Economy, Your Mood Swings Are Giving Me Whiplash.

  • December 5, 2013

Despite an influx of economic news, the market remained relatively calm. This morning interest rates increased slightly after strong economic news was released. Let’s break down what happened. Jobless Claims fell for the third straight week. This means fewer people filed for unemployment than last week. “Lindsey, we got it. This is another report telling us that economic growth is going strong. Got it.” A separate report stated consumer spending declined this week. This spending accounts for more than two-thirds of U.S. economic activity. “So, what you are telling me is the economy is not growing?” Orders for manufactured goods fell .9 percent in October. “But Lindsey, you said manufacturing expanded last week.” Yes, yes I did. The gross domestic product was also released today; it grew at a 3.6 percent annual rate. This is another win for the US of A; suggesting the Feds monetary policy is spurring economic growth. It was the biggest gain since Q1 2012. “Good job, Janet!” That sounds good, but not so fast. Increased inventories accounted for half the GDP growth.  This suggests businesses are holding inventory due to lack of demand, which may hurt growth this quarter.  “I don’t even know what to…

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Economic Growth: You Are A Dream Killer, Sir…

  • December 4, 2013

Let’s remind ourselves that good economic news is usually bad news for the bond market. When good news comes out, mortgage bond prices generally go down, and mortgage rates usually increase. Before we even had our first cup of coffee, our dreams of a positive day were crushed by strong employment data. The ADP Employment Report beat economists’ forecast in a very big way today. Employers added 215k jobs versus the expected 173k in November. That is the strongest reported number since last year. “No, it’s not my alarm clock going off? It can’t be…” To add insult to injury September’s number was revised adding 40k more jobs. “Ok, now I’m up…” The Fed Beige Book was released this afternoon. This report showed manufacturing expanded, residential real estate activity improved, and economic growth continued at a moderate pace.  Adjectives like “Moderate” and “Beige” never felt so dramatic. Prices did rebound this afternoon but not enough to put us back in the green for the day. “There’s always tomorrow…” The economy is showing resilience despite the government shutdown; this adds to speculation that the Fed will stop supporting low interest rates as soon as this month. Tomorrow morning GDP, jobless claims,…

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Cyber Monday…

  • December 2, 2013

Unlike the lines at retailers this weekend, investors weren't lined up waiting for the bond market to open. How do we get in on that Cyber Monday action? The market opened down this morning, after stronger than expected manufacturing data was released in Europe. Shortly after the opening bell, ISM manufacturing data and the Purchasing Managers Index both performed better than forecasted, exacerbating the selloff. Construction spending fell .3% in September and rose .8% in October. This data was released simultaneously due to the government shutdown. September’s downward revision made the recent upward trend more modest. Fannie 3.5s lost approximately half a point, which means the cost of mortgage rates increased today. Significant amounts of economic data are on the calendar this week, all of which have the potential to move the market. Tomorrow is quiet but Wednesday is the big day with ADP Employment Report scheduled to be released. GDP, Initial Jobless Claims, and Factory Orders are released on Thursday. We will wrap up the week with the Employment Situation report on Friday. -By Lindsey Fediuk, Quicken Loans Capital Markets Analyst

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Black & Blue Friday…

  • November 29, 2013

I am sure most of you are recovering from an early morning shopping spree. Unlike many retailers today, the Bond Market did not have a long line of investors waiting to purchase mortgage-backed securities(MBS). Maybe we should have a sale… The market was closed yesterday for the Thanksgiving holiday after a sell off caused a late afternoon re-price Wednesday. Economic data consistently performed better than forecasted and it hit the MBS market hard. The MBS market opened slightly lower due to low trading values. Apparently bond investors don’t camp out for early morning deals. The higher coupons remain headline sensitive especially with headlines regarding Fed tapering and the nomination of Mel Watt. Sale on HARP-able bonds aisle 8. Treasuries fell overnight extending their first monthly loss since August. This move is based on speculation a U.S. jobs report due out next week will be strong enough to question the Federal Reserve’s bond buying program. Maybe it’s time to talk about a budget. Next week everyone should return from their turkey induced stupor. The economic calendar is full of employment data that investors have been eagerly awaiting.

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Is anyone still in the audience?

  • November 27, 2013

The market opened flat, but that didn’t last long. There was a cornucopia of economic data released today, all of which had the potential to rock the market… and it did.

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Much Appreciated…

  • November 26, 2013

Better buying from Asia this morning caused a rally right out of the gate. These gains were solidified when the European Central Bank made some bond-friendly comments. However, the rally didn’t last long as trade volumes are leveling off for the holiday. In other news, Consumer Confidence came in weaker than expected but the market shrugged. FHFA announced home prices rose 2 percent in the third quarter. That sounds good, except that’s down from 8.4 percent in Q2. The largest one year increases were in Nevada, California, Arizona, Florida and Washington. In a surprising move today, Fannie and Freddie kept conforming loan limits unchanged for 2014 at $417,000 and $625,000 for specific States. Looks like the higher coupons are still seeing disproportionate volatility due to Mel Watt’s expected confirmation as the head of the FHFA. He is a proponent of the HARP program and investors are shying away from the higher coupons hoping the Fed keeps rates low. Initial jobless claims should increase and durable goods orders fell according to Bloomberg survey, data will be released tomorrow.

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What’s Cookin’?

  • November 25, 2013

…A good old fashioned rally in the bond market that’s what. Prices in the bond market improved this morning after the Dallas Fed Manufacturing Index came in at 1.9, much lower than economists had forecasted. However, the gain was erased before rates could be improved; rates closed flat at Friday’s levels. Pending Home Sales fell .6 percent in October to the lowest level since December. Maybe they forgot to defrost that data point first. This is an important index because the U.S. Central Bank has pegged the housing market as a channel to boost economic growth and job creation. Economic data continued to add some spice to the market when the Preliminary Purchasing Managers Index showed activity in the services sector rebounded in early November. This could mean the economy is maintaining momentum. Early November mortgage purchase applications increased in the middle of the month, suggesting application volume could outpace forecasts. Nothing like a well seasoned data point to close the day. The week ahead is short, but packed with economic news. Housing data will dominate the headlines this week with a few other pieces of economic data sprinkled in. See you tomorrow.

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Silver Linings…

  • November 21, 2013

The FOMC minutes were released yesterday and the bond market responded…just not in our favor. Shortly after 2 PM, the market sold off, causing mortgage bonds to lose a ½ point. A price event like that made me thankful for the small wins we had today…let’s break them down. The morning started off rough for the bond market when claims for jobless benefits fell more than expected last week; falling 21,000 for a seasonally adjusted 323,000 claims. The good news is less people are unemployed. The market began to gain momentum when Yellen cleared the Senate banking Panel on a 14-8 vote. The full Senate approval is expected post December.  The Senate (and the Market) love Yellen. Then the Philly Fed Index came out and it missed big. Economists forecasted the manufacturing index would be strong at 15; however it came in at 6.5. That may not be good for the economy, but it was a big win for the MBS market. Another data point for the day, the MBA reported a 6.5 percent decline in Refi Index. In order to encourage more people to refinance, analysts stated rates need to drop towards 3.6 percent. Today will help rates head in…

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It’s Three Strikes and You’re Out…

  • November 20, 2013

It's been quite a day at the ball park for the bond market. The stands were packed with eager investors ready to buy or sell bonds today, depending on how economic data shook out. We stepped up to the plate this morning eager to hit a home run, then… The Retail Sales Report came out stronger than expected and caused early morning damage to bond prices. Strike 1. Around 10:20 am EST a Bloomberg story suggested the ECB may consider a negative deposit rate. Strike 2. Right before the closing bell another Federal Banker threw us a curveball. Bullard stated December is still a taper target depending on employment data. Strike 3. Didn't Janet say she would keep buying bonds? Maybe she can storm the mound. The bond markets swung for the fences, but never fully recovered after that; losing over half a point by the closing bell. Tomorrow is a big day with Jobless Claims due out in the morning. If the number comes in strong it may support Bullard’s prediction that December tapering is still a possibility. By Lindsey Fediuk, Quicken Loans Capital Markets Analyst

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