Posts Tagged ‘employment report’

Market recap for week ending 8/2/2013

Posted on: August 3rd, 2013 by Fred Bohman No Comments

This week’s two big events were the Federal Reserve’s (FED) meeting and employment report.

On Wednesday the FED had their meeting and afterwards they are leaving interest rates where they are at for now. They also added that they will continue to monitor the economy and adjust their asset purchase program accordingly. Under the current asset purchase program The FED is currently keeping interest rates low by purchasing 45 Billion dollars of mortgage bond on a monthly basis. If the economy shows signs of improving they will lower this number and rates will increase.

Today job creation numbers were released. The report was expected to be good based on the ADP numbers released earlier in the week. Instead the numbers came in below estimates with the economy only adding 162,000 jobs in July. This was good news for interest as employment is one of the most important factors the FED looks at when deciding what to do with interest rates.

Market recap for week ending 7/19/2013

Posted on: July 19th, 2013 by Fred Bohman No Comments

This week’s big event was the Federal Reserve’s (FED) President Ben Bernanke’s biannual testimony in front of Congress and the Senate. The reason this is so important is that the FED has been keeping interest rates low in order to stimulate the economy. The Fed has been doing this by spending 40 billion dollars a month buying mortgage backed securities in a program called Quantitative Easing (QE). Bernanke’s testimony was centered on whether the FED will continue QE at its present levels or if they will start winding it down.

As you might recall over the last few week’s interest rates have been very volatile making big swings up and down. This was all caused by remarks made by Bernanke and other Fed members about when QE will start winding down. Our financial markets during the last few weeks have seen trillions of dollars disappear and reappear based on these comments and rumors surrounding them.

In my opinion Bernanke did the right thing in his testimony this week. Instead of trying to set a time frame as has in the past he said the future of the QE program will depend on how our economy is doing. If the economy appears strong over the next few months then they will begin tapering down QE, and if the economy recovery slows or stops then they will continue with the QE program. This returns interest rates and our financial markets to reacting to actual financial news rather than comments and rumors.

Looking forward the most important upcoming economic report is the July employment figures that are released two weeks from today.

Market recap for week ending 5/10/2013

Posted on: May 10th, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are 1/8th of a percent higher than they were last Friday.

This week was a slow week in terms of relevant economic reports. Markets were still digesting last Fridays better than expected employment report for most of this week. Last Friday we saw a big spike in the 10 year Treasury bond yield(10yr) following the employment report. Traditionally the 10yr and mortgage rates are closely tied, but in this case mortgage rates increased but not nearly as much at the 10yr.

Looking forward we have to monitor the economic reports closely to see if last Fridays employment report was fluke or it was beginning of a new trend. If more strong economic reports continue to come out look for interest rates to start climbing. On the flip side if economic outlook returns to negative, rates will stabilize where they are now.

Market recap for week ending 5/03/2013

Posted on: May 3rd, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th of a percent higher than they were last Friday.

There was a lot of financial news this week. The Federal Reserve Board (FED) had their Federal Open Market Committee (FOMC) on Tuesday and Wednesday. After the meeting they came out with a policy statement. Their statement said that the economy is still not growing at the pace they want to see so they will continue their assets purchase program to try and stimulate the economy. This is good news for interest rates since they are purchasing mortgage bonds which causes interest rates to stay low. Another topic brought up in their statement was deflation. Up until this point there has been concern that the continued printing of money would cause inflation, but now that concern has flipped. Deflation means that goods are becoming less expensive compared to the dollar. This might sound like a good thing, but it can actually cause problems in the economy.

Yesterday the European Central Bank(ECB) lowered their base lending rate from 0.75% to 0.5%. At this point most of the Euro zone is back in a recession and the lowering of the rate is an attempt to stimulate the economy.

This week was employment week with the unemployment claims on Thursday and the employment report on Friday. The unemployment claims figure showed that claims dropped 18K. The employment report showed that unemployment rate dropped to 7.5% from 7.6% rate. The job creation numbers were stronger than expected especially since the ADP estimates earlier in the week were low. The report was a surprisingly strong report compared to most other economic report lately that have been showing the economy softening. This was a setback for rates, but I believe we might see more negative reports next week which will help out rates again.

Market recap for week ending 4/4/2013

Posted on: April 5th, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th of a percent lower than they were last Friday.

This week was employment week with ADP employment estimates on Wednesday and the official numbers today. The unemployment figures released today showed that the unemployment rate had dropped, but the job creation numbers were only about half of the estimates. The drop in the unemployment rate was most likely to people giving up or taking part time jobs thus decreasing the rate. The way we calculate the unemployment rate is widely known for being flawed and the actual rate is much higher. Also on Thursday the unemployment claims figures were released and claims increased for the first time in a few months.
The Federal Reserve (FED) president Ben Bernanke has stated that they will continue to keep rates low as long as unemployment rate is above 6%. During the last few months unemployment had actually been going down, but this week’s reversal is good news for interest rates.

Also in the news this week has been North Korea and their threats of nuclear war. I don’t think many people other than the media are taking them seriously, but it still might cause some investors to get nervous and move money to bonds which will be good for rates.

For the last few months it has looked like our economy was getting back on track and the outlook for rates was higher. With all the negative news over the last 2 weeks that trend has reversed and it appears that we will be able to enjoy these low rates for a while longer. I would caution those borrowers looking for even lower rates to not wait too long and miss the boat on these low rates.

Market recap for week ending 02/01/2013

Posted on: February 1st, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th lower than they were last Friday.

Most of the week interest rates were on the climb mainly due to stronger than expected economic reports. Data is starting to show that US economy is recovering and that will always be bad news for rates. The reason this is bad news for rates is that low rats is seen as a toll to stimulate the economy and make it grow. When the economy is showing sign of growing there is less need for low rates to stimulate it.

Today there was a reversal in trends and the mortgage rates took back what they lost during the week and then some. The reason for this reversal was due to the unemployment report that came out today. Even though the job numbers were strong the unemployment rate was higher than expected at 7.9%. Also January payroll came in about 10% under estimates. Employment figures are considered a strong indicator on how the economy is doing, so it tends to have a big impact on rates. With the economy not doing as well as expected this signaled to investors that more stimulus might be needed and rates fell.

Market recap for week ending 12/07/2012

Posted on: December 7th, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are at the same level they were at last Friday.

This week was dominated by news about the Fiscal Cliff and the Europe debt crisis. Politicians still can’t come to an agreement about how to avoid the approaching Fiscal Cliff when the all of the Bush tax cuts are set to expire. As long as there is uncertainty the market will remain volatile. My guess is still that they will wait to the last minute then come to a short term agreement, basically extending the problem until the new Congress starts.

Today the US employment report came out. The report was mainly good with strong job creation numbers and the unemployment rate dropping.  However many economist are discounting the report saying the numbers were affected by Hurricane Sandy and temporary holiday jobs.

In Europe, most of the region is already officially in a recession, and the economically strongest country Germany looks like they are about to slip into a recession as well.  Yesterday the European Central Bank left their version of our Fed Funds rate unchanged at 0.75%.

Next week on Tuesday the Federal Reserve(FED) is meeting and is expected to announce some details about quantitative easing on Wednesday. The Fed has been using quantitative easing to keep mortgage rates low by selling short term debt and buying long term debt such as mortgage backed securities. This keeps mortgage rates low because then there is more money competing for mortgage backed securities thus driving rates down.  The Fed is almost out of short term debt to sell, but most economists believe the Fed will still continue buying long term debt by printing more money.

Market recap for week ending 11/03/2012

Posted on: November 2nd, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are exactly where they were last Friday.

Due to Hurricane Sandy the markets were only open for a few hours on Monday and closed Tuesday. The rest of the week was somewhat quiet, mainly due to the upcoming election next week. Investor’s don’t want to make any big moves ahead of the election.

The most significant event this week that affected mortgage rates was the unemployment report that came out today. The report was good with unemployment at 7.9% and better than expected job growth. Normally this would be bad for interest rates, but we saw only a small initial reaction to the report and through the day rates actually improved. Once again I believe the reason for the muted reaction was because of the election next week.

Looking forward at potential market movers we have the election next week. After the election we have the “Fiscal Cliff” at the end of the year. The Fiscal cliff is when the terms of the 2011 Budget control act will go into effect unless congress does something about it. This would be bad news for everyone because then all of the Bush tax cuts would expire since Congress can’t agree on which to keep and which to let expire. Any event that has to do with how much money investors will have to pay in taxes tends to really stir up the markets.

Market recap for week ending 10/05/2012

Posted on: October 5th, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are marginally worse than they were last Friday.

The focus this week was on the unemployment numbers that came out today. Leading up to today the markets were quiet with investors not wanting to make any big moves before the unemployment figures came out. The head line of the report was that the unemployment rate dropped from 8.1% in July to 7.8% in August. However there was more to the report than just the headline. Job creation numbers were less than expected, so somehow the unemployment number decreased with few jobs being created. One explanation is that people who could not find the jobs they were looking for settled for part time jobs or low income jobs. There are also rumors flying around this morning about the data being manipulated by the current administration to make the job umbers look better going into the election.

The reason all of this data affects mortgage rates is that generally speaking bad economic news is good for rates and vice versa. Keeping that in mind unemployment going down would be good for economy but bad for rates. This report however did not have that big of an effect on rates, because of the weak job creation numbers. Another factor that muted the jobs report’s effect on mortgage rates is that the Federal Reserve (FED) is still heavily buying mortgage backed securities. Even though the report might have scared away some private investors for mortgage securities the FED is still buying them.

On Monday the markets are closed for Columbus Day. I believe the outlook is still good for rates unless today’s selling carries over to Tuesday.

Rates drop on bad employment numbers and revival of European debt mess

Posted on: April 9th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting April 9th 2012.

Friday’s March employment report (non-farm jobs up just 120K and private jobs +121K) was half what was expected by economist and analysts. The reaction was swift and strong sending mortgage prices up 28/32 (.88 bp) and the 10 yr note yield down to 2.04% -14 basis points. Mortgage rates down about 12 basis points. The stock market was closed on Friday for Good Friday; this morning the key indexes are catching up to the reaction to the soft employment. The DJIA opened at 9:30 -90, NASDAQ -44, and S&P 500 -15; within five minutes the DJIA was off 143. The 10 yr note +4/32 to 2.03% -1 bp while MBS prices were up 4/32 (.12 bp) frm Friday’s close.

Employment didn’t come close to the forecasts, while not unusual for the monthly report, it was so far off the mark it sent traders and investors back into treasuries on increased belief the Fed may be more inclined to ease further. It was not only employment that drove rates down; Europe’s debt problems are back again after a month or so of little news. Spain’s prime minister saying his country is in “extreme difficulty”. Once again investors are turning to safety on the idea Spain is going to need a bailout and reprise concern that Europe’s economies will drag the region into recession and resurrect the concerns that the EU may not survive. The renewed fears are hitting US equity markets; after the strong rally in the key indexes stocks were prime for some decline but until Spain and the employment report took control the pull back in stock markets was being thought of as a buying opportunity; now the outlook has become much less optimistic. Not only is Spain in the headlights; The European Central Bank’s financing for Portuguese lenders rose to a record in March. Portugal became the third euro-area country after Greece and Ireland to require aid and will receive 78 billion euros under its agreement with the International Monetary Fund and the European Union.

Although job gains in March were half of what the last four months revealed, is that enough to get the Fed to ease again? Not a question easy to answer; one month of disappointing job growth isn’t in itself enough to get the Fed to ease. Besides as long as long term rates are at the present low levels an easing move wouldn’t likely add much to pushing rates much lower. Low interest rates are not the problem for the economy, low rates haven’t driven employment up or done much for the housing sector. That said, the potential of another QE will be debated now for a month. Investors are plowing into Treasuries at a record pace as the supply of the world’s safest securities dwindles, ensuring yields will stay low regardless of whether the Federal Reserve undertakes more stimulus to fight unemployment.

Treasury will auction $66B of note and bonds beginning tomorrow with $32B of 3 yr notes, Wednesday $21B of 10 yr notes and Thursday $13B of 30 yr bonds.

After the huge rally in the bond and mortgage markets on Friday the technical outlook has improved. The 10 yr note yield well under its 20 and 40 day averages and all of the momentum oscillators we track went from neutral to bullish levels. Although the picture has changed we still believe there will be continued volatility in the bond market for the next week or two until things settle a little.