Tue, 09 Mar 2010 21:11:53 -0800WeeblyWed, 03 Mar 2010 07:03:09 -0800http://www.myvarefinance.net/1/post/2010/03/economic-news-affecting-mortgage-rates-today.htmlMBS prices are down -3/32 (FNMA 30-yr 4.5 at 101.00), which is about 1/32 higher than yesterday at this time. The 30-yr fixed FNMA required net yield (60 day) is now at 4.76% from 4.76% yesterday.  

This morning, the ADP private payrolls firm's estimate for Friday's Employment report matched expectations. The Dow is up 40 points. ISM Services will be released at 10:00 et and the Fed's Beige Book will be released at 2:00 et.  

The Mortgage Bankers Association weekly purchase activity index rose 9%, while the refinancing activity index increased by 17%. Average reported rates for the prior week fell to 4.95% from 5.03% for 30-yr fixed mortgages.]]>Thu, 11 Feb 2010 09:46:46 -0800http://www.myvarefinance.net/1/post/2010/02/va-mortgage-rate-news.htmlMortgage investors are once again taking a cautious "wait-and-see" attitude in front of the Treasury Department's $16 billion 30-year bond sale this afternoon.  Tuesday's 3-year note offering and yesterday's 10-year note sale were ugly - which does not bode well for the prospects of robust bidding at today's 30-year bond offering.  If my assessment proves accurate, look for upward pressure on mortgage interest rates to prevail for most of the day.

The Labor Department announced this morning that initial weekly jobless benefit claims for the week ended February 6th dropped 43,000 to a seasonally adjusted 440,000.  For the week ended January 23rd , enrollment in extended benefits programs increased by 13,208 to 236,041 while enrollment in the government's Emergency Unemployment Compensation program fell by 184,627 to 5.448 million.  Boiling all this statistical mumbo-jumbo down the indications are growing that the labor market is improving - at a just barely perceptible pace.  First-time filings for unemployment benefits were kept artificially low in late December and early January because of the holidays and then were biased to the high side in late January as the Labor Department caught up on their claims processing.  Mortgage investors essentially shrugged the whole thing off - reasoning that until initial weekly jobs claims stabilize around the 400,000 per week level - net month-over-month job creation will not be strong enough to exert significant upward pressure on mortgage interest rates.

The Commerce Department has postponed the release of the much anticipated January Retail Sales report until 8:30 a.m. ET tomorrow.  Both the headline figure and the component of the report excluding auto sales are expected to post modest gains after a surprising slump in December.  The slight anticipated improvement for retail sales will likely be viewed as temporary since job creation remains dismal.  If so, this event will tend to be mortgage interest rate neutral.  

]]>Tue, 26 Jan 2010 11:35:27 -0800http://www.myvarefinance.net/1/post/2010/01/va-streamline-mortgage-rate-news.htmlNervousness about the sustainability of the economic recovery combined with jitters about the health of our domestic stock markets and breaking news that Japan's sovereign debt rating may be downgraded in the face of massive deficits will likely combine to drive investors in droves to today's $44 billion two-year Treasury note auction.  This sale is part of this week's $118 billion, three-part borrowing spree by Uncle Sam.

The Treasury Department is scheduled to sell an at-record $42 billion stack of 5-year notes tomorrow and a $32 billion bundle of 7-year notes on Thursday.  An overall expectation among market participants is that all three debt offerings will be solidly bid. With all the economic and geopolitical uncertainty currently flowing through the market place - most investors with a dollar to spend in the Treasury market are likely going to invest in the shorter-end of the yield curve - rather than in a 10-year note or 30-year bond.  Well bid auctions with solid foreign investor participation will not likely influence the direction of mortgage interest rates much one way or the other.  In the off chance any one of these three auctions is deemed to have been poorly bid - defined by a higher yield and lower price - you can bet mortgage investors will likely push their rates higher as well.   I post the results of today's 2-year note auction on the website as soon as possible after the final gavel falls at 1:00 p.m. ET.

The fact that the Fed will be holding a two-day monetary policy meeting right in the middle of Uncle Sam's borrowing spree is not helping lower trader anxiety levels.  Mortgage investors are fretting about what the Fed may say about it's exist strategy from its emergency market measures.  Current speculation that Wednesday's post-meeting statement from policymakers will sound sharply threatening to the prospects of steady to lower mortgage interest rates is, in my opinion, way over done.  The Fed has essentially two responsibilities; promoting full employment and keeping inflation in check.  The high jobless rate means the Fed is far from accomplishing its first goal while extremely benign inflation pressure are helping them achieve their second objective.  Against this backdrop it is highly likely the Fed's post-meeting statement on Wednesday afternoon will include only minor changes to the December statement but will focus on the headwinds still facing the economy as it struggles to recover from the worst recession since World War II.  At the end of the day - the probabilities are high that this event will exert little, if any significant influence on the trend trajectory of mortgage interest rates. 

This week's Federal Open Market Committee meeting is at bit more dramatic than normal due to the fact that Fed Chairman Ben Bernanke's path to a second term has taken an unexpected, and potentially dangerous turn for the worse.  If Bernanke is not confirmed before his current term expires on January 31st - the effect on mortgage interest rates will likely be swift - and unpleasant.  A Congressional refusal to give Bernanke a second term will likely be perceived by credit market participants as politicizing decisions on monetary policy, a condition sure to negatively impact the creditability of the central bank with domestic and foreign investors alike.

]]>Tue, 19 Jan 2010 08:51:55 -0800http://www.myvarefinance.net/1/post/2010/01/va-mortgage-rates32.htmlThe coming week's economic calendar doesn't offer much of substance for mortgage investors to chew-on during the coming four-day holiday shortened trading sessions.  There are no scheduled government debt auctions and members of the Federal Open Market committee have entered their "period of silence" in front of their two-day meeting next week. 

It is likely mortgage investors will take at least a passing glance at Thursday's December Leading Economic Index presented by the private Conference Board.  The Conference Board's Leading Indicator Index is intended to forecast likely economic conditions three to nine months in the future.  If, as expected, the index posts a gain of 0.7% or higher, it will have fully reversed the decline seen during the Great Recession - a condition that will almost certainly exert some upward pressure on mortgage interest rates. 

With nothing else to capture their attention during the run-up to Thursday's release of the Leading Economic Index - look for mortgage investors to take their interest rate directional cues from trading activity in the stock markets.  Rising stock prices will tend to drive mortgage interest rates higher -- while falling stock prices will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates.

]]>Mon, 11 Jan 2010 09:47:07 -0800http://www.myvarefinance.net/1/post/2010/01/va-streamline-refinance-news.htmlUncle Sam will be wading into the credit markets this week looking to borrow a total of $84 billion dollars.  He'll kick-off his four-part borrowing spree by warming up with today's $10 billion 10-year inflation-index security sale before really hitting his stride with tomorrow's $40 billion 3-year note auction followed by Wednesday's sale of a $21 billion stack of 10-year notes.  He'll wrap the whole thing up on Thursday with the sale of $13 billion worth of 30-year bonds.   

Investors remain unsure whether the economic recovery glass remain half-full - or half empty - so this big round of government supply will likely churn the credit market up a bit.  Even so, when the auction totals are finally tallied -- demand for each of these government debt offerings will probably prove to have been strong enough to support steady to perhaps fractionally lower mortgage interest rates.

]]>Mon, 21 Dec 2009 06:01:23 -0800http://www.myvarefinance.net/1/post/2009/12/va-refinance-news2.htmlWith nothing in the way of new macro-economic data to guide them, mortgage investors much decide whether to lock in some profits before the trading day comes to an end – or stick with the rally in hopes that it produces more upside gains before the early close for the Christmas Holiday next Thursday.  Look for trading action to become increasingly spasmodic as traders focus on making sure profits are safely registered “on-the-books” and as they put the final touches on their year-end positions.  The likelihood that anyone will be aggressively adding large risk positions to their portfolio is small – limiting the potential for a notable move to yet lower mortgage interest rates before the New Year begins.

     The few mortgage investors still at their desks next Tuesday will get a look at the final estimate of economic growth for the third-quarter.  The majority of economists expect Q3 Gross Domestic Product will register a reading of 2.8% -- exactly matching the previous guesstimate.  Tuesday also brings expectations for an improved pace of November existing home sales.   The day starts off on Wednesday with the November Personal Income and Spending report.  Contained within this data series is the Personal Consumption Expenditure Index, one of the Fed’s favorite measure of inflation pressure at the consumer level.  While both income and spending are expected to have edged a bit higher last month -- the pace of consumer inflation is expected to have posted a very modest, and mortgage market neutral gain of 0.1%.  Wednesday’s 10:00 a.m. release of the November New Home Sales and Thursday’s initial weekly jobless claims and November durable goods orders numbers will likely draw as much investor attention/interest as a single snowflake in a blizzard.  The mortgage market will close early at 2:00 p.m. ET on Thursday and will remain closed on Friday for the celebration of Christmas.]]>Thu, 03 Dec 2009 11:10:42 -0800http://www.myvarefinance.net/1/post/2009/12/va-refinance-news1.htmlFollowing a stronger-than-expected weekly jobless claims number - mortgage investors were quick to push mortgage interest rates fractionally higher in the day's early going. 

According to the Labor Department, new applications for jobless benefits unexpectedly fell by 5,000 last week to the lowest level in more than 14 months.  While this jobless claims report falls outside of the survey period for tomorrow's 8:30 a.m. ET release of the far more important November nonfarm payroll figures -- some investors wasted no time placing their "bets" for a surprisingly mortgage market unfriendly employment story. 

I personally think these mortgage investors may have jumped the gun a bit.  Even though the first-time claims number was better than the majority of economist had anticipated - the number of people continuing to collect benefits after the initial week rose by 28,000.   Going one step further, with hiring so slow, the unemployed are exhausting their regular benefits (26 weeks in most states) and instead are claiming extended benefits or Emergency Unemployment Compensation.  Growing totals for these programs have more than offset the decline in the regular weekly jobless claims number.  For the week ending November 14th, the enrollment in the extended benefits programs offered by the government grew by 323,000.   From this perspective, the weekly jobless claims numbers are almost certainly glossing over the underlying anemic conditions in the labor market.

     The probabilities remain high that Friday's November nonfarm payroll will fall within shouting distance of the consensus estimate for a national job loss number of 130,000.  If so, the Labor Department's data will likely exert little, if any influence on the mortgage market.   On the other hand, if the headline number shows the economy lost 150,000 jobs or more and/or the national jobless rate exceeds 10.3% -- the odds are high that a large number of investors will be caught leaning the wrong way - resulting in higher prices and lower mortgage interest rates before the day is over.

]]>Mon, 16 Nov 2009 09:20:03 -0800http://www.myvarefinance.net/1/post/2009/11/news-relating-to-your-va-refinance.htmlEarlier this morning the government reported the pace of October Retail Sales rose a brisk 1.4% -- but were much less impressive once auto sales were stripped out.  The "ex. auto" component of this report posted a lower than expected gain of 0.2%.  Even so, given the backdrop of a very anemic labor market, the October retail sales numbers were about as good as could be hoped.  Consumers remain financially constrained with wage income running 5.0% below its year-ago mark - a condition strongly suggesting recovery at the retail level will continue to be lethargic for many months to come.  In the convoluted world of mortgage interest rates investors see slow retail sales activity as a indication that demand for capital will remain low - a scenario that tends to support steady to perhaps fractionally lower mortgage interest rates.   

Definitely worth mentioning again - the Federal Reserve reached a milestone with its direct mortgage-backed purchase program last week, topping the $1 trillion mark.  The Fed's purchases of agency mortgage-backed securities totals roughly $1.007 trillion so far in 2009.  The central bank has started to slow the pace of its purchases, with buying decreasing from about $25 billion per week in mid-September to only $13.5 billion for the most current week ending Wednesday, November 11th.  The Fed is committed to buying the entire $1.25 trillion allotted for its direct mortgage-backed security program by the end of March 2010. 

These security purchases by the Fed have been hugely supportive of lower mortgage interest rates.  (The following maybe a bit technical for some - but bear with me - and please don't stop reading.)  The yield premium on Fannie Mae mortgage-backed securities paying 4.5% compared with the 10-year Treasury note (the assumed "riskless" rate of return) tightened to 0.668 percentage points last Thursday from 0.720 percentage points last Tuesday, according to Reuter's data.  When yield premiums tighten - mortgage rates move lower.  For comparison, the yield premium was around 1.863 percentage points last year prior to the initiation of the Fed's direct mortgage-backed security purchase program. 

The "so what" factor here is probably obvious to most - mortgage interest rates are almost certain to begin a move to higher levels as the Fed's direct purchase program draws to close.  Look for the pace of the upward move to be in direct, but opposite correlation to the number of dollars remaining in the central banks checkbook.  The fewer dollars rolling around in the bottom of the Fed's bucket - the more intense the upward pressure on mortgage interest rates will become.  Ultimately mortgage interest rates will once again reach their natural equilibrium point -- but until then -- the process of transition may be uncomfortable for those insistent upon trying to hope and wish rates to dramatically lower levels.   I'll keep you posted on the Fed's "burn rate" as this mortgage market friendly program fades into history.       

]]>Fri, 13 Nov 2009 05:49:09 -0800http://www.myvarefinance.net/1/post/2009/11/news-relating-to-va-streamline-refinance-rates.htmlTrading activity is thin this morning as investors await the results of this afternoon’s $16 billion sale of 30-year bonds by the Treasury Department.  This auction represents the last leg of a record-sized $81 billion three-part borrowing spree by Uncle Sam.  The Treasury sold $40 billion of 3-year notes on Monday and $25 billion of 10-year notes on Tuesday.  The 10-year sale drew decent demand while the 3-year note auction generated the strongest buyer appetite in more than 20 years.  One group of analysts is arguing the falling dollar will lure bargain shopping foreign investors in droves to today’s 30-year bond sale. The opposing camp is equally convinced that now that the Fed is no longer actively adding to their fixed-income portfolio, these longer-dated securities will likely require higher yields to attract the necessary capital. 

Everybody will be watching intently to see if demand steps up on its own.  If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed.  On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher. 

  In other news of the day – the government reported the number of workers filing new claims for jobless benefits dropped by 12,000 last week.  The four-week moving average of new claims, considered a better gauge of underlying trends, fell by 4,500 for the period.  During the latest week for which data is available (week ended October 24th) enrollment in extended benefits programs decreased by 28,240 while the Emergency Unemployment Compensation program enrollment rose by 22,400.  

Behind all this statistical mumbo-jumbo a story of very gradual improvement in the labor sector is beginning to emerge. Even so, it will likely be an extended period of time before the worst collapse in the labor sector since the Great Depression is declared officially over.  Recent economic improvement has to be sustained for many months for hiring to resume, as businesses first increase existing worker hours and bring on temporary workers before increasing payroll head count.  The majority of analysts firmly believe it will be well into the second-half of 2010 before the Labor Department’s headline nonfarm payroll report shows any meaningful gains.  Over the same time frame labor market data will tend to mute the development of upward pressure on mortgage interest rates emanating from other influences.]]>Wed, 21 Oct 2009 08:19:15 -0800http://www.myvarefinance.net/1/post/2009/10/news-affecting-va-streamline-refinances.htmlEquities are looking to extend yesterday’s losses in this morning’s pre-trading session. The data schedule is light today with no major releases scheduled to hit markets in the morning, although in the afternoon investors will eye the Fed’s Beige Book, a comprehensive, anecdotal report on economic conditions across all 12 Federal Reserve Districts.

Just before 7:00, the Dow is trading 47 points lower after shedding 5o points yesterday, putting the industrial led index just below the 10,000 threshold. S&P 500 futures are trading 5.7 points lower at 1,083.70.

As the dollar continues to rebound from 14-month lows, spot gold has fallen to $1,058.50 per troy ounce. The euro has once again failed to break past the key $1.50 level. 

In earnings, investors will be focusing on Q3 reports from Wells Fargo and Morgan Stanley, among others.

Key Events Today:

2:00 ― The Fed’s anecdotal summary of economic conditions, the Beige Book, should confirm broad improvement in the economy across most Federal Reserve districts. Growth is uneven between districts, however, and commercial real estate activity is suffering across the nation.

“The report is likely to emphasize that government aid has underpinned the recovery and that the prospect for strong growth once support is withdrawn remains uncertain,” said analysts from Nomura. 

The Beige Book from September 9 said the economy “continued to stabilize in July and August,” but officials noted that “labor market conditions remained weak across all Districts.”

4:30 ― Eric Rosengren, President of the Boston Fed, speaks on regulatory and monetary policy as he opens the bank’s annual Cape Cod economic conference in Chatham, Massachusetts. 

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