November 10th, 2017
After close Commentary:
After close Commentary: The U.S. Senate released its version of a tax cut bill yesterday with the focal point being mortgage interest deductions. The Senate bill will keep in place the current mortgage interest deduction cap of $1,000,000. The House would cap the deduction at $500,000. The corporate tax rate for the Senate bill would be slashed to 20% from the current 35%, but implementation would come in 2019, as opposed to 2018 for the House bill. The House and Senate seem to have a tough road ahead to come to some sort of compromise on the new tax bill.
Consumer Sentiment unexpectedly declined in early November after hitting the highest level in early October since 2004. The Consumer Sentiment Index fell to 97.8, below the 100.5 expected and down from 100.7 recorded in late October. The index measures 500 consumers' attitudes on future economic prospects, in areas such as personal finances, inflation, unemployment, government policies and interest rates. Richard Curtin, chief economist for Surveys of Consumers, attributed that decline in consumer attitudes to "widespread losses across current and expected economic conditions."
November 9th, 2017
After close Commentary: MBS closed lower in today's session, this despite a decline in U.S. Stocks. The Fannie Mae 30-yr 3.5% coupon closed at 102.88, -9bp, below resistance and right above support. Stocks closed lower as investors took the excuse of the tax headline drama to secure some profits, which is healthy for the equity markets. The Dow fell by 101.42 points to 23,461.94, the S&P 500 fell by 9.76 points to 2,584.62, while the tech heavy NASDAQ lost 39.06 points to end the session at 6,750.05 as the FAANG (Facebook, Amazon, Apple, Netflix, Google) Stocks declined. WTI oil settled at $57.17/barrel, +$0.36. 10-yr yield closed at 2.33%. The only economic report for tomorrow is Consumer Sentiment.
Late morning Commentary: The Senate is supposed to introduce its tax bill later this morning. There is growing sentiment that that tax cuts don't go far enough, parts will be phased in and there is major concern that middle-to-high income earners in high-tax states like CA, NJ and NY will see little to no tax benefit. This is causing uncertainty and anxiety in the U.S. Stock markets.
After holding steady last week, mortgage rates edged lower this week and remain just above historic lows. Freddie Mac reports that mortgage rates fell four basis points to 3.90% with an average point of 0.5. Last year at this time the rate was 3.57% while the rate was 4.20% in the first week in January 2017. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
With Black Friday still two weeks away, some retailers have already begun to discount hundreds of items. Walmart, Best Buy and Amazon are a few that are rolling out some super sales. Retailers are trying to lure shoppers into their stores earlier than Black Friday to capture shopper loyalty and to win their money. An industry watcher says as soon as the calendar turned to November 1, promotions and discounts began.
November 8th, 2017
After close Commentary: Mortgage Bond prices edged lower today after failing to overtake stiff resistance levels. Mortgage Bond prices fell despite just meager gains in Stocks as equities traded from negative to positive several times during the session. The Fannie Mae 30-yr 3.5% coupon closed at 102.94, -12bp. The major Stock indexes closed at fresh record highs today squeaking out meager gains. The Dow rose 6.13 points to 23,563.36, the S&P closed at 2,594.38, +3.74 points while the NASDAQ was up 21.33 points to end at 6,789.11. WTI oil closed at $56.81/barrel, -$0.39. 10-yr yield 2.33%. Weekly Initial Jobless Claims will be released tomorrow and probably will not carry much weight. The Treasury will sell $15B 30-yr Bonds and comes after two mediocre offerings this week from the 3- and 10-yr paper.
Late morning Commentary: The Mortgage Bankers Association (MBA) reported this week that mortgage credit availability tightened a bit in October following some loosening in September. The MBA's Mortgage Credit Availability Index (MCAI) fell by 0.2% to 181.0 with two of the four components decreasing. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. Lynn Fisher, MBA’s Vice President of Research and Economics says, “While government and conforming credit programs saw slight increases in availability in October, a moderate decrease in the number of investor jumbo offerings resulted in a decrease in the total index.”
Government sponsored entity Fannie Mae released its Home Price Sentiment Index (HPSI) on Tuesday slipping on diminished home buyer and seller sentiment. Fannie's HPSI fell 3.1 points on October to 85.2, falling from its all-time high matched in September. The net share of respondents who said now is a good time to sell a home decreased 8 percentage points compared to September while the net share who reported that now is a good time to buy a home fell 6 percentage points in October.
Mortgage rates edged lower in the latest week as reported by the Mortgage Bankers Association. The 30-year conforming fixed-rate mortgage fell four basis points to 4.18%, while the 30-year fixed-rate mortgage with jumbo loan balances declined to 4.12% from 4.16%. The MBA also reported that its refinance index fell 0.5%, purchase index +0.5%. Mortgage rates remain just above all-time lows.
November 7th, 2017
After close Commentary: Not much action in the Mortgage Bond markets today as prices hovered near unchanged throughout the session with little data or headlines to move prices. The Fannie Mae 30-yr 3.5% coupon closed near unchanged at 103.06 and traded in an extremely tight range. Stocks closed mixed as investors took the time to just to sit back and survey the landscape. The Dow did manage to squeak out a gain closing at a fresh record high of 23,557.23, +8.81 points. The S&P closed with a minor loss near unchanged at 2,590.64 while the NASDAQ fell by 18.65 points to 6,767.78. WTI oil closed at $57.20/barrel, near unchanged. 10-yr T Note yield 2.31%. There are no major economic reports due for release tomorrow. The Treasury will sell $23B 10-yr Notes, results at 1:00 p.m. ET.
Late morning Commentary: CoreLogic reports that home prices nationwide, including distressed sales, surged by 7% in September 2017 compared to September 2016. Month over month, sales were up 0.9% in September from August. Limited inventories coupled with low home loan rates continue to be the catalysts driving higher home prices. In addition, a strengthening economy and healthy consumer balance sheets were also contributing factors to the rise in prices. Looking ahead, prices are expected to rise 4.7% from September 2017 to September 2018.
Black Knight reports that housing affordability improved in September as the average homeowner needed 21.4% of their median income to purchase a home. That is below July's post-recession peak of 21.7% and well below the 26.2% needed in the years before the housing boom from 2000 to 2003. Black Knight went on to say that "affordability across most of the country still remains favorable to long-term benchmarks."
The National Association of REALTORS® (NAR) reports that due to an improving economy, job growth and rising consumer confidence, that now is a good time to purchase a home. The NAR reports that there will be 5.47 million Existing Home Sales in 2017, the fastest pace since 6.47 million in 2006. Looking out to 2018, the NAR predicts that sales will grow by 3.7% to 5.67 million. The NAR said the greatest hurdle for home sales in 2018 is the limited supply of homes for sale on the market.
November 6th, 2017
After close Commentary: Not much action in the Mortgage Bond market today as prices opened near unchanged and closed slightly higher. There were no economic reports released today. The Fannie Mae 30-yr 3.5% coupon closed at 103.09, +9bp as it flirts with resistance supplied by the 50- and 100-day Moving Averages. Stocks squeaked out gains as the big three closed at record highs after Broadcom offered to buy fellow chip maker Qualcomm. The Dow closed at 23,548.42, +9.23 points, the S&P gained 3.29 points to end at 2,591.13, while the NASDAQ was up 22 points to end at 6,786.43. WTI oil closed at 57.35/barrel, +$1.71. 10-yr yield declined to 2.31%. There are no economic reports due for release tomorrow. The Treasury will sell $24B 3-yr Notes tomorrow, part of a total of $62B being offered this week.
Late morning Commentary: With Thanks giving quickly approaching, retailers are readying for Black Friday which comes on November 24 this year. Retailers are beginning to announce their Black Friday hours and possible discounts as the 2017 holiday shopping season begins. Sears is offering discounts of 10% to 50% through Thanksgiving weekend, while Kmart is expected to offer nearly the same as Sears. The new iPhone X price will not be lowered by Apple, but Walmart, Best Buy, Target, Amazon and eBay are expected to offer deals on the phone.
There are just a few low-level economic reports due for release this week after last week's packed calendar. U.S. Stocks begin the week near unchanged levels as the Dow Jones Industrial Average, the S&P 500 and the NASDAQ hover near record highs. Strong corporate earnings and a recent spate of solid economic data have buoyed the Stock markets. U.S. Stocks historically do well in November and December, which could usher in fresh record highs as 2017 winds down.
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