Monday's Suggestion Float Until Fed Release 2 PM ET Wednesday

June 12th, 2017

Suggestion: Mortgage Bonds are near unchanged ahead of the two-day Fed meeting that kicks off tomorrow. Carefully floating is recommended.

Overview: The two-day Fed meeting begins tomorrow and ends Wednesday with the 2:00 p.m. ET release of the monetary policy statement. It is expected that the short-term Fed Funds Rate will rise by 0.25% to the 1.0% - 1.25% range. The hike in rates is most likely factored into the markets, but the wording in the statement as far as what the Fed has in store for its massive $4 trillion balance sheet, will be a key factor for the investing community.

There were 6.0 million job openings nationwide as of 4/30/17, the largest number ever reported for a statistic that has been tracked since December 2000. That number has climbed 2.3 million (from 3.7 million) in the last 4 years. For our nation's 6.9 million out-of-work citizens, the record total of job openings may point to a "shortage of skills" that has prevented them from gaining employment (source: Department of Labor).

Construction employment rose in May to the highest level since October 2008, according to the Associated General Contractors of America. There were 7,100 jobs added in residential construction and 4,400 in nonresidential. There was a total of 6,881,000 total construction jobs in May, up 2.9% from a year ago. “Construction firms continued adding new jobs at a faster rate than the broader economy during the past year as demand for their services remains strong,” said Ken Simonson, the trade association’s chief economist

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 traded range bound in today's session with little data or news headlines to impact trading. The Fannie Mae 30-yr 3.5% coupon closed 102.94, -9bp. Stocks ended modestly lower led by declining tech shares, most notably, Apple. The Dow lost 36.30 points to 21,235.67, the NASDAQ fell by 32.45 points to 6,175.46, while the S&P 500 was down 2.38 points to end at 2,429.39. WTI oil closed at $46.08/barrel, +0.25. 10-yr T Note yield 2.21%. The Producer Price Index will be released tomorrow. The two-day Fed meeting kicks off on Capitol Hill tomorrow with the monetary policy statement being delivered at 2:00 p.m. ET ... there will be no headlines until that time.
Mon, Jun 12 3:58 PM Fed Governor Powell says the recent performance of the labor market might warrant a faster pace of tightening but that inflation's undershooting of the Fed's target for the past five years argues for patience.
Mon, Jun 12 2:53 PM MBS trade in a tight range today as traders gear up for big week of economic data and the Fed's monetary policy statement release at 2:00 p.m. ET on Wednesday.
Mon, Jun 12 1:13 PM $20B 10-yr Notes auction garners a "C" rating.
Mon, Jun 12 1:01 PM At midday, MBS modestly higher, Stocks lower. 10-yr yield 2.18%.
Mon, Jun 12 12:43 PM McDonald's to hire 250,000 people this summer and will use Snapchat app to apply for the positions.
Mon, Jun 12 12:39 PM The $23B 3-yr Note auction garners an "A" rating. Next up, $20B 10-yr Note action, results at 1:00 p.m. ET.
Mon, Jun 12 11:51 AM MBS hit session highs as Stocks remain underwater.
Mon, Jun 12 9:57 AM Stocks move a leg lower, but MBS unable to move higher.
Mon, Jun 12 9:31 AM Stocks open modestly lower.

 

9:18 AM ET  3.5% Fannie Mae 30-yr coupon down 6 bp at a price of 102.97  down 19 bp when rates were set Friday at 10:00 am Open 103.03  High 103.06 Low 102.97. These prices are down 16 bp due to this month roll over. This has no impact on the yields but does make the prices seem different. Let me know if you have any questions about this.

 

Numbers to watch for:

Currently Buying Opportunities for Traders

102.82  50 day moving average

102.93 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.

103.18 200 day moving average

Currently Selling opportunities for Traders

 

103.59  High of 11/17/16

104.12  High of 11/10/16

 

Mon, Jun 12 8:31 AM The New York Fed will purchase up to $1.625B in 30-yr Fannie/Freddie 3.5% and 4% coupons beginning at 11:15 a.m. ET.
Mon, Jun 12 8:30 AM U.S. dollar index 97.10, -0.13.
Mon, Jun 12 8:19 AM 10-yr T Note yield 2.21%.
Mon, Jun 12 8:18 AM WTI oil at $46.52/barrel, +$0.67.
Mon, Jun 12 8:17 AM S&P futures lower as lower tech shares impact the broader market.
Mon, Jun 12 8:13 AM There are no economic reports due for release today. The rest of the week features PPI, CPI, Retail Sales, manufacturing data, housing numbers.
Mon, Jun 12 8:11 AM MBS open near unchanged ahead of the week's events.
Mon, Jun 12 8:11 AM The 2-day Fed meeting kicks off tomorrow and will end on Wednesday with the 2:00 p.m. ET release of the Fed statement. It is expected that the Fed Funds Rate will rise .25% the to 1% - 1.25% range.
Mon, Jun 12 8:05 AM The Treasury will sell $24B 3-yr Notes and $20B 10-yr Notes today, $12B 30-yr Bonds on Tuesday.
Mon, Jun 12 8:00 AM Mortgage Bonds had their Monthly Bond Rollover on Friday with the effect being -16bp for the Fannie Mae 30-yr 3.5% coupon.

 

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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