Wednesday's Suggestion Carefully Floating

Wednesday's Suggestion Carefully Floating

June 14th, 2017

Suggestion: Weak economic data coupled with a shooting incident at a GOP baseball practice sends Bond prices higher. Carefully floating is recommended.

Overview:  Inflation at the consumer level declined in May led lower by cheaper gas prices, shelter, and clothing. The Consumer Price Index (CPI) fell 0.1% versus the unchanged estimate. The Core CPI, which strips out volatile food and energy, rose 0.1%, just below the 0.2% expected. The report will be closely dissected by the Fed members at today's Federal Open Market Committee meeting as to the path of future monetary policy.

Consumer spending eased in May as evidenced by a weak Retail Sales report, which declined the most since January 2016. May Retail Sales fell 0.3% from April led lower by a drop in purchases of motor vehicles, a decline in discretionary spending and lower receipts at gasoline stations. Sales were up nearly 4% from a year ago. Within the report it did show a 0.8% increase in Internet sales.

A shooting occurred early this morning at a Republican baseball practice which left five wounded in Alexandria, Virginia. The shooter is said to be in custody. The practice comes before the annual baseball game between Republicans and Democrats tomorrow, which is a charity event. House Majority Whip Steve Scalise was among those wounded and has been reported in good condition after undergoing surgery.

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 surged after the weak Retail Sales data and tame inflation, but gave back some of the lofty gains before the Fed statement hit. After the Fed statement was released, MBS fell slightly, but held onto to a big chunk of the early gains. The Fed raised the benchmark Fed Funds Rate by 0.25% to the 1% to 1.25% range and talked of a slow taper to its massive balance sheet. The Fannie Mae 30-yr 3.5% coupon closed at 103.31, +31bp. Stocks ended mixed as lower oil prices weighed on energy shares. The Dow hit a fresh record close of 21,374.56, the S&P 500 fell by 2.43 points to 2,437.92, while the NASDAQ was down 25.47 points to end at 6,194.89. WTI oil closed at $44.73/barrel, -$1.73. 10-yr yield 2.13%. Tomorrow's data includes the Philly Fed, Empire manufacturing, NAHB Housing Market Index and Weekly Initial Jobless Claims.
Wed, Jun 14 4:16 PM The Fannie Mae 30-yr 3.5% coupon is just near the price before the Fed statement was released.
Wed, Jun 14 2:52 PM Yellen says conditions in place for inflation to rise.
Wed, Jun 14 2:43 PM Stocks turn modestly negative.
Wed, Jun 14 2:39 PM Yellen: economy should warrant further rate hikes.
Wed, Jun 14 2:39 PM Yeelne, provided the economy continues on its present course, the Fed will gradually decrease reinvestments in Treasury and Mortgage Backed Securities.
Wed, Jun 14 2:37 PM Yellen says rate hike reflects improving economy.
Wed, Jun 14 2:36 PM Inflation rate 1.6% in 2017, 2% in 2018, says Yellen.
Wed, Jun 14 2:34 PM Yellen sees signs of an improving labor market.
Wed, Jun 14 2:31 PM Yellen says economic growth rebounded in Q2. Business investment continues to expand.
Wed, Jun 14 2:30 PM Fed Chair Yellen begins her press conference.
Wed, Jun 14 2:26 PM An armed UPS employee killed two colleagues before turning the gun on himself inside a massive distribution center in San Francisco on Wednesday morning, police and witnesses said.
Wed, Jun 14 2:08 PM Stocks push into positive territory.
Wed, Jun 14 2:07 PM Until the Fed begins to taper its balance sheet, the Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.
Wed, Jun 14 2:05 PM 10-yr yield 2.11%, same as right before statement released.
Wed, Jun 14 2:04 PM S&P unchanged after Fed statement.
Wed, Jun 14 2:04 PM Not much change in MBS after Fed.
Wed, Jun 14 2:02 PM Forecast is for one more rate hike this year, three in 2018.
Wed, Jun 14 2:01 PM Economy continues to strengthen. Inflation has declined and remain below 2% near term.
Wed, Jun 14 2:00 PM Fed hikes Fed Fund Rates by 0.25% to a new target range to 1% - 1.25%.
Wed, Jun 14 2:00 PM Fed will begin to taper balance sheet this year if the economy warrants it.
Wed, Jun 14 1:01 PM At midday, MBS much higher, S&P near unchanged. 10-yr yield 2.11%.
Wed, Jun 14 12:38 PM The market gears up for the 2:00 p.m. ET release of the Fed's monetary policy statement.
Wed, Jun 14 11:37 AM The shooter from the Alexandria, Virginia incident dies from gunshot wounds fired from Capitol Hill police officers.
Wed, Jun 14 11:35 AM The 10-yr T Note (2.11%) at lowest point since November 10, 2016.
Wed, Jun 14 11:29 AM The CPI report shows a softening trend in consumer inflation. From the Retail Sales report it shows that consumers clearly remain guarded with their discretionary spending, which is likely the result of seeing little, if any, wage growth.
Wed, Jun 14 11:15 AM The Fannie Mae 30-yr 3.5% able to rise above resistance at the 200-day Moving Average.
Wed, Jun 14 10:45 AM WTI oil declines $1.37 to $45.09/barrel as crude stockpiles decline less than expected.
Wed, Jun 14 10:42 AM 10-yr yield falls to a session low 2.11%.
Wed, Jun 14 10:40 AM The FBI says its too early to know why the shootings that took place in Virginia occurred today.
Wed, Jun 14 10:00 AM After the big surge, MBS are off their earlier highs but hold solid gains. Stocks slightly higher.
Wed, Jun 14 9:37 AM Stocks mixed soon after the opening bell.

9:20 AM ET  3.5% Fannie Mae 30-yr coupon up 41 bp at a price of 103.41  up 47 bp when rates were set yesterday at 10:00 am Open 103.03  High 103.44 Low 103.03

 

Numbers to watch for:

Currently Buying Opportunities for Traders

102.84  50 day moving average

102.99 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.

Currently Selling opportunities for Traders

103.15 200 day moving average

103.59  High of 11/17/16

104.12  High of 11/10/16

Wed, Jun 14 9:03 AM 10-yr yield continues to decline now at 2.13% from 2.20% earlier this morning.
Wed, Jun 14 8:48 AM Year-over-year May Core CPI fell to 1.7% from 1.9% in April.
Wed, Jun 14 8:47 AM Year-over-year May CPI falls to 1.9% after hitting 2.7% four months ago.
Wed, Jun 14 8:42 AM The MBA reports that the 30-yr fixed conforming mortgage rate 4.13%, FHA 4%, jumbo 4.06%. Those rates carry at least 0.30 points on top.
Wed, Jun 14 8:41 AM The MBAs refi index +9.2%, purchase index +2.8%.
Wed, Jun 14 8:40 AM The MBAs Market Composite Index, a measure of total mortgage application volume, +2.8% in the latest week.
Wed, Jun 14 8:36 AM Tame consumer inflation, weak Retail Sales, and the shooting in Virginia sends Bond prices higher. 10-yr yield declines to 2.16%.
Wed, Jun 14 8:33 AM May CPI -0.1% vs 0.0%, Core CPI 0.1% vs 0.2% expected.
Wed, Jun 14 8:32 AM May Retail Sales fall 0.3% vs +0.1% expected, ex-autos -0.3% vs 0.2% expected.
Wed, Jun 14 8:20 AM May Retail Sales and May CPI will be released at 8:30.
Wed, Jun 14 8:17 AM A .25% hike to the Fed Funds Rate is expected today, while investors will be looking for confirmation as to when the Fed may begin to taper its massive $4.5T balance sheet made up of Treasury and Mortgage Backed Securities.
Wed, Jun 14 8:13 AM U.S. dollar index 97.05, +0.10.
Wed, Jun 14 8:12 AM 10-yr yield 2.20%.
Wed, Jun 14 8:12 AM WTI oil $46.15/barrel, -$0.33.
Wed, Jun 14 8:11 AM S&P futures slightly higher.
Wed, Jun 14 8:10 AM MBS open near unchanged ahead of the 2:00 p.m. ET release of the Fed's monetary policy statement.
Wed, Jun 14 8:09 AM A Congressman, two police shot at a congressional baseball practice in Alexandria, Virginia. A suspect is believed to be in custody.

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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