Mortgage Rates Hold Steady Despite Dow 10,000
Posted 10-15-2009 at 08:39 AM by VictorBurek
After opening lower in price which resulted in mortgage rates moving higher yesterday, the prices of mortgage backed securities held relatively stable throughout the trading day despite a large rally in stocks. Contributing to the large rally in equities was better than expected earnings from JP Morgan and Intel and better than expected retail sales numbers. The better than expected earnings reports continue today with Goldman Sachs reported a much larger than expected profit for quarter 3 and Citigroup beating estimates with a smaller loss; however, the stock market is poised for a lower open today.
Today is the busiest day of the week for economic data. First to hit the wires this morning is the weekly jobless claims. This report gives a weekly total of the number of Americans that filed for first time unemployment benefits in the prior week. As part of this report we get continuing claims which totals the number of Americans that continue to file due to lack of finding a new job. Since our economy is driven by consumer spending, higher unemployment generally benefits the bond market while equities tend to rally with better than expected numbers. If more people are working, there will be more money to be spent into the economy which helps to drive corporate profits. Recent reports have shown jobless claims improving but they remain stubbornly high as many companies have still not started to increase their labor force.
The U.S. Department of Labor reported that first time claims for unemployment benefits continue to improve beating estimates with 514,000 claims(520k expected). This is the lowest level of claims since January of this year. Last week’s numbers were revised slightly higher from 521,000 to 524,000. The continuing claims posted a weekly decline as well falling from 6.040 million to 5.99 million. The number of Americans that have used up their benefits and are now receiving extended benefits increased to 3.8million from 3.79million. The improving jobless claims are pointing to a better monthly jobs report which we get in a couple weeks.
Next report gives us a reading on inflation with the Consumer Price Index. This data measures the average price change of a fixed basket of goods and services purchased by consumers. The report indicates that inflation is still of no concern today. The headline reading posted a monthly rise of 0.2% matching expectations while the core reading which strips out food and energy due to their volatility also came in at 0.2% slightly higher than the 0.1% expected. On a year over year basis, overall consumer prices are down 1.3% indicating that inflation is still at bay which should allow the Fed to maintain their current accommodative stance with the Fed fund rate.
The Federal Reserve Bank of New York released their monthly Empire State Manufacturing Survey. This report is a survey of 175 manufacturers in New York on their opinion of the strength of business conditions. The report shows that manufactures from the state of New York see conditions improving dramatically beating economists’ expectations. Last month’s report came in at 18.88 which was the highest reading since November of 2007 but this report blew that away coming in at 34.57 which is the best reading since 2004!!
The final report on the day gives us a measure on the strength of business conditions in the Philadelphia region. This data has also shown conditions improving over the last few months but economists’ surveyed are expecting a slight set back to this month’s report. The report indicates that conditions have taken a step backward coming in lower than expected hinting that the economic recovery will be slow and gradual. Following the release, MBS have moved off the lows of the day.
After the closing bell, Treasury Secretary Timothy Geithner will be participating in economic forum hosted by The Economist at PACE University. Any time he speaks market participants pay attention for any clues as to his opinion of future economic conditions and regulations.
Following the release of all the data, MBS continue to be under pressure to move lower in price. Today’s data with the exception of the Philly survey does point to an improving economy leading some to believe that we are set for a quick V shaped recovery. Others believe that we are doomed for a W recovery where the economy worsens before the final recovery takes hold. While others believe we are set for a long slow economic recovery. What is your opinion?
Early reports from fellow mortgage professionals are indicating that lenders rate sheets are worse today. The par 30 year conventional rate mortgage does remain in the 4.875% to 5.125% range for the best qualified consumers. In order to secure a par rate you must have a FICO score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. As always, you can elect to pay less in fees and take a higher interest rate. That is a good option for consumers that do not plan on keeping their home for many years.
Floating remains risky at this point. If you are going to continue to float, keep an eye on the stock market. If equities start to move higher, it will probably be at the expense of fixed income which will pressure lenders to worsen rates. Lenders rate sheets this morning are not as ugly as we might have expected with the losses suffered this morning. So any further declines to MBS and lenders may be swift to reprice for the worse. Additionally, we have a couple economic reports tomorrow that have the potential to affect the markets, Industrial Production and Consumer Sentiment. Better than expected numbers will keep the pressure on MBS and increase the likelihood of higher mortgage rates.
Today is the busiest day of the week for economic data. First to hit the wires this morning is the weekly jobless claims. This report gives a weekly total of the number of Americans that filed for first time unemployment benefits in the prior week. As part of this report we get continuing claims which totals the number of Americans that continue to file due to lack of finding a new job. Since our economy is driven by consumer spending, higher unemployment generally benefits the bond market while equities tend to rally with better than expected numbers. If more people are working, there will be more money to be spent into the economy which helps to drive corporate profits. Recent reports have shown jobless claims improving but they remain stubbornly high as many companies have still not started to increase their labor force.
The U.S. Department of Labor reported that first time claims for unemployment benefits continue to improve beating estimates with 514,000 claims(520k expected). This is the lowest level of claims since January of this year. Last week’s numbers were revised slightly higher from 521,000 to 524,000. The continuing claims posted a weekly decline as well falling from 6.040 million to 5.99 million. The number of Americans that have used up their benefits and are now receiving extended benefits increased to 3.8million from 3.79million. The improving jobless claims are pointing to a better monthly jobs report which we get in a couple weeks.
Next report gives us a reading on inflation with the Consumer Price Index. This data measures the average price change of a fixed basket of goods and services purchased by consumers. The report indicates that inflation is still of no concern today. The headline reading posted a monthly rise of 0.2% matching expectations while the core reading which strips out food and energy due to their volatility also came in at 0.2% slightly higher than the 0.1% expected. On a year over year basis, overall consumer prices are down 1.3% indicating that inflation is still at bay which should allow the Fed to maintain their current accommodative stance with the Fed fund rate.
The Federal Reserve Bank of New York released their monthly Empire State Manufacturing Survey. This report is a survey of 175 manufacturers in New York on their opinion of the strength of business conditions. The report shows that manufactures from the state of New York see conditions improving dramatically beating economists’ expectations. Last month’s report came in at 18.88 which was the highest reading since November of 2007 but this report blew that away coming in at 34.57 which is the best reading since 2004!!
The final report on the day gives us a measure on the strength of business conditions in the Philadelphia region. This data has also shown conditions improving over the last few months but economists’ surveyed are expecting a slight set back to this month’s report. The report indicates that conditions have taken a step backward coming in lower than expected hinting that the economic recovery will be slow and gradual. Following the release, MBS have moved off the lows of the day.
After the closing bell, Treasury Secretary Timothy Geithner will be participating in economic forum hosted by The Economist at PACE University. Any time he speaks market participants pay attention for any clues as to his opinion of future economic conditions and regulations.
Following the release of all the data, MBS continue to be under pressure to move lower in price. Today’s data with the exception of the Philly survey does point to an improving economy leading some to believe that we are set for a quick V shaped recovery. Others believe that we are doomed for a W recovery where the economy worsens before the final recovery takes hold. While others believe we are set for a long slow economic recovery. What is your opinion?
Early reports from fellow mortgage professionals are indicating that lenders rate sheets are worse today. The par 30 year conventional rate mortgage does remain in the 4.875% to 5.125% range for the best qualified consumers. In order to secure a par rate you must have a FICO score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. As always, you can elect to pay less in fees and take a higher interest rate. That is a good option for consumers that do not plan on keeping their home for many years.
Floating remains risky at this point. If you are going to continue to float, keep an eye on the stock market. If equities start to move higher, it will probably be at the expense of fixed income which will pressure lenders to worsen rates. Lenders rate sheets this morning are not as ugly as we might have expected with the losses suffered this morning. So any further declines to MBS and lenders may be swift to reprice for the worse. Additionally, we have a couple economic reports tomorrow that have the potential to affect the markets, Industrial Production and Consumer Sentiment. Better than expected numbers will keep the pressure on MBS and increase the likelihood of higher mortgage rates.
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