Creating Wealth for my Family and Friends
Mortgage Market Daily Edition - Wednesday, September 23rd, 2009
At 8:00 this morning the rate markets traded weaker, chopping back and forth in a tight narrow range for the past six sessions. The 10 yr note at 8:30 -11/32 at 3.49%, continuing to bang off the 3.50% key support area; mortgage prices at 8:30 -6/32. At 9:00 the 10 yr -9/32 and mortgages -5/32, the DJIA futures +13. At 9:30 the DJIA opened unchanged, 10 yr -6/32, mortgage prices -4/32, (see below for 10:00 levels)
At 7:00 this morning the weekly MBA mortgage applications data was up strong, mostly on re-financing with mortgage rates hovering at their recent lows. The market composite Index, a measure of mortgage loan application volume, increased 12.8%; the refinance Index increased 17.4% from the previous week as, for the first time since mid-May, the 30-year fixed rate dipped below 5.0%. The seasonally adjusted purchase index increased 5.6%, driven by applications for government-insured loans.
The government purchase Index is at the highest level ever recorded in the survey and the share of purchase applications that were government-insured was 45.7%, the highest share since November 1990. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.97% from 5.08%, with points increasing to 1.12 from 0.98 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 4.41%, with points decreasing to 1.05 from 1.12 (including the origination fee) for 80% LTV loans.
Next up today; at 1:00 $40B of 5 yr notes to be auction by Treasury. Not a concern recent as investors have been stepping up to buy about $190B of note and bonds from 2 yr to 30 yr issues. Indirect bidders, generally thought of as foreign buyers are taking down about half of the issues each month. Yesterday's 2 yr note auction met with very strong demand, the bid-to-cover ratio at 3.23 to 1. The 5 today is also expected to be strong although not likely as well bid as the 2 yr. Tomorrow $29B of 7 yr notes will complete this week's borrowing; in two weeks Treasury will be back with 3s, 10s and 30s.
Following the auction, at 2:15 the FOMC will release their very short policy statement at the conclusion of the meeting. No increase in interest rates are expected. The statement will likely include comments that the economic recession is over, but recovery will be slow and unemployment will remain high for much longer. Every analyst in the world will look at every word for hidden clues of what the Fed really means; a huge waste of effort but that is what we do.
Ex Fed Governor Meyer on CNBC this morning said the Fed isn't likely to increase rates----get this---until late 2011. Meantime banks are accumulating a lot of cash; $800B at the moment and growing. If banks were to open their lending purses the Fed would likely have to increase rates. There are comments out there that the Fed will begin paying interest on those reserves to banks to keep banks from becoming too aggressive, keeping the money in the piggy bank so to speak; the other alternative would be the Fed will drain reserves with reverse repos. To keep rate low the Fed has to manage bank reserves in some manner.
The bellwether 10 yr is a rock at 3.50%, the sixth day in succession today that it tested it and so far has held. Technically, mortgages are also hanging tough and continue to stay below their 20 day MA. While holding support levels, on the other side, there is no significant buying to push rates down. The 10 has traded in a 7 basis point yield range for the past six days. Always easier to push prices down than up (yields higher), the rate markets presently are teetering and losing momentum. Equity markets are also a rock, refusing to back down, ignoring any news that could be considered negative.
At 7:00 this morning the weekly MBA mortgage applications data was up strong, mostly on re-financing with mortgage rates hovering at their recent lows. The market composite Index, a measure of mortgage loan application volume, increased 12.8%; the refinance Index increased 17.4% from the previous week as, for the first time since mid-May, the 30-year fixed rate dipped below 5.0%. The seasonally adjusted purchase index increased 5.6%, driven by applications for government-insured loans.
The government purchase Index is at the highest level ever recorded in the survey and the share of purchase applications that were government-insured was 45.7%, the highest share since November 1990. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.97% from 5.08%, with points increasing to 1.12 from 0.98 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 4.41%, with points decreasing to 1.05 from 1.12 (including the origination fee) for 80% LTV loans.
Next up today; at 1:00 $40B of 5 yr notes to be auction by Treasury. Not a concern recent as investors have been stepping up to buy about $190B of note and bonds from 2 yr to 30 yr issues. Indirect bidders, generally thought of as foreign buyers are taking down about half of the issues each month. Yesterday's 2 yr note auction met with very strong demand, the bid-to-cover ratio at 3.23 to 1. The 5 today is also expected to be strong although not likely as well bid as the 2 yr. Tomorrow $29B of 7 yr notes will complete this week's borrowing; in two weeks Treasury will be back with 3s, 10s and 30s.
Following the auction, at 2:15 the FOMC will release their very short policy statement at the conclusion of the meeting. No increase in interest rates are expected. The statement will likely include comments that the economic recession is over, but recovery will be slow and unemployment will remain high for much longer. Every analyst in the world will look at every word for hidden clues of what the Fed really means; a huge waste of effort but that is what we do.
Ex Fed Governor Meyer on CNBC this morning said the Fed isn't likely to increase rates----get this---until late 2011. Meantime banks are accumulating a lot of cash; $800B at the moment and growing. If banks were to open their lending purses the Fed would likely have to increase rates. There are comments out there that the Fed will begin paying interest on those reserves to banks to keep banks from becoming too aggressive, keeping the money in the piggy bank so to speak; the other alternative would be the Fed will drain reserves with reverse repos. To keep rate low the Fed has to manage bank reserves in some manner.
The bellwether 10 yr is a rock at 3.50%, the sixth day in succession today that it tested it and so far has held. Technically, mortgages are also hanging tough and continue to stay below their 20 day MA. While holding support levels, on the other side, there is no significant buying to push rates down. The 10 has traded in a 7 basis point yield range for the past six days. Always easier to push prices down than up (yields higher), the rate markets presently are teetering and losing momentum. Equity markets are also a rock, refusing to back down, ignoring any news that could be considered negative.
Tags: Fed, auction, bond, decision, economic, market, mortgage, policy, reports, update
Comment
© 2009 Created by Travis Neliton on Ning. Create a Ning Network!
You need to be a member of The Wealth Creation Team to add comments!
Join this Ning Network