Good Wednesday A.M. on this best day of the week.
As you would expect things are pretty quiet, not much going on but what is happening is good for bonds. The Dow is down 70 and mortgage bonds are +23bps.. The 10-yr at 2.34%. From Dan Rawitch: Durable orders came in far lower than expected. The market was looking for +.05 and instead got -.05. On a normal day, with normal volume, this rally could possibly take us places. However, as the day continues, trading will become considerably lighter, and could become much more volatile. It is also important to note that today may have very little bearing on what occurs Monday.
We (mortgage folks) are really a bunch of geeks and often follow our mother ship, the MBA (Mortgage Banker’s Assoc.). Just in time for Thanksgiving, the MBA shared the following insight into how Thanksgiving pricing has changed.. (yes, this is how little news there is today…)
Wishing you a wonderful Thanksgiving. We all have so much to be thankful for.
Good Tuesday AM,
The Stock market opened way up with Nasdaq at a record high (Dow +183) after the European Central Bank was said to be likely to make only small adjustments to its guidance on monetary policy next year. Stocks loved the cheap money and the status quo, this will likely have a negative impact on bonds however, this a.m. bonds are hanging in. The 10-yr at 2.36% and Mortgage bonds +4bps. The big news day is tomorrow, when a slew of information will be released but there may be no one at the desks to really care (when a tree falls in the woods with no one around, does it really make a sound?).
Rick Santelli from CNBC is talking about yield inversion (fancy words to explain that rates on longer bonds are lower than rates on shorter bonds). That’s not supposed to happen and can be a precursor to a recession, but it will also likely push long term rates down and with it mortgage rates. Just something to look out for.
Those are my sage words for today… nothing really happening (Oh, North Korea is now a terrorist state.. did you know?). I would expect some volatility with the comments from the ECB and thin trading from here on out. I would not be surprised to see bonds leak through the rest of the week. In theory, next week should stabilize.
Make today great!
Good Monday A.M…
This is Thanksgiving week and while that doesn’t mean much to the rest of the world.. (oh, unless it is they do any business with the US), it is a big deal here. Markets will see thin volume and volatile trades. By late tomorrow, I would expect mostly crickets from the trading desks. That doesn’t mean we will not see some movement, but more than likely it will be some leaking (as we are seeing today). No economic data and lots of uncertainty (Germany was unable to form a coalition government over the weekend, and may be headed back to the polls for another vote… sounds like no big deal but I do find it alarming that the extremist faction of nationalists is gaining a lot of traction)… should be boosting bonds but isn’t. Tax reform seems unlikely by year end but we will see what Mr. Trump can pull together with Congress’s last 15 working days of 2017. For today the 10-yr is at 2.36% and Mortgage bonds are -10bps. Just about in the middle of the last 30 days of trading. I don’t see much that will change that over the next few days and while I am the glass half full guy, I see a better chance for bond prices to leak lower the deeper into the week we get. If you haven’t locked or are not locking today… you’ll likely be waiting until next week.
Very interesting chart from the MBA… anything odd in the single family category from 07-17? Owner occupied household have declined for the first time (not to mention the newly formed ones are almost all rentals)… yeah, this is a problem.
Make today great and wishing you and yours a very Happy Thanksgiving!
Good Friday A.M.,
Treasuries are higher across the curve this morning from yesterday’s close. The UST 10-Year yield is currently at 2.348% after closing at 2.376% prior. The House passed their tax bill yesterday afternoon, but The Senate approved a far different version hours after House Republicans passed their bill. One of the differences from The Senate’s plan includes provisions to delay a corporate tax-rate cut by one year. The Senate version of the tax reform is currently going through the Senate Finance Committee and is expected to be available for debate within the next few weeks.
According to the Center for American Progress… A left leaning group who is using the nonpartisan CBO data:
- The Senate Republican bill would increase Obamacare premiums for unsubsidized families by an average of almost $2,000 in 2019.
- The bill also is estimated to lead to 13 million more people becoming uninsured.
- And the bill would trigger automatic spending cuts to Medicare, starting with $25 billion in 2018.
In economic news, we received the Housing Starts for October, which rose 13.70% Month over Month to a 1290k unit rate following an upwardly revised 1135k unit rate in September. The increase was mainly driven by a solid month of single family starts and multi-family starts. Building Permits rose 5.90% in October to a 1297k unit rate following an upwardly revised 1225k unit rate in September.
Once again we have tested the top of the range and that we don’t have enough conviction in the market to bust through resistance, thus making this a good lock opportunity. If bonds go on sale, the first level of support appears to be about 35bps from here but that doesn’t look too likely here either. We are flat for now.
Enjoy the weekend and first, make today great!
Good Thursday AM,
- Unemployment Jobless Claims: Actual 249K, Consensus 235K, Last 239K.
- Philadelphia Fed Index for Nov: Actual 22.7, Consensus 25.0, Last 27.9.
- Import Prices for Oct: Actual 0.2%, Consensus 0.4%, Last 0.7%.
- Industrial Production for Oct: Actual 0.9%, Consensus 0.5%, Last 0.3%.
So lots of news was released and most of it was bond friendly. However, the DOW is up 200 points and is causing a headwind for bonds. The House is going to vote on their tax reform bill later today but even if it passes, that won’t be the end of the story as there is still a Senate Bill and then a reconciliation of both. I think it will be tough to get all of this done in 2017. Bonds are off a bit. The 10-yr is back to 2.35% and mortgage bonds are -7bps. Bonds are very much range bound so the best way to play it is lock at the top of this range (about 10bps higher from here). if we can get some traction and move into the next trading channel, we’ll revise that strategy.
A rising tide lifts all boats and a new report from ATTOM Data Solutions says that 4.6 million properties had combined loan amounts of at least 25% above their estimated market values. That sounds baaad, but the spin is that the numbers are down 1.4 million from a year earlier and down 800,000 from the second quarter of 2017. The share of all homes with a mortgage that were seriously underwater fell from 9.5% in the second quarter to 8.7% in the third. A year earlier the share was 10.8%.
Finally, CFPB Director who has been under fire since taking the position tendered his resignation yesterday. Mr. Cordray is leaving the CFPB at the end of the month, but gave no insight to what’s next. The whispers are he will run for Governor of Ohio.
All I’ve got for now.. Make today great!