Austin Mortgage Blog

Posts Tagged ‘treasuries’

Failure to rally isn’t bad, just paints the chart neutral which will cause Austin mortgage rates/pricing to stay close to current levels

Part of the yesterday’s late market action, stocks rally/bonds slipping, had to do with a rumor about the Fed.  Word has it that they may stop paying interest on excess reserves and step back into the market buying fixed income assets (treasuries and mortgage backs).  Given that backdrop, Gentle Ben heads to the hill today, testifying to the Senate in his annual Monetary Report to Congress.  This could be a market mover so heads up around 2:00 pm cst.  Otherwise, its steady as she goes with stocks plus 9 points on the Dow, 10 year note down 3/32’s, and mortgage backs unchanged.

Technically, the early strength helped to recover from yesterday’s selling.  That has put the chart back into a neutral pattern, allowing the slightly bullish trend to continue on the daily chart.  We came close to our target of 2.88% but no cigar.  Now the market will need to rally soon or this will become just another range trade.  Failure to rally isn’t bad, just paints the chart neutral which will cause Austin mortgage rates/pricing to stay close to current levels.  Kinda like being all dressed up and no place to go.

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.

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.

Austin mortgage pricing worsening as deal has been made between President Obama and BP

Treasuries and mortgage backs are starting to drift lower (higher yields/worsening Austin mortgage pricing) as an apparent deal has been made between the Prez and BP.  Most likely something to do with an escrow account to pay the bills.  Stocks have caught a bid on the rumor.  Bill Gross has also made comments that are getting some attention.  First, he talks about low inflation and economic growth at only 2.0% for the next “several years”.  He also commented that when Pimco gets into the stock market it will be there for 10 to 20 years.  He also bought BP notes to yield 10%.  On balance, his comments are net bullish for bonds.  Heads up for the Obama statement as we are right on the cusp of a worsening price change.

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.

USDA UPDATE: In a nut shell, the USDA program is out of money (except for disaster funds in a few areas)

Maybe Shangri-Las were thinking about the fixed income market when they recorded their hit single, “Leader of the Pack” in 1964.  Something like

“ I met them at the Treasury store, they told me that they were bad, but I knew they were really glad, that’s why I fell for the Leader of the Pack”.

Treasuries are the big dog on the global market with traders from all corners of world running to them for safety.  Take for example the Treasury International Capital Flows (TIC Index) which measures the purchases of our Treasuries by foreign entities.  In March alone, 108.4 billion were bought, making it the instrument of choice as global debt issues and stock market roller coasters rule the day.  PPI, a measure of inflation at the wholesale level, hit the tape with a benign reading of minus .1% headline and a core print (ex-food and energy) of plus .2%.  Nothing to be scared of here and if anything, a deflationary trend may be setting up due to the global slowdown in Europe.

April Housing Starts also hit the tape, up 5.8% to 672K units.  Not bad except when you look at new Building Permits which dropped 11%.  Still tough sledding for the builders out there.  10 year trading has been volatile this morning as we opened in the red (down 12/32’s) with mortgage backs off 5/32’s.  Stocks have worked their way off the early morning highs ( opened up 80 now up 47), helping treasuries and mortgage backs to boot strap themselves back to unchanged.

USDA UPDATE: In a nut shell, the USDA program is out of money (except for disaster funds in a few areas).  The Senate now has three competing bills so the work out process has begun.  Nothing scheduled on the Senate floor so this could take some time.  USDA issued guidance stating that they would issue condition commitments so we could proceed with the loan process but not close until the program was funded.  USDA has now pulled that guidance to issue conditional commitments.  As you can see, this is a mess.  Investors such as Chase, etc. will not take locks unless you have a conditional commitment or are in a county that has adequate disaster funds available as they see this as hedging a “phantom” pipeline.

Have questions about USDA funds? Call me (512) 293-1239.

Latest news regarding the Euro zone’s debt crisis was again good news

Treasuries have been under pressure most of the morning as the risk trade was back on.  The latest news regarding the Euro zone’s debt crisis was again good news.  Spain announced sharp austerity programs to cut its budget deficits and the EU aims to seek further power over member country budgets.  In a nutshell, the news added more of a boost to global stocks after opening higher.  Stocks have held nice ground today, currently trading up at the highs at +140 points.  While our 10yr has suffered a little more, mortgage backs opened flat and still continue to trade the range.  Mixed conditions are being expressed on price charts by a triangle pattern between 121-015 and 118-12.  The pattern is not bullish, yet not bearish, needing a breakout to confirm a direction.  The lower line, support, has been breached, but a break below the preceding low at 118-225 is needed to boost the bearish case.  We are currently sitting about 118-275 on futures.  The upper line, resistance, lies at 119-07.  Above that area would shift conditions bullishly, but would require a break above 119-13/18 to confirm it.  Directional signals are mixed to say the least.  Treasury has just auctioned off $24bln new 10yr notes, which was reduced by $1bln from the last issue in February.  The issue tailed about .2 bps stopping at a 3.548% yield, which was very good.  The bid to cover was on the lighter side only seeing 2.96% as opposed to the average around 3.04% seen over the last six auctions.  Indirects were right on the button coming in at 41%.    Overall, the auction gets a B from most economists.

Today’s early trade pushed treasuries to higher yields and worsened mortgage pricing, but only slightly

New day, same story.  Sovereign debt remains the primary focus, taking stocks hostage for the fourth day in a row.  Never mind that Q1 Productivity was up 3.6% while Unit Labor Costs fell 1.6%.  Or that Weekly Unemployment Claims fell 7K to 444K.  Even the Monster Employment index rose 8 points.  The Greece fire has put a smoke screen in front of conventional wisdom, driving traders to safe haven investments such as treasuries, the dollar, and gold.

Today’s early trade pushed treasuries to higher yields and worsened mortgage pricing, but only slightly.  That occurred on a flat to slightly higher open for the Dow.  Currently, the big board is off 68 points as sellers are still looking for any strength to get out.  Reasons being that as Greece is on the edge of the cliff, global slowing will occur or even worse, a default in the Euro zone that could really put a pinch on global credit and stock earnings.

Our mortgage back market opened off a tick or two but has recovered to unchanged levels.  10 year note trades a 3.52% yield.  The tactical bias for today is neutral as we expect the chart to stay within yesterday’s highs and lows.  Traders call this an “inside day”, typical structure on the day before a big risk event (Employment Report for April 7:30 am cst Friday).  Overall conditions remain bullish but are over bought and need a stall or correction to bring their levels back into harmony.

With the Big Daddy of all data out tomorrow and the market rallying smartly into it, the risk reward for additional gains is possible but a low probability bet.  With expectations for a positive jobs number tomorrow, it’s only a matter of time before we get over Greece and focus on economic fundamentals.  We will discuss expectations for tomorrow’s jobs report later today.  Take a little caution with you into tomorrow.  Remember, it’s better to be a live dog than a dead lion!

Greece is the word

Just a quick note as we are close to a worsening mortgage price change.  Treasuries rallied as contagion and fear have investors and traders by the throat.  Burning banks in Greece and riots in the street are a wake up call to every nation in the world who spends more than they take in.  Hope the White House is watching.  Flight to quality buying is in bull form with the 10 year note up 20/32’s (yield 3.54%) and the 30 year bond up 1 point.  The rally is all treasury related as mortgage backs are up only 5/32’s.

Chart work points to resistance reached from 4 month ago levels and overbought conditions are in vogue.  When something happens to change the dynamics of the Euro fiasco, we will see a reversal of fortune in mortgage pricing.  The economic fundaments of our country just don’t support lower Austin mortgage rates.  Be careful out there as this rally is a one trick pony!   More in a few.

Just when Goldman looked to be on the ropes, they reported earnings that blew away the street

As much as everyone and their brother has been looking for a market top in stocks, the reality is it just ain’t so.  Up 70% to 100% from the March 2009 bottom, depending on the index or individual stock you’re looking at, one would think a major correction is near.  Even with good reasons abound; Greek insolvency, Goldman Sachs fraud allegations, China’s slowdown, health care reform, financial reform, and more taxes coming our way than you can shake a stick at, the trap door just won’t open.

Just when Goldman looked to be on the ropes, they reported earnings that blew away the street.  $5.59 versus analysts expectations of $4.01 is not a bad quarter.  Apple and Yahoo will release today after the close.  Wait until you see Apple’s numbers.  What we’re seeing here is an unwind of the flight to quality bond buying that happened Friday and early Monday.

Treasuries have been volatile the last 24 hours with traders more than willing to sell any strength.  From our technical view, the selling has followed a typical pattern of forced buying (rally) followed by corrective action that trades to retracement levels.  Currently, we sitting on the 62% retracement represented by a 3.82% yield on the 10 year note.  Mortgage backs took it on the chin for 8/32’s yesterday and are off another 2/32’s as we speak.  Nothing huge but then again we see no reason for a rally.  This type of overlapping, corrective price action often times leads to a triangle or large range pattern, one that the bulls need to defend and hold at 3.83% or lower.

With no news until Thursday, we’ll take a back seat to stocks and most likely go the opposite direction.  Don’t go to sleep out there, that’s when the market can pick your pocket!