Prices at 6 mos high means rates at 6 mos lows

May 30th, 2017

Suggestion: With Mortgage Bond prices at six-month highs and mortgage rates at six-month lows, locking is recommended.

Overview: The March S&P Case-Shiller 20-city Home Price Index came in at +5.9% year-over-year. The 5.9% matched February's reading and is the biggest gain since July 2014. From February to March, prices were up 0.9%. Lean inventories of homes for sales are the catalyst behind the rise. The national index increased 5.9%. "If mortgage rates, currently near 4%, rise further, this could deter more people from selling and keep pressure on inventories and prices. While prices cannot rise indefinitely, there is no way to tell when rising prices and mortgage rates will force a slowdown in housing,” said David Blitzer, managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

Inflation pressures remained contained in April as reported by the Bureau of Economic Analysis. Year-over-year Core PCE edged lower to 1.5% from 1.6% in March and has been moving lower from the Fed's target range of 2%. The Core reading strips out volatile food and energy and is the Fed's favorite measure of inflation. From March to April Core PCE rose 0.2% versus the 0.1% expected. Personal Income and Spending both were up 0.4% last month, in line with estimates. Spending rose the most since December.

The Paychex - IHS Markit Small Business Employment Watch showed a continued decline in small business growth in May. However, national hourly earnings in May were $25.76, +2.87% ($0.72) year-over-year. In addition, Consumer Confidence in May edged lower from April as consumers were somewhat less upbeat in may from April. The Consumer Confidence Index fell to 117.7 in May from 120.3 in April. However, consumers "remain optimistic that the economy will continue expanding into the summer months." said Lynn Franco of the Conference Board. 

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.

 

Not a lot of action in the MBS markets today though prices did manage to edge higher with Stocks declining modestly. Tame inflation and lower Stock prices boosted MBS. The 3.5% Fannie Mae 30-yr coupon gained 16bp to 103.22 and closed above the 103.12 resistance one (R1) level for only the third time in the last six months. The Dow lost 50.81 points to 21,029.47, the S&P fell by 2.91 points to 2,412.91, while the NASDAQ was down 7 points to end the session at 6,203.18. WTI oil closed at $49.66/barrel, down $0.14. 10-yr yield declined to 2.20%. Tomorrow's economic data includes Chicago PMI and Pending Home Sales. The Fed's Beige Book will also be released.
Tue, May 30 3:47 PM The New York Fed purchased $1.47B in Fannie/Freddie 3% and 3.5% 30-yr coupons this afternoon.
Tue, May 30 2:32 PM MBS trade to session highs with modest gains.
Tue, May 30 1:01 PM Fed's Brainard says slowing inflation could prompt rethink on rates.
Tue, May 30 12:56 PM At midday, MBS flat to slightly higher, Stocks lower, but the losses are small. 10-yr yield 2.22%.

12:27 PM ET  3.5% Fannie Mae 30-yr coupon up  6 bp at a price of 103.12  up 3 bp when rates were set today at 10:00 am Open 103.12  High 103.16 Low 103.03

 

Numbers to watch for:

Currently Buying Opportunities for Traders

102.61 50 day moving average

102.72 25 day moving average

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

Currently Selling opportunities for Traders

103.12  Traders keep their eye numbers that have been resistance or support in the past.  This is one of them.

103.27 200 day moving average

Tue, May 30 11:44 AM NPD Group reports that going out for lunch is a dying tradition as workers eat more and more at their desks. Americans made 433 million fewer trips to restaurants at lunchtime last year, the lowest level in lunch traffic in at least four decades.
Tue, May 30 11:39 AM It is expected that employers added 180 jobs in May when Non-farm Payrolls are released on Friday morning.
Tue, May 30 11:25 AM Fed Fund Futures show an 84% chance of a hike to the Fed Funds Rate at the June FOMC meeting.
Tue, May 30 11:05 AM Not much movement in MBS. Stocks cut half their losses.
Tue, May 30 10:33 AM The Paychex - IHS Markit Small Business Employment Watch showed a continued decline in small business growth in May. However, national hourly earnings in May were $25.76, +2.87% ($0.72) year-over-year.
Tue, May 30 10:19 AM The Dow, S&P and the NASDAQ are all trading lower.
Tue, May 30 10:01 AM May Consumer Confidence 117.9 vs the 119.5 expected.
 
Tue, May 30 9:19 AM Fed's Kaplan sees two more rate hikes this year, balance sheet reduction to begin some time in second half of this year.
Tue, May 30 9:14 AM The March Case Shiller 20-city Index +5.9% year-over-year, matching the February reading.
Tue, May 30 8:42 AM April Core PCE year-over-year 1.5% from 1.6%.
Tue, May 30 8:37 AM April Core PCE 0.2% vs 0.1% expected.
Tue, May 30 8:31 AM April Personal Income and Spending both at 0.4%, inline. March Spending revised to 0.3% from 0.0%.
Tue, May 30 8:25 AM Personal Income and Spending, Core PCE will be released at 8:30, Case Shiller at 9, Consumer Confidence at 10.
Tue, May 30 8:17 AM U.S. dollar index 97.35, unchanged.
Tue, May 30 8:16 AM WTI oil -$0.32 to $49.45/barrel.
Tue, May 30 8:15 AM It's jobs week. ADP Private Payrolls (180K expected) will be be released on Thursday, Non-farm Payrolls on Friday (185K expected).
Tue, May 30 8:15 AM 10-yr T Note yield 2.23%, near unchanged.
Tue, May 30 8:12 AM MBS open near unchanged to begin the holiday shortened week.
Tue, May 30 8:08 AM MBS open near unchanged. S&P futures push lower after record highs last week and after seven straight winning sessions.

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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