Tight Trading Today

May 25th, 2017

Overview: Mortgage rates continued to edge lower in the latest week as Bond prices hit six-month highs due to the political turmoil out of Washington in the past week. Freddie mac reports that the 30-year fixed conforming mortgage rate fell to 3.95% this week with 0.5 in points and fees added on top of the rate. It was the lowest rate since the week of November 17, 2016. At the end of last year, many predicted that mortgage rates would average 4.50% in 2017, but they have been in the range of 4.12% so far this year.

Freddie Mac released its Economic & Housing Research Outlook for May reporting that despite weak economic growth, housing got off to a good start in 2017 due in part to the low mortgage rate environment. Freddie Mac says that the U.S. housing market is now on track to eclipse last year as the best in over a decade. Freddie went on to say that increased inflation and higher short term rates will push up long-term rates, including mortgage rates. However, the increase will be measured with the 30-year fixed rate averaging 4.3% in the fourth quarter.

The minutes from the May 3 Federal Open Market Committee (FOMC) meeting were released yesterday and it had a bit of good news for both Stocks and Bonds. The minutes showed that "nearly all" FOMC participants agreed that the unwinding of the Fed's balance sheet should be controlled by a series of gradually increasing caps, or limits - good news for Bonds. In addition, members expect the economy to pick up momentum in the second quarter - good news for Stocks.

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.

Commentary at the close: MBS traded in an extremely tight range today with little conviction to either side of the market. The Fannie Mae 3.5% 30-yr coupon closed near unchanged at 103.03, just below stiff resistance at 103.12. Stocks closed higher for the sixth straight session led by consumer stocks. The S&P 500 closed at 2,415.07, +10.68 points while the tech heavy NASDAQ closed at 6,205.25, +42.23 points, both closing high records. The Dow settled at 21,082.95, +70.53 points, just 40 points shy of its all-time closing high set back on March 1. WTI oil closed at $48.90/barrel, -$2.46. 10-yr yield 2.25%. Tomorrow's data includes April Durable Goods, Q1 GDP second estimate and May Consumer Sentiment.
Thu, May 25 3:18 PM MBS trade in an extremely tight range in today's session hovering near unchanged.
Thu, May 25 1:15 PM The 28 billion dollar 7-yr note auction garners a C+ rating.
Thu, May 25 12:45 PM At midday, MBS unchanged. Stocks higher. 10-yr yield 2.25%. WTI oil -$2.04 to $49.32/barrel.
Thu, May 25 11:44 AM Oil prices fall below $50 as WTI trades at $49.78/barrel, -$1.64, falling 3% as OPEC output cut extension disappoints the market.
Thu, May 25 11:01 AM MBS trade in a tight range this morning as the Fannie Mae 30-yr 3.5% coupon hovers just below resistance at 103.12.
Thu, May 25 10:00 AM Freddie Mac reports that the 30-yr fixed conforming mortgage rate fell to 3.95% with 0.5 in points and fees, lowest of 2017.
Thu, May 25 9:43 AM Stocks trading higher soon after the open, Dow +55 points.
Thu, May 25 9:06 AM The Bond markets will close early tomorrow at 2:00 p.m. ET, while the Stock markets undergo a normal session. All capital markets will be closed on Monday in observance of Memorial Day. 

 

9:00 AM ET  3.5% Fannie Mae 30-yr coupon down 3 bp at a price of 103.03 up 22 bp when rates were set yesterday at 10:00 am Open 103.06  High 103.06 Low 102.97

 

Numbers to watch for:

102.55 50 day moving average the market considers a buying opportunity

102.70 25 day moving average the market now considers a buying  opportunity.

103.00  Traders keep there eye on round numbers and this is one them with lots of zeros    

103.29 200 day moving average the market considers a selling opportunity

 

Thu, May 25 8:30 AM Weekly Initial Jobless Claims 234K, inline, previous week was 233K.
Thu, May 25 8:25 AM Lower oil prices due in part to an OPEC delegate saying that the group has decided to extend production cuts for nine months, which was already expected and not as long as many players were hoping for.
Thu, May 25 8:24 AM The S&P (2,404) closed at a record high yesterday.
Thu, May 25 8:18 AM Economic data limited to Weekly Initial Jobless Claims at 8:30. The results from today's $28B 7-yr Note auction will be released at 1:00 p.m. ET.
Thu, May 25 8:13 AM U.S. dollar index 97.05, -0.09.
Thu, May 25 8:10 AM WTI oil at $50.65/barrel, -$0.71.
Thu, May 25 8:09 AM 10-yr T Note yield 2.24%, closed at 2.26% yesterday.
Thu, May 25 8:07 AM MBS open near unchanged.
Thu, May 25 8:03 AM The Fed minutes had a bit of good news for both Stocks and Bonds. The minutes showed that "nearly all" FOMC participants agreed that the unwinding of the Fed's balance sheet should be controlled by a series of "gradually increasing caps, or limits. In addition, members expect the economy to pick up momentum in the second quarter.
Thu, May 25 8:03 AM A an interest rate hike at the June meeting looks to be on the table with an 83% probability that the Fed Funds Rate will increase.
Thu, May 25 7:57 AM MBS look to open flat to higher. S&P futures show positive momentum when the bell rings at 9:30 a.m. ET in lower Manhattan on Wall Street at the New York Stock Exchange.


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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