Posted To: MBS Commentary

Today brought the (not very) much-anticipated FOMC Minutes--a more detailed account of the conversation that transpired at the end of July when the Fed announced its rate cut. As expected, some at the Fed wanted to cut more. Some wanted to cut less. The consensus was that it was a mid-cycle rate adjustment that left room for the Fed to hike again or cut again depending upon how conditions evolve. This was perhaps somewhat less upbeat than some market participants may have hoped, but not so much so that we should credit the Fed as a market mover today. I'm more inclined to give the Fed some credit for nudging rate expectations microscopically higher and give the consolidation range credit for turning away the post-Fed rally in 10yr yields. To be clear, this is exactly in line with my pre...(read more)

8/21/2019 3:33:50 PM

Posted To: Mortgage Rate Watch

Mortgage rates moved higher today, and it had nothing to do with any of the day's events or news headlines. Quite simply put, the bond market (which dictates the rates that can offered by lenders) had already begun to weaken as of yesterday afternoon. Weakness continued overnight as global financial markets dialed back their demand for safe havens. In market terms, a safe haven is generally a lower rate of return with a higher guarantee of the return remaining stable. Fixed rate government bonds from financially solvent countries are a classic safe haven. And no matter what you've heard in the news, the US mortgage market is also squarely in the safe haven camp. The only major risk associated with mortgages as far as investors are concerned is how long the mortgage will last. That uncertainty...(read more)

8/21/2019 2:58:00 PM

Posted To: MND NewsWire

Existing home sales returned to an upward track in July after dipping 1.7 percent in June. The National Association of Realtors® (NAR) said pre-owned single-family homes, townhomes, condominiums, and cooperative apartments sold at a seasonally adjusted annual rate of 5.42 million units during the month, a 2.5 percent increase from the 5.270-million-unit rate in June. The July sales were 0.6 percent higher than the 5.39 million pace set in July 2018, the first time this year that 2019 sales exceeded those a year earlier. Sales were toward the high end of the range of estimates from analysts polled by Econoday , 5.25 million to 5.50 million and beat the consensus estimate of 5.39 million units. Single-family homes sold at a seasonally adjusted rate of 4.84 million, a 2.8 percent increase...(read more)

8/21/2019 9:19:49 AM

Posted To: MBS Commentary

In the day just passed, a modest uptrend in yields was "defeated" from a technical standpoint. Yields broke below a trend-line marking "higher lows" that began last Thursday afternoon and spent the rest of the day moving mostly sideways at stronger levels. Stocks were weaker but that didn't necessarily have a bearing on bond market strength. If there was cause for concern, it's that bonds didn't rally below the lows from August 16th (which in turn represented higher lows versus the previous day). In the day ahead, bonds will likely continue feeling out a consolidative range heading into this afternoon's FOMC Minutes. Keep in mind that the Minutes do not represent a new policy decision from the Fed, simply a more detailed account of the meeting that occurred...(read more)

8/21/2019 8:14:44 AM

Posted To: Pipeline Press

Congratulations to Hawaii which became a state fifty years ago today. We’ve had plenty of economic cycles, small and large, in fifty years, although in general rates have been coming down since 1981. And we’ve had a flat or inverted U.S. yield curve for several months. Inverted yield curves don’t cause a recession: Two consecutive quarters of negative growth is the technical definition of a recession. Nine major economies have entered a recession or are on the verge of one, adding to fears the U.S. could see a downturn. The nine economies are Argentina, Brazil, Germany, Italy, Mexico, Russia, Singapore, South Korea and the UK. Bank of America CEO Brian Moynihan says recession risks in the US are low despite warning signals from bond markets, which he contends are mostly driven...(read more)

8/21/2019 6:43:24 AM

Posted To: MND NewsWire

Residential construction has been famously slow for several years and some new analysis of Census data by the National Association of Home Builders (NAHB) shows that the lack of robustness is shared in the custom home sector. In an Eye-on-Housing blog article, Robert Dietz, NAHB Senior Vice President and Chief Economist says custom home building has been effectively flat over recent quarters. In the second quarter of this year the Census Bureau recorded a total of 49,000 custom home starts, a tiny decline from 50,000 in the second quarter of 2018. Dietz says the last four quarters, custom housing starts totaled 169,000, down 1.7 percent compared to the prior four quarters (172,000). Note that this definition of custom home building does not include homes intended for sale, so the analysis uses...(read more)

8/21/2019 6:16:36 AM

Posted To: MND NewsWire

The volume of mortgage applications continued to be shored up by refinancing during the week ended August 16, but overall activity was down. The Mortgage Bankers Association (MBA) said its Market Composite Index slipped 0.9 percent on a seasonally adjusted basis, perhaps not surprising after it soared 21.7 percent the previous week. On an unadjusted basis the Index fell by 2.0 percent following a 27 percent gain during the week ended August 9. The Refinance Index managed a slight 0.4 percent gain from the previous week and was 180 percent higher than the same week one year ago . That index had increased by a cumulative 42 percent over the previous two weeks. The refinance share of mortgage activity increased to 62.7 percent of total applications from 61.4 percent a week earlier. The seasonally...(read more)

8/21/2019 6:11:54 AM

Posted To: MBS Commentary

Bonds were breathing easy by the time the domestic session got underway. Before that, they kicked off the overnight session in lower yield territory. Modest gains meant a friendly break below the potentially troubling resistance trend that had developed over the past 2.5 days. Pictures are worth more than words here, so here is an hourly 10yr candlestick chart as of this morning: Very little changed after that. Notably, this is the 2nd straight day where Treasuries have followed European bonds overnight and then mostly side-stepped through the domestic hours. This won't necessarily be a trend, and it's not so much interesting as it is a reflection of the absence of domestic market movers during that time. That same absence won't be intact tomorrow as the Fed Minutes hit at 2pm ET...(read more)

8/20/2019 3:41:44 PM

Posted To: Mortgage Rate Watch

Mortgage rates held steady today, for the most part. If there was a leaning, it was toward slightly lower rates, but not by a wide enough margin to be significant. At first glance, holding steady at the lowest levels in nearly 3 years is great! In fact, it's still great at second glance. But the more information we consider, the more we may wonder why they're not lower. Reason being: 10yr Treasury yields (which often move in the same direction as mortgage rates and by similar amounts) are noticeably lower today! So why aren't mortgages following? For the explanation, we can simply dust off last Friday's commentary: The reasons for the discrepancies have to do with the fundamental differences between mortgages and Treasuries as investments. Simply put, a mortgage can be paid off any time whereas...(read more)

8/20/2019 3:13:00 PM

Posted To: MND NewsWire

Monday's edition of the Federal Register featured a proposed rule that, depending on your viewpoint, would amend the Department of Housing and Urban Development's (HUD's) interpretation of the Fair Housing Act's disparate impact standard, (HUD) or "make a major change to a well-settled standard on how the agency and the courts review claims of discrimination under the Fair Housing Act of 1968" (Urban Institute.) The announcement from HUD says its proposed rule would provide more appropriate guidance on what constitutes unlawful disparate impact to better reflect the Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The court ruled that "disparate impact" is one arising out of an action that is not necessarily discriminatory...(read more)

8/20/2019 12:30:59 PM