What a week we had and it played out much like I had expected with MBS prices moving higher briefly, then resuming their downtrend and sending mortgage rates higher. It looks like much the same for this week, so you may as well just lock, especially if you are not following my daily Mortgage Rate Forecasts on Mortgage Rate Forecaster™.
WEEK IN REVIEW
Looking back over the last week, we can see why mortgage backed securities could find very little strength until Friday’s Jobs Jamboree big surprise. The week started out with nothing to motivate them except continued news overseas. Once Tuesday came, though, things began to heat up with the S&P Case-Shiller HPI showing prices are on the decline and the Chicago PMI beating expectations, showing the economy is doing better than expected. Even Consumer Confidence came in better than expected. The ADP Employment Report came in higher than expected as well and that sealed the fate of mortgage bonds and solidified the downtrend. Purchase Applications were up slightly while Refinances dropped significantly. As the day progressed, the ISM Manufacturing Index tried to give MBS prices some much needed support by coming lower than expected, but that proved to be insufficient as MBS prices resumed their fall after the Fed’s Beige Book. Thursday’s open gapped lower and things did not look good at the beginning, but Jobless Claims were higher than expected and that provided some optimism going into Friday’s Jobs Report. Pending Home Sales also threw in a surprise by climbing 10.4%. But the main event was Friday’s Employment Situation report, aka the Jobs Jamboree, which came in much worse than expected just about across the board and that sent mortgage bonds into rally mode. That being said, they just couldn’t hold on and it appears that the 200-day moving average (4.0% FNMA) is just too strong and despite being considerably higher than this level, they closed below it.
FORECAST FOR THE WEEK
This week will certainly not be as entertaining as last week, at least as far as economic data is concerned. In fact, there is virtually no economic reports that are impactful enough to make waves in the markets. However, there are several Treasury Auctions, namely the 3-year T-Note on Tuesday, the 10-year T-Note on Wednesday, and the 30-year T-Bond report, all of which could easily make tsunamis in this environment. That being said, Friday will be the bigger day for economic data with the International Trade report, along with Consumer Sentiment. But don’t forget the weekly Jobless Claims report could also make its own waves.
Looking at the charts, there really is not anything new to say except for the pattern that formed over the week. The 3.5% FNMA is essentially no longer a valid chart to follow as mortgage rates continue their climb, so the 4.0% FNMA will be used in my reports moving forward. Just like last week, the only “good sign” is that stochastic indications remain in the oversold spectrum. For a more detailed analysis, make sure you listen in to my Mortgage Market Weekly radio show and feel free to chime in if you listen live. I had to move this week’s show to Tuesday at 11:00 due to my flight schedule and I am changing the weekly time to 12:00pm ET on Mondays moving forward as it appears most listeners show up around that time to listen to the recordings. Also don’t forget to subscribe and follow my daily Mortgage Rate Forecasts at Mortgage Rate Forecaster™ to ensure you are up to speed on the “big picture” to ensure you are following the best locking advice.
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