Hawks are Circling (80% probability of a hike this month)

March 1st, 2017

Commentary at the close: Wednesday saw a continuation of Tuesday's late day sell-off following the coordinated message from the Fed's Harker, Williams and Dudley that a March rate hike is a distinct possibility.  MBS fell hard today but the 3.5% Fannie Mae 30-yr coupon was able to bounce off support at 101.84 and finished at 101.97, -28bp, after being down 41bp earlier in the session. (See Chart below)

 Stocks soared on the Trump speech and as the talk of higher rates boosted bank shares. The Dow gained 303.31 points to 21,115.55, the S&P 500 was up 32.32 points to 2,395.96, while the NASDAQ was higher by 78.59 points to end at 5,904.03 - all record high closes. WTI oil closed at $53.82, -$0.19. 10-yr yield 2.45%. Tomorrow's economic data is limited to Weekly Initial Jobless Claims

Chance of a March interest rate hike almost doubled:CME

http://www.cnbc.com/2017/03/01/chance-of-a-march-rate-hike-doubled-cme.html

Thursday, March 2, 2017ReportForEstimateActualPriorImpact
8:30 AMJobless Claims (Initial)2/25244K 244KModerate
       
Wednesday, March 1, 2017ReportForEstimateActualPriorImpact
2:00 PMBeige BookMarNAexpandingNAModerate
10:00 AMISM IndexFeb56.157.756High
8:30 AMCore PCEJanNA0.30%1.70%High
8:30 AMCore PCEYOY0.20%1.70%0.10%High
8:30 AMPersonal SpendingJan0.30%0.20%0.50%Moderate
8:30 AMPersonal IncomeJan0.40%0.40%0.30%Moderate

What are 'Personal Consumption Expenditures - PCE'

Personal consumption expenditures (PCE), or the PCE Index, measure price changes of consumer goods and services. Expenditures noted on the index include actual expenditures and expenditures that are attributed to households in the United States; data that pertains to services, durables and non-durables is measured through the index. Sharing similarities with the Consumer Price Index (CPI), the PCE is part of the personal income report issued by the Bureau of Economic Analysis of the Department of Commerce.

Read more: Personal Consumption Expenditures - PCE Definition | Investopedia http://www.investopedia.com/terms/p/pce.asp#ixzz4ZdwOQvsu

What is the 'ISM Manufacturing Index '

The ISM Manufacturing Index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production, inventories, new orders and supplier deliveries. A composite diffusion index monitors conditions in national manufacturing and is based on the data from these surveys.

Read more: ISM Manufacturing Index Definition | Investopedia http://www.investopedia.com/terms/i/ism-mfg.asp#ixzz4ZdxkyR7W

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.

 

At the close: 3.5% Fannie Mae 30-yr coupon down 28 bp at a price of 101.97 up 3 bp when rates were set today at 10:00 am Open 101.88 High 102.06 Low 101.84

4:25 PM Dallas Fed President Kaplan (FOMC voter) says if inflation heats up, Fed would have to raise rates more dramatically; Fed should begin gradual rate hikes in a patient manner.

4:02 PM Stocks post their best day of 2017, Dow closes above 21,000 for the first time at 21,114.87.

3:28 PM Bond prices decline today as the probability of a Fed Funds Rate hike at the March 15 FOMC rises to 80% and as the major indices hit record highs.

2:58 PM The 3.5% Fannie Mae 30-yr coupon able to trade above support two (S2) at 101.84, now at 101.94.

2:01 PM Beige Book says wages growing in most Fed bank regions.

2:00 PM Fed's Beige Book says economy has expanded at a modest to moderate pace in most Fed bank regions.

12:49 PM At midday, MBS underwater, Stocks at record high levels. 10-yr yield 2.45%.

12:29 PM Dow soars, +332 points to 21,143.

10:22 AM The MBAs refinance Index +5% to its highest level since December 2016, purchase Index increased +7%.

10:07 AM Dow +250 points.

10:02 AM The February ISM Index 57.7 vs 56.1 expected, up from 56 in January

9:44 AM WTI oil $54.31/barrel, +$0.29.

9:32 AM Stocks surge at the open, Dow +200 points.

9:28 AM 3.5% Fannie Mae 30-yr coupon down 34 bp at a price of 101.91 down 62 bp when rates were set yesterday at 10:00 am Open 101.88 High 102.06 Low 101.88

Chart below was posted at 9:28 AM

 

8:35 AM January Core PCE 0.3% vs 0.2% expected, Core year-over-year 1.7%, unchanged.

8:32 AM January Personal Income +0.4%, inline, Spending 0.2% vs 0.3% expected.

8:28 AM The MBAs Market Composite Index, a measure of total mortgage loan application volume, rose 5.8% in the latest week.

8:25 AM The U.S. dollar index +0.78 to 101.91 as a March interest rate could be on the table.

8:15 AM Fed Fund Futures surge to an 80% probability of a hike to the Fed Funds Rate later this month at the 14-15 FOMC meeting.

8:12 AM As expected, MBS open lower. 10-yr yield 2.43% from yesterday's close of 2.35%.

8:04 AM The notion of higher interest rates are buoying bank shares today, which is also fueling higher Stock futures and weighing on Bond prices.

8:02 AM In addition, S&P futures are higher after President Trump said he wants to boost the U.S. economy with a "massive tax relief", overhaul the Affordable Care Act and spend $1T on infrastructure.

8:01 AM MBS look to open sharply lower after hawkish Fed talk on a March rate hike spooked the Bond markets.


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. 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.  Most of the information posted on this blog along with the charts and indexes are available all during the day to the subscrbers of www.themortgagemarketguide.com  The cost of subscription is very reasonable.

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