at 3.34%. Nothing more than wiggles in an otherwise neutral to bullish market. The week ahead will not only feature high profile quarterly earnings but PPI, inflation at the wholesale level and Retail Sales tomorrow, CPI, inflation at the consumer level, Empire State Manufacturing, and Industrial Production/Capacity Utilization will be released on Wednesday.

Thursday’s plate will give us a look at Weekly Unemployment Claims, Philly Fed Survey, and the National Association of Home Builders Index. We’ll end the week with New Residential Construction. Technically, we traded (note futures) as an inside day. Trading was concentrated near Friday’s high volume mark (near 3.30% yield) with 70% of the volume falling within one standard deviation of the profile.

Potential mortgage price changes for the better should be around the corner, given that current levels hold

Results of the 10 year auction just hit the tape, trading at a yield 3.365%.  Indirect bidders took nearly 50% of the deal (very strong) while the bid to cover was 3.28 to 1 (strong).  The issues was bid 5.5 bps through the screen, meaning that everyone and their mother wanted to buy it.  The results have sparked a rally with the 10 year note currently up 1 point to yield 3.33%.  This is the lowest yield in 2 months.

Mortgage backs have followed suit, up 10/32’s on lower rates and 5/32’s on higher rates (5.25% and up).  Potential price changes for the better should be around the corner, given that current levels hold.  Watch stocks.  Their doom and gloom will do knowing but support mortgage pricing.