9/06/16 ISM not as good as expected

September 6th, 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 was posted at 10:34 am. All times are Eastern Standard. Currently Mortgage backed securities are trading at $103.84 up 22 basis points from Friday’s close, and below the 50 and 25 day moving average.

MBS rallied today after the weaker-than-expected ISM Service Index and capped a three-session streak of disappointments after the ISM Manufacturing and Non-farm Payrolls miss. The 3% Fannie Mae 30-yr coupon rose by 34bp to end the session at 103.97. Stocks closed modestly higher on an ease in interest rate hike fears. The Nasdaq closed at an all-time of 5,275.90, +26.00. The Dow closed at 18,538.12 up 46.16 points, while the closely watched S&P 500 finished higher by 6.50 points to end the session at 2,186.48. WTI oil closed at $44.85, +$0.41. The yield on the 10-yr T Note fell from the session high of 1.62% closing at 1.53%. There are no economic reports due for release tomorrow. The Fed's Beige Book will be released at 2:00 p.m. ET. The New York Fed will be a big buyer on Fannie/Freddie 30-yr 3s and 3.5s tomorrow morning.

 

Commentary 10:37 am the market only has 2 reports this week.  First was the ISM Service Index that was weaker than expected.  The market was flat until this was reported.  The only other report coming out is Jobless Claims on Thursday at 8:30 am. For more information on ISM click on the following link and see below.

http://www.cnbc.com/2016/09/06/ism-non-manufacturing-report-for-august-2016.html

What is the 'ISM Non-Manufacturing Index'

ISM Non-manufacturing Index is an index based on surveys of more than 400 non-manufacturing firms' purchasing and supply executives, within 60 sectors across the nation, by the Institute of Supply Management (ISM). The ISM Non-Manufacturing Index tracks economic data, like the ISM Non-Manufacturing Business Activity Index. A composite diffusion index is created based on the data from these surveys, that monitors economic conditions of the nation.

BREAKING DOWN 'ISM Non-Manufacturing Index'

By monitoring the ISM Non-Manufacturing Index, investors are able to better understand national economic conditions. When this index is increasing, investors can assume that the stock markets should increase because of higher corporate profits. The opposite can be thought of the bond markets, which may decrease as the ISM Non-Manufacturing Index increases because of sensitivity to potential inflation. 

Read more: ISM Non-Manufacturing Index Definition | Investopedia http://www.investopedia.com/terms/i/ism-nonmfg.asp#ixzz4JUHaUKVX 
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Feel free to call (205-266-5669) or email (jmarbury@nationalbankofcommerce.com) John for a quote based on the terms of you loan.

9:10 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. 

4:02 PM - Nasdaq closes at record high of 5,275.

Black Knight reports that In the second quarter of 2016, purchase loan originations increased 52% ($102 billion) from the first quarter, reaching the highest level in terms of both volume and dollar amount since 2007. Mortgage originations surge to highest level in three years.

3:56 PM - The modest Stock gains due to views the Fed will hold off on rate hikes.

The S&P closing the day with a modest gain, +4.82 points.

2:10 PM - MBS continue to rally today as the tepid job growth of August and the twin failures from the ISM activity indices downgrade the prospects for a September rate hike.

1:19 PM - At midday, MBS holding solid gains, Stock modestly higher. 10-yr Note falls to 1.53% from this morning's 1.60%.

12:41 PM - CoreLogic forecasts home prices will rise 5.4% from July 2016 to July 2017.

12:28 PM - CoreLogic reports that home prices, including distressed sales, rose 6% from July 2015 to July 2016, + 1.1% from June to July.

11:09 AM - MBS at session highs.

10:52 AM - MBS at session highs holding solid gains.

10:09 AM - The S&P edges into negative territory.

10:06 AM - MBS push higher into positive territory after the weaker-than-expected ISM Service data.

10:01 AM - The August ISM Service Index falls to 51.4 from July's 55.5 and below the 54.7 expected. Lowest number since February 2010.

 9:53 AM - Congress returns from its summer recess and must now pass appropriations bills to avert a government shutdown.

9:30 AM - The S&P opens modestly higher.

8:21 AM - This week's economic calendar is on the light side. ISM Services today (10) and Weekly Initial Jobless Claims on Thursday. The Fed' Beige Book will be released on Wednesday.

U.S. dollar index 95.67, -0.17.

WTI oil $44.49/barrel, near unchanged.

The 10-yr T Note yield 1.60%, the upper end of its recent trading range.

Fed Fund Futures show a 21% chance of a rate hike to the Fed Funds Rate.

S&P futures flat to slightly higher as the equity markets look ahead to the September 20 - 21 FOMC meeting.

MBS begin the holiday shortened week near unchanged levels as traders asses rate hike concerns.

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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