ABBA First Mortgage, Inc. - Wilmington, NC

4/17- Improving economy = Higher rates

April 17th, 2014

Initial Jobless claims 304K vs est 316K
Continuing Claims 2.739M vs est 2.795M

Because both above reports show an improving labor market, they are very negative for pricing and this will cause interest rates to go up.  The reasoning behind this assumption is that the economy must be improving, and therefore we see the markets (where investors place their monies for potential earnings) react accordingly.  Henceforth, we should see the stock markets improve, the bond and MBS markets worsen (causing the bond yields to go up), and the sum total of this equation typically causes the long term, mortgage interest rates to go up!  A domino effect for sure!

4/14- Rising rates

April 14th, 2014

March retail sales at 8:30 this morning were much better than forecasts; sales expected 1.0% overall were up 1.1% but ex auto sales were thought to be up 0.5% however sales were up 0.7%. The better report bolstered the stock indexes and took a little out of treasuries and MBSs. Sales were the best since Sept 2012. Feb sales, originally reported +0.3% were revised to +0.7%. Better sales suggest increased demand after Jan and Feb kept consumers from shopping. Sales at department and general merchandise stores jumped the most since March 2007.  Prior to sales data the 10 was at 2.63%, after the release at 2.64%, 30 yr MBSs on the initial reaction were down 14 bps, at 9:00 the price improved to -6 bps. At 9:00 the DJIA futures was up 58 against fair value of -24.  So what does all the above actually mean for the mortgage rate shopper?  Typically with an improving economy comes a stronger stock market which takes the wind out of the sails for the bond market. This in turn often prompts the mortgage interest rates to move up slightly which of course is not the news that we were hoping to hear. Keep an eye on the rates before thery go up higher than what you were hoping for. (SEE THE RATE TRACKER TO THE RIGHT. THE ARROW INDICATES THE DIRECTION THAT MORTGAGE RATES ARE PRESENTLY TAKING.)

4/10- Rates move sideways: not up & not down

April 10th, 2014

 

Mortgage backed securities (MBS) gained +14 basis points (BPS) from Tuesday’s close (net of our monthly roll over) which caused 30 year fixed mortgage rates to move sideways.

Another sideways day for MBS pricing, our monthly bond coupon rollover certainly skews the charts but when you compare apples to apples (May to May) then you will see that MBS moved sideways and in a fairly narrow range for the day. Actually stocks and MBS both moved in the same direction and both improved yesterday…it was the second straight day that they moved in the same direction. But usually when you see the stock market improve by almost 200 points (DJIA +181.04), MBS sell off. But not yesterday.

Why? Because there was something for everyone in yesterday’s FOMC minutes. Stock traders view the minutes as less “hawkish” than the off-the-cuff response that Janet Yellen made during the press conference after the official FOMC statement. But bond traders certainly do not think that they are as “dovish” – as all but one voting member saw the Fed raising rates in 2015.

4/8- Besides rates moving up slightly yesterday…

April 8th, 2014

ABBA First Mortgage has continued to offer rates below the national average.  The benefit of obtaining a lower interest rate may save a borrower thousands of dollars over the life of the loan.

Rates were stable in the past week as we approached another jobs report, though they started trending upwards. Freddie Mac announced that for the week ending April 3, 30-year fixed rates increased slightly to 4.41% from 4.40% the week before. The average for 15-year loans rose to 3.47%.

A year ago 30-year fixed rates were at 3.54%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans were little changed amid a week of light economic reports. Of the few releases, real GDP was revised up slightly to 2.6 percent growth in the fourth quarter of 2013. The private sector added an estimated 191,000 jobs in March, which followed an upward revision of 39,000 jobs in February according to the ADP Research Institute. Also, the Institute for Supply Management reported the manufacturing industry rebounded from a soft February but was still below market consensus.”

4/7- What’s happening this week-

April 7th, 2014
The biggest event of the week will be Wednesday’s release of the minutes from the last FOMC meeting. The market will want to see more detail on their internal discussions regarding the prospective timing of increasing their Fed Fund rate. This was the meeting where Janet Yellen disclosed in her press conference that the Fed may begin to increase rates as soon as six months after they have completed winding down their asset purchase program which puts that period around mid 2015.

We have a large supply of Treasuries hitting the market this week, with the 10 year getting the most attention:
04/08 3 year note
04/09 10 year note
04/10 30 year bond

We also have a few “Talking Feds” this week: Plosser, Kocherlakota, Evans and Tarullo.

The market will also to be closely monitoring international events such as any new news of QE out of the ECB, Russia, and China.

We have a nice and boring start to our week though with only a mid level report later in the afternoon.

After trading after the 2.800% yield mark with the 10 year Treasury note last week, it is heading South this morning to 2.702% which will provide some nice support for MBS pricing today.

 

4/1- New loan programs with expanded guidelines means more approvals for buyers

April 1st, 2014

In 2014, many Americans have the flexibility to do more — whether that means buying their first home, investing in a second home, or simply trading up to get into a larger house or one more suitable for their changing needs. ABBA First is here to help you navigate the new lending environment and guide you toward options that enable you to make the most of your financial abilities. With the goal of extending the availability of various programs targeted at first-time homebuyers and those who didn’t qualify previously for loans, ABBA First has familiarized its employees with the available government programs to reach the larger pool of potential borrowers that has been created. Whether you have shopped around already and been denied or if you just want want a better than market rate with low closing costs, we can assist you in making the right choices as you consider a new home purchase. Call us at 910-332-0650 (licensed in NC and TN-NMLS 74184)

3/31 Rates worsening slightly

March 31st, 2014

Bond and mortgage markets opened weaker this morning ahead of the March employment report on Friday. The 10 yr Treasury Note remains in its well-defined trading range that has held it now since last January with only a few exceptions when the note ventured out; 30 yr MBSs have the same chart pattern, trading in a 100 point range with a few exceptions. The only economic report this morning came at 9:45; the March regional Chicago purchasing managers’ index was released, the forecasts were for the index at 59.0 from 59.8 in Feb. As reported, the index fell to the weakest since August 2013 at 55.9.
The Ukraine/Russia/US situation didn’t change much over the weekend although there were talks between the US and Russia that didn’t resolve much, but at least there is dialogue. Financial markets are not paying much attention in terms of any significant movements that could be attributed to the issues. No bullets equals no major fears.
Europe facing a dilemma; similar to the US the level of inflation in the EU is slowing. Inflation is the slowest pace since November 2009, signaling that companies are struggling to raise prices amid feeble demand. The ECB aims to return inflation to just under 2 percent. Inflation in the 18-nation euro area slowed to 0.5% this month, according to an initial estimate by the European Union’s statistics office. Both the US Fed and the ECB want inflation to increase to speed spending and profits that in turn will increase employment, both banks are trying with no success as the global economies suffer the worst rebound from a recession since before the Big War. The ECB will meet on Thursday.
Janet Yellen is speaking now at a conference in Chicago, nothing new likely will occur. So far not much on the wires. So far she is continuing to remind that the employment condition isn’t as good as it looks as job creations are not the good jobs that the Fed wants to see.

3/28- Slightly higher rates today

March 28th, 2014

Interest rates increased a little today; the stock market did its usual swoon again today, opening strong with the DJIA up over 100 points before backing off in the afternoon. Going into the weekend with Russia’s troops apparently massing at the Ukraine border kept both stocks and bonds from any major moves. The 10 yr note, as we have mentioned many times has strong resistance at 2.70%; yesterday at 2.68% was a warning that the note was entering into an area that has been difficult to sustain. Markets are still edgy over the geo-political situation but as noted, as long as bullets are not flying traders are not in any panicky mode.

3/26- Keeping rates steady…for now

March 26th, 2014

Even though our domestic U.S. data clearly shows economic growth, concern over Russia and China are still providing fantastic support for our bonds. This news supercedes the old adage of good economics means improved stock prices and worsening of mortgage interest rates. Oft times, outside factors such as foreign currencies, are heavily reflected in the direction that rates may take. Early this morning, The People’s Bank of China announced that they would change the way it compiles benchmark money market rates to help prevent manipulation. Just another side story that gives traders more reason to be concerned about their banking system.
Speaking of banking system. We get the results of the latest and greatest bank stress-tests this afternoon. We have obviously been through a couple stress-tests before, so everyone expects almost every bank to pass. The real issue for traders is determining which of the major banks are over-capitalized and just how much money they will be able to put back to work. Depending on the severity of the over-capitalization and the banks longer term goals, we may see some additional supply of Treasuries hit the market.

3/25- Rates could deteriorate today due to Consumer Confidence

March 25th, 2014

We get our first dose of economic data and our first of three straight days of Treasury auctions today. The 2 Year Note Auction: Today we are selling $32 billion of our debt on a 2 year note. This will be an interesting auction as the real rate of return on this note to an investor will be impacted by a raising Fed Fund rate and this is now speculated to be in mid 2015 which is much earlier than what the market was assuming during the last 2 year auction.
As far as domestic data is concerned, the Consumer Confidence level was higher than expected today when the results were announced this morning at 10 AM. This is negative for mortgage rates and we may see them go up slightly.
MBS have started the day under some slight pressure and is forming a trading pattern that is very close to yesterday’s as bonds continue to weigh the probability of Chinese stimulus and how much impact it will have on their future growth.
Russia and Ukraine are becoming less of a support factor for our bonds as Russia has been temporarily suspended from the G8. This, along with more threats of tougher sanctions, have the market thinking that Putin will not escalate things further in the Ukraine in the near term.

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