Along with Wednesday’s release of the minutes from the Federal Reserve’s FOMC meeting from October 27-28, a string of noteworthy economic indicators and closely watched statements by Fed officials caused Treasury yields and bond prices to fluctuate through the week.

 

The FOMC minutes showed a clear majority of Fed officials were agreeable to a December rate hike while a dovish minority of FOMC members believed the use of the phrase “next meeting” in the policy statement could have been misinterpreted by financial markets as too strong of a signal for a rate hike.

 

Bond yields rallied early in the week, as the Consumer Price Index (CPI) increased for the first time in three months with a gain of 0.2% in October to match the consensus forecast. An additional 0.2% gain was recorded for the year-over-year headline CPI while the Core CPI reading, which excludes food and energy, was 0.2% higher on the monthly reading and was at 1.9% on the year-over-year reading for October.

 

Housing Starts declined 11% during October to a seasonally adjusted annual rate of 1.06 million units, the lowest level since March. Yet, October Starts remained above one million units for the seventh straight month, the longest consecutive monthly run since 2007. This suggests a sustainable housing market recovery remains intact.

 

Meanwhile, Building Permits, a much more forward-looking metric, increased 4.1% to a 1.150 million unit rate last month, exceeding the consensus forecast of 1.137 million. Single family building permits increased 2.4% in October to their highest level since December 2007. Multi-family building permits increased 6.8%. September’s rate of 1,105,000 permits was revised higher from 1,103,000.

 

Also, the November National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index fell 3 points from an upwardly revised reading of 65 in October to 62. Although the November reading was lower than the consensus forecast of 64.5, the revised October reading was the highest since the end of the housing boom in late 2005.

 

As for mortgages, the Mortgage Bankers Association released their latest Mortgage Application Data for the week ending November 13 showing the overall Market Composite Index increased 6.2%. The Refinance Index increased 2.0% from the prior week, while the seasonally adjusted Purchase Index increased by 12% from a week earlier. Overall, the refinance portion of mortgage activity decreased to 58.6% of total applications from 59.8%. The adjustable-rate mortgage segment of activity decreased to 6.3% of total applications from 6.6% the prior week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance rose from 4.12% to 4.18%, its highest level since July 2015.

 

On Friday, the bond market stalled with the yield curve flattening in anticipation of the Fed raising rates in December. Bond traders believe a rate hike within the current environment of low inflation and weakening commodity prices will push yields in shorter-term treasuries higher relative to longer-term Treasuries. This was evident when the yield gap or spread between the two and ten-year Treasuries and the yield gap between five-year and 30-year Treasuries contracted to their tightest levels since August.

 

For the week, the FNMA 3.5% coupon bond gained 12.5 basis points to end at $103.31 while the 10-year Treasury yield decreased 1.1 basis points to end at 2.26%. Stocks ended the week with the NASDAQ Composite gaining 177.04 points to close at 5,104.92. The Dow Jones Industrial Average added 578.57 points to end at 17,823.81, and the S&P 500 increased 66.13 points to close at 2,089.17.

 

Year to date, and exclusive of any dividends, the NASDAQ Composite has gained 7.23%, the Dow Jones Industrial Average has gained 0.004%, and the S&P 500 has added 1.45%. This past week, the national average 30-year mortgage rate decreased to 4.00% from 4.03% while the 15-year mortgage rate remained unchanged at 3.24%. The 5/1 ARM mortgage rate decreased to 2.97% from 3.00%. FHA 30-year rates remained unchanged at 3.75% while Jumbo 30-year rates decreased to 3.83% from 3.84%.

 

Mortgage Rate Forecast with Chart

 

For the week, the FNMA 30-year 3.5% coupon bond ($103.31, +12.5 bp) traded within a narrower 44 basis point range between a weekly intraday high of 103.52 and a weekly intraday low of $103.08 before closing at $103.31 on Friday. After trending higher Monday through Thursday, the bond reversed course on Friday in a move toward support located at the 38.2% Fibonacci retracement level at $103.16. Friday’s negative action sent the bond lower to touch its ascending lower trend line. This line is formed by connecting the intra-day lows from the low on November 10 onward to form the lower trend line. A break below this line would be considered a bearish event. The slow stochastic oscillator is showing a loss of momentum and is flattening out, suggesting the bond could subsequently trade sideways and be range-bound between support and resistance located at the 100-day moving average at $103.67. As a result, we shouldn’t see much change in rates this coming Thanksgiving holiday week that will be characterized by lower than average trading volume

 

fnma30yrmbscahrtfor11232015

 mortgage rates

from: mbshighway

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The economic calendar features a couple of manufacturing reports, the weekly Initial Jobless Claims report, and the Consumer Price Index in addition to the Fed’s FOMC Minutes from their October 28 meeting. Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Date Time

ET

Event /Report /Statistic For Market Expects Prior
Nov 16 08:30 New York Empire State Manufacturing Index Nov -6.0 -11.4
Nov 17 08:30 Consumer Price Index (CPI) Oct 0.2% -0.2%
Nov 17 08:30 Core CPI Oct 0.2% 0.2%
Nov 17 09:15 Industrial Production Oct 0.1% -0.2%
Nov 17 09:15 Capacity Utilization Oct 77.5% 77.5%
Nov 17 10:00 NAHB Housing Market Index Nov 64.5 64
Nov 17 16:00 Net Long-Term TIC Flows Sept NA $20.4B
Nov 18 07:00 MBA Mortgage Index 11/14 NA -1.3%
Nov 18 08:30 Housing Starts Oct 1,173K 1206K
Nov 18 08:30 Building Permits Oct 1,137K 1103K
Nov 18 10:30 Crude Oil Inventories 11/14 NA 4.22M
Nov 18 14:00 FOMC Minutes 10/28    
Nov 19 08:30 Initial Jobless Claims 11/14 272,000 276,000
Nov 19 08:30 Continuing Jobless Claims 11/07 2,164K 2,174K
Nov 19 08:30 Philadelphia Fed Manufacturing Index Nov -1.0 -4.5
Nov 19 10:00 Index of Leading Economic Indicators Oct 0.6% -0.2%

 

 

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The economic calendar strengthens this coming week with a greater number of reports having a potential market impact.

lock rate?

econ10132015

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by | Categories: main, The Economy | No Comments

Jobs, jobs, jobs.

Sep 9, 2015

We know that when peoples have good jobs they are more likely to buy things, including houses.  The most recent employment data shows a low unemployment rate of 5.1%.  The unemployment rate is great but the Labor Force Participation Rate, folks able to be employed but are not seeking employment, remains at historic lows.  The economy  is improving just not as quickly as economist would like.

mbshsep2015jobs

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Monthly Housing data

Sep 2, 2015

housing-infographic-8-28-15

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Rate hike expectations

Jan 13, 2015

\

Rate hike expectations:
Atlanta Fed President Dennis Lockhart is sticking to his mid-2015 rate liftoff forecast, but inflation readings will be pivotal in deciding the time.
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James Galbraith, economist and professor at the University of Texas tells Yahoo Finance the Fed has a dilemma: There may not be a good way out of current low-rate environment

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Mortgage Rate Update

Jun 16, 2014

Mortgage rates deteriorated last week. Here is the week’s review of the news that affected the financial markets during this past week.

 

Monday… trading resulted in an uneven, but constructive session for the stock market. It seems either new intraday or all-time highs are being recorded in the major equity indexes on a daily basis so far in June. As long as the Federal Reserve keeps its accommodative monetary policies in place, including near-zero percent short-term interest rates, there is not much of an alternative to equities for investors. With an absence of economic news, stocks mostly finished higher on the day with bond prices heading lower with rising yields.

 
For the session, the Dow Jones Industrial Average gained 26.46 points to close at a new high of 16,743.63. The S&P 500 Index also reached a new high, gaining 1.40 points to finish at 1,924.97. The Nasdaq Composite Index retreated 5.42 points to end at 4,237.20. The yield on the 10-year Treasury rose 5.2 basis points to 2.53% while the FNMA 30-year 3.5% coupon bond lost 31.3 basis points to close at $102.61.

 
Tuesday… the stock market had a weak beginning but managed to close above the day’s lows. This is an indication of underlying support for stocks even though the major market averages are nearing key psychological levels. For example, the Dow Jones Industrial Average is only 55 points away from the 17,000 level while the broader S&P 500 Index is just 50 points away from 2,000. These indexes have jumped higher than anyone expected over the past three weeks, and it wouldn’t be a surprise to see some stock market consolidation. A 12 period Commodity Channel Index, a momentum indicator, flashed a sell signal today suggesting weaker stock prices for the next few days.

 
Boosting investor sentiment was a report from the Commerce Department showing wholesale inventories rose more than expected in April. Specifically, inventory levels increased 1.1% for the month, compared to the consensus estimate of 0.3%. April’s 1.1% increase also matched the March reading. These increases are significant because inventory levels play a key role in the calculation of GDP, and we should see a rebound in GDP this quarter.

 
Also in the news, the National Federation of Independent Business (NFIB) reported the level of optimism among small business owners rose 1.4 points in May from 95.2 to 96.6, the best level since September 2007. Expectations were for a reading of 95.5. Small business owners have higher expectations for employment, sales, earnings, expansion, and improvement in the economy.

06162014-chart#1

 

There is better news on the housing front. RealtyTrac released their home foreclosure report for May showing a 5% decrease from April and a 26% decline year-over-year. Foreclosures are now at their lowest level since December 2006.

 
For the day, the Dow Jones Industrial Average edged 2.82 points higher to close at 16,945.92. The S&P 500 Index fell less than a point to finish at 1,950.79. The Nasdaq Composite Index added 1.76 points to end at 4,338.00. The yield on the 10-year Treasury climbed 3.25 basis points to 2.64% while the FNMA 30-year 3.5% coupon bond lost 31.25 basis points to close at $102.03.

 

Wednesday… the stock market traded lower and from a technical perspective this was not unexpected. There were no major economic reports released today and the stock market usually doesn’t perform as well when there is an information vacuum. There was one piece of global news that perhaps weighed negatively on stocks. The World Bank released its Global Economic Prospects report citing a downward revision in its estimate for economic growth in 2014. The World Bank’s latest projection is calling for an increase of 2.8% versus its earlier forecast of 3.2% in global economic growth. Mortgage Bonds ended the day flat, but lower from where they were earlier in the day. Prices closed at $101.75 and just above support at the 50-day Moving Average at $101.73.

 

The Mortgage Bankers Association released their weekly Mortgage Application Index for the week ending June 6 with the overall Index up 10.3% and the Purchase Index up by 9%. Year-over-year the Purchase Index is down 13%. The Refinance Index increased by 11% and made up 54% of total mortgage applications with adjustable rate mortgages accounting for 8% of all applications. Mortgage interest rates increased 8 basis points during the week to 4.34% with 0.16 points paid.

 06162014-chart#2

 

At the close, the Dow Jones Industrial Average fell 98.81 points to end at 16,847.11; the broader S&P 500 Index dropped 6.91 points to close at 1,943.88; and the Nasdaq Composite lost 5.71 points to finish at 4,332.29. The yield on the 10-year Treasury was flat to end where it did yesterday at 2.64% while the FNMA 30-year 3.5% coupon bond gained 2.0 basis points following a coupon re-pricing to close at $101.75.

 

Thursday… the U.S. stock market got off to a weak start and continued to head lower in the afternoon. A 2% jump in oil prices to $107 per barrel was the catalyst and this was due to Sunni militants seizing control of the Iraqi town of Mosul with the specter of renewed all-out civil war in Iraq threatening that nation’s energy production.

 

There were a couple of economic reports for traders to consider with the release of Retail Sales and weekly Jobless Claims. The Retail Sales report was a bit disappointing with a reported increase of 0.3% in May versus expectations of 0.7% with Core Retail Sales unchanged for May. However, April’s Retail Sales number was revised to a 0.5% increase, compared to the previously reported 0.1%.

 

There weren’t any major surprises in the weekly Initial Jobless Claims report for the week ending June 7th. Initial Claims were reported higher than expected at 317,000 with an increase of 4,000 jobs from the prior week’s revised reading of 313,000. The four-week moving average for Initial Claims jumped by 4,750 to 315,250 while the four-week moving average for Continuing Claims decreased by 13,000 to 2.622 million, its lowest average since November 24, 2007.

 

06162014-chart#3

 

For the session, the Dow Jones Industrial Average fell 109.69 points to close at 16,734.19. The S&P 500 also lost ground with a 13.78 point decline to finish at 1,930.11, and the Nasdaq Composite Index dropped 34.30 points to end at 4,297.63. The yield on the 10-year Treasury fell 4.3 basis points to end at 2.597%. The FNMA 30-year 3.5% coupon bond gained 26.6 basis points to finish at $102.02.

 

Friday… the stock market saw some choppy action during the morning hours followed by modest gains in the afternoon. Bond prices were mostly flat for the day on mixed economic news.

 

The Labor Department announced the Producer Price Index for May was down 0.2% matching expectations, but this result is in sharp contrast to the 0.5% rise in March and 0.6% increase in April. This is confirmation that inflation remains in check and gives the Federal Reserve more flexibility in keeping interest rates lower for an extended period of time, which is good for stocks. Meanwhile, the University of Michigan’s latest Consumer Sentiment Index fell to 81.2 in June from 81.9 in May, and below the consensus estimate of 82.9. This is also the lowest sentiment reading in three months.

 

For the session, the Dow Jones Industrial Average gained 41.55 points to close at 16,775.74. The S&P 500 added 6.05 points to finish at 1,936.16, and the NASDAQ Composite Index gained 13.02 points to end at 4,310.65. The yield on the 10-year Treasury increased 1.1 basis points, but overall increased 2.0 basis points for the week to end at 2.608%. The FNMA 30-year 3.5% coupon bond fell 3.1 basis points on the day and dropped 43.8 basis points on the week to finish at $101.98.

 

For the week, stocks ended with the Dow Jones Industrial Average losing 148.54 points, the S&P 500 falling 13.28 points, and the NASDAQ Composite dropping 10.75 points. Year to date for 2014, the Dow Jones Industrial Average has gained 1.19%, the S&P 500 has gained 4.53%, and the NASDAQ Composite has gained 3.11%. The national average 30-year mortgage rate climbed from 4.19% to 4.23% while 15-year mortgage rates increased from 3.32% to 3.36%. FHA 30-year rates rose from 3.75% to 3.80% and Jumbo 30-year rates increased from 4.01% to 4.06%.

 

Mortgage Rate Forecast with Chart

 

The FNMA 30-year 3.5% coupon bond ($101.98) saw some choppy trading this past week and appears to be in a sideways trading pattern between the 50 and 25-day moving averages. These two moving averages along with the 50.0% and 38.2% Fibonacci Retracement levels can be considered as dual levels of support and resistance respectively. The bond is currently trading from a sell signal and is not quite fully “oversold” yet so we could see some further weakness during the beginning of this week before prices attempt to turn around and head higher. The two major influences for the bond market this week will be the extent of the violence and chaos taking place in oil rich Iraq and the Federal Reserve’s FOMC meeting on Wednesday with its Summary of Economic Projections and a press conference by Chairman Janet Yellen. If mortgage bonds continue to trade sideways this week and remain between closest support and resistance levels, mortgage rates should stay fairly stable.

 

Chart: FNMA 30-Year 3.5% Coupon Bond

 06162014-chart#4

 

Economic Calendar – for the Week of June 16

 

The number of significant economic reports picks up this week highlighted by the Federal Reserve’s Federal Open Market Committee (FOMC) meeting and interest rate decision on Wednesday, June 18. Also of interest to investors will be a couple of surveys on manufacturing activity for June from the New York and Philadelphia regions on Monday and Thursday respectively. Housing Starts and Building Permits will be reported on Tuesday along with the Consumer Price Index. Thursday will feature weekly Initial Jobless Claims.

 

Economic reports having the greatest potential impact on the financial markets this week are highlighted in bold.

 

06162014-chart#5

 

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Mortgage Rate Update

Dec 16, 2013

Mortgage rates continued to rise last week.  Home buyers and paid roughly .3% (30bps) more for the same note rate as they did the week prior.  Markets continued to react to the strong jobs numbers of the week before and the apparent budget deal in Washington.

This week is a busy week for economic data releases but most of these releases will be trumped by the Fed’s announcement regarding tapering bond purchases.

 

econ12132013

 

Mortgage rates have slowly been moving upward and ate at a risk of extreme volatility this week.  Watch video above for more details.

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Even though media coverage on the economy may focus on how the holiday shopping season is unfolding, economy-watchers will still want to keep an eye on these five things in the reports scheduled for the week ending December 6.
1) Jobs Report
2) 3rd Quarter GDP
3) New Home Sales
4) European Central banks
5) Car and Truck Sales
Read full Article (WSJ Blog)
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by | Categories: main, The Economy | No Comments