This is a much lighter week for economic data compared to last
week's schedule but there are still some very important releases.
We have a large supply of 10 year and 30 year Treasuries that
will be auctioned off as well as a lot of "talking Fed's" this week
with Fed Chair Janet Yellen testifying before Congress Tuesday and Wednesday.
We will also hear from Evens, Stein, Tarullo and Bullard.
We have just a few economic reports that have the gravitas to
actually move pricing. These include ISM Servicing, Non-Farm Productivity and
Wholesale Inventories.
But once again....the "Teflon Bond Market" is all
about overseas.
Across the pond: Shockingly, Russia and Ukraine did not
magically become friends over the weekend and this will continue to provide
fantastic support for your pricing. This morning, MBS are up even more due to
weaker than expected economic data out of China.
TODAY'S EVENTS
|
|||
|
|||
MBS OVERVIEW -LEARN
FROM THE PAST
Mortgage backed securities (MBS) gained +46 basis points (BPS) from last
Friday's close which caused 30 year fixed mortgage rates to move lower from
the prior week. The market saw the lowest rates on Friday and the highest
rates on Tuesday.
As a refresher for you - when the economy and labor market
expands, long term bonds suffer which is why you see interest rates rise when
you see strong economic growth. And that is perfectly natural. You can't have
a growing economy AND low rates at the same time under normal circumstances.
But that is exactly what we have right now. Last week's economic data was
very, very strong.
16,912 Current homes available for sale in Houston Metro Area
11,582 Homes pending sale
21,046 Homes sold this year
On the housing front, Pending Home Sales were better than
expected (+3.4% vs estimates of +1.0%), and the Case-Shiller Home Price Index
showed a 12.9% gain in home prices over the past year. On the labor front,
ADP Private Payrolls were better than expected (220K vs estimates for 210K)
and the Non-Farm Payrolls was much stronger than market forecasts (288K vs
estimates for 210K) plus the past two months were revised upward. The
Unemployment Rate dropped to 6.3% but this was largely due to the
participation rate dropping as close to 1 million people said that they were
not looking for work any longer.
On the manufacturing front, Chicago PMI was very robust (63.0
vs est of 56.7), and ISM Manufacturing was hot with a reading of 54.9 (vs
estimates of 54.3). Our first look at the 1st QTR GDP was disappointing but
this number will be revised two more times and the market is largely
discounting the report due to the horrible weather that we had during that
period.
The Federal Reserve Open Market Committee voted to reduce
their monthly Treasury and Agency mortgage backed securities further..so that
means less demand and less support for long term bonds.
So....all of the above makes a wonderful text-book case for a
huge sell off in bonds and therefore a big run up in rates. But that is not
what happened. Why?
This is because of all of the headlines out of the
Ukraine/Russia conflict. Headlines of pro-Russian "civilian" forces
capturing administrative buildings, taking hostages, shooting down
helicopters and our weak sanctions against Russia are doing nothing to deter
them. This has foreign money flocking to U.S. bonds which is driving up
demand and therefore.....driving down interest rates.
|
Follow this BLOG daily for news regarding the Real Estate Industry, Interest Rate Advice, and Political Updates.
Monday, May 5, 2014
Cinco de Mayo Real Estate and Mortgage Updates
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment