Market Reports
A Mortgage Update from Jay Skwierawski for the week of February 17
Hello Everybody!
Before I get into my mortgage market update, it's...
POP TRIVIA QUIZ TIME!
Today is President's Day. Here are 10 questions for you to test how much you know about the people that have held the most powerful position in the free world. The answers are on the bottom!
1) What president approved the "Star Spangled Banner" as the national anthem?
2) Who is the only president buried in Washington D.C.?
3) Which president was the first son of a president?
4) Which president was the first to travel underwater in a submarine?
5) Who was the first president born in a hospital?
6) Who was the second president to die by assassination?
7) Who was the first president to visit all 50 states?
8) Who had the largest feet of any president?
9) Who was the only president to be the grandson of a president?
10) Who was the only president to be married at the White House?
As far as the mortgage bond market is concerned, we've had better weeks.
Now, the news wasn't all that bad for mortgage rates, but the bond market spent the week reeling from comments made by one of the voting members of the Federal Reserve - Dallas Fed President Richard "Loose Lips" Fisher. The reason that what he had to say on February 7th has spooked the markets so much is that he was the only Fed member voting against lowering interest rates at the last Fed meeting. Since his remarks about his concerns over inflation, mortgage bonds have lost 187 basis points - that translates into from 3/8 to 1/2% higher for mortgage rates. That's a pretty substantial jump in a week.
Here's the news that came out last week:
Retail Sales came in higher than expected, which is not good for mortgage rates.
The Trade Balance (deficit) between the U.S. and the rest of the world came in less than expected, not much impact on rates, however, the report showed import prices rising higher than expected, which is inflationary.
The Empire State Index, showing how the economy is doing in the N.Y. region came in tremendously lower than expected, which is good for rates.
Industrial Production and Capacity Utilization came in as expected - no impact on rates.
First Time Unemployment Claims came in slightly lower than expected, while continuing claims continue to rise - this was a wash.
Consumer Sentiment came in at its lowest level in 16 years.
Below is a candlestick chart of the price of mortgage bonds:
The highest green and red lines, after January 17, represent the price of mortgage bonds on the day the Fed made the surprise 3/4 point drop in rates and the day after. What these lines show is that on the day the Fed dropped rates, the market rallied. The day after (red line), the market started the morning rallying to its highest point (meaning lowest rates) in years. However, the line is red because the market ending up losing all of its momentum that day, and closed lower than where it had started before the Fed dropped rates. The market spent the next nine days treading water, before starting a rather pronounced plunge for the next seven trading days, especially the last three. Keep in mind, again, that the price of bonds moves opposite interest rates.
So, what's in store for the week ahead? The markets will be closed on Monday, and all of the week's reports will be coming out on Wednesday and Thursday, but that doesn't mean that the week's volatility will be limited to those days. Any negative news on the mortgage industry or mortgage backed bonds, or any wild swings in the stock market will be sure to wreak havoc on mortgage rates, as this market figures out what it wants to do.
The economic reports scheduled to be released this week include: (with typical impact on mortgage rates)
Wednesday - New Housing Starts (Moderate)
Wednesday - New Housing Permits (Moderate)
Wednesday - Consumer Price Index (CPI) (HIGH) A high inflation number will mean higher mortgage rates, a low number would mean lower rates
Wednesday - Core CPI, excluding food and energy (HIGH)
Wednesday - The minutes from the last Federal Reserve Meeting are released - Traders will be watching for inflation concerns
Thursday - First time unemployment claims (Moderate)
Thursday - Index of Leading Economic Indicators (Moderate)
Thursday - Philadelphia Fed Index (how the economy is on the east coast) (HIGH)
There are more reasons for rates to be going down right now than up, but for some reason they continue to rise. It could be a fear of inflation, it could be a fear that the insurance companies that insure mortgage backed bonds are going to lose their high ratings, making previously issued bonds even riskier than they already are, or it could just be a market that doesn't know what it wants to do with itself.
Trivia answers (hold computer screen upside down if you're used to reading trivia answers that way!
1) Herbert Hoover approved the "Star Spangled Banner". He was also the first president born west of the Mississippi River
2) Woodrow Wilson is interred at Washington National Cathedral
3) Who said George Bush? It was John Quincy Adams, the son of John Adams
4) Harry Truman was the first president to travel in a submarine
5) I was surprised by this one - Jimmy Carter was the first president born in a hospital
6) James Garfield was assassinated in 1881, after only two months in office
7) Richard Nixon was the first to visit all 50 states, the first to visit China and the first to resign
8) I bet you thought Abe Lincoln. Actually, it was Warren G. Harding. Size 14, if you were wondering!
9) Benjamin Harrison was the grandson of William Henry Harrison, the president who holds the record for shortest term - he died of pneumonia one month after delivering his 105 minute outdoor inaugural speech without wearing an overcoat or hat. Your mom was right.
10) Grover Cleveland was married in a ceremony at the White House on June 2, 1886. How nice, a June wedding!
Have a great week, and watch for my mid-week special report on changes coming to underwriting guidelines and private mortgage insurance guidelines and premiums.
Jay Skwierawski
President
First Sterling Mortgage Services,LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
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