This is going to be a huge week for Mortgage Rates

This is going to be a huge week for mortgage rates.  The economic reports include consumer confidence tomorrow, the Fed meeting on Wednesday, PCE Thursday, and the Employment Report on Friday.  These are all ELEVATED market movers.  The Feds Cut Rate is expected to be lowered -.25% tomorrow.  It is also important to note that Traders will be anxiously deciphering the Feds statements to see if they hint to further Fed rate cuts.  The Feds rate cuts stimulate the economy and increase inflation, the enemy of mortgage bonds. 

Now would be a good time to lock in an interest rate ahead of all this upcoming volatility if the rate and program you want are available.  There is a good chance though that we see 30 fixed rates in the 5′s again by the end of this week.  In January, when rates dropped down to the low 5′s, they came and went quickly, so be prepared to lock.

Mortgage Rates for April 28th, 2008

30 Year Fixed/apr | 6.125%/6.225%

15 Year Fixed/apr | 5.625%/5.725%

3/1 Interest Only [1%]/apr | 5.125%/5.388%

5/1 Interest Only [1%]/apr | 5.375%/5.575%

7/1 Interest Only [1%]/apr | 5.625%/5.825%

Philly Fed Index dismal | Mortgage Backed Bonds still -16bp

Philly Fed Index | Reported -24.0 | Est -14.0 | Prior -17.4 | ELEVATED

The Philadelphia Fed Index is an important index that is current reflecting extreme contraction in the Manufacturing Sector.  For months almost every report has been signally a damaged economy.  This report unfortunately has not helped the bonds market.  Until the Stock Market steps into reality, I would still recommend LOCKING in this volatile market.

PPI strong and Mortgage Rates Suffer

Empire State Index | Reported 0.6% | Est -16.0 | Prior -22.2 | MODEST

Producer Price Index [PPI] | Reported 1.1% | Est 0.4% | Prior 0.3% | MODEST

Core PPI [CPPI] | Reported 0.2% | Est 0.2% | Prior 0.5% | MODEST

Relatively-Hot PPI numbers reported due to the highest fuel  and food prices in 17 years.  The Core-PPI was at expectations of .2%.  The Empire State Survey was still weak, but better than expectations… and as usually the Bond Market reacted negatively -53bp currently. 

Tomorrow the very important Consumer Price Index will be reported.  CPI and Core CPI are significant inflation measures that could force the Mortgage Bond market below the solid support of both the 50 and 100 day moving averages.  The next level of support is the 200 day moving average -133bp below.  This could push mortgage rates up to the mid 6′s again, even with perfect credit.  With this risk and the rumored continued tightening of mortgage insurance companies coming in the near future, if you have an approval, I’d lock it.

Mortgage Rates Predictions | 30 Fixed 5.625% 15 Fixed 5.375% FHA 5.500%

 

The US Trade deficit was significantly wider than expectations this morning.  Even with the Initial Jobless claims beating expectations, the Fannie Mae Mortgage Backed Securities are +12bp currently.  We ended the day yesterday with about +26bp so long term mortgage rates have seen some benefit.  The credit tightening has shown no signs of letting up in regards to mortgage lending.  United Guarantee [the Mortgage Insurance Company] sent notification yesterday that they will be making major overhauls to their mortgage insurance guidelines.  All of St. Louis will now be considered a declining market, limiting loan to values [LTV] to 90%.  They require a 680 credit score for conventional loans to $417,000.  Also, they will no longer insure cash out, A-Minus, Limited Doc, Second Homes, Condos, Investment Properties, Arms, and will require 5% down payment from the buyers own funds [no gifts or grants].  Let’s hope everyone doesn’t follow suit with this overreaction.  I recommend locking and closing if you are in a position to.

30 Fixed/apr | 5.625%/5.725%

15 Fixed/apr | 5.375%/5.475%

FHA/apr | 5.5%/5.95%

 

Initial Jobless Claims 3.29 | worst since 2005

Initial Jobless Claims | Reported 407,000 | Est 360,000 | Prior 366,000 | MODEST

First time claims for unemployments surged to 407,000!  The highest number since 2005.  This is a sign of further weakening in the jobs market.  The Mortgage Backed Securities have responded well currently they are +31bp.  The ISM Services Index  is released at 10:00am.  This should make for continued volatility today.

Institute for Supply Management Manufacturing Index

ISM Index | Reported 48.6 | Est 48.2 | Prior 48.3 | ELEVATED

The Institute for Supply Management [ISM] Index for the manufacturing sector came in better than expectations.  A reading lower than 50 still signals further shrinking in the economy, but investors like “not that bad” news and stocks have benefited.  UBS has managed to write down $19,000,000,000 and investors think it’s a sign of the credit crunch coming to an end… I wouldn’t be quick to jump on that band wagon, but let’s hope.  Mortgage Backed Securities are off -28bp on the day.  It is important to understand that mortgage rates do not correlate with the 10-Year Treasury; it is currently -103bp on the day.  30 Fixed are about 5.875% today.

Grau Perspective | 30F 5.750% 7/1A[Int Only] 5.375%

Chicago PMI | Reported 48.2 | Est 46.7 | Prior 44.5 | ELEVATED

The Chicago Purchasing Managers Index for March reported above estimates.  The survey results signal more economic restraint and concern about the health of the economy.  Mortgage Bonds have not reacted much to the news, currently we are +3bp on the day.  Henry Paulson the Treasury Secretary is currently speaking about more mortgage reform and regulation requirements for our industry.   This week is full of ELEVATED economic reports.  Hold on to your hats!

ISM Index | Reported [Tue 4.1] | Est 48.2 | Prior 48.3 | ELEVATED

ADP Employment Report | Reported [Wed 4.2] | Est -23,000 | Prior -23,000 | ELEVATED

Crude Inventories | Reported [Wed 4.2] | Prior 88,000 | MODEST

Initial Jobless Claims | Reported [Thu 4.3] | Est 360,000 | Prior 366,000 | MODEST

ISM Services Index | Reported [Thu 4.3] | Est 49.2 | Prior 49.3 | MODEST

Unemployment Rate | Reported [Fri 4.4] | Est 5.0% | Prior 4.8% | ELEVATED

Hourly Earnings | Reported [Fri 4.4] | Est 0.3% | Prior 0.3% | ELEVATED

Average Work Week | Reported [Fri 4.4] | Est 33.7 | Prior 33.7 | ELEVATED

Non-Farm Payroll | Reported [Fri 4.4] | Est -40,000 | Prior -63,000 | ELEVATED

Economic Reports March 28 | 30F 6.000%

Personal Consumption YOY | Reported 2.0% | Est 2.0% | Prior 2.2% | ELEVATED

Personal Income | Reported 0.5% | Est 0.3% | Prior 0.3% | MODEST

Personal Spending | Reported 0.1%  | Est 0.2% | Prior 0.4% | MODEST

Personal Consumption FEB | Reported 0.1%  | Est 0.3% | Prior 0.2% | ELEVATED

Consumer Sentiment | Reported 69.5  | Est 71.0 | Prior 70.5 | MODEST

Inflation seams to be within the Fed’s 1-2% range based on YOY PCE.  With inflation in check the Fed should have a green light to lower the Feds Cut Rate.  The bond market is currently only up +22bp this morning.  There is a full day of trading a head, so pending on how the stock market reacts to these reports, we may see a little better long term rates this afternoon.

Economic Reports March 27, 2008 | 30F 6.000%

GDP | Reported 0.6%  | Est 0.6% | Prior 0.6% | MODEST

GPD Chain Deflator | Reported 2.5% | Est 2.7% | Prior 2.7% | MODEST

Initial Jobless Claims | Reported 366,000 | Est 371,000 | Prior 375,000 | MODEST

The GPD had no effect on the markets since it came in confirming earlier estimates.  Initial Jobless claims were slightly lower than last week and estimates.  The stock market has just been looking for any bit of “not bad” economic news to rally.  Movement in the stock market was at the expense of mortgage bonds, currently -41bp from open.  New home buyers and clients looking to refinance have more to consider than just the lowest mortgage rates quoted in the newspaper.  With uncertainty about RISK scaring investors, locking in your rate and program while they still exist are more important.

Consumer Confidence for March 2008 | 30F 5.875%

Consumer Confidence | Reported 64.5 | Est 75.0 | Prior 75.0 | MODEST

Consumer Confidence for March 2008 suggests that families are locking down the check books for a little while longer.  The 64.5 number is the largest decline on 5 years.  An interesting bit of information about the portion of the survey that measures consumer’s outlook on the future, it’s at a 35 year low!  This report is yet another piece of negative economic data to kindle the recession talk.  Unfortunately, with continued turmoil in the mortgage market, FNMA bond prices have not been able to hold the +40bp gains this morning.  The FNMA 30 bond is trading +18bp current.

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