CHM Blog

Daily Market Analysis

Stock indexes higher in early trade, the 10 yr. note holding at 2.40% at 9:00 am AM ET.

At 6:00 AM this morning the NFIB small business index shot a lot higher than forecasts. Optimism among small business owners is surging, according to the National Federation of Independent Business (NFIB), whose Small Business Optimism Index rose 3.7 points in November to 107.5, the highest level since November 2004. The monthly jump in small business sentiment beat analysts’ forecasts with 8 out of the 10 components of the index rising, led by a 16-point gain in expected better business conditions to 48 and an increase of 13 points to 34 in sales expectations. On employment, job creation plans rose 6 points to 24, and while job openings declined by 5 points to 30, it was still the third most positive among the components. Hiring plans soared in construction, manufacturing and professional services, according to the NFIB.

At 8:30 November PPI; up 0.4% as expected, the core ex-food and energy +0.3% against 0.2% forecasts. PPI ex-food and energy and trade services +0.4% with markets looking for 0.2%. Yr./yr. PPI +3.1% up from 2.8% in October; yr./yr. core PPI +2.4% unchanged from October. Yr./yr. less food, energy and trade services +2.4% up from 2.3% in October. Overall inflation in wholesale prices a little higher than what was expected; tomorrow’s November CPI carries more significance, if CPI data exceeds forecasts inflation concerns will flare (overall expected +0.4%, core +0.2%).

At 1:00, Treasury will sell $12B of the 30s, re-opening the issue from November. Yesterday, the 10 yr. auction was soft compared to recent history.

At 2:00 this afternoon, Treasury will release its budget data for November; the monthly deficit spending is thought to be -$134B after October’s -$63.2B.

The FOMC meeting begins today; nothing until tomorrow afternoon at 2:00 when we get the policy statement. Markets fully expect the Fed will increase the Federal Funds rate to 1.50% from 1.25%. More interesting will be the policy statement in terms of gleaning what the FOMC thinks about inflation, economic growth, the tax cuts, and additional increases in 2018. Janet Yellen’s press conference also a major factor tomorrow. She has one more FOMC meeting at the end of January before she leaves in February. Jerome Powell, a current Fed governor, will replace her as Fed chief.

10 yr. at a critical technical level at 2.40% this morning; actually holding well, with stocks running higher and the stronger PPI data earlier this morning. Our key 9-day RSI is presently negative, but so far holding. Tomorrow’s FOMC policy statement and the anticipated increase in the Federal Funds rate dominating.

Bitcoin continues to increase, up $600 more this morning. Most being interviewed on news media are so roaring about it: there are forecasts of $30K, $40K and even hearing $100K soon. It is what it is, but I worry. Back in the 1600s global stock markets were on fire, investors could not get enough to salve their appetites. They looked for anything to increase profits and somehow landed on tulips (plant bulbs). The mania likely about how it is now for Bitcoin; it was the end of the stock market ascent and the world entered a deep recession. Is Bitcoin another tulip mania?

PRICES @ 10:00 AM

10 yr note: -2/32 (6 bp) 2.40% +0.5 bp

5 yr note: -2/32 (6 bp) 2.17% +1 bp

2 Yr note: -1/32 (3 bp) 1.84% +1 bp

30 yr bond: -7/32 (22 bp) 2.79% +1 bp

Libor Rates: 1 mo 1.459%; 3 mo 1.563; 6 mo 1.735%; 1 yr 1.201%

30 yr FNMA 3.5 Jan: @9:30 102.47 -9 bp (-18 bp from 9:30 yesterday)

15 yr FNMA 3.0: @9:30 101.90 -1 bp (-13 bp from 9:30 yesterday)

30 yr GNMA 3.5: @9:30 103.52 -6 bp (-15 bp from 9:30 yesterday)

Dollar/Yen: 113.58 +0.02 yen

Dollar/Euro: $1.1744 -$0.0026

Dollar Index: 94.07 +0.14 (97 a key technical level)

Gold: $1242.30 -$4.60

Crude Oil: $57.76 -$0.23

DJIA: 24,474.80 +88.77

NASDAQ: 6868.40 -6.68

S&P 500: 2661.30 +1.31

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 12th, 2017 8:56 AM
Rates At a Glance
Mortgage Rates
Currently Trending
7 Day Mortgage
Rate Forecast
This Week's
Potential Volatility

Neutral

Neutral

Average
(by Sigma Research)
Realtor Report

Home Equity Continues to Climb

According to the newly released CoreLogic Q3 2017 Home Equity Analysis, homeowners with mortgages (roughly 63 percent of all homeowners) have collectively seen their equity increase 11.8 percent year over year, representing a gain of $870.6 billion since Q3 2016.

Additionally, homeowners gained an average of $14,888 in home equity between Q3 2016 and Q3 2017. Western states led the increase, while no state experienced a decrease. Washington homeowners gaining an average of approximately $40,000 in home equity and California homeowners gaining an average of approximately $37,000 in home equity.

“Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years,” said Dr. Frank Nothaft, chief economist for CoreLogic. “This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”

Negative equity, often referred to as being “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both.

“While homeowner equity is rising nationally, there are wide disparities by geography,” said Frank Martell, president and CEO of CoreLogic. “Hot markets like San Francisco, Seattle and Denver boast very high levels of increased home equity. However, some markets are lagging behind due to weaker economies or lingering effects from the great recession. These include large markets such as Miami, Las Vegas and Chicago, but also many small- and medium-sized markets such as Scranton, Pa. and Akron, Ohio.”

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways to slightly higher so far today.  Last week the MBS market improved by +18 bps.  This may've moved mortgage rates slightly lower last week.  Mortgage rates continue to trade in a very tight range.

This Week's Rate Forecast: Neutral

Three Things: These three areas have the greatest ability to impact mortgage rates this week: 1) Fed 2) Tax Reform and 3) Domestic.

1) Fed: Our Federal Reserve Open Market Committee (FOMC) begins two days of meetings on Tuesday and will culminate Wednesday afternoon with their policy statement and interest rate decision. But they will also release their revised economic projections (famous dot-plot chart) and will be followed up with a live press conference with Janet Yellen. While all markets widely expect a 1/4 point rate hike, the bond markets will be focusing on their future rate hike projections (dot plot chart) to see if the consensus among the Fed is 2 or 4 rate hikes next year.

2) Tax Reform: The bond market continues to put a low-probability on Tax Reform getting done by the end of the year. And if it is done, markets believe many of the most stimulative measures will be watered down to get the bill out of reconciliation. Any announced agreements/changes to the Tax Bill will have a significant impact on mortgage rates.

3) Domestic: We have a big week for economic releases outside of the Fed. Retail Sales will take center stage, and Core CPI (YOY) will get a lot of attention.

Treasury Auctions This Week:

  • 12/11 3 year Note, 10-year note
  • 12/12 30 year Bond

This Week's Potential Volatility: Average

We're not looking for too much rate volatility until potentially Wednesday when the Fed meets. Of course, any news on tax reform, positive or negative, can push mortgage rates around.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 11th, 2017 1:16 PM
Daily Market Analysis

Quiet this morning in very early trade. The rate markets a little better, stock indexes generally unchanged at 7:30 AM ET.

This week has a number of key issues; tax cut bill progress, treasury auctions, Bitcoin trading, inflation data; AND the FOMC on Wednesday. The Fed is widely expected to increase the Federal Funds rate on Wednesday by 0.25% taking it to 1.50%.

Bitcoin futures eased back from an initial surge of almost 22% to trade up 13% on Monday, in an eagerly awaited U.S. market debut that backers hope will confer greater legitimacy on the volatile cryptocurrency and lead to its wider use. The January contract up 13% while the February contract was up 18%. Given the volatility of the coin, the margin rates are 30% to 35% compared to 3 and 4% for most futures. Gains or losses in bitcoin trading will be paid or received in dollars, not coins.

Tax cuts—some headlines: In the Senate version, investors would lose the ability to choose which shares they can sell to reduce a position. Instead, investors selling partial stakes in a company would have to unload their oldest shares first, a process known as selling on a “first-in, first-out” basis. Some concern that before the end of the year if that stays in the bill, investors may sell stocks to avoid that. It doesn’t pertain to the firms that manage mutual funds and exchange-traded funds—only to their individual clients. This one likely to be changed as the two bills merge into one; according to Congressional leaders and Pres. Trump, by the end of this year. Recent surveys imply the normal everyday consumer believes that the tax bill won’t help them and only help the “rich.”

The FOMC meeting is more about the policy statement than the anticipated increase in the Federal Funds rate. How the statement is phrased, markets will look for clues about what may be expected in 2018. The next meeting after this one is at the end of January. That will be the last for Yellen and there is no press conference scheduled as of yet.

Nothing has changed from a technical perspective. As long as the 10 is between 2.30% and 2.40% our models and most all market momentum oscillators will remain in neutral conditions. Whether or not the bond market at the long end (mortgages) depends on the tax cuts and how equity market move between now and when a tax bill emerges and how investors’ continued penchant to bet on economic growth keep climbing. Short-term rates have increased, but with little to no inflation increase and the need to protect other investments, the 10s and 30s will hold well. Later this afternoon, $20B of 10s will be auctioned by Treasury.

This Week’s Calendar:

  • Monday
    •  10:00 am JOLTS November job openings, expected at 6.10 mil from 6.093 mil in October (as reported 5.996 mil)
    • 11:30 am $24B 3 yr. note auction
    • 1:00 pm $20B 10 yr. note auction, re-open of 10 issued in November
  • Tuesday
    • 7:00 am NFIB small business optimism (104.02 from 103.80)
    • 8:30 am November PPI (+0.4%, core +0.2%)
    • 10:00 am FOMC meeting begins
    • 1:00 pm $12B 30 yr. bond auction, re-open of 30 issued in November
    • 2:00 pm November Treasury budget (-$134B)
  • Wednesday
    • 7:00 am weekly MBA mortgage applications
    • 8:30 am November CPI (+0.4%, core +0.2%)
    • 2:00 pm FOMC policy statement
    • 2:30 pm Janet Yellen press conference
  • Thursday
    • 8:30 am weekly jobless claims (239K +3K) November retail sales (+0.3%, ex autos +0.7%) November export and import prices (exports +0.3%, imports +0.7%)
    • 10:00 am October business inventories (-0.1%)
  • Friday
    • 8:30 am December Empire Sate manufacturing index (-0.1 from 19.4)
    • 9:15 am November industrial production and capacity utilization (production +0.3%, manufacturing index +0.3%; capacity utilization 77.2% from 77.0% in Oct)

PRICES @ 10:10 AM

10 yr note: +3/32 (9 bp) 2.37% unch

5 yr note: -1/32 (3 bp) 2.14% unch

2 Yr note: unch 1.80% unch

30 yr bond: +12/32 (37 bp) 2.75% -2 bp

Libor Rates: 1 mo 1.444%; 3 mo 1.548%; 6 mo 1.792%; 1 yr 2.010%

30 yr FNMA 3.5 Dec: @9:30 102.77 -5 bp (-14 bp from 9:30 Friday)

15 yr FNMA 3.0: @9:30 102.03 -5 bp (-1 bp from 9:30 Friday)

30 yr GNMA 3.5: @9:30 103.67 -5 bp (-17 bp from 9:03 Friday)

Dollar/Yen: 113.33 -0.14 yen

Dollar/Euro: $1.1805 +$0.0032

Dollar Index: 93.79 -0.13

Gold: $1249.60 +$1.20

Crude Oil: $57.60 +$0.24

DJIA: 24,359.74 +30.58

NASDAQ: 6859.62 +19.54

S&P 500: 2656.26 +4.76

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 11th, 2017 9:42 AM
Daily Market Analysis

November employment data didn’t disappoint from the perspective that the data is usually well off from forecasts. The unemployment rate did remain unchanged at 4.1%; that was expected. NFP jobs were expected 190K, as reported +228K, private jobs were thought to be 184K, as reported +221K. Manufacturing jobs thought to be +20K increased 31K. Average hourly earnings were believed to be up 0.3%, as reported +0.2%; yr./yr. earnings expected +2.6%, as reported +2.5%. The labor participation rate unchanged from October at 62.7%. Looking at revisions in the report; October NFP jobs revised lower from 261K to 244K, private jobs in October revised to 247K from 252K originally, October average hourly earnings was revised from 0.0% to -0.1%. Employment growth has averaged 174,000 jobs per month this year, down from the average monthly gain of 187,000 in 2016.

Initial market reaction sent the US stock indexes higher: the DJIA based, on the knee-jerk, was up 120 points; NASDAQ +50, S&P +14. 10 yr at 8:45 2.38% +1 bp; Fannie 3.5 30 yr coupon -2 bps.

At 10:00 AM ET, U. of Michigan consumer sentiment mid-month read, expected at 98.8 from 98.5 in November; as reported, 96.8. October trade inventories declined -0.5% with forecasts of -0.1%. Inventories had been increasing but -0.5% will be a negative component for the Atlanta Fed GDPNow that will be updated later today.

Unemployment at 4.1%; lots of talk from Republicans that the coming tax cuts will add more jobs, may be one of those conundrums. Companies may want to hire, but it is looking like there won’t be qualified workers: job openings are near a record high. Most economists don’t believe that will be the case though—the same economists who still can’t explain why inflation is not increasing. Average hourly earnings were +0.2%, but not 0.3% as forecast, and October, originally reported 0.0%, was revised today to -0.1%. Yr./yr. average hourly earnings at 2.5% is historically low.

This, as you know, is Dec 8th, 17 days until Christmas. Over these 17 days, the Fed will increase the Federal Funds rate next Wednesday. Congress passed a temporary increase in the debt ceiling today that will expire on the 22nd of December that falls on a Friday, then has to agree on a detailed and lasting increase that won’t be a rubber stamp. Democrats want something to ease the plight of the DACA immigrants who are presently in limbo among other things that may be attached to any budget extension. Republicans are pushing for $54B more in defense funding per year. Democrats want to ensure a comparable increase for nondefense spending. Those are the second-string events, although both are important to markets. The obvious major focus is the tax bill that many continue to believe will be signed by the president by Christmas. The House voted to move its bill to conference; the Senate still hasn’t. Once the bill gets to a conference committee, the differences between the two versions must be ironed out. Not willing to suggest it won’t get done, but the history of Congress and its slow movement on issues doesn’t bode well.

Treasuries and mortgage rates remain in narrow ranges; the 10 at 2.36% unchanged from yesterday. In the face of more jobs and rock-hard beliefs that the potential tax cuts will grow the economy….and the belief inflation in wages is about to happen after three years of little inflation and not much in wages. Markets are anticipatory vehicles. Most of what we read or hear is very optimistic: higher wages, economic growth exceeding 3.0% to 4.0%, companies repatriating back to the US, global markets set to take off. Anything of a contrary view is ignored. All that, and no increases in long-dated Treasuries and MBSs.

PRICES @ 10:00 AM

10 yr note: -2/32 (6 bp) 2.37% +0.5 bp

5 yr note: +1/32 (3 bp) 2.13% unch

2 Yr note: unch 1.80% unch

30 yr bond: -5/32 (15 bp) 2.77% +1 bp

Libor Rates: 1 mo 1.431%; 3 mo 1.536%; 6 mo 1.722%; 1 yr 1.997%

30 yr FNMA 3.5 Dec: @9:30 102.89 +2 bp (-4 bp from 9:30 yesterday)

15 yr FNMA 3.0: @9:30 102.04 +5 bp (+4 bp from 9:30 yesterday)

30 yr GNMA 3.5: @9:30 103.84 +5 bp (+2 bp from 9:30 yesterday)

Dollar/Yen: 113.30 +0.22 yen

Dollar/Euro: $1.1754 -$0.0019

Dollar Index: 93.89 +0.14

Gold: $1252.10 -$1.00

Crude Oil: $57.41 +$0.72

DJIA: 24,265.66 +54.18

NASDAQ: 6859.74 +46.90

S&P 500: 2647.11 +10.13

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 8th, 2017 9:12 AM
Daily Market Analysis

Overnight, the 10 yr. note yield held well after declining to its resistance yesterday at 2.32%. This morning in very early activity trading unchanged at 2.33%; MBS prices at 8:30 AM ET +5 bps from yesterday’s closing price.

Jobless claims no longer as much of an issue as it was for years, but still deserve a look. Despite an unexpected uptick for Puerto Rico, initial jobless claims fell 2,000 in the December 2 week to a lower-than-expected 236,000. The 4-week average is down less than a thousand to a 241,000 level that remains about 10,000 above the month-ago trend and, though low, nevertheless points to less strength for tomorrow's monthly employment report.

The November JOLTS layoffs increased to 35,038 from 29,831 in October. This is the highest total in seven months and, though still at a historically low level, does hint at softer-than-expected results for tomorrow's monthly employment report. Health care had the highest total for a second month, with services and computer products also showing sizable totals.

Nobel Prize winner Richard Thaler, of the University of Chicago Booth School of Business, talking today about the tax cuts being debated. He believes the package will increase inequality and opportunities for tax avoidance. “If we concede that one of our greatest problems is rising inequality, a tax reform that has the primary effect of increasing inequality seems to be misguided.” His main concern is the part of the package that deals with “pass-through” businesses; taxes on pass-through companies’ income (sub S corps and partnerships) are paid by owners in their individual returns and are currently higher than corporate taxes. He worries lawyers will work a way around paying taxes. His concerns, though, won’t sway Republicans.

Trump’s decision to move the US embassy to Jerusalem is increasing mid-east tensions. The Islamist group Hamas urged Palestinians to abandon peace efforts and launch a new uprising against Israel in response to President Trump's recognition of Jerusalem as its capital. US and global markets not reacting to the change yet; it will take two or three years to make it happen. In the meantime, the Trump administration is asking Palestinians and Israeli officials to restrain their reactions. Three of the great monotheistic faiths: Judaism, Christianity, and Islam have sites of great religious significance there.

Although stock indexes opened generally flat, there is little reason to believe a major decline is coming as long as markets believe a tax cut bill will be worked out and signed by President Trump. Republicans remain confident (at least to the press) that they will have a completed bill by Christmas, now 18 days away.

Yesterday, the 10 yr. tested and failed to push through its technical resistance at 2.32%. To have that happen, stock indexes have to experience selling whether on tax cut worries or some kind of unexpected event (a Black Swan). Not expecting either now, but we doubt any significant price improvements are ahead. The November employment data out tomorrow should keep markets tame today.

PRICES @ 10:00 AM

10 yr note: +4/32 (12 bp) 2.327% -0.4 bp

5 yr note: +1/32 (3 bp) 2.12% unch

2 Yr note: unch 1.80% unch

30 yr bond: +19/32 (59 bp) 2.70% -2.5 bp

Libor Rates: 1 mo 1.406%; 3 mo 1.522%; 6 mo 1.714%; 1 yr 1.988%

30 yr FNMA 3.5 Dec: @9:30 102.92 +5 bp (+1 bp from 9:30 yesterday)

15 yr FNMA 3.0: @9:30 102.00 +1 bp (+3 bp from 9:30 yesterday)

30 yr GNMA 3.5: @9:30 103.83 +13 bp (+13 bp from 9:30 yesterday)

Dollar/Yen: 112.68 +0.39 yen

Dollar/Euro: $1.1793 -$0.0004

Dollar Index: 93.67 +0.15

Gold: $1256.70 -$9.40

Crude Oil: $56.38 +$0.42

DJIA: 24,184.20 +43.29

NASDAQ: 6791.87 +15.49

S&P 500: 2631.00 +1.73

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 7th, 2017 9:23 AM
Daily Market Analysis

All global stock markets were lower today: the US key indexes before they opened at 9:30 AM ET were lower, but not much. Yesterday, stock indexes ended weaker, but also not a huge amount of price declines. Trading in the MBS market early had Fannie 3.5 coupon +13 bps from yesterday’s close. Tax cuts are moving forward; the fly in the ointment now is the alternative minimum tax (AMT) for businesses; the Senate has it in its bill, the House doesn’t. Businesses rebelling and want it dropped. Most continue to believe there will be a bill for Trump to sign before the end of the year.

ADP November private jobs were +190K in line with forecasts; no revision in October at +235K. Friday, the BLS will release the November employment data; current forecasts call for unemployment unchanged from October at 4.1%, NFP job growth 185K, private job growth 183K, average hourly earnings +0.3% after being flat in October.

Q3 revised productivity +3.0% with estimates calling for +3.3%; Q3 unit labor costs expected +0.2% declined 0.2%. The weakness in unit labor costs adds to the idea that inflation isn’t likely to increase soon. Underscoring the weakness in wages is a downward revision to second-quarter labor costs from a 0.3% gain to a 1.2% decline. Second-quarter productivity growth holds at 1.5%. Real compensation growth in the third quarter, that is adjusted for inflation, is now at plus 0.7%, down from an initial rise of 1.5%.

Trump will officially announce today that the US will move its embassy from Tel Aviv to Jerusalem. Not going to sit well with Palestinians or other Arab countries. Pope Francis called for the city’s “status quo” to be respected, saying new tension in the Middle East would further inflame world conflicts.

Tax cuts are a done deal; not totally resolved, but will be. Republicans can’t let this fail; Democrats won’t vote for it. Republicans in U.S. House of Representatives began staking out their positions on final tax legislation, days ahead of talks with the Senate. The proposals are estimated to increase the federal deficit by nearly $1.5 trillion over 10 years and touch just about every aspect of the current system. Let me make a point here: the deficit is projected to increase $1.5 trillion as expected now, but that isn’t what the deficit will total. US annual deficits continue to increase each year, and even with an expected increase in economic growth and better wages, it is unlikely the annual deficits will ebb (-$655 in 2017, -$550B in 2016. (Total debt outstanding at the end of 2017 $20 trillion).

US rates lower today, driven by rate declines in Europe, particularly in Germany, where its 10 yr. bund at 0.29% is making a new low going back to mid-June. US Treasuries following.

The 10 is now back to the bottom of its months-long range at 2.32%; any improvements in the rate find resistance at that level, on the upside 2.40%. No trend, but keeping rates very stable since Mid-October.

PRICES @ 10:10 AM

10 yr note: +10/32 (31 bp) 2.32% -3 bp

5 yr note: +6/32 (18 bp) 2.10% -5 bp

2 Yr note: +2/32 (6 bp) 1.80% -3 bp

30 yr bond: +20/32 (62 bp) 2.70% -4 bp

Libor Rates: 1 mo 1.403%; 3 mo 1.515%; 6 mo 1.711%; 1 yr 1.989%

30 yr FNMA 3.5 Dec: @9:30 102.92 +14 bp (+29 bp from 9:30 yesterday)

15 yr FNMA 3.0: @9:30 101.97 +3 bp (+11 bp from 9:30 yesterday)

30 yr GNMA 3.5: @9:30 103.70 +9 bp (+9 bp from 9:30 yesterday)

Dollar/Yen: 112.28 -0.58 yen

Dollar/Euro: $1.1793 -$0.0032

Dollar Index: 93.49 +0.17

Gold: $1267.50 +$2.60

Crude Oil: $56.67 -$0.95

DJIA: 24,169.43 -11.21

NASDAQ: 6772.30 +10.09

S&P 500: 2630.58 +1.01

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 6th, 2017 9:46 AM
Daily Market Analysis

Slightly softer on the open this morning in the bond and mortgage markets, but still hardly any change in mortgage rates now for over two months while the equity market runs higher (DJIA).

Yesterday the Senate tax bill came under fire from technology, banking and other industries. The Senate on Saturday decided to keep a corporate alternative minimum tax, or AMT, a move that gave the senators $40B over a decade to use on other priorities, according to the official estimate. The corporate AMT is a parallel system with low rates and fewer breaks that kicks in if a variety of tax breaks bring a firm’s regular tax bill too low. “With a proposed 20% corporate rate, many companies could end up in the AMT—and lose some of their tax breaks in the process.” (WSJ). The tax bills into conference negotiations that will square the House and Senate bills that will end in a bill that Trump will sign; the path has been extremely smooth and quick so far, rather surprising given the importance of the tax overall being debated.

The October US trade deficit increased more than forecasts at -$48.7B with estimates at -$347.4B. The increase is a drag on Q4 GDP, but it’s an October report, so we have November and December yet to be accounted for in GDP analysis. Net exports get off to a weak start, comes in much deeper than expected and well beyond September's revised $44.9B. Exports, at $195.9B in the month, failed to improve, while imports, at $244.6B, rose a steep 1.6%.

At 10:00 am, November ISM services sector index expected at 59.0 from 60.1 in October dropped to 57.4 but still strong. The October read at 60.1 was the best going back to 2004; this takes a little wind from the sails. On the release, the DJIA lost most of its gain but the NASDAQ after opening -6 did improve.

The Bank for International Settlements (BIS) recently commented that the increases in US interest rates by the Fed don’t appear to have cooled financial markets and may not, therefore, be having much impact on the U.S. economy. The bank saying four increases in short-term policy interest rates since the end of 2015, asset prices suggest that investors are just as willing to take on risk as before, if not more so. Central bank rate increases are accompanied by an increase in broader borrowing costs for households and businesses. Equity prices usually fall or at least stall, again making it more costly for businesses to borrow. But the BIS said that hasn’t happened yet. US stock indexes have no limits on how high investors are willing to go in search of gains; there will be a cost to pay eventually, but from what levels is the ultimate concern.

Still trapped in narrow ranges, the bond and mortgage markets holding well; very little change in rates for two months. Tax cuts are driving stock indexes to new highs as investors toss risk out the window presently. Our technical analysis continues to be neutral, with balanced buying and selling keeping long-term rates stable. With little concerns about inflation driving rates higher, savvy investors foreign and domestic still willing to use the 10 and 30 yr. note and bond as a hedge against the climbing indexes that many now believe are headed for a fall. The view that any day stocks will fall has been with markets for weeks but so far, it’s up, up and away.

PRICES @ 10:00 AM

10 yr note: -2/32 (6 bp) 2.38% +0.5 bp

5 yr note: -3/32 (9 bp) 2.16% +2 bp

2 Yr note: -1/32 (3 bp) 1.83% +1 bp

30 yr bond: +3/32 (9 bp) 2.76% -0.5 bp

Libor Rates: 1 mo 1.391%; 3 mo 1.508%; 6 mo 1.693%; 1 yr 1.981%

30 yr FNMA 3.5 Dec: @9:30 102.64 -5 bp (+5 bp from 9:30 yesterday)

15 yr FNMA 3.0: @9:30 101.86 -1 bp (+1 bp from 9:30 Yesterday)

30 yr GNMA 3.5: @9:30 103.61 -3 bp (+9 bp from 9:30 yesterday)

Dollar/Yen: 112.76 +0.25 yen

Dollar/Euro: $1.1833 -$0.0029

Dollar Index: 93.34 +0.26

Gold: $1269.60 -$8.10

Crude Oil: $57.53 +$0.06

DJIA: 24,292.40 +2.35

NASDAQ: 6815.79 +40.43

S&P 500: 2642.18 +2.74

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 5th, 2017 9:34 AM
Rates At a Glance
Mortgage Rates
Currently Trending
7 Day Mortgage
Rate Forecast
This Week's
Potential Volatility

Neutral

Neutral

High
(by Sigma Research)
Realtor Report

Pending Home Sales Best Since June:

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October. The index is now at its highest reading since June (110.0).

Lawrence Yun, NAR chief economist, says pending sales in October were primarily driven higher by a big jump in the South, which saw a nice bounce back after hurricane-related disruptions in September. “Last month's solid increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven months,” he said. “Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market.”

According to Yun, the supply and affordability headwinds seen most of the year have not abated this fall. Although homebuilders are doing their best to ramp up production of single-family homes amidst ongoing labor and cost challenges, overall activity still drastically lags demand. Further exacerbating the inventory scarcity is the fact that homeowners are staying in their homes longer. NAR's 2017 Profile of Home Buyers and Sellers – released last month – revealed that homeowners typically stayed in their home for 10 years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling.

“Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 19991,” said Yun. “Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.”

With two months of data remaining for the year, Yun forecasts for existing-home sales to finish at around 5.52 million, which is an increase of 1.3 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market worsened by -14bps.  This may've moved mortgage rates slightly higher last week. Mortgage rate volatility has really picked up the last few days.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Jobs, 2) Geopolitical and 3) Across the Pond

1) Jobs: We have a slew of wage and jobs related data this week with the market focus primarily on Friday's Non-Farm Payrolls and Average Hourly Wages YOY. The stronger these data points are, the worse it is for mortgage rates, the weaker this data is - the better it will be for rates.

  • 12/05 - ISM Services - Employment Index
  • 12/06 - ADP Private Payrolls, Unit Labor Costs
  • 12/07 - Challenger Grey Job Cuts, Initial Jobless Claims
  • 12/08 - Non-Farm Payrolls, Unemployment Rate, Participation Rate, Average Hourly Wages.

2) Geopolitical: There will be plenty of drama this week. Now that the Senate has passed their form of the Tax Bill, it must be reconciled with the House version. The final Bill that emerges out of that process could be different than what the markets expect. For example, the corporate tax rate could end up being 22 or 23 percent instead of the 20% rate passed by the Senate. The final Bill that is put forth for the President's signature will drive markets. Of course, the Michael Flynn/FBI vs Trump saga will get plenty of press and attention by the markets as well.

3) Across the Pond: We have an important week for international events that can impact the bond markets and mortgage rates. Both Canada and Australia have Central Bank meetings and interest rate decisions. Brexit is front and center with Great Britain and Ireland already hammering out border agreements, and Prime Minister May will be meeting with key EU leadership on finalizing the financial penalty for their leaving the EU.

We also get some significant economic releases from the worlds' largest economies.

  • China: Caixin Services PMI, Imports and Exports
  • Japan: Consumer Confidence, GDP
  • Eurozone: PPI, Retail Sales, Non-Monetary Policy ECB Meeting

This Week's Potential Volatility: High

As noted above, mortgage rate volatility has picked up the last few days. We have a lot on the table this week that could push rates out of a relatively tight channel. Expect continued increased mortgage rate volatility.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 4th, 2017 2:43 PM
Daily Market Analysis

This is a key week for markets. On Saturday morning, the Senate passed its tax cut package as was widely expected. The next step is for the conference committee to iron out the differences between the House version and what the Senate pulled together; then to full votes in both the House and Senate. No Democrat in the Senate will vote for the bill, mostly political. There are some key differences between the two versions, but likely we will have a bill signed by the president before the end of the year. Before the beginning of the tax cut bills, we expected a little more debate and worried a bill was unlikely to pass this calendar year; two weeks passed between the day the House Ways and Means Committee unveiled its tax plan and the day the full House passed the measure. On the Senate side, 23 days passed between unveiling details of a tax plan and passage. Very rapid for any Congress. The last major tax overhaul in the mid-1980s took about 18 months to get it passed.

The government will run out of money to pay bills next Saturday morning. The Congress is working on an extension that will last only until the 22nd of December; then a more lasting spending bill will have to be passed. Not to worry, no politician regardless of the party affiliation wants a government shutdown.

This is employment week: November employment report out on Friday; generally increases volatility. Wages remain an important component in the employment data; current estimates for average hourly earnings in November +0.3% after no increase in October, annual average hourly earnings thought to be +2.6% and up from 2.4% in October. (calendar below has the complete details).

The bond and mortgage markets remain in tight ranges even as stocks increase. Foreign buyers presently driving equity indexes higher. Back in 2012, foreign stock buyers retreated from heavy US buying, but recently they are back pushing indexes ever higher. In a sense rather surprising in that the tax cuts have been widely expected within markets; most times when markets front run a major event like a tax cut, the benefits are mostly baked into current levels. This time, not the case; the key indexes appear to have no end to how high they will increase. Tax cuts are the keystone, but also the strength of the present economy is adding to the euphoria in equity markets. The most recent Atlanta Fed GDP forecast for Q4 was a growth rate of 3.5%. If that holds as the data continues to flow, the economy would have increased from 3.3% in Q3.

The long end of the curve continues to impress, holding at low levels within tight ranges for mortgage rates. A week from Wednesday, the FOMC meeting and another rate increase in the Federal Funds rate. The Fed will increase the rate, there is little debate now. Next year still a toss-up, but presently the consensus is the Fed will move three more times.

This Week’s Calendar:

  • Today
    • 10:00 am October factory orders were expected down 0.4%, as released down 0.1%
  • Tuesday
    • 8:30 am October US trade deficit (-$47.1B)
    • 10:00 am November ISM Services sector index (59.0 from 60.1)
  • Wednesday
    • 7:00 am weekly MBA mortgage applications
    • 8:15 am November ADP private jobs (+192K from +235K in October)
    • 8:30 am Q3 productivity and unit labor costs, 2nd look (productivity +3.3% from +3.0% on the preliminary report; unit labor costs +0.2% down from 0.5% on the preliminary)
  • Thursday
    • 8:30 am weekly jobless claims (240K from 2389K last week)
    • 3:00 pm October consumer credit (+$17.0B from $20.8B in Sept)
  • Friday
    • 8:30 am November employment data (Unemployment 4.1% unch from October, NFP jobs +185K, private jobs +183K, manufacturing jobs +20K, average hourly earnings +0.3% yr./yr. +2.6%)
    • 10:00 am October wholesale inventories (-0.1%) Final November U. of Michigan consumer sentiment index (98.8 from 98.5)

PRICES @ 10:15 AM

10 yr note: -8/32 (25 bp) 2.39% +3 bp

5 yr note: -6/32 (18 bp) 2.15% +3 bp

2 Yr note: -3/32 (9 bp) 1.81% +3 bp

30 yr bond: -18/32 (56 bp) 2.79% +3 bp

Libor Rates: 1 mo 1.379%; 3 mo 1.494%; 6 mo 1.674%; 1 yr 1.960%

30 yr FNMA 3.5 Dec: @9:30 102.58 -8 bp (-2 bp from 9:30 Friday)

15 yr FNMA 3.0: @9:30 101.85 -6 bp (-1 bp from 9:30 Friday)

30 yr GNMA 3.5: @9:30 103.52 +5 bp (-1 bp from 9:30 Friday)

Dollar/Yen: 112.84 +0.60 yen

Dollar/Euro: $1.1836 -$0.0061

Dollar Index: 93.22 -0.11

Gold: $1277.30 -$5.00

Crude Oil: $57.59 -$0.77

DJIA: 24,514.69 +283.10

NASDAQ: 6846.54 -1.05

S&P 500: 2659.83 +17.61

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 4th, 2017 9:28 AM
Daily Market Analysis

The day started with interest rates slightly higher, MBS prices a little lower. Stock indexes: there is no stopping them—early this morning in the futures markets, the DJIA up over 100 points and moving closer to 24K.

At 8:30, October personal income was a little better than forecasts, up 0.4% against +0.3%; personal spending though +0.3% in line with estimates. Spending dropped from +0.9% in September. The PCE (personal consumption expenditures) a more significant data point: as expected +0.1%; yr./yr. PCE +1.6% stronger than 1.5% estimate. The core PCE +0.2% as thought, and yr./yr. core +1.4%. PCE is the Fed’s preferred inflation read and remains soft compared to the Fed’s 2.0% goal that now even the Fed is beginning to question as unattainable in the near term. Same in Europe and Japan; those central bankers are also looking for 2.0% inflation that has eluded economists now for almost three years. Media, though, sounding alarms that the level of inflation may have bottomed; even though core PCE is at 1.4% and up from 1.3% in September, and August inflation remains well below 2.0%.

Also at 8:30, weekly jobless claims remain generally stable, -2K to 238K, the 4-week average at 242.25K from 240K the prior week. Weekly claims these days don’t carry much significance with traders; at 4.0% unemployment claims have ended their climbs and have been mostly unchanged for weeks after the roiling over the summer hurricanes.

At 9:45 the November Chicago purchasing managers’ index, expected at 63.5 increased to 63.9 from 66.2 in September. Tomorrow the national ISM manufacturing index forecast is at 58.4 from 58.7 in October.

OPEC and non-OPEC oil producers meeting today and expected to extend output cuts until the end of 2018 to finish clearing a global glut of crude while signaling they could exit the deal earlier if the market overheats. The cutbacks to 1.8 million barrels/day was due to expire in March 2018.

Today may be the day the Senate votes on its tax plan if Republicans can be assured of the necessary votes to pass. If not, there will be no vote. Still discussing corporate tax cuts that were slated at 20%, a new proposal suggested cutting the corporate rate to 22 percent instead of 20 percent in an effort to fund extra support for working families in the overhaul. Is it a huge deal, taking 2.0% away from the goal of 20%? Lobbyists think so, given remarks that less generous cuts would also unsettle companies. Deficit concerns among a couple of Republican Senators who want a trigger mechanism that would automatically reverse some cuts if assumptions about how they would generate sufficient economic growth to “pay for themselves” turned out to be over-optimistic. The plan calls for permanent cuts.

Technically speaking, the 10 moved from its resistance at 2.32% on Tuesday to now at its near-term technical support at 2.40%. The last month the 10 yr. has stayed between 2.32% and 2.40% and has kept mortgage rates flat the last month. Inflation today (October PCE) is still not close to the Fed’s target, but markets remain convinced the Fed will raise its Federal Funds rate at the December meeting in about two weeks. The short end of the yield curve (2s thru 5s) have moved higher in anticipation of the increase. The long end (mortgages) focusing more on the lack of inflation and haven’t increased.

PRICES @ 10:00 AM

10 yr note: +1/32 (3 bp) 2.39% +0.3 bp

5 yr note: unch 2.10% unch

2 Yr note: -1/32 (3 bp) 1.77% +1 bp

30 yr bond: +2/32 (6 bp) 2.82% unch

Libor Rates: 1 mo 1.360%; 3 mo 1.480%; 6 mo 1.660%; 1 yr 1.944%

30 yr FNMA 3.5 Dec: @9:30 102.66 -3 bp (+2 bp from 9:30 yesterday)

15 yr FNMA 3.0: @9:30 101.94 -2 bp (-2 bp from 9:30 yesterday)

30 yr GNMA 3.5: @9:30 103.56 -2 bp (+4 bp from 9:30 yesterday)

Dollar/Yen: 111.95 +0.02 yen

Dollar/Euro: $1.1906 +$0.0056

Dollar Index: 92.97 -0.29

Gold: $1283.50 -$2.70

Crude Oil: $57.67 +$0.37

DJIA: 24,060.89 +120.21

NASDAQ: 6851.49 +27.10

S&P 500: 2637.76 +11.69

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 1st, 2017 8:40 AM

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