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March 25th, 2014 - Quentin’s Weekly Review

The following is a day by day summary of the news affecting the financial markets this past week.

Monday: There wasn’t much reaction in financial markets to the news that Crimean residents voted to secede from Ukraine and rejoin Russia.  Russia ignored Western nations’ complaints that the referendum was illegal.  Close to 97% of Crimeans voted to rejoin Russia.  U.S. economic news was modestly better than expected and this helped to drive the stock market higher.  The Empire State Manufacturing Survey, which measures manufacturing in the NY region, came in at 5.61, which was lower than estimates of 6.50, but higher than last month’s weak reading of 4.48.  Industrial Production and Capacity Utilization were both reported slightly higher than expectations.  Capacity Utilization came in at 78.%, which was stronger than the 78.6% expected.  The National Association of Home Builders (NAHB) Housing Market Index for March came in at 47, which was a little better than last month’s 46, but still quite a ways below 50.  This figure, which is almost in real time, tracks builders’ sentiment.  Sales increased one point to 52, while future sales fell 1 point to 53.  Traffic did jump 2 points to 33, but this figure is still well below 50.  This part of the report is most likely to be affected by weather conditions.

The Dow Jones Industrial Average jumped 181.55 points to close at 16,247.22; the S&P 500 climbed 17.70 points to finish at 1,858.83; and the Nasdaq Composite Index rose 34.55 points to close at 4,279.95.  In the bond market, interest rates rose slightly with the yield on the 10-year Treasury rising by almost four basis points to 2.6938%.

Tuesday: Favorable U.S. economic news continued to have a positive influence on the stock market.  The Consumer Price Index (CPI) was released and as has been the story for a long time, inflation was virtually nonexistent.  The headline and core numbers were both up 0.1%, which was in line with expectations.  ON a year over year basis, headline inflation was up 1.1%, while Core was up 1.6%.  Housing Starts for the month of February came in right around expectations at 907,000.  But the previous month’s numbers were revised higher to 909,000.  Building permits jumped over the 1 Million mark and were stronger than expected.  Overall this was a good report on the present state of the new construction market.

The Dow Jones Industrial Average rose 88.97 points to 16,336.19, the S&P 500 Index added 13.42 points to 1,872.25, and the Nasdaq Composite Index climbed 53.36 points to 4,333.31.  The yield on the 10-year Treasury fell two basis points to 2.6722%.

Wednesday: The financial markets reacted negatively to Janet Yellen’s first meeting as Chair of the Federal Open Market Committee (FOMC).  Yellen announced some unexpected revisions to the “guidance” relating to what to expect from the Fed in the future.  Immediately following the release of the Fed statement. The S&P 500 dove 10 points.  Yellen dropped the 6.5 percent unemployment rate “threshold” that, up to this point, had been viewed as the trigger that would cause the Fed to begin making changes to monetary policy.  Instead, Yellen said the FOMC would now be watching what is being referred to as the “Yellen dashboard,” a set of indicators that will include data on employment, inflation, and overall financial conditions.  When asked how long it would be before the Fed would begin to the raise the Fed Funds Rate after QE ended.  Her response was “probably something on the order of around six months, that type of thing.”  Both the Stock and Bond markets continued to sell off on the comment.  So when will the Fed hike rates?  At the current rate and schedule of reduction, the Fed could hike rates anytime between April and June of 2015.

In housing news, the Mortgage Bankers Association released their weekly Mortgage Application data for the week ending March 14th, and the index was reported down 1.2%.  The Purchase Index, which fell by 1% last week, was down another 1%.  Purchases are still down 15% from this time last year.  Interest rates decreased 2bp to 4.50% with 0.26 points paid.  This did not help Refinances, which dropped 1%.  The Dow Jones Industrial Average fell 114.02 points to close at 16,222.17, the S&P 500 dropped 11.48 point to finish at 1,860.77, and the Nasdaq Composite Index declined 25.71 points to finish at 4,307.60.  The yield on the 10-year Treasury jumped 10 basis points to 2.7716%.

Thursday: Favorable economic news pushed the broader stock market indices higher today.  Initial Jobless Claims were released for the week ending March 15th, and Claims increased 5,000 to 320,000 and another very good reading.  Claims results for the week of the 12th are factored into the models for employment figures next month.  It remains to be seen whether these low Claims figures will translate into real job growth.

The index of Leading Economic Indicators and the Philadelphia Fed Manufacturing Survey both came in stronger than expected.  This helped the Stock market turn positive and push Mortgage Bonds lower.  Existing Home Sales for February were reported down 0.4%.  This was in line with expectations and a decent report.  All of the regions did better, expect for the Northeast, where weather was a problem.  Median Home Prices were reported at $189,000, up 9.1% year over year.  The supply of homes increased to a 5.5 month supply.

The Dow Jones Industrial Average rose 108.88 points to close at 16,331.05; the S&P 500 added 11.24 points to 1,872.01 and the Nasdaq Composite Index gained 11.69 points to reach 4,319.29.  The yield on the 10-year Treasury increased by just one half of a basis point to 2.7771%.

Friday:After achieving early gains, including a new intraday high for the S&P 500 Index, the stock market battled to a dismal finish during a quarterly quadruple

“witching day” that led to a significant increase in market volatility.  This is a day when contracts for stock index futures, stock index options, stock options and single stock futures all expire at the same time.  Traders sold momentum stocks to lock in gains ahead of the weekend, and sold the biotech stocks in particular after Rep. Henry A. Waxman (D-Beverly Hills) and two other Democratic lawmakers asked Gilead Sciences, Inc. Chief Executive John C. Martin to explain the rationale for selling their new drug for hepatitis C (Sovaldi) for $1,000 per pill.  The NASDAQ biotech index (^NBI) fell 119.18 points or 4.4 percent on the day.  Mortgage bonds finished the day 14 basis points higher with the 10-year US Treasury yield falling by three basis points to 2.74%.

For the week, the FNMA 4% bond lost 58 basis points to close at 103.83, and the GNMA 30-year 4.0% coupon bond lost 63 basis points to end at 104.90.  The 10-year Treasury yield increased 9 basis points for the week to close at 2.74 percent.  The national average 30-year mortgage rate rose from 4.39% to 4.53% while 15-year mortgage rates increased from 3.42% to 3.52%.  FHA 30-year rates held steady at 4.00% and Jumbo 30-year rates increased from 4.24% to 4.33%.

For stocks, the Dow Jones Industrial Average rebounded 232.83 points to close at 16,298.50; the S&P 500 rose 24.76 points to close at 1,865.89; and the NASDAQ Composite climbed 28.31 points to close at 4,273.71.  Year to date for 2014, the Dow Jones Industrial Average has lost 1.65%, the S&P 500 has gained 0.98%, and the NASDAQ Composite has gained 2.40%.

Mortgage Rate Forecast with Chart

The chart of the FNMA 30-year 4.0% Coupon Bond ($103.83) shows the price lying between the 38.2% and 50% Fibonacci retracement levels that define nearest support ($103.75) and resistance ($104.11) respectively.  The technical signals are currently “mixed” with the slow stochastic oscillator showing a sell signal but “oversold” condition while a candle pattern over the past three sessions shows a variant of a Morning Star Candle Pattern, a buy signal.  The technical picture favors a move higher toward resistance, and should this happen, mortgage rates would improve slightly.

Chart: FNMA 30-Year 4.01% Coupon Bond

Economic Calendar – for the Week of March 24

The economic calendar features a variety of housing reports throughout the week along with Consumer Confidence for March on Tuesday; Durable Goods for February on Wednesday; weekly Jobless Claims on Thursday; and February Personal Income and Spending with PCE Core inflation on Friday.  Economic reports having the greatest potential impact on the financial markets this week are highlighted in bold.

Date

Time (ET)

Event /Report /Statistic

 

Report For

Market

Expects

Prior

Mar 25 09:00 Case-Shiller 20-city Index Jan 13.3% 13.4%
Mar 25 09:00 FHFA Housing Price Index Jan NA 0.8%
Mar 25 10:00 Consumer   Confidence Mar 78.2 78.1
Mar 25 10:00 New Home Sales Feb 445K 468K
Mar 26 07:00 MBA Mortgage Index 03/22 NA -1.2%
Mar 26 08:30 Durable   Goods Orders Feb 1.0% -1.0%
Mar 26 08:30 Durable   Goods –ex transport. Feb 0.3% -1.1%
Mar 27 08:30 Initial   Jobless Claims 03/22 330K NA
Mar 27 08:30 Continuing   Jobless Claims 03/15 2900K NA
Mar 27 08:30 GDP – Third Estimate Q4 2.6% 2.4%
Mar 27 08:30 GDP Deflator – Third Estimate Q4 1.6% 1.6%
Mar 27 10:00 Pending Home Sales Feb -0.2% 0.1%
Mar 28 08:30 Personal   Income Feb 0.2% 0.3%
Mar 28 08:30 Personal   Spending Feb 0.3% 0.4%
Mar 28 08:30 PCE   Prices – Core Feb 0.1% 0.1%
Mar 28 09:55 Mich. Consumer Sentiment – Final Mar 80.0 79.9

The 2014 Federal Reserve FOMC Meeting Schedule

January 28-29
March 18-19*
April 29-30
June 17-18*
July 29-30
September 16-17*
October 28-29
December 16-17*

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.

February 25th, 2014 - Quentin’s Weekly Review

Disappointing economic data this past week resulted in a mixed stock market, a largely flat bond market, and slightly higher mortgage rates.  The weakness seen in the data was mostly blamed on the unusually cold winter weather that has gripped most of our nation.

Last Tuesday, the National Association of Home Builders (NAHB) Housing Market Index for February was reported at a shockingly low 46 points, which represents a drop of 10 points from last month’s 56.  This is the largest one month decline in the history of the report, which began in 2006.  Additionally, this is the first negative reading (below 50) since last May.  This figure, which is almost in real time, tracks builders’ sentiment.  Builders attributed the weakness in the report to a shortage of buildable lots, labor concerns, and weather.

On Wednesday, the Census Bureau released Housing Starts for January at 880,000.  This was a pretty large miss with the market looking for 950,000 starts.  This was a drop of almost 16% from last month’s figure, which was revised much higher to 1.048 million.  Permits were only marginally lower, down 5.4% to 937,000.  Weather may have played a big factor because you cannot start new construction in bad weather conditions, but you can still sign a permit.  Additionally, the numbers for November and December, when weather was better, were very strong.

On Thursday, Initial Jobless Claims were released for the week ending February 15th, and the number was pretty much in line with expectations at 336,000.  This was a decrease of 3,000 from last week’s unrevised 339,000.  Jobless Claims, which have been extremely volatile, seem to be settling in at around 330,000 range.

On Friday, Existing Home Sales for January were reported below market expectations at a minus 5.1%, the softest number seen in 18 months.  The Existing Home Sales report is based on closings, so it measures activity in advance of those closings.  When we take into consideration, we can’t blame the weather for this slowdown.  The report cites tighter affordability and credit, and weakness amongst first time homebuyers.  Sales on the lower end of the price spectrum were predominantly the cause for the weaker report.  Medium and higher price range categories held up well.  Year over year price appreciation was still strong at 10.7%.  I expect home price appreciation to slow, but not turn negative.  It’s likely that then next couple of Existing Home Sales reports will also be soft as effects of the weather will begin to show up in the numbers.

For the week, the FNMA 4% bond added one basis point to close at 104.17, and the GNMA 30-year 4.0% coupon bond gained five basis points to end at 105.48.  The 10-year Treasury yield lost one basis point on the week to close at 2.73 percent.  The average 30-year mortgage rate increased from 4.43% to 4.49% while 15-year mortgage rates moved from 3.44% to 3.50%.  FHA 30-year rates rose from 4.00% to 4.25% and Jumbo 30-year rates climbed from 4.32% to 4.36%.

For stocks, the Dow Jones Industrial Average fell 51.09 points, to close at 16,103.30; the S&P 500 dropped 2.38 points to close at 1,836.25; and the NASDAQ Composite gained 19.38 points to close at 4,263.41.  Year to date for 2014, the Dow Jones Industrial Average lost 2.86%, the S&P 500 has lost 0.66%, and the NASDAQ Composite has gained 2.08%

Mortgage Rate Forecast with Chart

The chart of the FNMA 30-year 4.0% Coupon Bond shows it is once again at a critical juncture.  Last week the bond fell below a critical area of support at the convergence of the 50% Fibonacci retracement level and the 200-day moving average.  This level now becomes overhead resistance.  A break above this resistance level could result in a move toward the next higher resistance level at the 61.8% Fibonacci retracement level near 104.50 producing a slight improvement in mortgage rates.  However, a failure to move above this level could foreshadow a continued move lower toward the next support level at the 38.2% Fibonacci retracement level at 103.75 resulting in slightly higher mortgage rates.  Unfortunately, the slow stochastic oscillator is not yet “oversold” so the probabilities favor lower mortgage bond prices and a slight worsening in rates this week.

Chart 1: FNMA 30-Year 4.0% Coupon Bond

Economic Calendar – for the Week of February 24

The economic calendar this coming week features a mixture of reports on housing, consumer confidence, manufacturing, and jobless claims.  Reports having the greatest potential impact on the financial markets are highlighted in bold.

Date    Time (ET)    Event /Report /Statistic    Market
Expects    Prior
Feb 25    09:00    Case-Shiller 20-city Index    12.0%    13.7%
Feb 25    09:00    FHFA Housing Price Index    NA    0.1%
Feb 25    10:00    Consumer Confidence    81.0    80.7
Feb 26    07:00    MBA Mortgage Index    NA    -4.1%
Feb 26    10:00    New Home Sales    400K    414K
Feb 27    08:30    Initial Jobless Claims    335K    336K
Feb 27    08:30    Continuing Jobless Claims    2975K    2981K
Feb 27    08:30    Durable Goods Orders    -0.2%    -4.2%
Feb 27    08:30    Durable Goods –ex transportation    -0.6%    -1.3%
Feb 28    08:30    GDP – Second Estimate    2.4%    3.2%
Feb 28    08:30    GDP Deflator – Second Estimate    1.3%    1.3%
Feb 28    09:45    Chicago PMI    55.0    59.6
Feb 28    09:55    Michigan Consumer Sentiment – Final    82.0    81.2
Feb 28    10:00    Pending Home Sales    -1.0%    -8.7%

The 2014 Federal Reserve FOMC Meeting Schedule
January    28-29
March    18-19*
April    29-30
June    17-18*
July    29-30
September    16-17*
October    28-29
December    16-17*

*Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.

February 12th, 2014 - Quentin’s Weekly Review

Last week was volatile for both stocks and bonds as conflicting economic reports resulted in exaggerated moves in the financial markets.  Many economists blamed the most severe winter weather in two decades on negative economic data that caused investors to flee the stock market last Monday resulting in a “flight to safety” in bonds.

The institute for Supply Management reported a severe slowdown in the rate of growth in manufacturing activity in January and this was echoed by auto makers who reported poor vehicle sales during the month.  Employment data reported during the week was mixed and somewhat contradictory.

On Wednesday, private payrolls firm ADP reported a strong gain in private sector jobs created January while Thursday’s report on initial jobless claims showed a sharp drop in claims.  This was followed on Friday by the Labor Department’s nonfarm payrolls report showing a dismal 113,000 jobs created in January, far below market expectations.  However, a different government measure of the labor market, known as the household survey, was more positive.  The household surveys showed a large increase in the number of people reporting they were employed and this helped lower the unemployment rate to 6.6% in January, its lowest level since October 2008.

Friday’s jobs data sparked a rally in stocks and bonds while pressing the yield on 10-year Treasuries a couple of basis points lower.  Also helping U.S. financial markets was a strong rebound in emerging market debt and currency markets.  The debt status of Mexico in particular saw improvement after Mood’s Investors Service upgraded Mexico’s credit rating to A3 from Baa1 following the country’s recent economic reforms.

For the week, the FNMA 4% bond added 11 basis points to close at 104.92, and the GNMA 30-year 4.0% coupon bond lost 8 basis points to close at 105.98.  The 10-year Treasury yield rose by 4 basis points on the week to close at 2.68 percent.  The average 30-year mortgage rate held steady at 4.34% while 15-year mortgage rates moved from 3.37% to 3.38%.  FHA 30-year rates held steady at 4.00% and Jumbo 30-year rates remained at 4.25%

For stocks, the Dow Jones Industrial Average gained 95.23 points, to close at 15,794.08; the S&P 500 added 14.43 points to close at 1,797.02; and the NASDAQ Composite advanced 21.98 points to close at 4,125.86.  Year to date for 2014. the Dow Jones Industrial Average has lost 4.72%, the S&P 500 has lost 2.78%, and the NASDAQ Composite has retreated 1.21%.

Mortgage Rate Forecast with Chart

The chart of the FNMA 30-year 4.0 Coupon Bond shows another deep “V” pattern for the week.  A significant gain last Monday was followed by three down days and a subsequent bounce higher on Friday.  The stochastic oscillator appears to be in the process of crossing over to the upside for a new buy signal and this would be a positive for mortgage bonds and mortgage rates.  It is interesting to note the bond has struggled at the 46.4% Fibonacci retracement level located at $104.93 with the bond closing at $104.92 on Friday.  The bond closed above this level last Monday, but was unable to follow through toward the 100% level and prior peak high recorded last October 23, 2013.  The bond fell back below the 76.4% level last Tuesday and had to work higher the remainder of the week to challenge this resistance level once more on Friday.  If the bond gets turned away from the 76.4% retracement level this week and begins to head lower it would be a good time to lock in mortgage rates on any pending loans.  If the bond can manage to make a solid move above this level, it would be beneficial to let mortgage applications “float” for a slight improvement in rates.

Chart 1: FNMA 30-Year 4.0% Coupon Bond

Economic Calendar – for the Week of February 10

There are only a few economic reports on the calendar this coming week with the potential to briefly influence the financial markets and these are highlighted in bold in the table below.

Date

Time (ET)

Event /Report /Statistic

Market

Expects

Prior

02/11

10:00

JOLTS – Job Openings

NA

4.001M

02/11

10:00

Wholesale Inventories

0.6%

0.5%

02/12

07:00

MBA Mortgage Index

NA

0.4%

02/12

14:00

Treasury Budget

NA

$2.9B

02/13

08:30

Initial   Jobless Claims

335K

331K

02/13

08:30

Continuing Jobless Claims

2975K

2964K

02/13

08:30

Retail   Sales

0.0%

0.2%

02/13

08:30

Retail   Sales ex-auto

0.1%

0.7%

02/13

10:00

Business Inventories

0.4%

0.4%

02/14

08:30

Export Prices ex-ag.

NA

0.3%

02/14

08:30

Import Prices ex-oil

NA

-0.1%

02/14

09:15

Industrial Production

0.3%

0.3%

02/14

09:15

Capacity Utilization

79.4%

79.2

02/14

09:55

Mich   Consumer Sentiment

80.2

81.2

*Meeting associated with a Summary Economic Projections and a press conference by the Chairman.

 

January 27th, 2014 - New Home Sales Price Hit Record High:

Today’s report out of the U.S. Commerce Department showed that New Home Sales for December was a mixed bag.

On the positive side, inventories shrank 2.8 percent to 171K units which was the lowest level since July.  At the current pace of sales, it would take just 5.0 months to wipe out the supply of new homes for sale.  The median price jumped up 4.6% last month.

For the entire year of 2013 new home prices shot up 8.4% which is the hottest pace since the housing boom of 2005.  The median home price rose to $265,800 which is the highest on record.

Monthly sales did pull back from 445K in November to 414K in December but this was largely due to frigid temperatures in the North and North East regions.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained +59 basis points (BPS) from last Friday’s close which caused 30 year fixed rates to move lower for the week.  We saw our best rates on Friday and our worst rates on Wednesday.

MBS moved higher (and therefore mortgage rates moved lower) on global concerns.  Historically, when we have a light week for economic releases, MBS tend to drift upward and we had a holiday shortened week and a very light economic schedule where we only had one day (Thursday) with any economic data.

As a result, bond traders focused on international events and MBS moved upward on concern over several developing situations.  First up was China’s PMI data which showed the lowest rate of manufacturing in six months.  Also, China’s bank system was a huge source of concern among investors.  Puerto Rico, Argentina and Turkey were also in the spotlight as their bond yields shot up as investors are becoming very concerned about their ability to repay their debts.  This all made any U.S. based bonds very attractive and caused our 10 year Treasury yield to tank and MBS prices to surge and that gave us our lowest rates since November 27th.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

Date Time (ET) Economic Release Actual Market Expects Prior
27-Jan 10:00 AM New Home Sales - 457K 464K
28-Jan 8:30 AM Durable Orders - 2.10% 3.40%
28-Jan 8:30 AM Durable Goods -ex transportation - 0.60% 1.20%
28-Jan 9:00 AM Case-Shiller 20-city Index - 13.80% 13.60%
28-Jan 10:00 AM Consumer Confidence - 77.5 78.1
29-Jan 7:00 AM MBA Mortgage Index - NA 4.70%
29-Jan 10:30 AM Crude Inventories - NA 0.990M
29-Jan 2:00 PM FOMC Rate Decision - 0.25% 0.25%
30-Jan 8:30 AM Initial Claims - 325K 326K
30-Jan 8:30 AM Continuing Claims - 3000K 3056K
30-Jan 8:30 AM GDP-Adv. - 3.00% 4.10%
30-Jan 8:30 AM Chain Deflator-Adv. - 1.20% 2.00%
30-Jan 10:00 AM Pending Home Sales - -0.20% 0.20%
30-Jan 10:30 AM Natural Gas Inventories - NA -107 bcf
31-Jan 8:30 AM Personal Income - 0.20% 0.20%
31-Jan 8:30 AM Personal Spending - 0.20% 0.50%
31-Jan 8:30 AM PCE Prices – Core - 0.10% 0.10%
31-Jan 8:30 AM Employment Cost Index - 0.40% 0.40%
31-Jan 9:45 AM Chicago PMI - 58 60.8
31-Jan 9:55 AM Michigan Sentiment – Final - 80.4 80.4

I will be watching these reports closely for you and let you know if there are any big surprises:

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

 

January 21st, 2014 - Thinking of Becoming a Landlord? Here are Some Tips:

With homes appreciating for 13 straight months (according to the Case-Shiller Home Price Index), many home owner’s are considering renting out their current home or purchasing a home to rent out.  Here are some simple tips to help you on your way:

Selecting Properties

  • Purchase rental properties in attractive upcoming neighborhoods and know what your exit strategy is going to be, no matter how far out in time.  Even if the price seems right, don’t buy rental properties in declining neighborhoods.  If you own a rental in moderately priced neighborhoods, consider making the property available to section 8 tenants.  Section 8 is a federal rental voucher system coordinated through local housing authorities.  You can arrange to do this with the county, and if accepted, the section 8 program will subsidize your tenant’s rent.

Selecting Tenants

  • Use an application form that gathers as much info as possible about your prospective tenants.  Get a credit report or ask the applicant to provide one that is less than three months old.  Contact personal references and previous landlords.  Hold an open house to meet prospective tenants.  Prepare an information book for the property that answers questions about the home and neighborhood.

Deposits and Rent

  • Collect a damage deposit that is equal to or greater than the monthly rent amount.  Inspect the house with your tenant and take pictures to record the existing condition of the home.  The landlord and tenant should sign off on the inspection report.  Use a lease that addresses a comprehensive range of issues and spells out the tenant and landlord responsibilities.  Include specific information on how much the rent is, when it is due, penalties for late payment and what will happen and when if the rent is not paid.  Know your local landlord- tenant laws, including eviction procedures, and make sure your lease is in compliance with local regulations.  Always act in accordance to the lease, using the prescribed penalties when necessary.

Buy a Home Warranty

  • Purchasing a home warranty could save you a lot of money and time.  Home warranties cost $275 and up, depending on the coverage, but for the price of a service call, usually around $55 to $75, certain problems can be fixed.  Compensation for replacing appliances covered in the warranty is prorated based on their age.  Depending upon the age and condition of your furnace, water heater and appliances, you can save a lot of money on repairs.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained +42 basis points (BPS) from last Friday’s close which caused 30 year fixed rates to move lower for the week.  We saw our best rates on Friday and our worst rates on Wednesday.

We had a slew of “Talking Feds” which included many district Federal Reserve Bank Presidents as well as Ben Bernanke.  They pretty much carried the same message: The economy is growing at a moderate pace and the labor market is slowly improving and if the economy continues along the path that they have forecasted, then further reductions in their monthly Treasury and agency mortgage backed securities should be expected.  If that does occur, then naturally fixed rates will continue to rise at a very slow but consistent pace.

We had some very tame inflationary data with both the headline Producer Price Index (PPI) and Consumer Price Index (CPI), 0.4% and 0.3% respectively.  Retail Sales beat estimates and initial Jobless Claims were better than expected.  We even had some improvement in manufacturing data out of NY and Philly.  But offsetting that positive economic data was a dismal reading for Continuing Jobless Claims, and a weaker than expected preliminary reading of the Consumer Sentiment Index.  Housing Starts were stronger than expected but offsetting that was Building Permits being weaker than expected.

Overall, we had some decent economic news but nothing to cause our benchmark FNMA February coupon to break above our 100 day moving average.

What to Watch Out For This Week:

The following are the major economic reports that willl hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

Date Time (ET) Economic Release Actual Market Expects Prior
22-Jan 7:00 AM MBA Mortgage Index - NA 11.90%
23-Jan 8:30 AM Continuing Claims - NA 3030K
23-Jan 8:30 AM Initial Claims - 327K 326K
23-Jan 8:30 AM Continuing Claims - 2900K 3030K
23-Jan 9:00 AM FHFA Housing Price Index - NA 0.50%
23-Jan 10:00 AM Existing Home Sales - 4.90M 4.90M
23-Jan 10:00 AM Leading Indicators - 0.20% 0.80%
23-Jan 10:30 AM Natural Gas Inventories - NA -287 bcf
23-Jan 11:00 AM Crude Inventories - NA -7.658M

I will be watching these reports closely for you and let you know if there are any big surprises:  It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing gonvernment and conventional mortgage rates are based upon.

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