Current Price of FNMA 6.0% Bond: $98.38, -12bp
The June Jobs Report was as we expected, higher than anticipated at 132,000 new jobs being created – and another 75,000 new jobs were added via revisions to April and May. Bonds are moving lower, yet some of the damage was already “cooked in” after yesterday’s ADP report gave hint of a strong Jobs number today.
In other details from the Report, Average Hourly Earnings rose by 0.3% for a 12-month gain of 3.9%, and the Unemployment Rate remains at a low 4.5%. Overall, this report indicates a very healthy labor market – which gives the Fed continued reason to be concerned over “wage-based inflation”. This means that as employees are paid more – they have more money to spend on goods and services, which can drive prices of consumer products higher with the added demand. Additionally – employers that have to continually pay higher wages to their employees may have to raise the prices of their own goods and services, just to help retain their profit margins. This very real concern will keep the idea of a Fed rate cut on the back burner for now.
Technically, Bonds have now been pushed all the way back below the Falling Resistance Line, as we were concerned could happen. One positive note is that Bonds did bounce higher after hitting important support at $98.31 and are now being squeezed between the overhead Falling Resistance Line, and this support level just underfoot. It will be interesting to see who wins this battle – the Bulls or the Bears, especially in light of next week’s slim economic news calendar. The biggest report of interest (Retail Sales) does not arrive until Friday, and with no immediate catalyst to help drive Bond prices higher or help them fight back above the Falling Resistance Line – it appears the tone may be negative for Bonds in the near term.
Showing posts with label Mortgage market update. Show all posts
Showing posts with label Mortgage market update. Show all posts
Friday, July 6, 2007
Monday, June 18, 2007
Market Update - June 18, 2007
Current Price of FNMA 6.0% Bond: $98.59, -9bp
Mortgage Bonds are trading slightly lower, but off of the best levels of the day.
At 1:00pm ET, the National Association of Home Builders will release the Housing Market Index for June. The report measures housing market conditions by surveying buyer traffic through model homes, expectations for sales during the next six months, and builders’ sentiment on current sales. Lately, builder sentiment has trended lower and weakened with readings of 36 in March, 33 in April, and 30 in May. A reading below 50 indicates more builders view conditions as poor rather than good. Should this report come in a little weak, Mortgage Bonds may benefit. Tomorrow, a further view on the health of the Housing Sector takes place with the release of the Housing Starts and Building Permits report for May.
After bouncing 100 basis points higher since last Wednesday, Mortgage Bonds appear to be taking a breather. We want to be patient and see if Mortgage Bonds can shrug off the early morning losses, but if prices are unable to recover you might be hearing from us later today as we are seeing the early makings of a Bearish Dark Cloud Cover Pattern.
Mortgage Bonds are trading slightly lower, but off of the best levels of the day.
At 1:00pm ET, the National Association of Home Builders will release the Housing Market Index for June. The report measures housing market conditions by surveying buyer traffic through model homes, expectations for sales during the next six months, and builders’ sentiment on current sales. Lately, builder sentiment has trended lower and weakened with readings of 36 in March, 33 in April, and 30 in May. A reading below 50 indicates more builders view conditions as poor rather than good. Should this report come in a little weak, Mortgage Bonds may benefit. Tomorrow, a further view on the health of the Housing Sector takes place with the release of the Housing Starts and Building Permits report for May.
After bouncing 100 basis points higher since last Wednesday, Mortgage Bonds appear to be taking a breather. We want to be patient and see if Mortgage Bonds can shrug off the early morning losses, but if prices are unable to recover you might be hearing from us later today as we are seeing the early makings of a Bearish Dark Cloud Cover Pattern.
Friday, June 15, 2007
Maret Update June 15, 2997
Current Price of FNMA 6.0% Bond: $98 .62, +28bp
Mortgage Bonds are rallying sharply higher this morning. The reversal from the floor we had identified is continuing in full form, and adding even more favorable technical signals by way of a positive stochastic crossover.
Giving Mortgage Bonds some additional help, is the tame read on Core Consumer Inflation. The Core Consumer Price Index (CPI) for May was reported today at 0.1%, which was lower than expectations of 0.2%. Additionally, the year-over-year Core CPI dropped to 2.2%, which is the lowest read in more than a year, and is moving closer to the Fed's target zone for Core Inflation of 1 - 2%. Since inflation erodes the buying power or value of the fixed return that a Bond provides, the news of inflation moving lower is very good news for the Bond market.
And the tame inflation reading is even helping Stocks. In recent days, Stocks had been selling off on the fear that interest rates were going to rise - which could hurt Stocks, as higher rates make it more expensive for businesses to "do business". But after seeing this morning's tame Consumer Inflation read, Stock traders started buying with both fists, driving Stock prices higher this morning as well. Maybe stock traders are seeing a peak in interest rates too. Where's Bill Gross?
Aside from the big headline news of the Consumer Price Index, there were a few other reports released, but their importance and impact paled in comparison to the welcome read on lower inflation.
David Kosmecki
http://www.americanstar.com
Mortgage Bonds are rallying sharply higher this morning. The reversal from the floor we had identified is continuing in full form, and adding even more favorable technical signals by way of a positive stochastic crossover.
Giving Mortgage Bonds some additional help, is the tame read on Core Consumer Inflation. The Core Consumer Price Index (CPI) for May was reported today at 0.1%, which was lower than expectations of 0.2%. Additionally, the year-over-year Core CPI dropped to 2.2%, which is the lowest read in more than a year, and is moving closer to the Fed's target zone for Core Inflation of 1 - 2%. Since inflation erodes the buying power or value of the fixed return that a Bond provides, the news of inflation moving lower is very good news for the Bond market.
And the tame inflation reading is even helping Stocks. In recent days, Stocks had been selling off on the fear that interest rates were going to rise - which could hurt Stocks, as higher rates make it more expensive for businesses to "do business". But after seeing this morning's tame Consumer Inflation read, Stock traders started buying with both fists, driving Stock prices higher this morning as well. Maybe stock traders are seeing a peak in interest rates too. Where's Bill Gross?
Aside from the big headline news of the Consumer Price Index, there were a few other reports released, but their importance and impact paled in comparison to the welcome read on lower inflation.
David Kosmecki
http://www.americanstar.com
Thursday, June 14, 2007
Market Update June 14, 2007
Current Price of FNMA 6.0% Bond: $98.28, Unchanged
Mortgage Bonds are backing up yesterday's rally with an impressive recovery today. Prices traded down as much as 16bp earlier in the day, but have since rebounded and made back all of the earlier losses.
Initial Jobless Claims were reported in line with expectations at 311,000 showing the labor market remains stable. The Producer Price Index (PPI) was reported at 0.9%, which was hotter than expectations of 0.6%. However, the Core PPI, which strips out volatile food and energy prices, matched consensus estimates with a 0.2% gain. The overall PPI has climbed 4.1% higher over the past 12 months, but the Core PPI has risen by just 1.6% over the same period. Overall, the year over year Core rate of PPI appears to be an encouraging sign that inflation is moderating on the wholesale level. The market initially reacted a bit negatively to this report, but has since shrugged it off and awaits tomorrow's more closely watched Core Consumer Price Index (CPI). Economists are expecting the Core CPI to be reported at 0.2% for the month of May.
This morning's Bond price reversal higher from the worst levels of the day is a very encouraging sign on the heels of yesterday's rally. We feel that tomorrow's CPI will likely be inline with expectations, which would help Bond prices further stabilize and move even higher.
As you know, we made a major position change yesterday from locking to floating. We are calling for a bottom at the floor we have identified at $97.84. We expect prices to improve further from here and gain momentum from a positive stochastic crossover.
David Kosmecki - AmStar Mortgage
http://www.americanstar.com
Mortgage Bonds are backing up yesterday's rally with an impressive recovery today. Prices traded down as much as 16bp earlier in the day, but have since rebounded and made back all of the earlier losses.
Initial Jobless Claims were reported in line with expectations at 311,000 showing the labor market remains stable. The Producer Price Index (PPI) was reported at 0.9%, which was hotter than expectations of 0.6%. However, the Core PPI, which strips out volatile food and energy prices, matched consensus estimates with a 0.2% gain. The overall PPI has climbed 4.1% higher over the past 12 months, but the Core PPI has risen by just 1.6% over the same period. Overall, the year over year Core rate of PPI appears to be an encouraging sign that inflation is moderating on the wholesale level. The market initially reacted a bit negatively to this report, but has since shrugged it off and awaits tomorrow's more closely watched Core Consumer Price Index (CPI). Economists are expecting the Core CPI to be reported at 0.2% for the month of May.
This morning's Bond price reversal higher from the worst levels of the day is a very encouraging sign on the heels of yesterday's rally. We feel that tomorrow's CPI will likely be inline with expectations, which would help Bond prices further stabilize and move even higher.
As you know, we made a major position change yesterday from locking to floating. We are calling for a bottom at the floor we have identified at $97.84. We expect prices to improve further from here and gain momentum from a positive stochastic crossover.
David Kosmecki - AmStar Mortgage
http://www.americanstar.com
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