Florida Mortgage Daily

Locking Stance: LOCKING    Mortgage Bonds: +15bp

First, you probably already noticed the site looks different, that is because the full design did not transfer, but it is safely at the new host.  When time permits, I will make some changes, so don’t be surprised when the site looks different in the near future.  With the successful transfer completed with this site, the remaining sites are going to be transferred in the coming days and I hope to have everything completed by the end of the week.

OK, back to the real business.  Mortgage backed securities are back on the rise, and while there was not a “solid” retracement, MBS prices are holding above their 10-day moving average.  Yesterday lacked data and that fact will continue through today.  However, Treasury Auctions are in the driver’s seat, with longer-term auctions taking place today and through Thursday, ending with the 30-year T-Bond.  Yesterday’s results were very strong still and that is helping MBS prices and mortgage rates.  Today will see the results of the 3-year T-Note and as the terms get longer, expect more of an effect on MBS prices.

What does this mean for Mortgage Rates?  Mortgage rates are holding steady, if not edging slightly lower, though the long-term outlook is not certain.  In the future, odds are almost right on middle ground, with higher mortgage rates remaining a possibility.

Locking Stance: LOCKING    Mortgage Bonds: –6bp

My normal breakdown of today’s events is going to be omitted due to web hosting issues I am encountering.  You may of noticed MBS Commentary is no longer operating due to a database connection issue.  Well, this is but one site that was effectively destroyed due to my web hosting company migrating to a new server.  The websites have been down for over a week and I have yet to receive a fix or even a response from the hosting company in regards to the issue.  As such, I am currently in the process of transferring my websites over to a new hosting company.

Please be patient as I switch hosting companies and hopefully I will have all of my websites back up and running within the next week.  I plan on resuming normal posts here tomorrow, hopefully after fully migrated to the new host’s server and with a successful database migration.  I am hoping there will be no technical issues or lost data as there have been in the past.

Thank you for you understanding….

Locking Stance: LOCKING    Mortgage Bonds: –47bp

Greetings from Santiago, Chile where the earth is still shaking every so often, but certainly not as much as the mortgage bond market.  I told you yesterday that I did not like the way the mortgage backed securities charts’ looked and today you can see why as they have finally begun that overdue correction.  Now we have to wait and see if it is just a correction or what pattern will develop.

Today’s headlines are all about the Jobs Jamboree.  Nonfarm Payrolls came in better than expected at –36K versus –50K.  January and December revisions also added 35K net, making the whole report unfavorable for MBS prices.  The Unemployment Rate was better than expected as well as the Unemployment Rate held at 9.7% versus expectations of 9.8%.  Average Hourly Earnings were below expectations, coming in at 0.1% versus 0.2%.  And Average Workweek was below expectations at 33.1 versus 33.6.  Overall, the Jobs Jamboree numbers were unfavorable for mortgage bonds and MBS prices have plummeted as a result.

What does this mean for Mortgage Rates?  We finally have seen the beginning of a corrective move as I have been expecting.  While the future is not certain, odds still favor mortgage rates climbing from here.

(Note:  So far in Santiago I have not seen a whole lot of damage from the outside of buildings, but just as with the terminal, looks can be deceiving.  Aftershocks continue to be felt here.)

Locking Stance: LOCKING    Mortgage Bonds: +15bp

Mortgage backed securities continue to hold their ground, springing back to wards the flatline each day after moves up and down attempt to break free.  Things appear to look better, though I still do not like the charts overall, especially since we lack a solid correction.

Data today included the weekly Jobless Claims report, which came in slightly better than expected at 469K versus 475K, which is down from 496K last week.  The 4-week moving average dropped to 470.75K.  The 4-week moving average plays a more important role as it smoothes out the weekly increases and decreases, especially when there are special factors, such as the winter storms we have been experiencing.  Nonfarm Productivity was better than expected, coming in at 6.9% versus 6.3%.  Part of what is helping mortgage bonds today is the fact Unit Labor costs were lower than expected, coming in at –5.9% versus –4.5% and that helps ease inflationary fears.  Pending Home Sales dropped 7.6% as the Pending Home Sales Index came in at 90.4, down from 96.6 prior.  The NAR was quick to blame the weather though reality has shown a continued weak housing market despite the weather.

This afternoon has several Treasury Announcements coming up and that will likely add pressure to MBS prices.  Traders of mortgage backed securities will surely be watching these announcements, especially the 3-year T-Note, the 10-year T-Note and the 30-year T-Bond.  Remember that the added supply can bring down MBS prices, especially the longer term Treasuries.  Chicago Federal Reserve Bank President Charles Evans will also be speaking to the CFA Society of Chicago this afternoon.

What does this mean for Mortgage Rates?  Mortgage rates have been holding their ground, remaining steady or slightly improving lately.  The future is becoming more uncertain, though today may see a breakout of the very narrow sideways pattern they have been in. 

Locking Stance: LOCKING    Mortgage Bonds: –6bp

Mortgage backed securities continue to maintain a confused state of mind regarding their direction.  There still has not been a corrective move, yet they hover around their 100-day moving average, drifting slightly lower each passing day.  I doubt this will last much longer as this week holds plenty of data, including Friday’s Jobs Jamboree.

Data today has already been somewhat favorable as the ADP Employment Report was inline with expectations but the prior report was revised lower, typically favorable for MBS prices.  MBA Purchase Applications showed purchase applications rose 9.0% and refinance applications jumped 17.2%.  While these are steps in the right direction, the numbers are still far from a “recovery”.  The only good news for jobs right now is the Challenger Job-Cut Report which came in at 42,090, hitting the lowest total since mid-2006.  The ISM Services Index was slightly better than expected, coming in at 53.0 versus 51.0.  Still to come is the Beige Book at 2:00.

Minneapolis Federal Reserve Bank President Naranyana Kocherlakota speech yesterday also showed his concerns about economic recovery and the jobs market, certainly favorable to MBS prices.  Dallas Federal Reserve Bank President Richard Fisher was speaking on globalization and the recovery to the Council on Foreign Relations in New York today, as was Boston Federal Reserve Bank President Eric Rosengren speaking at a conference on post-crisis capital markets in Philadelphia.  Rosengren stated that the Fed’s low interest rate is “now totally appropriate.”  Still to come today is Atlanta Federal Reserve Bank President Dennis Lockhart’s speech on credit markets and the economic outlook to the New York Association for Business Economics.

What does this mean for Mortgage Rates?  Mortgage rates are likely to hold steady again today, though the Beige Book may change that.  The outlook remains most favorable for mortgage rates to edge back higher.

(Note:  MBS Commentary is still down due to the hosting company’s lack of support to correct the database connection.  I may have to start all over, but will take some time and the article that was posted may be lost forever.)

Locking Stance: LOCKING    Mortgage Bonds: –9bp

Mortgage backed securities once again failed to mount a sustainable rally yesterday despite numerous data reports that were favorable.  I still do not like how the charts look, hence why I favor the locking stance as there still needs to be a correction and that will likely trap MBS prices in a sideways pattern.

Data is virtually non-existent today, with just some minor players that do not make waves typically.  The day will be riddled with various Feds talking up a storm.  We will see Boston Federal Reserve Bank President Eric Rosengren speech at a conference on post-crisis capital markets in Philadelphia, Minneapolis Federal Reserve Bank President Naranyana Kocherlakota speech to Allied Executives Business & Economic Outlook Symposium in Minneapolis, and Dallas Fed President Richard Fisher is scheduled to be interviewed on the Nightly Business Report/PBS.  The markets could very well move on what these Feds say.

What does this mean for Mortgage Rates?  Mortgage rates will likely hold steady or move higher.  The future outlook remains most favorable for higher mortgage rates.

Locking Stance: LOCKING    Mortgage Bonds: +3bp

Mortgage backed securities are still trying to break the potential sideways pattern, but odds remain unfavorable for their success.  Looking at the recent run up that lacks a retracement shows this very clearly.  Of course, other things are indicative as well.

MBS prices are not moving much at all today as you can see.  That is a serious problem for the future because today was the release of the Fed’s favorite gauge on inflation, the PCE report (Personal Consumption Expenditures Index).  Today’s PCE report showed inflation was inline with expectations, coming in at 0.0% and at 1.4% year/year, which was lower than last reading.  Personal Income was well below expectations, coming in at 0.1% versus 0.4%.  Consumer Spending was above expectations, coming in at 0.5% versus 0.4%.  Overall, the entire Personal Income and Outlays report was very favorable to mortgage backed securities, but they are failing to move higher.  The ISM Manufacturing Index is another “biggie” and was released today.  The ISM Manufacturing Index also was favorable for mortgage rates, coming in at 56.5 versus expectations of 57.5.  Even this morning’ short-term Treasury Auctions went favorably for MBS prcies.

Part of the reason MBS prices aren’t climbing is that Richmond Federal Reserve Bank President Jeffrey Lacker is stating that there is little to no chance of a double dip recession.  He is also saying there is no need to make a decision on the Fed’s exit sequence though it is natural to start at asset sales.  Looking at the charts, you can see that the “rubber band” is stretched considerably right now and is keeping MBS prices from pushing higher.

What does this mean for Mortgage Rates?  Mortgage rates should be dropping right now, but they are holding steady.  For the long run, it still appears that a mortgage rates will be trapped in a sideways pattern.

(On a side note, my hosting service migrated my sites to a new server and damaged several of them in the process, including the new one, MBS Commentary, which I hope will be back soon.)

Locking Stance: LOCKING    Mortgage Bonds: +3bp

Mortgage backed securities are making another attempt to break through their 100-day moving average, but they have another resistance layer just above as well, namely the last “peak”.  If they can successfully break that level, lower mortgage rates are awaiting us.  If not, mortgage rates are back on the climb.

Data today included a couple of moderate and heavy hitters.  GDP started the day off, beating estimates slightly, coming in at 5.9% versus 5.7%.  The GDP Price index came in at 0.4%, below expectations of 0.6%, and favorable to mortgage bonds.  Chicago PMI was the big report of the day, beating expectations with a 62.6 versus the 60.0 estimated.  Consumer Sentiment came in essentially inline with expectations at 73.6.  And, probably not surprisingly, Existing Home Sales was well below expectations at 5.05M compared to the expected 5.50M while supply rose to 7.2 months from 6.5 months.

The charts are beginning to look more like the best we are going to get is a sideways pattern, meaning mortgage rates will climb, then likely drop back to about where they are this morning.  We still have a while before we see the future become certain again, but for now it appears mortgage rates are likely turning higher again.

What does this mean fro Mortgage Rates?  Mortgage rates likely have gotten as low as they are going to get, though the future remains uncertain still.

Locking Stance: LOCKING   Mortgage Bonds: +16bp

Sorry for the delayed report, but I got caught up on other websites I am working on, including the NEW Florida Mortgage Report site.  In the meantime, I have not changed my stance and that is despite that little ray of hope that looked like it was going to get extinguished managed to get brighter.  Let me explain.

Durable Goods came in better than expected, except when you take transportation out of the equation, so it was generally a favorable report.  The headlines, though, focused on Jobless Claims, which were well above the expectations of 460K, coming in at 496K and bringing the 4-week average up to 473.75K.  Both of these numbers are the highest since November.  The 5-year T-Note auction weighed on MBS prices yesterday and prevented the potential breakout and that is what the charts predicted would happen.  But the charts do not always accurately forecast the future as they occasionally get surprises like this morning’s Jobless Claims.  So, the only way MBS prices would likely fall would be a poor 7-year T-Note Auction.  Well, they actually got strong results on that Treasury auction and now MBS prices are getting a leg to stand on and new chart patterns are forming.

With MBS prices holding yesterday and gaining today, the 10-day MA has skipped off the 50-day and is turning higher.  With MBS prices breaking above their 25-day MA, the downtrend is broken, though the 100-day MA is holding as resistance, so we may merely get a new sideways pattern.  Stochastic indications, the prior bright spot, have now moved through the middle ground, though still remain positive.  That means the next few days will be critical to establishing a new pattern, or trend.  The problem is that the market looks confused and that bothers me and I am not willing to risk it.

What does this mean for Mortgage Rates?  Mortgage rates edged lower this morning as the outlook becomes uncertain again.  We may be looking at lower mortgage rates or a new sideways pattern with rates edging back and forth for a while.

Locking Stance: LOCKING    Mortgage Bonds: -3bp

I wanted to wait to see how data played out this morning as I suspected change was in the air and the little ray of sunshine in the charts may get bigger.  I am glad I did as mortgage backed securities are still on the rise and resistance is still holding, keeping that ray of sunshine from lighting the way to lower mortgage rates.  MBS prices maintained positive ground yesterday as the 2-year T-Note auction showed decent results.

Starting the day off was the MBA Purchase Applications report which showed a 7.3% drop in Purchase Applications, bringing them to their lowest point since 1997, further proof our housing market is far from recovery.  Refinance Applications were also down 8.9% this report.  But the big report of the day was the New Home Sales report which surprised the markets with a mere 309K, well below the 360K expected and a large drop from last month’s 342K.  Certainly, this report strikes another blow to the housing recovery.  This afternoon will see the results of today’s 5-year T-Note auction.

At 10:00, Federal Reserve Chairman Ben Bernanke (FOMC Voting Member) began his Semiannual Monetary Policy Report to the Congress, before the House Committee on Financial Services, U.S. House of Representatives.  Some highlights of his testimony are the reiteration of the Fed’s forecast for a modest recovery, a slow decline in unemployment, and soft inflation.  He also sees the credit markets improving for short-term lending but bank lending is still contracting.  In regards to monetary policy, he reiterated the Fed’s planned exit strategy from the massive expansion of its balance sheet (MBS purchase plan included).

What does this mean for Mortgage Rates?  It appears that move higher, while offering a slight ray of hope, remains nothing more than a correction and mortgage rates are going edge higher again.