Initial Jobless Claims Still Dismal

Initial Jobless Claims | Reported 365,000 | Est 370,000 | Prior 380,000 | MODEST

The Initial Jobless claims report was in-line with expectations.  This initially boosted bond prices benefiting mortgage rates.  We will need to be watching the stock market closely this week since there is and have been no substantial economic reports.  Mortgage Bonds will be reacting opposite stocks.

Mortgage Rates Predicitons | 5.7.08

 

The Fannie Mae Bonds +34bp on the day.  Rates should improve.

Conforming No Points & 1%

30 Fixed  6.125% | 5.875%

15 Fixed 5.625% | 5.375%

7/1 Arm 5.875% | 5.375%

5/1 Arm 5.625% | 5.125%

3/1 Arm 5.500% | 4.875%

30 Fixed FHA 6.000%

15 Fixed FHA 5.500%

Jumbo No Points & 1%

30 Fixed N/A | 7.125%

15 Fixed 6.875% | 6.250%

7/1 Arm 6.875% | 6.125%

5/1 Arm 6.500% | 5.875%

3/1 Arm 6.000% | 5.250%

1/1 Arm 6.875% | 5.000%

 

(This information has been compiled for Real Estate Professionals and is not intended for public distribution as it does not comply with REG Z Truth-In-Lending disclosure requirements.)

Feds Cut Rate coming soon…

FOMC Meeting | Reported [1:15pm Central] | ELEVATED

ADP Employment Report | Reported +10,000 | Est -55,000 | Prior 8,000 | MODEST

Employment Cost Index | Reported 0.7% | Est 0.8% | Prior 0.8% | ELEVATED

GDP | Reported 0.6% | Est 0.4% | Prior 0.6% | MODEST

GDP Chain Deflator | Reported 2.6% | Est 3.o% | Prior 2.4% | ELEVATED

Chicago PMI | Reported 48.3 | Est 48.5 | Prior 48.2 | ELEVATED

Crude Inventories | Reported [10:30E] | Prior 2,421,000 | MODEST

The markets appear to be anxiously awaiting the Feds Cut Rate announcement today.  The notoriously misleading ADP report came in much better than expectations signally job growth.  Friday we will see the real Employment Report to gauge the economy more accurately.  The employment cost index, GDP, and GDP Chain Deflator all come in better than the revised expectations.  GDP Chain Deflator is an important inflation index, so it coming in better than expectations is actually a good thing for Mortgage Backed Bonds.  If the Fed has decided to hold off on rate cuts because they believe the economy has shown signs of recovery, that will reassure bonds traders that inflation will not continue to be ignored and should be good for Mortgage Rates.

This is going to be a huge week for Mortgage Rates

This is going to be a huge week for mortgage rates.  The economic reports include consumer confidence tomorrow, the Fed meeting on Wednesday, PCE Thursday, and the Employment Report on Friday.  These are all ELEVATED market movers.  The Feds Cut Rate is expected to be lowered -.25% tomorrow.  It is also important to note that Traders will be anxiously deciphering the Feds statements to see if they hint to further Fed rate cuts.  The Feds rate cuts stimulate the economy and increase inflation, the enemy of mortgage bonds. 

Now would be a good time to lock in an interest rate ahead of all this upcoming volatility if the rate and program you want are available.  There is a good chance though that we see 30 fixed rates in the 5’s again by the end of this week.  In January, when rates dropped down to the low 5’s, they came and went quickly, so be prepared to lock.

Mortgage Rates for April 28th, 2008

30 Year Fixed/apr | 6.125%/6.225%

15 Year Fixed/apr | 5.625%/5.725%

3/1 Interest Only [1%]/apr | 5.125%/5.388%

5/1 Interest Only [1%]/apr | 5.375%/5.575%

7/1 Interest Only [1%]/apr | 5.625%/5.825%

Philly Fed Index dismal | Mortgage Backed Bonds still -16bp

Philly Fed Index | Reported -24.0 | Est -14.0 | Prior -17.4 | ELEVATED

The Philadelphia Fed Index is an important index that is current reflecting extreme contraction in the Manufacturing Sector.  For months almost every report has been signally a damaged economy.  This report unfortunately has not helped the bonds market.  Until the Stock Market steps into reality, I would still recommend LOCKING in this volatile market.

PPI strong and Mortgage Rates Suffer

Empire State Index | Reported 0.6% | Est -16.0 | Prior -22.2 | MODEST

Producer Price Index [PPI] | Reported 1.1% | Est 0.4% | Prior 0.3% | MODEST

Core PPI [CPPI] | Reported 0.2% | Est 0.2% | Prior 0.5% | MODEST

Relatively-Hot PPI numbers reported due to the highest fuel  and food prices in 17 years.  The Core-PPI was at expectations of .2%.  The Empire State Survey was still weak, but better than expectations… and as usually the Bond Market reacted negatively -53bp currently. 

Tomorrow the very important Consumer Price Index will be reported.  CPI and Core CPI are significant inflation measures that could force the Mortgage Bond market below the solid support of both the 50 and 100 day moving averages.  The next level of support is the 200 day moving average -133bp below.  This could push mortgage rates up to the mid 6’s again, even with perfect credit.  With this risk and the rumored continued tightening of mortgage insurance companies coming in the near future, if you have an approval, I’d lock it.

Mortgage Rates Predictions | 30 Fixed 5.625% 15 Fixed 5.375% FHA 5.500%

 

The US Trade deficit was significantly wider than expectations this morning.  Even with the Initial Jobless claims beating expectations, the Fannie Mae Mortgage Backed Securities are +12bp currently.  We ended the day yesterday with about +26bp so long term mortgage rates have seen some benefit.  The credit tightening has shown no signs of letting up in regards to mortgage lending.  United Guarantee [the Mortgage Insurance Company] sent notification yesterday that they will be making major overhauls to their mortgage insurance guidelines.  All of St. Louis will now be considered a declining market, limiting loan to values [LTV] to 90%.  They require a 680 credit score for conventional loans to $417,000.  Also, they will no longer insure cash out, A-Minus, Limited Doc, Second Homes, Condos, Investment Properties, Arms, and will require 5% down payment from the buyers own funds [no gifts or grants].  Let’s hope everyone doesn’t follow suit with this overreaction.  I recommend locking and closing if you are in a position to.

30 Fixed/apr | 5.625%/5.725%

15 Fixed/apr | 5.375%/5.475%

FHA/apr | 5.5%/5.95%

 

Grau Perspective | 30F 5.750% 7/1A[Int Only] 5.375%

Chicago PMI | Reported 48.2 | Est 46.7 | Prior 44.5 | ELEVATED

The Chicago Purchasing Managers Index for March reported above estimates.  The survey results signal more economic restraint and concern about the health of the economy.  Mortgage Bonds have not reacted much to the news, currently we are +3bp on the day.  Henry Paulson the Treasury Secretary is currently speaking about more mortgage reform and regulation requirements for our industry.   This week is full of ELEVATED economic reports.  Hold on to your hats!

ISM Index | Reported [Tue 4.1] | Est 48.2 | Prior 48.3 | ELEVATED

ADP Employment Report | Reported [Wed 4.2] | Est -23,000 | Prior -23,000 | ELEVATED

Crude Inventories | Reported [Wed 4.2] | Prior 88,000 | MODEST

Initial Jobless Claims | Reported [Thu 4.3] | Est 360,000 | Prior 366,000 | MODEST

ISM Services Index | Reported [Thu 4.3] | Est 49.2 | Prior 49.3 | MODEST

Unemployment Rate | Reported [Fri 4.4] | Est 5.0% | Prior 4.8% | ELEVATED

Hourly Earnings | Reported [Fri 4.4] | Est 0.3% | Prior 0.3% | ELEVATED

Average Work Week | Reported [Fri 4.4] | Est 33.7 | Prior 33.7 | ELEVATED

Non-Farm Payroll | Reported [Fri 4.4] | Est -40,000 | Prior -63,000 | ELEVATED

Grau Perspective | 3/20 | 30F 5.625% 15F 5.125%

 

Yesterday, Fannie and Freddie were given the OK to lend out another $200 billion in mortgages.  This is a good thing for the mortgage market.  With the Fed giving $200 billion of liquidity last week to ”upgrage” mortgage backed securities and $200 billion to the largest buyers of mortgages yesterday, hopefully some of the mortgage liquidity concerns will be eased.  Now we need investors to figure out how much risk premium really needs to be charged for average credit scores, low equity, adjustable rates, jumbo loan amounts, 2nd liens, or limited documentation.  Until home values stabilize I expect to see continued additional tightening in any “risk” category.

Today the Initial Jobless Claims, LEI, and Philadelphia Fed Index were reported.  The Jobless Claims came in at 378,000 implying that a recession may already be here.  The Philly Fed Index was -17.4.  That’s not good, but better than expectations.  The LEI met expectations at -0.3%.  LEI is an Index of Indexes and not really a market mover.  The bond market closed at 2:00pm today and is closed tomorrow for Good Friday.  It should be nice to take a breather and prepare for next week.  This market is not for the faint of heart. 

Upcoming Economic Reports for March 24 - 28th

Existing Home Sales | Reported [3.24] | Est 4,860,000 | Prior 4,900,000 | MODEST

Consumer Confidence | Reported [3.25] | Est 75.0 | Prior 75.0 | MODEST

Durable Goods | Reported [3.26] | Est 1.0% | Prior -5.3% | MODEST

New Home Sales | Reported [3.26] | Est 580,000 | Prior 588,000 | MODEST

Crude Inventories | Reported [3.26] | MODEST

GDP | Reported [3.27] | Est 0.6% | Prior 0.6% | MODEST

GPD Chain Deflator | Reported [3.27] | Est 2.7% | Prior 2.7% | MODEST

Initial Jobless Claims | Reported [3.27] | MODEST

Personal Consumption YOY | Reported [3.28] | Prior 2.2% | ELEVATED

Personal Income | Reported [3.28] | Est 0.3% | Prior 0.3% | MODEST

Personal Spending | Reported [3.28] | Est 0.2% | Prior 0.4% | MODEST

Personal Consumption FEB | Reported [3.28] | Est 0.3% | Prior 0.2% | ELEVATED

Consumer Sentiment | Reported [3.28] | Est 71.0 | Prior 70.5 | MODEST

grau team wrap-up | 30F 6.000% 15F 5.250%

 

What a week for the mortgage market!  The good news - since the inflation numbers came out flat today, we can almost guarantee a -.75% Feds Rate cut on Tuesday March 18th.  This should at least give some stability to the market.  So much has happened this week, I am going to have to finish the “wrap-up” over the weekend.  Have a great weekend!

30 Fixed/apr | 6.000%/6.100%

15 Fixed/apr | 5.250%/5.350% 

 

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