8/17/16 Fed Decision

August 17th, 2016

What Is Going On With Interest Rates?  #wigowir

When the price of Mortgage Backed Securities (MBS) on the Chart above goes down rates go up, and when the price goes up rates come down. Chart posted at 11:10 am

Commentary

Close of Business: MBS were able to edge higher in today's session aided in part by Stock prices trading lower for most of the session before ending with meager gains. There were no economic reports due for release today. The benchmark 3% Fannie Mae 30-yr coupon closed at 103.66, +16bp. The Fed minutes revealed that a rate hike may be coming, but Fed members will need more economic data before pulling the trigger. The dollar closed off its highs, signaling a rate hike is not imminent in September. The Dow gained 21.92 points to 18,573.94, the S&P was up 4.07 points to 2,182.22, while the Nasdaq was up 1.54 points to 5,228.65. WTI oil was last seen at 46.29/barrel, +$0.31. The 10-yr T Note yield 1.55%. Tomorrow's economic data includes Weekly Initial Jobless Claims and the Philly Fed Index.

2:12 pm the minutes revealed that many Fed Members are wanting to increase.  Currently with what happened after Brexit and their uncertainty on the inflation they decided to keep their options open.  Bonds are currently improving. This tells us that traders are thinking that there will not be any rate changes in September.

11:10 am currently the price is flat.  The Green Line or 25 day moving average was our friend and floor of support.  Now is our enemy and the ceiling of resistance.  The Black Line or 50 day moving average is now the floor of support.  Notice on the candle how we touch this line only to be bounced higher.  Yes I know this is exactly what was said yesterday.  The difference is that the Fed is meeting at 2pm today and the market is likely to react to this announcement. So stay tuned for more information today.

10:09 AM ET New Rates have been posted

30-Year Fixed 3.375% (3.457% APR) No Origination Fee  

15-Year Fixed 2.750%   (2.892% APR) No Origination Fee

7-1 ARM 30 year 3.000% (3.341% APR) No Origination Fee

For more rates and details click: http://www.johnmarbury.com/page5.html/

  • 30-Year Fixed-Rate Mortgage: The monthly payment on a $200,000 30-year Fixed-Rate Loan at 3.375% and 70% loan-to-value (LTV) is $884.19 with 0 points due at closing. The Annual Percentage Rate (APR) is 3.457%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.
  •  15-Year Fixed-Rate Mortgage: The monthly payment on a $200,000 15-year Fixed-Rate Loan at 2.750% and 70% loan-to-value (LTV) is $1357.24 with 0 points due at closing. The Annual Percentage Rate (APR) is 2.892%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.
  • 7-1 30 year ARM for $200,000 with an Initial Interest Rate of 3.000% (3.334% APR) your monthly payments for years 1 – 7 would be $870.41 and for years 8 -30 monthly payments would be $886.87 (based on the current Index  of  1.210% Plus Margin of 2.25% to $417,000 and 2.5% to $900,000).  Monthly payments do not include taxes and insurance and the actual payment obligation will be greater.  Your variable interest rate is subject to a floor of your Initial Interest Rate.  Your variable interest rate can increase or decrease after the seventh year by 2 percentage points annually and can increase 4 percentage points over your Initial Interest Rate over the term of your loan.  The index for this loan program is the average of the interbank Offered Rates for One Year Denominated Deposits in the London Market (LIBOR)

Below is the news when it happened and the market’s reaction.  All Times are Eastern Standard Time. 

3:19 PM - The U.S. dollar index gives up its gains after the Fed minutes showed little accord among Fed members on when to raise the Fed Funds Rate.

3:00 PM - Fed Fund Futures show a 47% chance that the central bank would raise the Fed Funds Rate at its December 13-14 meeting, down from 58% shortly before the release of the minutes, according to the CME Group's FedWatch program.

2:40 PM - S&P cuts losses and trades to unchanged after the Fed minutes were released.

 2:12 PM - The uptick in Bond prices and the decline in yields tells us the Bond market doesn't see a rate hike in September, despite what the Fed minutes revealed. A December hike could be in the cards.

 2:03 PM - Fed noted uncertainty from the Brexit aftermath.

Some Fed members uncertain on the inflation outlook.

Fed sought to keep options open at the July meeting.

Fed minutes reveal an increase in rates could soon be warranted. Some Fed members wanted rate hike sooner.

1:21 PM - Investors await the 2:00 p.m. release of the July Fed minutes.

1:16 PM- Fed's Bullard repeats, single rate hike necessary over next two years.

12:22 PM - Outspoken St. Louis Fed President James Bullard (voter) will be speaking at 1:00 p.m. ET.

12:19 PM - What is economic growth? A positive change in the level of production of goods and services by a country over a certain period of time. Nominal growth is defined as economic growth including inflation, while real growth is nominal growth minus inflation. Economic growth is usually brought about by technological innovation and positive external forces.

11:28 AM - An error has occurred on the 10:00 a.m. and 11:00 a.m. windows for the U.S. 2-Year T Note. The windows for 10:00, in between and the 11:00 windows should read -3bp for all.

10:57 AM - Tech giant Cisco Systems is expected to announce that the company will be laying off 14,000 workers, representing about 20% of its global workforce.

10:48 AM - Stocks edge lower into negative territory - Dow down 45 points.

10:39 AM - The MBA reports that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) slightly dipped to 3.64% from 3.65%. In addition, the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 3.6% from 3.64%.

10:37 AM - MBS continue to hug the flatline ahead of the 2:00 p.m. ET release of the Fed minutes.

9:31 AM - The S&P opens flat to slightly lower.

 8:44 AM - The MBAs refinance index -4%, purchase index -4%.

The 3% Fannie Mae 30-yr coupon opens on the second layer of support at the 50-day Moving Average (103.51).

The MBAs Market Composite Index, a measure of total loan application volume, fell 4% in the latest week.

S&P futures near unchanged.

8:26 AM - WTI oil at $46.45/barrel, near unchanged.

U.S. dollar index edges higher to 94.88, +0.12.

10-yr T Note yield 1.58%.

MBS open near unchanged ahead of the 2:00 p.m. release of the July Fed minutes.

Contact

John Marbury
jmarbury@nationalbankofcommerce.com
NMLS# 740833
Phone:205-266-5669
Fax: 866-217-4174

813 Shades Creek Parkway
Birmingham, Alabama 35209
 

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