Monday, January 9, 2012

Market Update

Here is another market update from Josh Hay at US Bank.


MARKET COMMENT
Mortgage bond prices were slightly higher last week, which kept mortgage interest rates relatively in check. We started the week with worse rates as stocks surged higher following the extended holiday weekend and the DOW was up 225 points at pricing Tuesday morning. Fortunately, weaker than expected factory orders data Wednesday helped reverse the upward trend in rates and got us back near unchanged on the week. The European debt crisis continued which generally helped US debt instruments. Mortgage bonds ended the week unchanged to better by approximately 1/8 of a discount point.
The Treasury auctions this week will provide an indication of foreign appetite for US debt.
LOOKING AHEAD
Economic
Indicator
Release
Date and Time
Consensus
Estimate
Analysis
Consumer CreditMonday,
Jan. 9,
3:00 pm, et
$7.5bLow importance. A significantly large increase may lead to lower mortgage interest rates.
3-year Treasury Note AuctionTuesday,
Jan. 10,
1:15 pm, et
NoneImportant. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note AuctionWednesday,
Jan. 11,
1:15 pm, et
NoneImportant. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed “Beige Book”Wednesday,
Jan. 11,
2:00 pm, et
NoneImportant. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Weekly Jobless ClaimsThursday,
Jan. 12,
8:30 am, et
365kImportant. An indication of employment. Higher claims may result in lower rates.
Retail SalesThursday,
Jan. 12,
8:30 am, et
Up 0.2%Important. A measure of consumer demand. Weakness may lead to lower mortgage rates.
30-year Treasury Bond AuctionThursday,
Jan. 12,
1:15 pm, et
NoneImportant. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Trade DataFriday,
Jan. 13,
8:30 am, et
$43b deficitImportant. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
U of Michigan Consumer SentimentFriday,
Jan. 13,
10:00 am, et
65.5Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
EMPLOYMENT RESULTS
The December employment report came in stronger than expected with the headline rate surprisingly lower and the jobs figure better than expected. Fortunately stocks took a dive later Friday morning and rates were able to rebound a little later in the morning recovering the initial weakness. Unemployment came in at 8.5%, considerably better than the 8.7% rate that was expected and not bond friendly. The payrolls component showed jobs increased 200,000 compared to the 150,000 increase expected by analysts. The mortgage bond market had an initial negative reaction to the report.
The Bureau of Labor Statistics (BLS) of the U.S. Department of Labor compiles data from two different surveys, the household survey and the establishment survey, in order to complete the employment report. This explains why sometimes there is a divergence between the unemployment rate and payrolls figures each month. The payrolls figure usually receives the greater weight from analysts but the headline figure covers the news headlines.
Job gains occurred in transportation and warehousing, retail trade, manufacturing, health care, and mining.

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