Phoenix, AZ Real Estate Professional

Phoenix Mortgage Broker Updates The Rate Market For Today

Start by floating this morning; the rest of the session will be focusing on equity markets. We are not looking for much improvement however, and continue to remind the present condition in the rate markets is bearish; although not aggressively so. Any additional selling in mortgages and we will stop floating and lock. Stay tuned for updates as necessary.

Rate markets opened weaker early this morning. At 8:15 prior to weekly jobless claims the 10 yr note -6/32 and mortgage prices -5/32. Weekly jobless claims at 8:30 were higher than expected; markets were expecting an increase of about 4K they jumped 11K to 531K. Last week's claims were revised up 6K frm 514K to 520K. Continuing claims declined to 5.92 mil from 6.02 mil last week, revised from 5.992 mil.

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Weekly claims being higher than expected should have provided a modicum of support for the rate markets and a little pressure on equity prices (although at 9:45 the DJIA was trading better); at least on a knee jerk reaction. Not the case however, claims data is leveling out recently so a little chop is no longer the issue it was a month ago.  We don't trust the recent claims data on jobs with the jobless claims a touch higher, continuing claim lower and a minor improvement on the 4-wk average.  All the alterations in how jobs and or joblessness are counted have shifted, and without a straight read of some sort the market will continue to distrust the reports.

At 10:00, a few minutes ago, Sept leading economic indicators were expected to be +0.9%; it came at +1.0%, August revised to +0.4% frm +0.6%. Not a big series so not much attention is paid to it by traders.

Also at 10:00 the FHFA housing price index for August, expected to be +0.3%, prices as reported were down 0.3%. That did a little initial number on the equity market with the DJIA selling off slightly, The decline boosted the rate market prices a little.

At 11:00 Treasury will announce the amounts for next week's auctions; 2 yr, 5 yr and 7 yr notes to fund the growing federal deficit. Last month the total was $112B for all three. Supply, while in the past few months has not been a problem to absorb, is always a pressure point for the rate markets. The last auction Treasury conducted, 30 yr bond on the 8th of the month, didn't go as well as traders expected. At the long end of the curve, it doesn't necessarily equate to the auctions next week; but with the dollar declining it begs the question about how much more foreign investors are willing to take down at present yields. So far the weakening dollar has attracted investors, likely to continue this go round. That said, it is unlikely treasuries will rally into the supply.

Stepping back; since 8/14 the bellwether 10 yr note has established a well defined range and set the range for mortgage rates. With the exception of six trading days the 10 yr note has held between 3.25% and 3.50% with most of the trade occurring between 3.35% and 3.47%. When seen in that context the rate markets have been very stable since mid-summer. Lots of swings but within a tight range. The run lower (below 3.25%) was immediately rejected, implying investors have little interest in the 10 yr or mortgages when their yields fall much below where they trade today. Technically the 10 yr and mortgages are bearish, as long as 3.50% holds we are not concerned, but if 3.50% breaks on the note look for a rapid increase of 25 basis points on the note and 30 yr mortgage rates.

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Phoenix Mortgage Broker Thinks Interest Rates Will Stabilize Today!

I suggest starting the day by floating; we normally do that. It is a bear market now however so we will not press it and move to lock mode on any weakness. If you float today keep close for our alerts. Unless mortgage markets gain a little traction through the rest of the day we will lock over the weekend.Look for interest rates to remain stable today.

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As we expected, the 10 yr and mortgages opened slightly better this morning with the benchmark 10 yr testing its technical support yesterday and holding it at the 3.50% area. No change in the bearish path however, just a bounce in what we believe will be a range for the note and mortgages of about 25 basis points (3.50%/3.25% on the 10) and 5.00% to 5.25% for 30 yr mtgs. At 9:00 this morning the 10 yr note traded +8/32 at 3.44% -2 BP; mtgs +5/32 (.15 bp). The DJIA futures traded -58 on some weaker than expected earnings reports. At 9:30 the DJIA opened -95; 10 yr +12/32 3.42% -4 BP, mtg prices +5/32.

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Prior to the equity market open at 9:30; Sept industrial production was expected to +0.2%, it jumped 0.7% and August production increased from 0.8% to +1.2%. Manufacturing output rose 0.9%, lower than +1.2% in August. Sept capacity utilization, also better than expected, 70.5% against estimates of 69.6%; August capacity use was revised slightly better to 69.9% frm 69.6% originally reported. Manufacturing use increased to 67.5% frm 66.8% in August. The reaction to the better data pushed mortgages backed to unchanged and the 10 yr note from +8/32 to unchanged.

At 9:55 the U. of Michigan consumer sentiment index, expected at 74.0 frm 73.5 at the end of Sept, was lower at 69.4. The 12 month outlook question on the survey fell to 79 frm 88.0 at the end of Sept; consumer expectations at 67.6 frm 73.5 at the end of Sept. The survey is subject to wide variations at times, but does take some wind from the sales and reminds consumers are still not in the game of recovery being so heavily bet in the equity markets. No real positive reaction to the report in the bond and mortgage markets but the DJIA fell 10 points on the report.

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The stock market is opening lower this morning on reports from BofA and GE; BofA took another $1B loss for the quarter, the second this year. Loan defaults drove the losses. GE made a profit by cost cutting but its revenues fell short of expectations.

Treasury reported August net foreign purchases of US debt. A total of $32.9B in August; $21.3B by private foreign investors, $11.6B by foreign "official" institutions (central banks) and $4.3B by US residents. No need to look any farther as to who is supporting US deficits.

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Being Friday trade will likely have a narrow range through the remainder of the day. The wider outlook is bearish for the bond and mortgage markets; the shorter view however is a little better after the 10 yr note managed to  hold its first key support at 3.50% yesterday. Still looking for a trading range on the note and mortgages of about 25 basis points; 3.25% to 3.50% on the 10 yr and 5.00% to 5.25% for mortgage rates. So far this morning mortgage markets are somewhat soft.

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Phoenix Mortgage Broker Gives Interest Rate Analysis

Floating is going against the grain these days with the rate markets bearish. However, we always look for that opportunity to catch a bounce. If you are able to keep tuned to our rate alerts we suggest floating to start, but if you are unable to keep close we suggest locking through the day. We will not float overnight unless mortgage prices improve enough to reduce overnight risk (+.25 bp frm initial pricing levels)

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More selling in the interest rate markets this morning. Prior to 8:30 data the 10 yr note was off 5/32 and mortgages were unchanged, the DJIA futures trade had the index -25 after closing slightly above 10K yesterday At 8:30 weekly jobless claims were down 10K to 514K; continuing claims also declined to 5.992 mil from 6.067 mil last week. Sept CPI was fractionally higher than forecasts; +0.2% for both the overall and the core (ex food and energy components). Finally at 8:30, the NY Empire State manufacturing index jumped to 34.57, the estimate was a decline to 17.5 frm 18.88 in Sept, new orders component jumped to 30.82 frm 18.82 (above zero is expansion). All three reports added more negative response in the bond and mortgage markets.

On the weekly claims; continuing claims are declining but may be due to those unemployed running out of unemployment benefits. 514K new filings however isn't a reason to cheer too much, workers continue to lose jobs at a lesser rate but jobs are still eroding. On the CPI, inflation based on the Sept report suggest a slight increase on the core, but so far we consider it an anomaly, traders however are on edge with the inflationary outlook with interest rates at the current low levels. Don't have much to comment about on the NY Empire State index jumping like it did, rather surprising given the index was expected to decline, it didn't go unnoticed by traders.

At 10:00 the Philly Fed business index was expected at 12.5 frm 14.1 in Sept, as reported the overall index fell to 11.5; new orders at 6.2 frm 3.3, prices pd at 21.3 frm 14.9 and employment at -6.8 frm -14.3. Overall the report is slightly better but not nearly as robust as the earlier NY Empire State data at 8:30. No initial reaction to the report in either stocks or bonds.

The bellwether 10 yr is approaching where we expect to hold at 3.50%. Looking for a new range between 3.25% and 3.50%. The 10 yr and mortgages are however technically bearish and it is not advisable to make decisions that the 3.50% will hold until it actually is tested. Both mortgages and long term treasuries are trading below their 20 and 40 day moving averages and have broken various chart support levels after interest rates declined to unsustainable levels based on the increasing view the economy is recovering.

PIMCO is betting on deflation based on the view that the economic recovery will be slow and lethargic. PIMCO reduced its holdings of mortgages in favor of long term treasuries a month ago on the bet deflation and not inflation will keep interest rates low. The increase in treasuries was minor however, from 44% to 48% of the total $185.7B Total Bond Fund. Traders concerned about inflation, Bill Gross at PIMCO concerned that deflation is the coming issue. A lot of uncertainty about the outlook in 2010 will keep volatility high with overall interest rates at these historic low levels.

The FOMC minutes yesterday noted some of the members want to consider having the Fed buy mortgage MBSs after the $1.25 commitment runs out at the end of Q1 2010. If the Fed does signal it will continue to buy MBSs it will keep mortgage rates from increasing as much as they would otherwise. Mortgage rates however will track the 10 yr note direction; if interest rates increase so too will mortgage rates but with less of an increase if the Fed is in the game.

Call our office at (602) 291-4362 to see how our SmartBuyer™ System can save you at least $50,000 when buying and financing a home.

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Phoenix Mortgage Broker Warns......LOCK Your INTEREST RATE

We warned of increased volatility this week, the rate markets are near term bearish but with not much enthusiasm for massive selling. Yesterday mortgage prices started better, this morning starting lower. We suggest floating to start the day, but remind to stay close for our updates. Not willing to press the markets but with the pricing this morning lower we hang in there for a pop. Unless prices improve frm morning levels we will lock at the end of the session if not sooner based on market movements.

Treasuries were weak from the get-go this morning with the stock indexes roaring higher; the DJIA at 8:00 was trading +90. The 10 down 13/32 and mortgages off 7/32. At 8:30 the 10 -21/32 at 3.42% +7 bp, and mortgages -13/32. At 9:00 the 10 yr -16/32 3.41% +6 BP, mtg prices -15/32 and the DJIA +109. JP Morgan profits were well above forecasts (about 7 times better), and is driving all bank and financial stocks higher this morning, taking the entire market up with it. Most all earnings in Q3 are beating the Street estimates although only a few are out so far. Intel is saying sales will to $1B and earnings from Alcoa and others have been better. In China their exports were down 15%, but that is the best in a year. At 9:30 the DJIA opened +90, 10 yr note -14/32 3.40% +5 BP and mortgages at 9:30 -11/32 on 30s, -9/32 on FHAs and -7/32 on 15s.

Sept retail sales hit at 8:30, better than expected; -1.5% overall but when auto sales are extracted +0.5%, expectations were for a 0.2% increase. August retail revised to +2.2% frm +2.7% overall and ex autos +1.0% frm +1.1%. The initial reaction to the better ex auto sales sent treasuries and mortgages lower but both managed to recover a little from the knee jerk. The DJIA and the other key indexes are on fire this morning on better Q3 earnings being reported. No signs of any weakness in the equity markets as the DJIA is now seen headed to 10K.

Earlier this morning at 7:00 the weekly MBA mortgage applications index fell 1.8%; purchases declined 5.0% while re-finance applications were down 0.1%. 64.7% of all apps were for re-finances. The four week moving average for the seasonally adjusted Market Index is up 5.6%.  The four week moving average is up 1.6% for the seasonally adjusted Purchase Index, while this average is up 8.0% for the Refinance Index.  The average contract interest rate for 30-year fixed-rate mortgages increased to 5.02% from 4.89%, with points decreasing to 1.11 from 1.13 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.44% from 4.32%, with points remaining unchanged at 1.04 (including the origination fee) for 80% LTV loans. The decline in apps on an increase of 13 basis points in rates tells a big story. With interest rates headed higher the volume is likely to continue to fall until buyers and re-financers believe the best has likely passed for rates.

August business inventories were out at 10:00, expected to be down 0.9%, inventories were down 1.5%; sales were up 1.0%. The inventory to sales ratio at 1.33 month frm 1.36 months in July.

At 2:00 the FOMC minutes are the day's biggest known-unknown, with the market sniffing for hints of dissention on rate hike timing among the ranks and inflation concern. We know what the statement said, what markets will look for in the minutes is the debate that focuses on when the Fed will decide to wind down the easing. Most Fed watchers are expecting the Fed will start by doing re-pos to drain money from banks before it actually starts raising the FF rate. No matter, the bond market will as usual be ahead of what the Fed actually does, so we don't wait to see the whites of the eyes before markets discount any tightening. While no one is expecting a tightening move from the Fed for many more months until unemployment bottoms, markets will be way out front in driving rates higher----slowly, but moving higher.

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Phoenix Mortgage Broker Makes Sense Of Today's Interest Rate Market

Floating today is touchy; while the markets are better the likelihood of more improvement through the day is questionable and depends on how equity markets act. We suggest floating to start but we also caution that the near term is bearish for the bond and mortgage markets. If floating stay close for our rate alerts.

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At 8:30

the 10 yr note +9/32, mortgage prices +8/32; at 9:00 the 10 yr +16/32, mortgage prices +11, the DJIA futures -14. At 9:30 the DJIA opened -24, the 10 yr note +18/32 3.32% -6 BP; mortgage prices at 9:30 +10/32 on 30s, +12/32 on FHAs and +7/32 on 15s.

After the heavy selling on Thursday and Friday last week treasuries and mortgages are starting better this morning. As noted in Friday's 4:30 report we expect increased market volatility this week; the reversal and heavy selling last week purged a lot of bullishness as interest rates finally hit their low yields.  The trigger last Thursday was the weak demand for the 30 yr bond auction, comments from various Fed officials that the Fed was preparing to drain bank reserves with reverse repos, Australia increasing its base rates, and the exploding federal deficits driven by the mostly wasted bailout money.  Regardless of the arguments either side of the rate debate; there is a limit that rates cannot exceed, we believe we have hit those limits as long as there is no major change in sentiment on the economic outlook.

Last week there was very little economic data to chew on; this week we do have more meat on the bone.

Today;

2:00 Sept treasury budget statement (-$31B, August -$111.4B)

Wednesday;

8:30 Sept Retail sales (-2.1%, ex auto sales +0.3%)

Sept export and import prices

10:00  August business inventories (-0.9%)

2:00 FOMC minutes frm the 9/23 meeting

Thursday;

8:30 Weekly jobless claims (+4K to 525K; continuing claims 6.06 mil frm 6.04 mil)

Sept CPI (+0.1%, ex food and energy +0.1%)

NY Empire State manufacturing index (17.5 frm 18.88)

10:00 Oct Philly Fed business index (12.5 frm 14.1)

Friday;

9:15 Sept Industrial production (+0.2%)

Sept Capacity utilization (69.6%, unch frm Aug)

9:55 U. of Michigan consumer sentiment index (74.0 frm 73.5)

The dollar is lower again this morning, sooner or later the US will pay a huge price on its decline. The Obama administration chose to spend the US out of recession, the consequence is the dollar is doomed to continue to fall. The current consequence is a mad scramble for hard assets lead by gold and other precious metals (silver, copper, platinum, and palladium are leading the run). Eventually it will lead to an explosion of inflation; that is the bet being laid now by investors; next up will be interest rates as the US has to pay more for borrowing to fund the spending spree. While on the subject, the CBO has blessed the current health care reform moves currently boiling in Congress saying that the US can insure another 15 mil people while it lowers the budget deficit; really? The plan is to tax the daylights out of health insurers, businesses that offer health care and yes, those that are currently covered in some way. One hell of a way to stimulate the economic recovery.

The technical picture; the 10 yr note broke above its support Friday (3.28%) it cut through its 20 day moving average but held Friday at its 40 day average; this morning the 10 is trading back below its 20 day (3.34%) on the yield chart. We expect the 10 yr will set up a new range for the near term between 3.25% and 3.50%. Mortgage prices hit their May high prices but failed, still however holding to their 20 day moving averages this morning. Mortgages technically are a little better than the bellwether 10 yr note but it still rests with the 10 yr note for the direction of mortgage rates and prices. The Fed is still buying mortgages to complete its $1.25T commitment to support mortgage rates, however it is unlikely that the Fed will up the amount when the plan is completed at the end of Q1 2010.

If you are shopping for a mortgage, monitoring interest rate markets a minimum of every 30 minutes is imperative.  It doesn't matter what rate a Phoenix Mortgage Broker quotes you over the phone. What matters is the rate you get and how well the Phoenix Mortgage Broker follows the market and analyze the data.

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Are you searching for a Phoenix, AZ home?  If so, Phoenix area homebuyers should be monitoring interest rates every day! Bookmark or sign up for our RSS feed or Twitter feed to receive this market update on a daily basis. Interest rates can have significant swings on a daily and have a huge impact on affordability for Phoenix area homebuyers.

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So, here is today's update for Phoenix area homebuyers:

Interest rate markets started softer but by 9:30 the 10 and mortgages were trading better, but not much. The rate markets remain bullish, however we are at levels that may be difficult to improve on unless equities completely collapse (and that appears unlikely). We will continue floating to start but caution to keep in touch with our rate alerts.

Treasuries and mortgages opened a little soft prior to 8:30 release of weekly jobless claims. At 8:00 the 10 yr -3/32 and mortgages -3/32; the DJIA futures trade had the index +70. At 8:35, shortly after the weekly claims data, the 10 yr  -4/32, mtgs -2/32 and the DJIA +80. At 9:30 the DJIA opened +50, 10 yr note +7/32 (.21 bp), mortgage prices +6/32 (.18 bp).

Weekly jobless claims were expected to have declined 11K to 540K, claims fell 33K to 521K after a small increased revision last week from 551K to 554K; the lowest since January, a sign the labor market is deteriorating more slowly as the economy emerges from the recession. Continuing claims, a more interesting number, declined to 6.04 mil (-72K for the week) after a slight upward revision last week from 6.09 mil to 6.112 mil. Treasuries saw initial selling on the better looking weekly claims and the decline in continuing claims. The 10 yr yield jumped to 3.21% from 3.19% close yesterday and mortgages declined 2/32 (.06 bp). Not much of a reaction but with the 30 yr bond auction later today it lessens the outlook of improvement in the rate markets. While the figures today indicate improvement, government data last week showed more job cuts than forecast for September and a rising unemployment. On continuing claims, 400K on unemployment ran out of unemployment payments at the end of Sept, Congress has yet to extend the time frame but will do so shortly. If those that lost their unemployment return continuing claims will increase, we take that into account when analyzing this week's continuing claims decline.

At 10:00 August wholesale inventories, expected down 1.0% were down 1.3%; July revised to -1.6% frm -1.4%. Sales in August +1.0%; the inventory to sales ratio at 1.20 months from 1.23 months in July. Not any movement on the report.

When is bad news good news? When the US 2009 budget deficit was not nearly as bad as was expected just a few months ago. The 2009 fiscal deficit was $1.4T, a couple of months ago we were hearing close to $1.8T and six months ago $2T. The deficit amounted to 9.9% of total GDP and the largest since WW II (1945).  Total tax revenue fell $420B, 17%, to the lowest level in more than 50 years. Individual income taxes fell by 20%, corporate income taxes dropped by 54%.  Spending increased 18%. About half of the spending increase, $245B, was driven by the costs of bailing out the financial industry and taking over mortgage financiers Fannie Mae and Freddie Mac. The spending increases and tax cuts included in the economic stimulus package approved in February added almost $200B to the 2009.

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