Archive for Money Market
Bond Market Review and Forecast – for Week Ending 01/08/10
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There was no strong data indicating a reason to believe in an economic recovery in 2010, and mortgage rates ended a little better last week.
Construction Spending for November fell -0.6% worse than expected, continuing to support the notion that any real growth is still a long ways off.
Factory Orders came in at 1.1% increase, double the expectation, and greater than the October reading of 0.6. The durable goods portion was relatively flat, with just a slight decrease from October.
Minutes from last FOMC meeting showed an uneasy feeling of when the purchasing of Mortgage backed securities should end. The purchasing of mortgage backed securities by the Fed has been largely attributed with keeping mortgage interest rates low. The report did maintain that inflation is still tame, and the recovery will be gradual.
Initial Jobless claims showed an increase of 1,000 to 434,000, which was less than expected.
Decembers Unemployment Rate came in at 10%; however, November was revised to show a gain of 4,000. The pace of people no longer counted in the unemployment rate is growing steadily. The continued weakness in employment is giving people hope that the Fed will not increase interest rates soon.
Today is the only day this week without any economic news scheduled for release. The most important data doesn’t report until Thursday.
The U.S. trade balance reports on Tuesday with an expected deficit of $34.8 billion for November from $32.9 billion in October. Don’t expect this number to cause much fan fare.
The Federal Reserve’s Beige book, details economic conditions throughout the U.S by region, will be posted on Wednesday. The Fed puts a lot of weight on the findings during it’s FOMC meetings. Any unexpected news will have a large impact on the financial market and mortgage rates.
There is a Treasury auction scheduled for Wednesday and Thursday. If the auctions are met with strong demand we could see a slight improvement in mortgage rates. I see investors appetite for long-term US securities waning, which will lead to slightly higher rates.
December retail sales will be released on Thursday the expectation is 0.4%, versus the 1.3% gain in November. Strong retail sales growth is important to an economic recovery, thus better than expected numbers will lead to pressure on Treasuries that would probably carry over to mortgage rates. Initial jobless claims for the week of January 09 will be released on Thursday. The estimate is for a 430,000 new claims.
Consumer Price Index (CPI) from December reports on Friday, estimates are for a 0.2% increase versus 0.4% in November. The Core CPI, eliminating food and energy from CPI, is expected to rise 0.1% from 0% in November.
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Bond Market Review and Forecast – for Week Ending 01/01
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Last week was pretty ugly for mortgage rates with positive economic data, and not so strong demand for all of the government’s treasury auctions.
Case-Shiller HPI for October declined 7.3% for the 20 city index, slightly better than estimates. Overall the number was described as flat with only 7 of the 20 cities showing a month-to-month increase. This is about 9 months of improving numbers, the fear is that this may begin a second decrease in the index; with the current consistent Fed policy this is not something to worry about.
Consumer Confidence for December, came in at 52.9, just slightly below the expectations of 53. The economy is considered to be on solid ground with a reading of 90, not contracting or expanding, 100 would indicate economic growth.
Chicago PMI (Purchasing Managers Index) for December, came in at 60, considerably higher than the estimate of 55, and November’s 56.1. Reinforcing the fact that we are starting to see some growth.
Jobless Claims for the week of 12/26 fell to 432,000 much better than the estimate of 460,000, which would have been an increase. This is the lowest weekly number since July 2008. The increasing employment points to an improving economy, and inflation.
Monday we have the ISM Index (Institute for Supply Management), estimates call for 54.0, which would be an increase from November of 53.6. The slight increase called for in the forecast are probably not enough to move the market. The higher the number the worse for mortgage rates, as it shows the manufacturing sector strengthening.
Construction Spending for November, estimates call for a -0.5%, worse the flat reading in October. No real weight will be put into this number until we see some strong growth, even then the number is not considered to have much impact on the market.
Tuesday kicks off with Factory Orders expected to increase by 0.5%, less than Octobers 0.6%. Not much to see here unless we see a large revision to durable goods portion.
Wednesday we will have the release of the minutes from the last FOMC meeting. This will give us a glimpse into the Fed’s thoughts on inflations and monetary policy.
Thursday will bring the initial Jobless claim, estimates call from 445,000. A fear is that the Holiday’s and weather may have skewed the numbers, meaning the number should have been worse than reported. The market has been extremely focused on this number as of late. If the number is lower it will put some pressure on Treasuries, but the traders could wait for Friday’s full report for December.
Friday will bring the release of December’s Unemployment Rate, forecasts call from a rise to 10.1%. If we see a worse number this will move the market, and cause better mortgage rates.
If we get as analysts expect to a net job gain of zero, we would have a strong psychological effect causing the stock market to risk and mortgage market to get worse.
Keep in mind positive economic data generally causes money to flow from Bonds and into Stocks, causing Bonds and home loan rates to worsen, and negative economic data will have the opposite result.
With the economy starting to show signs of expanding, don’t expect mortgage rates to stay low for long. For your personalize rate quote just complete the box to the right.
Bond Market Review and Forecast – for Week Ending 12/25
Posted by: | CommentsThis last week ended up being more of a ride than initially expected. The 10 year treasury closed at a four year high of 3.8%.
The final revision of 3rd quarter GDP was revised down to 2.2% from 2.8% from the 1st revision. This number was actually worse than expected so there was a slight improvement in mortgage rates.
Existing Home sales rose to 7.4% for an annual rate of 6.54 million units. Obviously, a large portion of this increase can be attributed to First Time Homebuyers wanting to take advantage of the tax credit, since it was originally scheduled to end in November.
Personal Income rose 0.4% the best since April, spending rose 0.2%, less than the increase seen in October. The lackluster report helped reassure bond traders that inflation is still a ways off.
University of Michigan’s Final consumer Sentiment fell to 72.5 from 73.4 two weeks earlier, although it did rise during the month, from November’s 67.4. This is 22% above last December. Much of the gain can be attributed to consumer’s opinion of the economy in general as compared to their own finances.
This week brings another shortened holiday week for trading. Trading volume is likely to be extremely low this final week of the year, which could lead to wild swings if any data points to large variances over what was predicted. While the economic data scheduled for release this week is fairly light, there are treasury auctions which can show general demand for bonds.
The first report comes out on Tuesday is Case-Shiller HPI (Home Price Index) for October. This generally has very little effect. It is expected to show home prices declined 7.45%, which is far better than the 9.36% decline reported in September. Keep in mind this index is only for the 20 largest metropolitan areas, so Indianapolis is not included.
Then the Consumer Confidence for December, the estimate calls for 53, last month gave us a reading of 49.5. If the value comes in above 54, look for a slight move in the market. The move in treasuries would be caused by consumers spending more which would help move the economy out of its slump.
Wednesday brings us the Chicago PMI (Purchasing Managers Index) for December. This typically has very little market moving value; however, it is sometimes looked at as preview of what will come from the ISM Manufacturing survey (Institute for Supply Management Manufacturing Survey). With this being the last week of the year, and a shortened trading session, this report could potentially move the market. The estimate calls for a report of 55, with last months coming in at 56.1. Market equilibrium is based off a reading of 50, so anything above 50 shows the market expanding. An item to keep a close watch on is the one two punch of Healthcare Reform (very likely to pass shortly) and Cap and Trade, which could prolong the recession or even deepen it for the next ten years.
The biggest market mover is to be released on Thursday Jobless Claims for the week of 12/26. The estimate calls for new claims to reach 460,000, where it was 452,000 during last release. The bigger item will be release next Friday, aggregating the data for the month of December.
Bond Market Review and Forecast – for Week Ending 12/11
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There was little economic news early last week, but releases on Thursday and Friday kept selling pressure on and yields, which move in the opposite direction of prices, on the high side.
When the markets closed Thursday, the 10-year yield was at 3.50% — a four-week high. Monday was an up-and-down day on Wall Street, which sent some investors to bonds. And Tuesday, after a wobbly start, bonds gained traction as the equity markets slid. A successful auction and mounting questions about an economic recovery sent yields down.
Wednesday’s report on October wholesale inventories had little impact. They rose 0.3% versus a 0.8% decline in September. Earlier in the day Treasuries benefited from safe-haven buying on a debt rating downgrade for Greece, but the problem was resolved and selling prior to the 10-year auction sent yields back up.
Thursday began with first- time unemployment claims jumping by 17,000 to 474,000. But the four-week average fell for the 14thstraight week, hitting 473,000. Continued claims also dropped to 5.157 million.
The data had no lasting effect on Treasuries, which sold prior to the 30-year auction, and sold more heavily due to soft demand for long-term debt. This followed a poorly bid 10-year note auction on Wednesday, creating concern regarding demand and the budget deficit.
Strong November retail sales in November pushed Treasury yields higher. They rose 1.3%, when a 0.6% gain was predicted. Ex-autos, they were up 1.2%. November sales were up 1.9% from one year ago. Separately, the University of Michigan preliminary consumer sentiment survey for December jumped to 73.4, the highest since September. The index rose to 69.3 from 67.4 two weeks ago, sending the yield on the 10-year note to 3.56 — its highest level since August.
In other news, the U.S. trade deficit narrowed in October. It declined to $32.9 billion from $36.5 billion. Business inventories in October rose 0.2%.
The Mortgage Bankers Association reported an increase in applications for the week ended Dec. 4, in spite of a slight uptick in rates. Purchase applications rose 4.0%, while refis jumped 11.1%.
If the economists are right about the indicators due this week, it could be a tough one for Treasuries. Predictions for almost every report indicate that the economy is getting back on track, which would ignite more selling in 10-year notes. But the reports will fall by the wayside if the Federal Reserve, which meets Wednesday, indicates in any way that it is considering a rate hike. No one expects that, but traders will hold their collective breaths until the statement is read.
Tuesday’s November producer price index, which looks for wholesale inflation, should rise 0.9%, which would be leap past October’s 0.3% increase. And the more-important core rate should rise 0.2% versus a 0.6% decline in October.
Wednesday’s consumer price index, which looks at inflation at the retail level, might also indicate rising prices. But the more important core rate should only creep up 0.1% versus a 0.3% gain in October.
Although the Fed has repeatedly said it will control inflation, should there be any signs, traders are a wary bunch. Inflation robs fixed assets of their value over time.
Tuesday also should show an increase in industrial production for November. It’s predicted to rise 0.6% — much more than the previous 0.1% increase. And capacity utilization could step up to 71.7% from 70.7%.
Wednesday also features housing starts/building permits for November. Starts are expected to rise to an annual rate of 575,000 units from 529,000 units, while permits should jump to an annual rate of 570,000 from 552,000. Big numbers like this could signal a turnaround.
Thursday’s reports begin with the totally unpredictable first-time jobless claims for the week ended Dec. 12. The outlook for leading economic indicators in November is not as iffy. Analysts expect a 0.7% increase versus a 0.3% increase in October. This would indicate better economic times ahead.
The final report comes from the Philadelphia Federal Reserve Bank. Known as the Philly Fed index on manufacturing conditions, it queries manufacturers regarding their outlook on business conditions. This month’s results should find a 16.5 reading, which is just short of the 16.7 posted in November.
Bond Market Review and Forecast – for Week Ending 11/20
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U.S. Treasuries did well last week, thanks to a big rally the previous Friday, some weaker-than-expected economic reports and a little safe-haven buying. The yield on the benchmark 10-year note held below 3.35% most of the week — at least 10 basis points lower than the week before — but ticked up slightly on Friday.
Retail sales for October kicked off a big week of reports, with sales jumping 1.4% thanks to strong demand for cars. Excluding autos, sales rose by only 0.2%. And an unexpectedly huge drop in the NY Empire State manufacturing index for November gave bonds a boost. It plunged to 23.51 from 34.57.
Fed chairman Ben Bernanke gave further support to bonds when he stated that “significant economic challenges remain,” but he added that he saw moderate growth with subdued inflation.
Tuesday’s reports were also bond friendly, with the producer price index finding no signs of wholesale inflation. In fact, the core rate, which eliminates food and energy prices, fell 0.6%. In addition, industrial production in October slowed, rising only 0.1%. Capacity utilization edged up to 70.7% from 70.5% but missed expectations.
Wednesday’s disappointing report on housing starts and building permits gave traders another reason to buy. Starts fell 10.6% to an annual rate of 529,000 units from 592,000, making October starts the worst since April. Building permits fell 4% to an annual rate of 575,000.
The October consumer price index, or CPI, which checks for wholesale inflation, put some pressure on Treasuries. The CPI rose 0.3% when 0.2% was expected, and the core rate also exceeded estimates, rising 0.2%. But losses were offset by weak housing starts
Thursday began with first-time jobless claims for the week ended Nov. 14 coming in flat at 505,000, while the four-week average hit its lowest level in almost a year. Continuing claims edged down to 5.611 million from 5.650 million.
The Philly Fed index on Mid-Atlantic manufacturing conditions for November jumped to 16.7, the fourth straight gain and its highest reading since June 2007. But the index of leading economic indicators, which looks at future economic conditions, rose only 0.3% when economists expected a 1% increase. Nevertheless, it’s risen for seven consecutive months.
In spite of low mortgage rates, purchase applications fell for the sixth straight week, according to the Mortgage Bankers Association. Purchase apps were down 7.9% while refis dipped 1.4%.
This week will be short and wild with most of the eight-plus reports coming out Tuesday and Wednesday.
Monday’s existing home sales for October is expected to show sales rising to an annual rate of 5.65 million units versus September’s 5.57 million. This could spawn selling in Treasuries, but if Tuesday’s preliminary revision on 3rdquarter GDP is true, they’ll recapture losses. Revised 3.0% growth is expected — significantly lower than the advance 3.5% increase. If the loss is greater, Treasuries will rally.
Tuesday also brings the November consumer confidence index, which can move markets. But a 47.5 reading versus 47.7 in October is expected. This would be a non-event, but if it comes in lower, buying in Treasuries probably will increase. A couple of home price indices are likely to show continuing price erosion.
On Wednesday initial claims could fall below 500,000 — or not. Whenever they do, bonds won’t take kindly to that. Separately, personal income and spending are both expected to rise for October. Income should be up 0.2% from 0.0% while spending is expected to increase 0.5% from 0.5%. But the core PCE, which is a key inflation gauge, should only rise 0.1% — same as last month.
October durable goods orders should increase 0.5%; that’s less than the previous month, but excluding transportation, they could rise 1.0% — a tad more than the 0.9% in September. And October new home sales are predicted to increase to an annual rate of 414,000 from 402,000.
The University of Michigan’s final consumer sentiment survey for November can influence trading, but if it comes in on target, there will be little reaction. It’s expected to rise to 66.5 from 66.0.
Reports that meet expectations generally don’t rile the markets. It’s when there’s a big miss — either up or down — that gets buyers and sellers busy.
