December 6th, 2016
Commentary: We have closed above $102.47 or S1 for the last 3 days. Hopefully we are building a foundation for better rates in the future. The economy also appears to be getting stronger, which may not be good for rates long term. We will continue to let you know what is happening and feel free to let us know if you have any questions.
WRAP: Not a lot of action in today's session as Mortgage Bonds took a break from the blistering volatility since the presidential election results, which led to lower Bond prices, higher yields and mortgage rates hitting 2016 highs. MBS traded in a tight 16bp range with the 3.5% Fannie Mae 30-yr coupon closing at 102.59, near unchanged. Stocks closed modestly higher as banks and telecoms gained. The Dow closed at yet another record high of 19,251.78, +35.54 points, the S&P gained 7.52 points to 2,212.23, while the Nasdaq was up 24.11 points to end the rather quiet session at 5,333.00. WTI oil closed at $50.93/barrel, -$0.86. 10-yr T Note yield 2.38%. There are no major economic reports due for release tomorrow.
What is Productivity?
Productivity is an economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in revenues and other gross domestic product (GDP) components such as business inventories. Productivity measures may be examined collectively (across the whole economy) or viewed industry by industry to examine trends in labor growth, wage levels and technological improvement.
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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.
10:25 AM The Fed's Labor Market Conditions Index (LMCI) rose to 1.5 in November from 1.4 in October. The index is derived from 19 labor market indicators, designed to gauge the strength of the jobs market. The index is heavily weighted to the unemployment rate and private payrolls. It also includes the labor-force participation rate as well as data on wages, hiring and dismissals. A reading above 0.0 indicates improving labor market activity, below indicates deteriorating activity.
10:13 AM Goldman Sachs analyst sees four hikes to the short-term Fed Funds Rate in 2017.
Commentary: If this is correct prime would go from 3.5% to 4.5%. Recently the Fed raises or lowers rates by 0.25%.
9:39 AM S&P near unchanged soon after the market opens.
8:39 AM Within the Productivity numbers, unit labor costs rose by 0.7% vs the 0.2% expected, which measures the expense imposed on companies to compensate workers for their output. It could signal wages may be on the upswing.
8:35 AM CoreLogic reports that home prices, including distressed sales, rose 6.7% from October 2015 to October 2016, +1.1% month-over-month from September.
8:34 AM Not much reaction to the Productivity data.
8:31 AM Second reading on Q3 Productivity 3.1% vs 3.3% expected and matches the first look.
8:14 AM Economic data is limited to Q3 Productivity due to be released at 8:30.
8:13 AM U.S. dollar index 100.35, +0.23.
8:12 AM 10-yr T Note yield 2.39%, unchanged.
8:09 AM After yesterday's bounce off the lows and reversal higher, MBS open flat to slightly higher.
8:03 AM WTI oil $51.03/barrel, -$0.78.
8:01 AM Italy's Monte dei Paschi di Siena bank, the oldest bank in the world founded in 1472, hangs in the balance and may go under after no vote in the Italian referendum.
7:57 AM MBS look to open near unchanged.
7:55 AM Oil prices lower. S&P futures slightly higher. Treasury prices near unchanged.
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