Durable Goods (come in stronger than expected)

November 23rd, 2016

Commentary: Mortgage Bonds traded in ad 62bp range. Early on, it was a major Bond sell off that saw prices drop sharply and within a whisker of 2-year price lows, before mounting a nice rally, leaving prices well of the worst levels. You can clearly see the long lower wick of today’s candle on the bond chart. If prices can build on the positive momentum and get back above the $102.75 level over the next couple trading days, we might just be seeing a near-term bottom in prices.

On 9/29/16 the headline was $104 or higher a sell signal? At that time we were tracking the 3% Mortgage Backed Security (MBS).  Now we are at $102.56 on the 3.5% MBS.  Obviosly with the benifit of hind sight the answer was yes.  Today the 3% MBS closed at $99.38. Click on the following link for more information: http://www.johnmarbury.com/blog/7480/92916-104-or-higher-a-sell-signal

WRAP: MBS fell again today as the downward pattern continued as the risk rally rolled on. The Dow (19,083.18, +59.31) and the S&P (2,204.72, +1.78) closed at fresh record highs, while the Nasdaq declined (5,379.98, -5.67). Weighing on Bond prices was a strong Durable Orders report for October. The Bond closed at 102.50, -38bp, though off worst levels. WTI oil was last seen at $47.98/barrel near unchanged. 10-yr T Note yield 2.35%. All financial markets are closed tomorrow for Thanksgiving. On Friday, which is typically one of the lowest trading volume days of the year and the quietest, the Bond markets will close at 2:00 p.m. ET, while Stocks close at 1:00 p.m. ET.

 

Today's Agenda

Date & Time of ReportReportForEstimateActualPriorImpact
11/23/16 8:30 AMDurable GoodsOct1.10%4.8%-0.10%Moderate
 Jobless Claims11/19243K251K235KModerate
11/23/16 10:00 AMNew Home SalesOct587K563K593KModerate
 Consumer SentimentNov91.6 93.691.6Moderate
11/23/16 2:00 PMFOMC MinutesNov 2NANANAHIGH

 

 

What Is Going On With Interest Rates?  #wigowir

 

Below is the news when it happened and the market’s reaction.  For a full view of the day start at the bottom and work your way up. If want to know what just happened start at the top. All Times are Eastern Standard Time.  When the price of Mortgage Backed Securities (MBS) goes down rates go up, and when the price goes up rates come down. Remember in the bond market Bad News is Good News and Good News is Bad news.

3:35 PM The 3.5% Fannie Mae 30-yr is in the middle of today's trading range.

2:12 PM MBS quickly fall lower after the minutes just as they were cutting into some of the steep losses.

2:10 PM Fed minutes show senior members feel a rate hike should come "relatively soon" due to the strengthening labor market and as inflation edges higher.

2:00 PM The Fed minutes reveal members feel that the case for a rate hike has increased, though still data dependent.

1:23 PM The strong demand for the 7-yr Notes pushed Treasury and MBS prices higher, though both still remain in the red.

1:13 PM 10-yr yield 2.35%. Freddie Mac 30-yr fixed conventional 4.03%, highest this year.

1:11 PM At midday Stocks mixed, S&P down slightly -1.17 points, Dow +42, Nasdaq -15.

1:09 PM MBS able to bounce off lows though the benchmark 3.5% Fannie 30-yr trades below support.

11:34 AM The $28B 7-yr Note auction results comes early and garners an "A" rating.

10:43 AM Alert To Lock!

10:41 AM The FHFA reports house prices rose 6.1% from the third quarter of 2015 to the third quarter of 2016.

10:10 AM Freddie Mac reports that the 30-yr fixed conventional mortgage rate ($417K or less) rose to 4.03% this week with 0.5 in points and fees.

10:08 AM Final November Consumer Sentiment 93.8, above the 91.6 expected.

10:02 AM October New Home Sales fall 1.9% from September to an annual rate of 563K vs the 587K expected. September revised lower by 19K.

9:32 AM Stocks open mixed.

9:18 AM The benchmark 3.5% Fannie Mae 30-yr coupon has now fallen below support two (S2) at 102.75.

9:15 AM MBS are now in a steep decline in early trading.

9:09 AM MBS now heading lower after the strong Durables.

 

9:17 AM Chart below posted showing negative reaction to a strong durable goods report.

 

8:43 AM MBS recovering some of their losses.

8:39 AM  The MBA also reported that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417K or less) increased to its highest level since January 2016, 4.16%, from 3.95%.

8:38 AM The MBAs refinance index -3%, purchase index +19% from the previous week.

8:37 AM The MBAs Market Composite Index, a measure of total mortgage application volume, rose 5.5% in the latest week.

8:36 AM Weekly Initial Jobless Claims rise 18K to 251K vs 243K expected.

What are 'Durables'

Durables is a category of consumer goods that do not have to be purchased frequently. Some examples of durables are appliances, home and office furnishings, lawn and garden equipment, consumer electronics, toys, small tools, sporting goods, photographic equipment, jewelry, motor vehicles and motor vehicle parts, turbines and semiconductors. Also known as "durable goods," they tend to last for at least three years.

 

8:34 AM The components within Durables are positive.

8:33 AM Durable Orders in October 4.8% vs the 1.1% expected. Bond prices falling. 10-yr yield rises to 2.35%.

8:17 AM WTI oil $47.90/barrel, near unchanged.

8:17 AM  The FOMC minutes from the November 2 meeting will be released at 2:00 p.m. ET. After that, the markets will be extremely quiet with Friday historically being one of the lowest trading volume days of the year.

8:15 AM 10-yr T Note yield 2.32%, just below yesterday's close of 2.31%.

Wed, Nov 23 8:14 AM

S&P futures flat after all three major indices closed at record highs yesterday. Dow 19,023, S&P 2,202, Nasdaq 5,386.

8:12 AM The Bond markets will undergo normal trading hours today, all U.S. financial markets are closed tomorrow for Thanksgiving. The Bond markets will close early at 2:00 p.m. ET on Friday, while Stocks close at 1:00.

8:07 AM MBS open flat to lower ahead of a cornucopia of economic data that includes Weekly Initial Jobless Claims, Durable Orders, FHFA Housing Price Index, New Home Sales and Consumer Sentiment.

 

On October 5th we started posting our rates and leaving them on the site for you to refer back to. This will allow  you see where actual rates have been along with the news that caused the fluctuations on the rate sheet.  I ask that you forgive my spelling and grammatical mistakes. This is due writing skills that are lacking and the need to communicate quickly.

 

Johnmarbury.com has attempted to verify the information contained on this post.  However any aspect of such may change without notice.  Johnmarbury.com does not provide investment advice and does not represent that any of the information or related analysis is accurate or complete at any time.

 

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