Tuesday's Suggestion: Carefully Floating

June 6th, 2017

Suggestion: Mortgage Bond prices are pushing higher today due to lower Stock prices as equity investors book some profits. Carefully floating is recommended.

Overview:  CoreLogic reports that home prices, including distressed sales, rose 6.9% from April 2016 to April 2017, due in part to low home loan rates and a lack of homes for sale on the market. Month-over-month, prices were up 1.6% from March to April. Looking ahead, CoreLogic sees a 5.1% gain from April 2017 to April 2018. CoreLogic reports that in “some metro areas, there has been a bidding frenzy as multiple contracts are placed on a single home.”

Oil prices continue to drift lower on output concerns as West Texas Intermediate oil falls further from the $50/barrel mark. Concerns that diplomatic tensions between Qatar and several Arab states could undermine efforts by OPEC to reduce oil production is weighing on prices. WTI oil is at $47.32 a barrel. However, for the week of May 26, gasoline consumption hit an all-time high during the Memorial Day holiday weekend. American drivers used a record 413 million gallons/day of gas during the week ending on May 26. The national average price for a regular gallon of gas is at $2.36.

At the Federal Open Market Committee meeting scheduled for June 13-14, it is expected that Fed members will vote to raise the benchmark Fed Funds Rate by .25% bringing that rate to 1.25%. Despite low inflation, Fed Fund Futures are pricing in a 95% probability of a hike next week. Despite May Non-farm Payrolls coming in below expectations, the labor market remains strong with first time unemployment benefits at 40 year lows and the Unemployment Rate at a 16-year low. The two-day meeting ends Wednesday with the 2:00 p.m. ET release of the monetary policy statement. 

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.

 

MBS opened higher and remained range bound throughout the session with prices trading in a 2-3 tick range. There were no major economic reports released today but the JOLTS report showed that job openings in April hit an all-time high. The 3.5% Fannie Mae 30-yr coupon closed at 103.47, +16bp. Stocks traded just below sea level during the session ending slightly negative. The Dow lost 47.81 points to 21,136.23, the S&P 500 fell 6.77 points to 2,429.33, while the NASDAQ lost 20.62 points to end the session at 6,275.05. WTI oil closed at $48.19/barrel, +$0.79 after finding support in the high $46 range. 10-yr yield 2.14%. There are no economic reports due for release tomorrow.
Tue, Jun 06 4:02 PM Stocks close lower as investors book some profits. Dow -48 points.
Tue, Jun 06 2:49 PM MBS trade in a tight range for the past few hours while the S&P trades near unchanged.
Tue, Jun 06 1:14 PM Just after midday, MBS holding gains, Stocks slightly lower. 10-yr yield 2.13%.
Tue, Jun 06 12:42 PM The invasion of Normandy, D-Day, took place 73 years ago today and resulted in the liberation of Europe from Nazi, Germany.
Tue, Jun 06 12:03 PM MBS hit session highs.
Tue, Jun 06 12:00 PM Thirteen Alabama counties saw an 85% drop in food stamp participation after work requirements restarted on January 1, 2017.
Tue, Jun 06 11:17 AM Stocks now showing modest losses after trying to trade to unchanged.
Tue, Jun 06 10:37 AM Job openings across the U.S. rose to an all-time high in April at 6.04 million according to the Job Opening and Labor Turnover Survey (JOLTS).
Tue, Jun 06 10:16 AM Stocks cut most of their losses, NASDAQ turns positive.
Tue, Jun 06 9:31 AM Stocks open lower.
Tue, Jun 06 9:09 AM 1-month LIBOR 1.08%, 3-month 1.21%, 6-month 1.41%, 12-month 1.72%.

 

9:07 AM ET  3.5% Fannie Mae 30-yr coupon up 16 bp at a price of 103.41     up 12 bp when rates were set yesterday at 10:00 am Open 103.47  High 103.50 Low 103.41

 

Numbers to watch for:

Currently Buying Opportunities for Traders

102.71 50 day moving average

102.86 25 day moving average

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

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

103.22 200 day moving average

Currently Selling opportunities for Traders

 

103.59  High of 11/17/16

104.12  High of 11/10/16

Tue, Jun 06 8:33 AM CoreLogic reports that home prices nationwide, including distressed sales, increased 6.9% from April 2016 to April 2017. Month over month, prices were up 1.6% from March to April.
Tue, Jun 06 8:21 AM U.S. dollar index 96.63, -0.12.
Tue, Jun 06 8:20 AM China says it stands ready to buy more U.S. Treasuries.
Tue, Jun 06 8:03 AM WTI oil falls further from the $50/barrel mark on concerns that diplomatic tensions between Qatar and several Arab states could undermine efforts by OPEC to reduce production. WTI at $47.26/barrel, -$0.14.
Tue, Jun 06 8:02 AM Stocks continue to hover near all-time highs buoyed by a strong corporate earnings season.
Tue, Jun 06 8:02 AM The 10-yr T Note yield slips to 2.14% from yesterday's close of 2.18%.
Tue, Jun 06 8:01 AM MBS look to open higher as investors turn risk averse ahead of the U.K. elections and FBI Director Comey's highly anticipated testimony before Congress later this week. 

 

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 subscribers of www.themortgagemarketguide.com  The cost of subscription is very reasonable.

 

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