March 2018

March 1st, 2018

Instructions on how to read this blog: Below is the news for the month when it happened and the market’s reaction.  For a full view of the month start at the bottom and work your way up. If want to know what just happened start at the top. All Times are Eastern Standard Time.  When the price of Mortgage Backed Securities (MBS) goes down rates go up, and when the price goes up rates come down. Remember in the bond market Bad News is Usually Good News and Good News is Usually Bad news.

Thursday March 29th

A WORD FROM THE BOND PITS:

In the final session of Q1, Mortgage Bond prices closed higher and narrowly changed on spread vs Treasuries with heavy month-end volumes. 

CLOSING TECHNICAL SIGNAL:

Technically, the Bond has successfully traded above resistance one (R1) at the 25-day Moving Average, which now becomes support. The Bond now sets its sights on new resistance one at the 50-day Moving Average. Heading into the long weekend, continue to float.

MARKET WRAP:

Mortgage Bonds were able to edge higher in the shortened session boosted by low inflation data from the Core PCE. The Fannie Mae 30-yr 4% coupon closed at 102.59, +12bp to the highest close since March 1. At the time of this writing, Stocks were rallying as the tech sector rebounds. WTI oil last traded at $65.17/barrel, +$0.78. 10-yr yield 2.74%. Next week the closely watched Jobs Report will be released for the numbers in March. Have a great long weekend!

Late Morning Review

Tame inflation data is giving both Stocks and Bonds a boost this morning as the month and quarter come to an end. The Fed's favorite inflation gauge, the annualized Core PCE, met expectations of 1.6% for February, just above the 1.5% recorded in January - yet still well below the Fed's target range of 2%. The month-over-month Core PCE rose 0.2%, in line with estimates and just below the 0.3% recorded in January. If inflation continues to run low, the Fed will be hard pressed to keep raising the short-term Fed Funds Rate multiple times in 2018.

Consumer Sentiment surged to its highest level in 14 years in March due in part to a growing economy and strong labor market. The final Consumer Sentiment Index for March rose to 101.4, the highest number since January 2004. Looking ahead, consumers see higher interest rates with a slight slowdown in economic growth. Consumer sentiment measures the overall health of the economy as determined by consumer opinion.

Americans filing for first-time unemployment benefits fell to lows not seen in 45 years as the labor market continues to grow. Weekly Initial Jobless Claims fell by 12,000 in the latest week to 215,000. The four-week moving average of claims, which irons out seasonal abnormalities, fell 500 to 224,500. Weekly Initial Jobless Claims have now run below the 300,000 threshold for 158 straight weeks, which signals a strong labor market.

First Thing

The New York Fed will purchase up to $690M in Fannie/Freddie 30-yr 3.5% and 4% coupons beginning at 9:45 a.m. ET. Inflation remained relatively tame last month as evidenced by the inline Core PCE data. Weekly Initial Jobless Claims -12K to 215K, below the 230K expected and hover near levels seen in 1970.Core PCE month-over-month 0.2%, inline with estimates and down from 0.3% in January. February Personal Income 0.4%, inline. Personal Spending 0.2% inline and both matched the January number.  Annualized Core PCE at 1.6% in February, up from 1.5% from January. The Bond markets will close early at 2:00 p.m. ET today, while Stocks undergo normal hours. Tomorrow, all U.S. financial markets will be closed in observance of Good Friday.  10-yr yield near unchanged at 2.76%.

Wednesday March 28th

A WORD FROM THE BOND PITS:

Mortgage Bonds closed near unchanged and mostly wider on spread vs Treasuries though off the highs of the session. 

MARKET WRAP:

Not a whole lot of movement in Mortgage Bonds today while Stocks closed a bit lower in a choppy session led by losses for Amazon. A weak Treasury offering capped prices in the afternoon session while a solid GDP and strong Pending Home Sales also weighed on Bond prices. The Fannie Mae 30-yr 4% coupon closed at 102.47, -6bp. The Dow lost 9.29 points to 23,848.42, the S&P fell by 7.62 points to 2,605.00, while the tech heavy NASDAQ was lower by 59.58 points to end the session at 6,949.22. WTI oil fell $0.87 to $64.38/barrel on a rise in oil stockpiles. 10-yr yield closed at 2.78% from the early morning 2.74%. Tomorrow's data includes the Fed's favorite inflation gauge the Core PCE, Personal Income & Spending, Weekly Initial Jobless Claims, Chicago PMI and Consumer Sentiment.

Late Morning Review

Final Gross Domestic Product (GDP) in the fourth quarter of 2017 came in at 2.9%, down a bit down from 3.2% in the third quarter. This was up, however, from the 2.5% from the second estimate. Within the report it showed that consumer spending rose 4.0%, up from 2.2% in the third quarter, representing the highest rate since the fourth quarter of 2014. Consumer spending makes up nearly 70% of GDP and is a key component of economic growth.

The National Association of REALTORS® reports that Pending Home Sales in February jumped 3.1% from January but limited housing supply continues to be an obstacle for potential home buyers. The 3.1% was above the 2.5% expected. From February of 2017 to February of 2018, sales were down 4.1%. Lawrence Yun, NAR chief economist, says "The expanding economy and healthy job market are generating sizeable homebuyer demand, but the minuscule number of listings on the market and its adverse effect on affordability are squeezing buyers and suppressing overall activity.”

The National Association of REALTORS® released its first quarter 2018 Housing Opportunities and Market Experience (HOME) survey this week showing that consumers felt more confident about the U.S. economy and their financial situations. Heading into the spring buying season, those surveyed on the question that now is a good time to purchase a home is at its lowest level in two years at 68% in the first quarter of 2018 from 72% in the final quarter of 2017.

 

First Thing

Q4 2017 final read on GDP at 2.9%, above the 2.6% expected and up from the second read of 2.5% The MBA reports that the 30-yr fixed-rate mortgage was essentially unchanged at 4.69% for the week ended March 23. That rate carries at least 0.40 point on top. 10-yr yield 2.77%, unchanged.

 

Tuesday March 27th

A WORD FROM THE BOND PITS:

Mortgage Bonds ended higher in price and wider on spread vs Treasuries as risk-off was the trade today. 

CLOSING TECHNICAL SIGNAL:

Continue floating with the Fannie Mae 30-yr 4% closing above resistance at the 25-DMA and the yield on the 10-yr T Note closing below 2.80% at 2.77%. We are cautiously optimistic with the yield below 2.80%. 

MARKET WRAP:

Mortgage Bonds were able to produce some gains today as Stocks dropped hard in today's session. The tech wreck resumed today for equities which pushed the broader Stock markets lower. Mortgage Bonds were able to rise despite a solid housing report and with Consumer Confidence at lofty levels. The Fannie Mae 30-yr 4% coupon closed at 102.50, +28bp and closed above resistance at the 25-day Moving Average. The Dow lost 344.89 points to end at 23,857.71 and comes after a 400 point loss on Friday and a 700 point gain yesterday. Talk about volatility! The S&P fell by 45.93 points while the tech heavy NASDAQ lost a whopping 211.73 points to 7,008.80. WTI oil was last seen in after hours trading at $64.63/barrel, -$0.91. 10-yr yield 2.77%. Tomorrow's data includes the third reading on Q4 2017 GDP and Pending Home Sales.

Late Morning Review

Home prices continued to rise in January due in part to the low amount of homes for sale on the markets. Currently there is a 3.4-month supply of homes for sale, well below the 6-month supply that is seen in a healthy market. The S&P/Case-Shiller 20-City Home Price Index rose 6.4% from January 2017 to January 2018, just above the 6.3% expected and up from 6.3% recorded from December 2016 to December 2017.

On a monthly basis, home prices were up 0.8% from December 2017 to January 2018. Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices David M. Blitzer says, “Despite limited supplies, rising prices and higher mortgage rates, affordability is not a concern. Affordability measures published by the National Association of REALTORS® show that a family with a median income could comfortably afford a mortgage for a median-priced home.”

Easing trade war fears between the U.S. and China and word that Kim Jong-un made a surprise visit to China are helping to lift U.S. Stocks today. Treasury Secretary Mnuchin is trying to strike a deal with his China counterpart that would lower tariffs on U.S. cars being imported into China and for China to open its market to U.S. financial services. This process of negotiations could take some time and the headlines will continue to impact the markets. This would be a major positive development if it comes to pass.

 

 

First Thing

Mortgage Bonds are trading higher this morning. The S&P/Case-Shiller 20-City Index +6.4% annually from January 2018 to January 2017 and just above the estimate of 6.3%. The New York Fed will purchase up to $815M in Fannie/Freddie 30-yr 3.5% and 4% coupons beginning at 11:15 a.m. ET this morning. 10-yr yield at 2.83% near unchanged.

 

Monday March 26th

A WORD FROM THE BOND PITS:

Mortgage Bond prices closed slightly lower and tighter on spread vs Treasuries amid a resilient market despite the huge gains in Stocks. Trading volumes were below average. 

CLOSING TECHNICAL SIGNAL:

Continue to float but be aware things can change at any moment. 

MARKET WRAP:

Despite the huge gains for Stocks today, Mortgage Bond prices were unnerved having closed with minor losses. However, on the flip side, the S&P suffered its work week in two years last week and Mortgage Bonds couldn't produce any significant gains. There were no economic reports released today. The Fannie Mae 30-yr 4% coupon closed at 102.25, -9bp. Stocks soared as trade fears eased and as tech Stocks rose. The big three had their greatest one day gain in two-and-a-half years. The Dow gained 669.40 points to 24,202.60, the S&P rose 70.29 points to 2,658.55 while the NASDAQ was up 227.87 points to end the bullish session at 7,220.54. WTI oil lost $0.33 to $65.55 amid profit taking after last week's big gains. 10-yr yield 2.85%. Tomorrow's economic data includes S&P/Case Shiller Home Price Index and Consumer Confidence. The Treasury will sell $35B 5-yr Notes and comes after today's so-so demand for the 2-yr paper.

 

Late Morning Review

Reports from the Wall Street Journal stating that the U.S. and China are in quiet trade talks are helping Stocks rebound after last week's steep losses. The S&P 500 lost 6% last week, its worst week in two years, but finished just above support at its 200-day Moving Average at 2,585 on Friday. The Dow Jones Industrial Average was up 450 points in early Monday trading. All U.S. financial markets are closed Friday in observance of Good Friday.

Gas prices at the pumps continue to edge higher as the spring and summer driving seasons get underway. The national average price for a regular gallon of gasoline rose to $2.61 today, up $0.10 in the past month and up from $2.28 a year ago. Gas prices tend to move up in the spring and summer months as demand picks up and as refineries have more man hours around the clock to meet the increased demand.

Rental apartment prices have risen at their fastest pace over the past year according to Zillow. The median rent across the nation rose 2.8% in the past year to $1,445. In 2017, renters spent a record $485.6 billion, an increase of nearly $5 billion form 2016. Zillow says that the increase in rents is likely due to people renting longer than usual, which drives up demand and in turn, prices.

 

First thing

The Dow climbs 500 points. The Bond markets will close early at 2:00 p.m. ET on Thursday, while Stocks undergo normal hours. On Friday, all U.S. financial markets will be closed in observance of Good Friday.

10-yr yield rises to 2.85% from Friday's close of 2.82%.

 

Friday March 23

A WORD FROM THE BOND PITS:

Mortgage Bonds closed near unchanged and wider on spread vs Treasuries with below average trading volumes. 

CLOSING TECHNICAL SIGNAL:

With Stocks in correction mode, continue to advise floating but be on guard for a reversal. 

MARKET WRAP:

Not much action in Mortgage Bond market today as prices traded in a tight range near unchanged. However, Stocks plunged on trade war fears, tech wreck and lower financials. This morning's lower New Home Sales had little impact on the markets. The Dow lost 424.69 points to 23,533.20, the S&P 500 was lower by 55.43 points to 2,588.26 while the NASDAQ was down 174.01 points to end at 6,992.66. WTI oil gushed higher by +$1.58, to $65.88/barrel. 10-yr yield 2.81%. Next week we'll get key inflation data from the Core PCE in the holiday shortened week. The Bond markets will close early at 2:00 p.m. ET on Thursday, March 29 while Stocks undergo normal hours. On Friday March 30, all U.S. financial markets will be closed in observance of Good Friday. Have a great weekend!

 

 

This week's newsletter link: http://www.mmgweekly.com/w/index.html?SID=fa7518562603d5c4a7ad69e2e5726f5f

Chart News 180223

 

Late Morning Review

The Commerce Department reported on Friday that New Home Sales in February edged lower by 0.6% from January to an annualized rate of 618,000, just below the 620,000 expected. This was the third straight monthly decline. However, New Home Sales were up 0.5% from February 2017 to February 2018. Sales increases were seen in the Northeast and South with declines in the Midwest and West. The median sales price of new homes sold in February was $326,800. There was a 5.9-month supply of new homes for sale on the market, which is near the 6-month supply that is considered normal.

Freddie Mac released its Outlook for March showing that rising home prices are providing many homeowners to build equity though it is making it difficult for first-time homebuyers to purchase a home. Freddie Mac said that home loan rates have been increasing and it expects that trend to continue with the 30-year fixed-rate mortgage averaging 4.9% in the fourth quarter of this year. The GSE went on to say that since the end of the Great recession in 2009, home prices have soared 37% nationwide.

The Senate passed a $1.3T spending bill last night, averting tonight's government shutdown with Bond prices under pressure on the notion that it now has to be funded. But hold on - there is a chance President Trump might just veto this bill. Mr. Trump is considering a veto due to the fact that the DACA situation wasn't addressed in the bill along with the border wall.

First Thing

Global Stocks decline after China hits back on Trump's tariffs. S&P futures near unchanged, off worst levels.10-yr yield 2.83%, unchanged.Fed's Bostic expects further rate hikes over the next few years, inflation trending towards 2% goal.The Senate passed a $1.30T trillion spending bill, averting a government shutdown.February Durable Orders rise 3.1% from January, above the 1.5% expected.

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Thursday March 22nd

A WORD FROM THE BOND PITS:

Mortgage Bonds closed modestly higher in price and unchanged on spread vs Treasuries with heavy trading volumes. 

CLOSING TECHNICAL SIGNAL:

Continue floating and be mindful that in the absence of move beneath 2.80% on the 10-year yield, it is tough to get overly bullish. 

MARKET WRAP:

China tariffs, trade war fears, looming government shutdown, specter of higher inflation along with profit taking sent U.S. Stocks plunging today which gave a modest boost to Bond prices. The Fannie Mae 30-yr 4% coupon closed at 102.34, +12bp and toyed with resistance at the 25-day Moving Average (102.59) before closing below that level. The Dow fell off a cliff today losing 724.42 points to close at 23,957.89, the S&P lost 68.24 points to 2,643.69, while the NASDAQ plunged 178.60 points to end at 7,166.67. WTI oil fell by $0.87 to $64.30/barrel. 10-yr yield 2.82%. New Home Sales will be released tomorrow.

Late Morning Review

As expected, yesterday the Federal Reserve raised the short-term Fed Funds Rate by 0.25% bringing it to a range of 1.50 to 1.75%. The statement and Fed Chairman Jerome Powell's first press conference offered no surprises. The Fed is forecasting at least two more rate hikes in 2018, with three more hikes in 2019, up from the two predicted in December. The Fed went on to say that Gross Domestic Product will average 2.7% in 2018, up from the previous forecast of 2.5% back in December.

Mortgage rates are essentially unchanged this week remaining near four-year highs though still historically low. Freddie Mac reports that that 30-year fixed-rate mortgage is at 4.45% today with an average 0.5 in points and fees. Freddie Mac says the U.S. housing markets remain resilient in the face of higher mortgage rates and that momentum is carrying through into spring. Last year the rate was 4.23%.

Home prices edged higher in January as reported by the Federal Housing Finance Agency (FHFA). Housing prices rose 0.8% month over month from December to January, up 7.3% from January 2017 to January 2018. The FHFA monthly Housing Price Index is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. The FHFA regulates Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks

First Thing

S&P futures lower due in part to today’s tariff announcement and possible trade wars. In addition, the specter of higher inflation down the road as told by the Fed yesterday is also weighing on futures.  10-yr yield 2.85% from yesterday's close of 2.90%.  Mortgage Bond prices open modestly higher.Weekly Initial Jobless Claims +3K to 229K vs 225K expected.  The FHFA reports that house prices were up 0.8% in January from December, +7.3% from January 2017 to January 2018.  Freddie Mac reports that the 30-yr fixed-rate mortgage was essentially unchanged this week at 4.45% with an average 0.5 in points and fees added on top.

Wednesday  March 21

CLOSING TECHNICAL SIGNAL:

With today's modest gains, it might be a good idea to float until tomorrow. 

MARKET WRAP:

The Fed raised its benchmark Fed Funds Rate, as expected, by 0.25% to bring the rate to the 1.50% - 1.75% range. The statement showed continued economic growth with low inflation. The Fannie Mae 30-yr 4% coupon closed at 102.19, +12bp. February Existing Home Sales came in better than expected and had little impact on the markets. Stocks flip flopped during the session, especially after the statement, finally ending lower. The Dow lost 44.96 points to 24,682.31, the S&P 500 fell by 5.01 points to 2,711.93 while the NASDAQ was lower by 19.01 points to end the session at 7,345.28. WTI oil closed at $65.17/barrel, +$1.63, a six-week high. 10-yr yield 2.88%. Weekly Initial Jobless Claims will be released tomorrow.

Fed Notes 2pm EST

Fed says economic outlook has strengthened recently. The Fed raises the short-term Fed Funds Rate by 0.25% to 1.50% to 1.75% range.  Fed says three rate hikes for 2018, raises outlook for hikes in 2019, 2020. Fed says inflation low, but is expected to rise in coming months and to stabilize” around the Fed’s 2% target “over the medium term.”Fed forecasts Unemployment Rate at 3.6% in 2019.

Late Morning Review

The National Association of REALTORS® (NAR) reported on Wednesday that Existing Home Sales rose 3 percent in February from January to an annual rate of 5.54 million annualized units, above the 5.42 million expected. The NAR said that despite low inventories of homes for sales on the market and faster price growth, sales bounced back after two straight months of declines. Gains were seen in the South and West with declines in the Northeast and Midwest.

The NAR went on to report that Existing Home Sales are up 1.1 percent from a year ago. Unsold inventory is at a 3.4-month supply, well below the 6-month supply that is seen as normal. The median existing home price in February was $241,700, up 5.9 percent from February 2017 ($228,200). February’s price increase marks the 72nd straight month of year-over-year gains. Lawrence Yun, NAR chief economist says, “The very healthy U.S. economy and labor market are creating a sizable interest in buying a home in early 2018."

Mortgage rates remained steady in the latest week near four-year highs though still historically low. The Mortgage Bankers Association reports that the 30-year fixed-rate conforming mortgage rate ($453,100 or less) was unchanged at 4.68% in the latest survey. The rate comes with an average 0.46 point added on top. A year ago the rate was 4.20%. Within the report it showed that the refinance index fell 5%, purchase index rose 1%.

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First Thing

It's Fed Day!  The statement will be released near 2:00 p.m. ET today where it is expected that the Fed Funds Rate will rise by 0.25% to 1.75%. 10-yr yield 2.90% from 2.88% at yesterday's close.Traders sit on their hands as they await this afternoon's Fed statement. Little movement seen in Bond prices.

Tuesday March 20th

A WORD FROM THE BOND PITS:

Mortgage Bonds closed lower in price and tighter on spread ahead of the FOMC meeting and the Nor'Easter bearing down on the Eastcoast. 

CLOSING TECHNICAL SIGNAL:

Ahead of tomorrow's Fed statement, we are trying to float brand new files headed into the Fed, however, with little conviction.

MARKET WRAP:

Mortgage Bond prices edged lower today as Stocks rebounded from yesterday's losses. There were no economic reports released today. The Fannie Mae 30-yr 4% coupon closed lower by 22bp to end the day at 102.09. Stocks ended higher, rebounding from yesterday's plunge boosted by higher oil prices, which fueled energy shares. The Dow gained 116.36 points to 24,727.27, the S&P 500 was up 4.02 points to 2,716.94, while the NASDAQ closed with a 20.05 point gain to end at 7,364.30. WTI oil settled at $63.40, +$1.34. 10-yr yield rose to 2.89%. Economic data tomorrow is limited to Existing Home Sales. The Fed statement will be released at 2:00 p.m. ET with economic and interest rate projections. Fed Chairman Powell's press conference will immediately follow at 2:30 p.m. ET

Late Morning Review

In D.C. news, the Washington Post reports that the Trump Administration is getting ready to announce a $60B tariff plan for Chinese imports. In addition, there is now talk out of Capitol Hill of "Phase Two" of the U.S. tax plan, which may look to make individual cuts permanent. Newly appointed Fed Chairman Jerome Powell will preside over his first Fed meeting today where it is expected that the Fed Funds Rate will rise by 0.25% when the monetary policy statement is released at 2:00 p.m. ET tomorrow.

U.S. Stock markets are rebounding today after yesterday's steep sell-off. Yesterday's plunge was touched off by lower shares of Facebook after a report from the New York Times confirmed that voter profiling company Cambridge Analytica had gathered data on over 50 million Facebook users. The news touched off a big decline in the technology sector which spread to the broader market. The Dow lost 335 points for the day. Shares of Facebook are lower again this morning.

Yet another school shooting took place today in Great Mills, Maryland. Reports reveal that three people were hurt, including the shooter and the incident is now contained. The incident occurred at Great Mills High which has 1,600 students and comes after last week's high school rallies around the nation calling for action against gun violence in schools.

First Thing 

Mortgage Bond prices edging lower.  There are no economic reports due for release today.  There is now talk out of Capitol Hill of "Phase Two" of U.S. tax plan, which could make individual cuts permanent ... could be presented soon.The Washington Post reports that the Trump Administration is readying the announcement of a $60B tariff plan for Chinese imports.10-yr yield 2.87%.

Newly appointed Fed Chairman Jerome Powell will preside over his first Fed meeting where it is expected that the Fed Funds Rate will rise by 0.25% when the monetary policy statement is released at 2:00 p.m. ET Wednesday afternoon.

 

Monday March 19th

A WORD FROM THE BOND PITS: 

Mortgage Bonds closed mixed in light volume trading as Treasuries also ended narrowly mixed despite the plunge in Stocks. 

CLOSING TECHNICAL SIGNAL:

You can try to float , but the Dow as down nearly 500 points today and Mortgage Bonds couldn't produce and hold any gains. Be careful.

MARKET WRAP:

Not much action today in the Mortgage Bond markets as prices traded near unchanged despite the big losses in the Stock markets. Traders were loathe to put on any new long positions ahead of the Wednesday Fed statement. There were no economic reports released today. The Fannie Mae 30-yr 4% coupon closed at 102.31, near unchanged. Stocks fell as lower shares of Facebook touched off a tech wreck that spread to the broader market. The Dow lost 335.60 points to 24,610.91 after being -500 points, the S&P 500 fell by 39.09 points to 2,712.92 while the tech heavy NASDAQ plunged 137.74 points to end at 7,344.24. WTI oil settled at 62.06/barrel, down $0.28. 10-yr yield 2.85%. There are no economic reports due for release tomorrow. The 2-day fed meeting kicks off tomorrow but there will be no headlines until Wednesday's 2:00 p.m. ET release of the Fed statement.

Late Morning Review

Government-sponsored entity Fannie Mae released its March Economic and Housing Outlook on Friday showing that 2018 and 2019 economic growth outlooks upgraded on the stimulus passage. Fannie reports that it has raised its full-year 2018 GDP growth to 2.8% and 2.5% in 2019, both up slightly from February. On housing, home sales began the year lower due in part to "persistent challenges of the inventory shortage." However, strong price gains are welcome news to existing homeowners.

Fitch Ratings reported today that rising mortgage rates are not likely to end the path of higher U.S. home prices overall, though the rate of home price growth is likely to slow in some markets. However, there are still overheated markets which include Nevada, Oregon and Idaho. Fitch says that fixed rate mortgages are now at 2014 highs and are likely to rise further in 2018.

The Fed will kick off its two-day Federal Open Market Committee meeting tomorrow and will end Wednesday with the release of the monetary policy statement. Fed Chair Powell will then hold a press conference at 2:30 p.m. ET for questions and answers. The Fed is expected to raise the short-term Fed Funds Rate by 0.25% to 1.75% bringing the Prime Rate to 4.75%. Fed Funds Rate (1.75%) + 3 points = Prime Rate of 4.75%. The markets most likely have the increase already baked in. The big question is the amount of rate hikes this year. More on the Fed meeting in Wednesday morning's Update.

First Thing
Fannie Mae reports that fewer lenders now say they are easing credit standards despite competitive pressure. Dow -132 points.10-yr yield 2.87% from 2.84% on Friday. The Fed will kick off its 2-day FOMC meeting tomorrow and will end Wednesday with the release of the monetary policy statement.

Friday March 16th

A WORD FROM THE BOND PITS:

Mortgage Bond prices closed near unchanged and tighter on spread vs Treasuries in an uneventful session.

CLOSING TECHNICAL SIGNAL:

We reiterate this morning's advice - It would not surprise us to see Bonds tick lower in price from here, at least in the near-term. Should the 10-year yield break beneath 2.80% we would be more bullish. Consider adopting a locking bias.

MARKET WRAP:

Not much action in the Mortgage Bond market today as prices traded in in tight 6bp range for most of the session. Strong Consumer Sentiment outweighed weak Housing Starts. Starts were lower due in to the plunge in multi-dwelling units. The Fannie Mae 30-yr 4% coupon closed unchanged at 102.38. Stocks rose today on strong Consumer Sentiment Index and a rise in Industrial Production. The Dow gained 72.85 points to 24,946.51, the S&P 500 was up 4.68 points to 2,752.01 while the tech heavy NASDAQ closed at 7,481.98, near unchanged. WTI oil hushed higher by $1.15 to $62.34/barrel. 10-yr yield 2.84%. Next week's big event is the 2-day Fed meeting that kicks off on Tuesday and ends Wednesday with the 2:00 p.m. ET release of the monetary policy statement. As always stay tuned to the Mortgage Market Guide as we navigate you through the tumultuous financial waters. Have a great weekend!

 

 

News Chart 180316

Weekly Newsletter:http://www.mmgweekly.com/w/index.html?SID=fa7518562603d5c4a7ad69e2e5726f5f

Late Morning Review

Economic data had little impact on the U.S. markets earlier this morning with a better-than-expected Empire Manufacturing Index, Philadelphia Fed Index was in line with estimates and Weekly Initial Jobless Claims hovering near lows seen in 1970. The NAHB Housing Market Index came in at 70 this month, below the 72 expected and down from 71 in February. A reading above 50 is considered positive.

Homeowner equity got a big boost in 2017 rising by $908B due to the continued rise in home prices, reports CoreLogic. ATTOM Data Solutions reports that total residential mortgage originations in Q4 2017 came in at 1.9 million, down 20% from Q3 and down 19% from Q4 2016, due in part to a big decline in refinance originations.

After rising every week since 2018 began, mortgage rates edged lower this week as the tariffs and possible trade wars pushed Bond prices higher. Freddie mac reports that the 30-year fixed-rate mortgage fell two basis points to 4.44% with an average point of 0.5. Freddie Mac says average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. 

 

First Thing 

February Housing Starts -7% from January to an annual rate of 1.236 million units, below the 1.283 million expected.February Building Permits -5.7% from January to an annual rate of 1.377 million units. January revised lower to 1.377 million from 1.396 million units.The weaker than expected housing data has little impact on Mortgage Bond prices. 10-yr yield near unchanged at 2.82%.

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Thursday March 15th

A WORD FROM THE BOND PITS:

Mortgage Bonds closed near unchanged and mostly wider on spread vs Treasuries, range bound during the session. 

CLOSING TECHNICAL SIGNAL:

Float, but be aware of that sentiment can easily turn south for Mortgage Bond prices. We don't have a lot of conviction in floating, so be careful. 

MARKET WRAP:

Mortgage Bond prices traded in a tight 9bp range for most of the session and closed near unchanged as the Fannie Mae 30-yr 4% coupon settled at 102.38, -3bp. This morning's push-pull economic data had little impact on trading. Stocks closed mixed on news that Special Counsel for the U.S. Department of Justice, Robert Mueller, is said to be issuing subpoenas to the Trump organization. The Dow gained 115.54 points to 24,873.66 but with the Dow at 25,000, a 100 point gain is nothing. The S&P lost 2.15 points to 2,747.33 while the NASDAQ fell by 15.07 points to end at 7,481.74. WTI oil settled at $61.19/barrel, +$0.23. 10-yr yield 2.82%. Tomorrow's economic data features Consumer Sentiment, Housing Starts and Building Permits.

Late Morning Review

Economic data had little impact on the U.S. markets earlier this morning with a better-than-expected Empire Manufacturing Index, Philadelphia Fed Index was in line with estimates and Weekly Initial Jobless Claims hovering near lows seen in 1970. The NAHB Housing Market Index came in at 70 this month, below the 72 expected and down from 71 in February. A reading above 50 is considered positive.

Homeowner equity got a big boost in 2017 rising by $908B due to the continued rise in home prices, reports CoreLogic. ATTOM Data Solutions reports that total residential mortgage originations in Q4 2017 came in at 1.9 million, down 20% from Q3 and down 19% from Q4 2016, due in part to a big decline in refinance originations.

After rising every week since 2018 began, mortgage rates edged lower this week as the tariffs and possible trade wars pushed Bond prices higher. Freddie mac reports that the 30-year fixed-rate mortgage fell two basis points to 4.44% with an average point of 0.5. Freddie Mac says average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

First Thing

CoreLogic reports homeowner equity rose by $908B in 2017, homeowner equity increased by an average $15K between Q4 2016 and Q4 2017. Empire Manufacturing Index 22.5 vs the 15 expected. Philly Fed 22.3 vs 23.7.  Weekly Initial Jobless Claims -4K to 226K, in line. 10-yr yield 2.81%, unchanged.

Wednesday March 14th

A WORD FROM THE BOND PITS:

Mortgage Bonds ended flat to slightly higher in price and wider on spread vs Treasuries. The New York Fed will purchase up to $830M in Fannie/Freddie 30-yr 3.5% and 4% coupons tomorrow beginning at 9:45 a.m. ET.

CLOSING TECHNICAL SIGNAL:

It might be a good time Float, but it is tough for prices to get much better with so much good news coming in. Be careful the sentiment can quickly reverse."

MARKET WRAP:

Not a lot of action in the Mortgage Bond market today as prices traded in a tight range, but they did close modestly higher for three straight sessions. This morning's somewhat tame wholesale inflation data (PPI) and lower Retail Sales helped to support Bond prices but didn't give them any meaningful boost. Stocks ended lower on renewed trade war fears which weighed on the industrial sector. The Dow fell by 248.91 points to 24,758.12, the S&P 500 lost 15.38 points to end at 2,749.48 while the NASDAQ closed lower by 14.20 points to end at 7,496.81. WTI oil closed at $60.96/barrel, +$0.25. 10-yr yield 2.81%. Tomorrow's economic data includes Weekly Initial Jobless Claims, Empire Manufacturing, Philly Fed and the NAHB Housing Market Index.

Late Morning Review

Spending at U.S. retail stores fell for the third straight month in February, which could signal an economic slowdown in the first quarter. February Retail Sales fell 0.1% last month versus the gain of 0.3% expected after declines in December and January. The three straight months of decline in Retail Sales has not occurred since April 2012. In order to have a healthy economy, the consumer has to spend. Consumer spending makes up two-thirds of the U.S. economy.

Mortgage rates continued to edge higher in the latest week hitting highs not seen since the beginning of 2014. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose four basis points in the latest week to 4.69%. That rate does carry an average point of 0.45 added on top. Interest rates in general have been moving higher since January 1 due in part to an improving economy.

With "March Madness" set to explode at the end of the week and continue on until April 2, worker productivity across the nation is expected to decline. Many companies will be hosting their NCAA brackets for march Madness with billions exchanging hands at offices around the country. In 2017, there were 70 million tournament brackets amounting to a whopping $10.4 billion wagered. The downside is a loss in worker productivity. It is estimated that unproductive work due to March Madness totaled $6.3 billion in 2017 and is ranked third in office distractions.

First Thing

February Retail Sales -0.1% vs 0.3% expected, x-autos 0.2% vs 0.4% expected. February PPI 0.2% vs 0.1% expected, Core PPI in line at 0.2%.  Year-over-year PPI 2.8% in February from 2.7% in January, Core 2.7% from January's 2.5%. Wholesale inflation not looked at in a big way by the markets.

The MBA reports that the 30-yr fixed-rate conforming mortgage rate rose 4bp to 4.69%, highest since the beginning of 2014.  MBA says 30-yr jumbo rate 4.55%, FHA 4.73%. Those rates do carry at least 0.50 point added on top.  10-yr yield unchanged at 2.84%.  The Fannie Mae 30-yr 4% coupon opens near unchanged. Stocks are poised to rebound after yesterday's volatile session that ended with the Dow, S&P and NASDAQ in negative territory.  Not much reaction the economic data. Mortgage Bonds flat, S&P futures higher.

Retail Sales 1802

Tuesday March 13th

A WORD FROM THE BOND PITS:

Mortgage Bonds sat on the sidelines today with little movement with well below trading volumes.

MARKET WRAP:

Float, but be mindful that it may be tough for prices to get much better with so much good news coming in.

MARKET WRAP:

Mortgage Bond prices traded in a tight range in today's session as they continue to be trapped in a sideways pattern. Today's somewhat tame inflation supported Bond prices but wasn't enough to produce any decent gains. The Fannie Mae 30-yr 4% coupon closed near unchanged at 102.34. Stocks began the day higher but things turned south after it was announced that Secretary of State Rex Tillerson was out of a job, being replaced by CIA Director Mike Pompeo. The Dow fell by 171.58 points to 25,007.03, the S&P 500 lost 17.71 points to 2,765.31 while the NASDAQ dropped by 77.31 points to end the volatile session at 7,511.01. WTI oil settled at $60.71/barrel, -$0.64. 10-yr yield 2.84%. Tomorrow's economic data includes PPI and Retail Sales.

Late Morning Review

The February Consumer Price Index (CPI) came in at 0.2% last month, in line with estimates and down from the 0.5% previously recorded in January. Lower energy prices were the catalysts for the lower readings. When stripping out volatile food and energy, the more closely watched Core CPI was also in line at 0.2%, leaving the year-over-year Core unchanged at 1.8%. If inflation numbers remain tame, the Fed will be hard pressed to raise the short-term Fed Funds Rate four times in 2018. This doesn't change next week, as it appears a Fed Funds Rate hike is a lock at the FOMC meeting.

Small business optimism continued to run near record highs in February due in part to lower taxes and decreased regulations. The National Federation of Independent Business Small Business Optimism Index rose to 107.6 last month as owners showed unprecedented confidence in the economy. “When small business owners have confidence and certainty in the economy, they’re able to hire more workers and invest in their business,” said NFIB President and CEO Juanita Duggan.

The shakeups at the White House continued today as Secretary of State Rex Tillerson is out with current CIA Director Mike Pompeo taking his place. Last week President Trump's Chief Economic Adviser, Gary Cohn resigned with the leading candidate being economist Larry Kudlow from CNBC. It's been said that Mr. Tillerson due to the failure to wield any significant influence in internal administration over issues surrounding North Korea and Russia.

First Thing

February CPI 0.2%, inline.Core CPI 0.2%, inline.Year-over-year CPI 2.2%, slightly hotter than expected.Year-over-year Core CPI 1.8%, unchanged. CPI data somewhat tame. 10-yr yield 2.86% near unchanged

Monday March 12th

A WORD FROM THE BOND PITS:

Mortgage Bonds ended modestly higher in price and tighter on spread vs Treasuries to open a week in a continuation of Friday's trade in a light trading volume affair.

CLOSING TECHNICAL SIGNAL:

Floating, but be aware that Mortgage Bonds are still on shaky ground. Inflation data from the Consumer Price Index will be released at 8:30 a.m. ET tomorrow and could shake up the market.

MARKET WRAP:

Not a lot of action in the Mortgage Bond market today as prices traded in a tight range for most of the session. There were no economic reports due for release today. The Fannie Mae 30-yr 4% coupon closed at 102.28, +9bp. Stocks closed mixed as lower shares of Boeing and Caterpillar weighed. The Dow lost 157.13 points to 25,178.61 while the S&P 500 fell by 3.55 points to end at 2,783.02. The tech heavy NASDAQ gained 27.51 points to end at 7,588.32, a fresh record high close. WTI oil settled at $61.36/barrel, -$0.68. Tomorrow's economic data is limited to CPI, but market players will be watching the number for any signs of inflation.

Late Morning Review

The Conference Board's Employment Trends Index (ETI) +1.2% to 107.7, a fresh all-time high. “The Employment Trends Index accelerated further in February, suggesting that strong job growth is likely to continue in the coming months,” said Gad Levanon, Chief Economist, North America, at The Conference Board. February’s increase in the ETI was fueled by positive contributions from six out of the eight components.

There are no economic reports set for release today but the rest of the week is packed with reports on Retail Sales, the Consumer and Producer Price Indexes (inflation data), Consumer Sentiment, manufacturing and housing. The Fed will be closing watching tomorrow's Consumer Price Index data for any signs of inflation when considering monetary policy at next week's two-day Fed meeting. It is anticipated that the Fed will raise the short-term Fed Funds Rate by 0.25% at the meeting.

The personal savings rate in the United States rebounded to 3.2% in January 2018, up from a near historic low of 2.4% in December 2017. The monthly statistic, tracked since 1959, reached an all-time high of 17.0% in May 1975 and fell to a record low of just 1.9% in July 2005. 

First Thing

There are no economic reports due for release today but the rest of the week features Retail Sales, CPI/PPI, Consumer Sentiment manufacturing and housing. 10-yr yield 2.89%, unchanged. The Fannie Mae 30-yr 4% had its Monthly Rollover on Friday evening with the effect being -16bp.

Friday March 9th 

A WORD FROM THE BOND PITS:

Mortgage Bond prices closed flat to slightly lower and tighter on spread vs treasuries in a big risk on session. The Monthly Bond Rollover will take place after the close of trading this evening.

CLOSING TECHNICAL SIGNAL:

With the Jobs Report and risk event behind us, brand new clients can try to float, but be mindful that the good economic news that continues to roll in, puts a limit to any move higher in Bonds. Folks purchasing a home would be wise to start considering locking sooner rather than later. If you look 60+ days out, should the present solid economic trend continue, it is highly likely that mortgage rates will be higher than they are today.

MARKET WRAP:

The blowout number in Non-Farm Payrolls of 313+ with low wage growth sent U.S. Stocks soaring today as inflation fears eased. The news sent Bond prices modestly lower and yields a bit higher. The Fannie Mae 30-year 4% coupon fell by 9bp to end at 102.34. The Dow surged by 440.53 points closing at the high of the day at 25,335.74, the S&P closed at 2,786.57 up 47.60 while the NASDAQ closed at a fresh record high of 7,560.81 +132.86 points. WTI oil gushed higher to $62.04/barrel, +$1.92 on market optimism. 10-yr yield closed at 2.89%, up from 2.86% early this morning. Next week the Treasury will sell a total of $62N in 3- and 10-yr Notes on Monday along with 30-yr Bonds on Tuesday. Have a great weekend!

 

This week's newsletter:http://www.mmgweekly.com/w/index.html?SID=fa7518562603d5c4a7ad69e2e5726f5f

News Chart

 

Late Morning Review

U.S. job growth surged in February as the labor market continues to tighten, though wage growth cooled. The Bureau of Labor Statistics reported that Non-Farm Payrolls rose by 313,000 last month, well above the 210,000 expected. This was the largest gain since July 2016. December and January were revised higher by a total of 54,000. Big job gains were seen in construction followed by retail and professional and business services.

However, wage growth cooled rising just 0.1%, below the 0.2% expected, while year-over-year slowed to 2.6% from the 2.9 percent in January soothing fears of wage inflation. Within the report, the Unemployment Rate remained at 4.1 percent; the Labor Force Participation Rate rose to 63% from 62.7%. The U6 number, a measure of total unemployment, remained at 8.2%. Overall, it was a solid report.

First Thing

Fed's Evans (non-voter, dove) says he would prefer to wait a little longer before raising interest rates this month.  On March 9, 2009, the Dow hit a 13-yr low of 6,547 ... now currently at 25,122.

President Trump accepts offer to meet with North Korean Kim Jong Un which could take place by May.

Jobs 1802

Thursday March 8th

A WORD FROM THE BOND PITS:

Mortgage Bond prices closed modestly higher and tighter on spread vs Treasuries with positions being squared ahead of tomorrow's Jobs Report.

CLOSING TECHNICAL SIGNAL:

Technicals take a backseat to tomorrow's Jobs Report. Locking is recommended heading into the report, at least for those files 30 days until closing.

MARKET WRAP:

Mortgage Bonds were able to squeak out some gains today heading into the Jobs Report. The Fannie Mae 30-yr 4% coupon rose by 19bp to end at 102.44. President Trump signed off on tariffs with 25% on imported steel and 10% on imported aluminum that exempts Mexico and Canada for now and leaves the door open for negotiations with other countries. Stocks ended higher after Trump's announcement after back and forth trading during the session. The Dow gained 93.85 points to 24,895.21, the S&P was up 12.17 points to 2,738.97 while the NASDAQ closed with a 31.29 point gain to end at 7,427.94. WTI oil settled at $60.12/barrel, -$1.02. 10-yr yield 2.85%. The Jobs Report for February will be released tomorrow where it is expected that 210K new workers were added. Be sure to be tuned in to the Mortgage Market Guide tomorrow morning near 8:30 a.m. ET to get the numbers from the Jobs Report and the markets reaction.

Late Morning Review

President Trump is expected to announce tariffs today but some reports say it could be put off until tomorrow. The White House said yesterday that Mexico and Canada may get tariff exemptions along with some other countries while China warns of a trade war. The U.S. markets continue to get ebb and flow by the headlines out of Washington, D.C. The U.S. Bond market, a safe haven to uncertainty, does not appear to be swayed by the doom and gloom predictions many are making as it relates to tariffs.

Mortgage rates have now climbed nine consecutive weeks and hover near four-year highs. Freddie Mac reports that the 30-year fixed-rate mortgage rose three basis points this week to 4.46% with an average 0.5 point for the week ended March 8. A year ago the rate was 4.21%. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

Fannie Mae reported its Home Purchase Sentiment Index (HPSI) for February as housing confidence declined last month from January. The HPSI fell 3.7 points to 85.8, reversing January's increase. The net share of respondents who said it's a good time to buy a home decreased, as did those who reported that now is a good to sell. The report went on to reveal that there was a weakened sense of job security . 

First Thing

The government Jobs Report will be released tomorrow morning at 8:30 a.m. ET where it is expected that employers added 210K new workers in February.  Within the Jobs report wage growth will be closely watched. Weekly Initial Jobless Claims +21K to 231K vs the 220K expected.  10-yr yield unchanged at 2.88%.  ECB leaves rates unchanged but the statement is on the hawkish side.  S&P futures edge higher as White House talks tariff exemptions.

Wednesday  March 7th

A WORD FROM THE BOND PITS:

Mortgage Bonds closed near flat levels and unchanged on spread vs Treasuries following today's back and forth session which saw overnight risk-off trade, following the resignation by Gary Cohn. 

CLOSING TECHNICAL SIGNAL:

Ahead of the big risk event of Friday's Jobs Report and with Bond prices unable to produce any gains in a down Stock market ... locking is recommended. 

MARKET WRAP:

The headlines out of Washington impacted the markets in today's session with Gary Cohn's resignation and some possible exemptions to President Trump's tariff announcement. A strong print from ADP weighed on Bond prices while Cohn's resignation pushed Stocks lower. However, near mid-afternoon, the White House said that Mexico and Canada may get exemptions to the tariffs along with some other countries. Those headlines helped Stocks to pare some losses while the NASDAQ closed positive. The Fannie Mae 30-yr 4% coupon closed unchanged at 102.22. The Dow was down 350 points at one point only to close with an 82.76 point loss ending at 24,801.36. The S&P closed with a small loss of 1.32 points settling at 2,726.80 while the NASDAQ rose by 24.64 points to end at 7,396.64. WTI oil fell $1.45 to $61.15/barrel. 10-yr yield closed unchanged at 2.88%. Economic data tomorrow is limited to Weekly Initial Jobless Claims.

Late Morning Review

The labor market continued to produce strong gains in February though the jobs created were concentrated in the service sector, which are typically not high-paying positions. ADP reports that private employers added 235,000 new workers last month, above the 193,000 expected while January was revised higher by 10,000 to 244,000. As mentioned, of the 235,000 workers hired in February, 198,000 were added in the service sector. Ahu Yildirmaz, vice president and co-head of the ADP Research Institutes said, "At this pace of job growth employers will soon become hard-pressed to find qualified workers."

Mortgage rates continue to hover near four-year highs but when looking at rates going back 40 years, they are relatively low. The Mortgage Bankers Association reports that the 30-year fixed-rate conforming mortgage ($453,100 or less), was essentially unchanged in the latest week at 4.65% with a 0.58 point added on top. Mortgage rates have remained relatively low the past 10 years due in part to low inflation and as the Fed has been purchasing Mortgage Backed Securities in an effort to keep rates low.

The big news today was the resignation of President Trump's top economic adviser Gary Cohn following disagreements over the tariff plans. President Trump has proposed a 25% tariff on imported steel and a 10% tariff on imported aluminum. Mr. Cohn wanted to host top CEOs at the White House to discuss their oppositions the tariffs, but the plan never came to fruition. Mr. Cohn said it was "an honor to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform."

 

First Thing:

S&P futures plunge after Trump's top economic adviser Gary Cohn, resigns following disagreements over the tariff plans. February ADP Private Payrolls 235K vs the 193K expected. January revised higher by 10K to 244K. February ADP Private Payrolls 235K vs the 193K expected. January revised higher by 10K to 244K. The MBA reports that the 30-yr fixed-rate conforming mortgage at 4.65%, continuing at 4-yr highs. That rate carries at least an average point of 0.5.Q4 2017 second read on Productivity comes and goes with little fanfare ... 0.0% vs the -0.1% expected.

Tuesday March 6th

A WORD FROM THE BOND PITS:

Mortgage Bonds closed near unchanged and mixed on spread as the big Bond offering from CVS took center stage.

CLOSING TECHNICAL SIGNAL:

With the first of two key labor market reports being released tomorrow morning (ADP Private Payrolls), technicals take a backseat. Locking is recommended.

MARKET WRAP:

Choppy trading patterns continued today as headlines on the tariff issue and possible North Korean talks impacted the markets. Both Stock and Mortgage Bond prices ended near unchanged as investors and traders seek out some confirmation on the aforementioned subjects. There were no economic reports released today. The Fannie Mae 30-yr 4% coupon closed at 102.22, near unchanged. The Dow ended near unchanged at 24,884.12 +9.36 points, the S&P 500 closed higher by 7.18 points to 2,728.12, while the NASDAQ managed a 41.30 gain to end at 7,372.00. WTI oil closed at $62.60/barrel, near unchanged. 10-yr yield 2.88%. Economic data tomorrow includes Productivity and the potential market moving ADP Private Payrolls Report. The Fed's Beige Book will be released at 2:00 p.m. ET.

Late Morning Review:

Low supplies of homes for sale on the market, especially entry-level homes, continues to push home prices higher across the nation. CoreLogic reports that home prices, including distressed sales, rose 6.6% from January 2017 to January 2018. On a month-over-month basis, home prices were up 0.5%. Looking ahead, CoreLogic forecasts that home prices will increase by 4.8% from January 2018 to January 2019. In January, 48% of the top 50 markets were considered overvalued.

On Monday, top U.S. Republicans, including House Speaker Paul Ryan, urged President Trump not to go ahead with the tariffs. That sent Bond prices lower, yields higher and Stocks soaring as the Dow closed with a 336 point gain, representing a 430+ point reversal higher from the lows. This morning, Stocks are volatile having opened in positive territory only to fall into negative territory as volatility in the markets continues.

Get ready for slightly higher gas prices in the coming months as the spring and summer driving season will soon be underway. The national average price for a regular gallon of gasoline is at $2.52, relatively unchanged for the past two weeks. Jeanette Casselano of AAA says, “Typically, March brings more expensive pricing as days get longer, weather gets warmer and refinery’s gear up to switchover to pricier summer blends.” 

Core 1801

 

 

First Thing:

S&P futures point towards a higher open on the prospect of talks between North Korea and the U.S. In addition, increasing resistance to President Trump's proposed metal tariffs are also buoying futures. 10-yr yield rises to 2.90% from yesterday's close of 2.88% and up from yesterday's low of 2.81%. Volatility continues to grip the markets.  Fed Fund Futures show a 98% chance of a rate hike at this month's FOMC meeting.

Monday March 5th

A WORD FROM THE BOND PITS:

Mortgage Bonds ended the session lower in price and wider on spread vs Treasuries as risk off quickly became risk on in today's session.

CLOSING TECHNICAL SIGNAL:

With today's reversal lower and the trade war fears easing, we are recommending locking overnight to play it safe.

MARKET WRAP:

Market reversals occurred today as tariff headlines continued to dominate the headlines. Mortgage Bond prices opened higher while Stocks opened lower. Late in the morning, House Speaker Paul Ryan (R) urged President Trump not to advance with tariffs, which reversed Stocks higher as the Dow's 150 points loss turned into a 336 point gain by the close of trading. Bond prices declined as Stocks soared. The Fannie Mae 30-yr 4% coupon traded as high as 102.56 and as low as 102.16 before closing at 102.25, -12bp. The Dow surged by 336.70 points to 24,874.76, the S&P rose 29.69 points to 2,720.94, while the NASDAQ was up 72.83 points to 7,330.70. WTI oil closed at $62.57/barrel, +$1.32. 10-yr yield 2.88%. There are no economic reports due for release tomorrow.

Late Morning Review:

Rising mortgage rates and an increase in home prices pushed affordability to its lowest point since 2009. Since the beginning of 2018, the 30-year fixed-rate mortgage increased 48 basis points while the cost to purchase a median priced home rose by $67. The average cost to purchase a median-priced home per month, which includes the monthly mortgage and insurance, rose to $1,141, the highest since 2009. However, those numbers are still better than the long-term averages.

Banks foreclosing on unpaid mortgages have continued to decline the past few years due in part to a stronger labor market, a growing economy and an uptick in home prices. ATTOM Data Solutions reports that American banks repossessed 292,000 homes in 2017, 379,000 homes in 2016 and 450,000 homes in 2015.

The service sector of the U.S. economy continues to turn in solid numbers as it has now grown 97 straight months in February. The ISM Service Index registered 59.5 last month, just below the 59.9 recorded in January. Within the report it showed that the new orders index rose, while the employment component decreased. In addition, the survey went on to say that the majority of respondents’ continue to be positive about business conditions and the economy. 

First Thing:

S&P futures lower as trade war fears dominate the equity markets. The week features the closely watched Jobs Report for February where it is expected that U.S. employers added 210K new workers last month. 10-yr yield at 2.84%. The NAHB came out against the recent tariff announcement from President Trump saying higher costs for steel and aluminum will translate into higher costs for builders. Black Knight released its latest Mortgage Monitor which revealed rising mortgage rates and home prices pushed affordability to its lowest point since 2009. American banks repossessed 292K homes in 2017, 379K homes in 2016 and 450K homes in 2015.

Friday March 2nd

A WORD FROM THE BOND PITS:

Mortgage Bonds closed lower and wider on spread vs treasuries with sellers jumping in ahead of next week's heavy corporate Bond offering calendar.

CLOSING TECHNICAL SIGNAL:

As per today's Weekly Market Wrap, we are encouraged by the rounding support right below Mortgage Bonds. However, with the big losses in Stocks the past few days, you would think we'd see a big rally in Bond prices. You might try to float into next week.

MARKET WRAP:

After two days of gains, Mortgage Bond prices declined today as traders looked to lighten up ahead of next week's big event in the February Job Report and after February Consumer Sentiment hit its second best level since 2004. The Fannie Mae 30-yr 4% coupon closed lower by 25bp to end at 102.38. Stocks opened lower as uncertainty over tariffs and interest rates weighed. However, the Dow was down nearly 400 points at the session lows only to close with a 70.92 point loss to 24,538.06, the S&P closed higher by 13.58 points to 2,691.25 while the NASDAQ saw a 77.30 gain to end the day at 7,257.86. WTI oil closed at $61.25/barrel, +$0.26. 10-yr yield 2.86%. Next week brings the closely watched Jobs Report for February where it is expected that U.S. employers added 210K new workers. That report will be released Friday morning at 8:30 a.m. ET. Have a great weekend!
 

This week's newsletter: http://www.mmgweekly.com/w/index.html?SID=fa7518562603d5c4a7ad69e2e5726f5f

Chart news 180302

 

Late Morning Review:

U.S. Stocks suffered another blow yesterday after President Trump announced the U.S. will impose tariffs on steel and aluminum imports coming into the country. There will be a 25% tariff on steel and 10% on aluminum imports. The news sent Stocks sharply lower with the Dow Jones Industrial Average down by 600 points before closing 422 points lower. Fears of a trade war are bringing uncertainty, which Stocks loathe.

Consumer Sentiment hit its second highest level since 2004 last month spurred on by a strong labor market. The Consumer Sentiment Index hit<

Contact

John Marbury
jmarbury@nationalbankofcommerce.com
Mortgage Lender NMLS# 514390
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Phone:205-266-5669
Fax: 866-217-4174

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Birmingham, Alabama 35209
 

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