Recent news is reported at the top of page scroll down for older news. All times below are eastern time. The 10 year treasury is a good way to track mortgage rates. Recent high for the 10 year was 4.335% on 10/21/22. This yield hit a low of 0.55% on 8/07/2020. Stats from Investopedia: Investopedia 10 year Treasury
8:49 AM Mortgage Bonds are down 11 bp to 101.13 (Price Down Yield Up)
The 10 year treasury is up 6 bp with a yield of 3.357%.
8:44 AM : The BLS Jobs report showed that there was an increase of 236,000 jobs in the month of March, which was below expectations of 239,000. Employment gains in January and February combined were revised lower by 17,000. The unemployment rate decreased by 0.1% to 3.5%, which was just below the 3.6% estimate. Average weekly earnings are flat for the month and up 3.3% year over year.
8:30 AM BLS Jobs Report (Reported on the first Friday of every Month at 8:30 AM) This report can create the most volatile day of the month. Volatility can be good or bad depending if you want rates to go up or down.
Freddie Mac Rate 30 year fixed rate 6.28% this is the lowest it has been since February the 2nd 2023 when the rate was 6.09%.
8:48 AM Mortgage Bonds are up 8 bp to 101.41(Price up yield down) and 10 year is down 1 bp to 3.29%
8:39 AM : Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, was reported at 228,000 claims for last week. This represents a decrease of 18,000 from the previous revised report of 246,000 claims, and was above expectations of 200,000. Continuing Claims increased by 6,000 to 1.823 Million claims, which was higher than the 1.699 Million estimate.
8:30 AM Initial Jobless Claims (Reported Every Thursday at 8:30 AM)
12:14 PM ET Job growth appears to be lagging as evidence of the ADP report today and Tuesday's Jolts Report and the bond market likes it.
Mortgage Bonds are now up 8 bp at 101.42 (Price up yield down) The 10 year is down 7 bp to 3.279% which is the lowest it has been since September.
8:22 AM ET 10 year is down 4 bp at 3.3090%. Mortgage bonds are down slightly 3 bp to 101.31. (Price Down yield up).
8:16 AM ET 145,000 new jobs were created below the 200,000 jobs created
8:15 AM ADP Employment report (Reported on the first Wednesday of every Month at 8:15 AM)
Last month showed Job creation increased by 242,000 and the market expects an increase in job creation of 200,000 in this month's report.
Market Wrap Mortgage Bonds ended the day up 20 bp to 101.34 (price up yield down). This is the highest price since Thursday February 3, 2023. The day before the BLS Jobs Report came out showing 517,000 new jobs were created. The 10 year treasury ended the day at 3.339% down 8 bp.
11:12 AM Mortgages Bonds are up 9 bp to 101.23 (price up yield down) and the 10 year Treasury percent is down 6 bp to 3.3650%. This is a good turnaround from 9:31 AM
10:00 AM Job Openings and Labor Turnover Survey (Jolts) (Monthly)
The Labor Department's JOLTS report, which tracks the monthly change in job openings, was reported at 9.931 Million for the month of February, which was below expectations of 10.4 Million and last month's revised report of 10.563 Million.
9:31 AM : Stocks have started the day near unchanged levels. The Dow is -15.38 at 33,585.77 and the S&P 500 is +4.84 at 4,129.35. Mortgage Bonds are -20bp at 100.94.
4:10 PM : Stocks have ended the day higher. The Dow closed +327.00 at 33,601.15 and the S&P 500 closed +15.20 at 4,124.51. Mortgage Bonds are +13bp at 101.14. When the price of bonds goes up the yield comes down. The 10 year treasury ended the day at 3.413%
12:30 PM : At mid-day stocks are higher. The Dow is +244.31 at 33,518.46 and the S&P 500 is +2.45 at 4,111.76. Mortgage Bonds are +3bp at 101.05.
10:15 AM : Construction spending decreased by 0.1% in February, while estimates called for no change. January's figure was revised higher from a loss of 0.1% to a gain of 0.4%.
10:12 AM : The ISM Manufacturing Index, which measures the health of the manufacturing sector in the US, came in at 46.3 for the month of March, which was below expectations of 47.5 and last month's reading of 47.7. This marks five consecutive months of contraction in the manufacturing sector, and the biggest since May of 2020.
9:30 AM : Stocks have started the day lower. The Dow is -28.37 at
33,245.78 and the S&P 500 is -7.11 at 4,102.20. Mortgage Bonds are -23bp at 100.78.
9:29 AM OPEC to cut 1 million barrels a day. Crude Oil closed Friday at 75.67, and today trading around 80.10.
Newsletter Week of March 27, 2023 in Review
Consumer inflation is trending lower in the right direction, while data shows the housing market is stronger than media reports suggest. Here are last week’s highlights:
-Annual Consumer Inflation Continues to Move Lower
-Signed Contracts Show Housing Is Standing Strong
-Media Cries Housing Crash but Appreciation Data Says Otherwise
-Significance of Elevated Continuing Jobless Claims
-What Do GDP Forecasts Signal?
Annual Consumer Inflation Continues to Move Lower
The Fed’s favorite measure of inflation, Personal Consumption Expenditures (PCE), showed that headline inflation increased 0.3% in February, while the year-over-year reading fell from 5.3% to 5%. Both readings were just below market estimates. Core PCE, which strips out volatile food and energy prices, also rose by 0.3% with the year-over-year change declining from 4.7% to 4.6%.
What’s the bottom line? Inflation is the arch enemy of fixed investments like Mortgage Bonds because it erodes the buying power of a Bond's fixed rate of return. If inflation is rising, investors demand a rate of return to combat the faster pace of erosion due to inflation, causing interest rates to rise like we saw throughout much of last year.
Inflation continues to trend lower in the right direction, though last month’s reading would have been even lower if the decelerating shelter costs seen in the real world were better reflected in the PCE report. Once this lagging shelter data catches up in the PCE report, it should cause additional downside pressure to inflation.
Signed Contracts Show Housing Is Standing Strong
Pending Home Sales rose 0.8% from January to February, which was much stronger than expectations and marks the third straight month of increases. Sales were down 21.1% from a year earlier, though this was an improvement from the 24.1% annual decline in January’s report. Pending Home Sales is a critical report for taking the pulse of the housing market. It is considered a forward-looking indicator of homes sales because it measures signed contracts on existing homes, which represent around 90% of the market.
What’s the bottom line? Lawrence Yun, chief economist for the National Association of REALTORS�, noted, “After nearly a year, the housing sector’s contraction is coming to an end. Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months.”
Housing activity should continue to rebound during the spring buying season, especially if home loan rates move lower and hibernating buyers are motivated to resume their home search.
Media Cries Housing Crash but Appreciation Data Says Otherwise
The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices declined 0.5% from December to January but they were 3.8% higher when compared to January 2022. This annual reading is a decline from the 5.6% gain reported in December.
The Federal Housing Finance Agency (FHFA) also released their House Price Index, which revealed that home prices rose 0.2% from December to January. While prices rose 5.3% from January 2022 to January 2023, this was a decline from the 6.6% annual increase reported in December.
These figures differ in part because FHFA’s report measures home price appreciation on single-family homes with conforming loan amounts, which means it most likely represents lower-priced homes. FHFA also does not include cash buyers or jumbo loans.
What’s the bottom line? Home prices have been softening nationwide, but S&P DJI Managing Director Craig J. Lazzara noted that they are only down 5.1% from their peak
last June. Plus, when you adjust for seasonal factors, prices are only down 3% from the peak. This is a far cry from a housing crash of 20% that some in the media have been predicting.
Significance of Elevated Continuing Jobless Claims
The number of people filing for unemployment benefits for the first time rose by 7,000 in the latest week, as 198,000 Initial Jobless Claims were reported. The number of people continuing to receive unemployment benefits after their initial claim is filed also rose 4,000 to 1.689 million. Note that the number of Continuing Claims can be volatile from week to week. However, the overall trend has been higher, as they have now risen by nearly 350,000 since the low reached last September.
What’s the bottom line? While it’s true that Initial Jobless Claims remain under 200,000, which is a relatively muted level, it’s important to understand that this is a lagging indicator regarding the strength of the labor market. Think of it this way. As the economy slows, companies don’t typically hold layoffs right away. Instead, they usually slow their pace of hiring first, potentially implementing hiring freezes before making the difficult decision to let people go. The elevated level of Continuing Claims suggests companies have reduced their pace of hiring and it’s harder for people who are let go to find new employment.
What Do GDP Forecasts Signal?
The final reading of fourth quarter 2022 Gross Domestic Product (GDP) showed that the U.S. economy grew by 2.6%, which is a downward revision from the first (2.9%) and second (2.7%) readings. Still, seeing GDP turn positive in the third and fourth quarters of last year was a welcome sign, since it was negative for the first two quarters of 2022.
What’s the bottom line? Given that GDP functions as a scorecard for the country’s economic health, the big question now is what will GDP be for the first quarter of this year? The initial reading will be released April 27 and as of now the markets are expecting a reading of 3.2%. However, the Fed’s estimate for full year 2023 GDP is just 0.4%. If the Fed’s forecast is accurate, GDP would likely turn negative for the remainder of the year, which could signal recession.
Family Hack of the Week
April 5 is National Caramel Day. This easy recipe for Caramel Sauce courtesy of the Pioneer Woman is a perfect way to celebrate.
In a heavy bottom stainless steel pot, add 1 1/2 cups granulated sugar and 1/4 cup water. Stir to combine. Turn heat to medium high.
Cook until sugar turns to a caramel color, approximately 13 to 14 minutes, swirling the pot instead of stirring. Watch carefully to ensure caramel doesn’t burn. If sugar crystals form along the sides of the pot, dissolve them with a brush coated with water.
Turn heat down to low, add 1 stick unsalted butter (cubed and room temperature) and whisk until thoroughly combined. Add 3/4 cup heavy cream and whisk thoroughly. Remove from heat, add 1/4 teaspoon pure vanilla extract and 1 tablespoon sea salt, and whisk until evenly mixed.
Enjoy generous dollops over your favorite ice cream. Allow caramel to cool before placing in sealed containers. Store in refrigerator for up to two weeks.
What to Look for This Week
The latest data from the labor sector will be front and center, starting Wednesday with ADP’s Employment Report, which will give us an update on private payrolls for March. The latest Jobless Claims data will be reported on Thursday while Friday brings the Bureau of Labor Statistics Jobs Report for March, which includes Non-farm Payrolls and the Unemployment Rate.
We’ll also see an update on the manufacturing sector when the ISM Index is reported on Monday.
Mortgage Bonds broke out of their narrow range last Friday, moving above overhead resistance at the 100.758 Fibonacci ceiling. This level will now act as support, with the 200-day Moving Average as the next ceiling. The 10-year broke beneath a tough floor at its 200-day Moving Average, with the next floor at the 3.431% Fibonacci level.