Phoenix Mortgage Broker Gives Interest Rate Analysis

Floating is going against the grain these days with the rate markets bearish. However, we always look for that opportunity to catch a bounce. If you are able to keep tuned to our rate alerts we suggest floating to start, but if you are unable to keep close we suggest locking through the day. We will not float overnight unless mortgage prices improve enough to reduce overnight risk (+.25 bp frm initial pricing levels)

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Call my office at (602) 291-4362 or e-mail me at: bob@bobmangold.com

More selling in the interest rate markets this morning. Prior to 8:30 data the 10 yr note was off 5/32 and mortgages were unchanged, the DJIA futures trade had the index -25 after closing slightly above 10K yesterday At 8:30 weekly jobless claims were down 10K to 514K; continuing claims also declined to 5.992 mil from 6.067 mil last week. Sept CPI was fractionally higher than forecasts; +0.2% for both the overall and the core (ex food and energy components). Finally at 8:30, the NY Empire State manufacturing index jumped to 34.57, the estimate was a decline to 17.5 frm 18.88 in Sept, new orders component jumped to 30.82 frm 18.82 (above zero is expansion). All three reports added more negative response in the bond and mortgage markets.

On the weekly claims; continuing claims are declining but may be due to those unemployed running out of unemployment benefits. 514K new filings however isn’t a reason to cheer too much, workers continue to lose jobs at a lesser rate but jobs are still eroding. On the CPI, inflation based on the Sept report suggest a slight increase on the core, but so far we consider it an anomaly, traders however are on edge with the inflationary outlook with interest rates at the current low levels. Don’t have much to comment about on the NY Empire State index jumping like it did, rather surprising given the index was expected to decline, it didn’t go unnoticed by traders.

At 10:00 the Philly Fed business index was expected at 12.5 frm 14.1 in Sept, as reported the overall index fell to 11.5; new orders at 6.2 frm 3.3, prices pd at 21.3 frm 14.9 and employment at -6.8 frm -14.3. Overall the report is slightly better but not nearly as robust as the earlier NY Empire State data at 8:30. No initial reaction to the report in either stocks or bonds.

The bellwether 10 yr is approaching where we expect to hold at 3.50%. Looking for a new range between 3.25% and 3.50%. The 10 yr and mortgages are however technically bearish and it is not advisable to make decisions that the 3.50% will hold until it actually is tested. Both mortgages and long term treasuries are trading below their 20 and 40 day moving averages and have broken various chart support levels after interest rates declined to unsustainable levels based on the increasing view the economy is recovering.

PIMCO is betting on deflation based on the view that the economic recovery will be slow and lethargic. PIMCO reduced its holdings of mortgages in favor of long term treasuries a month ago on the bet deflation and not inflation will keep interest rates low. The increase in treasuries was minor however, from 44% to 48% of the total $185.7B Total Bond Fund. Traders concerned about inflation, Bill Gross at PIMCO concerned that deflation is the coming issue. A lot of uncertainty about the outlook in 2010 will keep volatility high with overall interest rates at these historic low levels.

The FOMC minutes yesterday noted some of the members want to consider having the Fed buy mortgage MBSs after the $1.25 commitment runs out at the end of Q1 2010. If the Fed does signal it will continue to buy MBSs it will keep mortgage rates from increasing as much as they would otherwise. Mortgage rates however will track the 10 yr note direction; if interest rates increase so too will mortgage rates but with less of an increase if the Fed is in the game.

Call our office at (602) 291-4362 to see how our SmartBuyer™ System can save you at least $50,000 when buying and financing a home.

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