March 8, 2010
Market Comment
Mortgage bond prices continued to rebound higher last week, which pushed mortgage interest rates lower. Stock gains kept mortgage bonds relatively in check but many of the data releases were very bond friendly. The core PCE inflation reading was unchanged compared to the slight increase expected by analysts. Q4 revised productivity rose 6.9%, much better than expected. Higher productivity means a company can produce more with less input, helping to keep prices and thus inflation in check.
Rates fell about 1/8 of a discount point for the week.
Early in the week, expect stocks to factor into trading, with very little data on tap. The Treasury auctions will be the focus throughout the middle portion of the week. Strong foreign demand would likely help mortgage bonds. The jobless figures and retail sales data will be the focus for the end of the week.
Auctions
US Treasury bonds do not directly dictate fixed mortgage interest rate pricing, however they do have an indirect impact. Both Treasuries and mortgage bonds often track in the same direction but this is not always the case. There are many times that Treasuries and mortgage bonds move inversely.
Despite the overwhelming size of the US economy, foreign investors can still have an effect on moving the financial markets. When foreign economies struggle, foreign investors often purchase US based investments including mortgage bonds. This demand usually causes mortgage bond prices to rise and interest rates to fall. This flight to quality buying was one of the factors that helped mortgage interest rates to remain historically low in years past.
There is a real threat that continued global economic turmoil might keep foreign investors from purchasing mortgage bonds in the future. The Treasury auctions this week will be important in determining the current appetite of foreign investors for dollar denominated securities. If this week’s auctions are poorly bid, mortgage bond prices could fall, pressuring mortgage interest rates higher.
More Articles on: Foreign Demand, Interest Rate, Mortgage Bonds
March 4, 2010
Seller Trends: A bulk of the media’s attention is focused towards first-time homebuyers. But what about sales trends in Chicagoland? Regine Norgle of R. Hawthorne Group joins PERL Mortgage’s Matt Cochran to discuss sales trends — and ways in which real estate agents and mortgage consultants partner throughout the homebuying process.
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More Articles on: Matt Cochran, Mortgage podcast, R. Hawthorne Group, Regine Norgle, Sellers
March 1, 2010
Market Comment
Mortgage bond prices rebounded last week, pushing mortgage interest rates lower. The majority of the data came in bond friendly. Tuesday’s weaker than expected consumer confidence data helped mortgage interest rates improve. The Treasury auctions showed decent foreign demand. The gross domestic product price deflator component showed a smaller price increase than expected. Consumer spending component also came in weaker than expected. Existing home sales fell a surprising 7.1%, considerably weaker than the expected 1% increase.
Rates fell about 3/4 of a discount point for the week.
The employment report Friday morning will take center stage this week. Until then, look for the PCE inflation data to set the tone for the beginning of the week and the ADP employment report to set the tone for the mid portion of the week.
Fundamental Week
The abundance of fundamental data this week provides a good opportunity for mortgages to improve. If the data shows weakness in the economy with little or no inflationary pressures then it is possible for mortgage bonds to rally resulting in mortgage interest rate decreases. However, if the data shows that the economy is rebounding or any significant signs of inflation, mortgage bonds may fall, pushing mortgage interest rates higher.
Mortgage interest rates remain favorable. Now is a great time to avoid the uncertainty surrounding continued market fluctuation.
More Articles on: Inflation, Interest Rate, Mortgage Bonds
February 22, 2010
Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. The bond market took a hit as inflation concerns emerged after the stronger than expected producer price index data. Producer prices surged in January amid higher energy costs to almost double expectations. The Fed made a surprise rate hike to the discount rate that also resulted in mortgage rate increases. The only positive was the tame consumer inflation reading Friday morning, but we were unable to rebound from the earlier losses.
Unfortunately, rates rose over a full discount point for the week.
This Tuesday’s consumer confidence data will set the tone for trading this week. New home sales, weekly jobless claims, and the gross domestic product data may also move the financial markets. The Treasury will auction $118B in 2/5/7-year notes starting Tuesday. The additional supply may cause interest rate fluctuation.
Fed Action Causes Uncertainty
The Federal Reserve caught market participants by surprise with their 25 basis point discount rate hike last week. While analysts were split on whether the Fed would raise rates this year, that question has now been answered. The move resulted in fluctuation in most of the US financial markets.
The discount rate is the interest rate charged to commercial banks on loans they receive from the Fed. The rate hike is an effort to pull back the aid provided by extraordinary low rates amid the global economic decline. The Fed specifically noted the move was needed “in light of continued improvement in financial market conditions.” Many analysts noted the earlier warnings from Fed Bernanke that rate hikes were coming but very few, if any, expected the move this soon.
While the rate hike resulted in mortgage bond price weakness in the short-term, the long-term outlook is less certain. Most analysts believe inflation remains in check, but at the same time the Fed purchasing of MBS will soon be over. A cautious approach to “float” and “lock” decisions is prudent, given current market conditions.
More Articles on: Fed, Interest Rate, Mortgage Bonds
February 21, 2010
Lincoln Park, River West and Rogers Park: Ryan Stavros, agent with Jameson Real Estate, joins Barry Schwartz, mortgage consultant at PERL Mortgage, to discuss trends in inventory and sales prices in Chicago’s Lincoln Park, River West and Rogers Park neighborhoods.
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More Articles on: Barry Schwartz, Jameson, lincoln park, river west, rogers park, ryan stavros
Market Comment
