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.



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.



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.




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



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.




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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.




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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Financial markets are confused by FOMC minutes.  Mortgage rates were improving this morning but prices for mortgage backed securities and Treasuries went south this afternoon.  Hopefully the markets will find comfort when digging deeper int these minutes tomorrow, which may result in regaining some of the mortgage rate losses.


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Mortgage rates shot dramatically higher after Friday’s long-awaited employment report.

Prior to Friday mortgage rates were relatively steady throughout most of the week trading within a narrow range.   The unemployment rate in October stood at 7.3% and the economy added 204,000 jobs. Traders expected the unemployment rate at 7.3% and the creation of 110,000 jobs. Mortgage interest rates finished the week worse by approximately 7/8 of a discount point.

Adding to the angst of bond traders was a third quarter GDP report that also raised expectations the Fed might begin decreasing their bond purchases in December.  The Commerce Department’s release of its advance third-quarter estimate of GDP showed an annualized economic growth rate of 2.8%, well above consensus estimates of 1.9%.

The Bond markets are closed Monday in observance of Veterans Day, and the economic calendar is light the rest of the week.  The biggest events on this week’s calendar are prepared speeches from five Federal Reserve members, including one from Federal Reserve Chairman Ben Bernanke.


Traders will be listening to the Fed speeches, searching for clues about whether QE3 will continue indefinitely, or whether the program is headed for a “taper”. Rates are expected to move sharply should the Fed provide specific, clear direction.

Mortgage rates remain low, compared to historical levels now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Paul Cantor

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 This should be good news for interest rates rates.  Falling rates means the opportunity to refinance missed by many home owners in the spring may be open again.  Approval on HARP 2.0 loans is getting easier as well.

Also of interest is the spike over the last 4 years in the duration of unemployment.  This indicates that the percentage of employable people actually employed remains high.



Job Openings and Labor Turnover Summary

Weekly Initial Unemployment Claims decline to 350,000.

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Yes We are Open

Oct 17, 2013

yes-were-openAs anticipated in an eleventh hour deal Congress and the President agreed on a deal to re-open the Government and avoid a true debt ceiling crisis.  This kicking of the can means in about 90 days we will see a repeat.


– Markets react to passage of debt deal overnight
– Earliest indications suggest potential return to range
– Most of this morning’s economic data is reporting as normal

We know that the BLS collates most of the data by the Wednesday of NFP week, and that they were still on the clock on the Monday of NFP week. That creates an outside chance of the payrolls data arriving within the next few business days, but we have no indication thus far whether they’ll attempt to expedite it or take their sweet time.  Failing that, we at least have Jobless Claims and Philly Fed today. The latter is one of the more  significant pieces of economic data that remained on the scheduled during the shutdown, and the market’s reaction may offer clues as to the immediate role of economic data vs headlines and debt deal reactions

It is now 90 days and counting down before the next crisis in Washington.

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Mortgage News Daily – Oct 9 2013, 11:27AM

The White House has confirmed that President Obama will announce his nomination of Janet Yellen to succeed Ben Bernanke as Chairperson of the Federal Reserve’s Board of Governors.   Yellen, who has served as Fed Vice Chair since 2010 will become the first woman to head a central bank among major powers although there are a half dozen in the development world.  Her appointment, one commentator said this morning, will make her the most powerful woman in the country.

Yellen has been a close ally of Bernanke and is generally expected to continue his accommodative monetary policies . . .

Yellen Brings Impeccable Foresight and Soothing Continuity as Fed Chair

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Another sign of rising home prices and a healthier housing market (from Calculated Risk)


Calculated Risk: Framing Lumber Prices increased recently.

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Mortgage rates improved last week by approximately one-third of a discount point, meaning the same note rate cost less at the end of the week than at the end of the previous week.  Much of this improvement in mortgage rates was due to the headlines in the Middle East, coupled with weaker than expected retail sales data.

This week should prove interesting.  Markets have been waiting for month for the Fed’s decision on tapering of bond purchases, scheduled for Wednesday.  Other potential market moving data due to be released this week include inflation measuring CPI, weekly jobless claims, housing starts and Leading Economic Indicators.


 MBS (Mortgage Backed Securities) pricing has started off in a positive direction for rates this morning in reaction to the news that Lawrence Summers has been dropped from the list of possible replacement for Ben Bernanke and weaker than expected Empire Manufacturing Survey and Industrial Production.

Although the Fed is expected to announce the slowdown of bond purchases, this may be a positive move for rates if the Fed slows down the purchase a treasuries faster that the purchase MBS, especially as the volume of MBS hitting the market is slowing due to the rise in rates.  This being said it is unlikely that rates will return to the low levels of early May.

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