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.
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.
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9:10 AM ET New Rates have been posted
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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.