On Monday, lower Bond prices ushered in buyers with modest volume levels. Strong Durable Orders helped to lead prices lower, moving Mortgage Rates higher, while the weak Pending Home Sales data and a decent 2 – year note sale helped Bonds recover and bring Mortgage Rates back down.. Tuesday’s Bullish Hammer candle leads us to offer a cautiously floating bias.
At Fridays close, the Bond chart showed a long upper wick piercing through the 200-day Moving Average tells us that the Bond is still unable to break above that level…not a good sign for Mortgage Rates. The only positive signal is that we have not made a new low in the trend lower. If that happens, meaning that prices move below $103.12. If we do move below that level, more selling could take place.
MARKET WRAP: Mortgage Bonds started the day to the upside on the mixed jobs data but quickly reversed course after positive data from the Consumer Sentiment report and the ISM Index. The 3% coupon hit 103.75 before closing at 103.16 down 9bp. Stocks were higher in premarket trading as the momentum in the equity markets continues to build and surged after the strong economic data. The Dow rose by 149.21 points to 14,009.79 closing above the 14,000 for the first time since October 12, 2007. The S&P gained 15.06 points to end at 1,513.17 while the tech heavy Nasdaq jumped 36.97 to end the week at 3,179.10. Oil was last seen at $97.63/barrel near unchanged levels.
Housing News
The Case-Shiller report showed that 19 of the 20 metropolitan areas it tracks registered year-over-year price increases, with New York as the sole city to see prices fall. The improvement has been considerable in much of the nation: 11 cities in the Case-Shiller index saw year-over-year price gains of 7% or more.
Many economists expect home prices to keep rising in 2013 because those two forces—low interest rates and a slender inventory of homes for sale—are expected to persist throughout the year. “We’re not building enough at a high enough rate,” said Patrick Newport, an economist at IHS Global Insight.
National Forclosure Inventory Falls 19.5%
“The most encouraging foreclosure trend reported here is that the inventory of foreclosed properties is almost 20% smaller than a year ago,” said Mark Fleming, chief economist for CoreLogic. “This big improvement indicates we are working toward resolving the backlog of the most distressed assets in the shadow inventory.”
Economic News
The jobs recovery continued to crawl forward at a slow pace in January, and there’s little hope it will pick up any time soon.
The U.S. economy added 157,000 jobs in January, according to a Labor Department report released Friday. That’s slower growth than in December, when employers hired 196,000 workers. Call it “Groundhog Day in the labor market,” said Heidi Shierholz, economist with the Economic Policy Institute. “It’s the same old crap. We’ve been waking up to this same story for two years.”
The unemployment rate was 7.9% in January, as 12.3 million people were counted as unemployed. Overall, hiring is barely keeping pace with population growth, and the Labor Department noted that the unemployment rate has barely changed since September.
A Look Ahead
It’s a good bet that Uncle Sam will close up shop come late March, as the White House and House Republicans lock horns over federal spending and budget matters. Current stopgap spending authorization runs out on March 27. But the shutdown will be short…no more than a week or two, probably less. And critical government functions will continue. The Defense Dept., intelligence offices, key portions of the Federal Reserve, Homeland Security Dept. and Treasury Dept., for example, will remain open. Ditto, the Federal Aviation Admin., which oversees airports and controls air traffic. Amtrak trains will run, the Postal Svc. will continue to deliver mail, and no one’s Social Security benefits will be interrupted. Most agencies will go dark. A million federal employees in the D.C. area and around the country won’t report to work and won’t be paid for the duration. You won’t be able to get a passport, visit a national park or get an SBA loan. Federal courts won’t be in session. USDA meat inspections and DHS inspections of imported commercial cargo will be slowed but not stopped. IRS tax refund checks will likely be stalled, but probably not electronic refunds. And federal contractors won’t receive payments, leaving them holding the bag for payments to subcontractors. For most people, it’ll be a nuisance. But for some…a significant disruption, causing delays and loss of business every day that the federal government is closed. Source Kilinger Letter
Sources: MMG, Housing Wire, CNBC, Bloomberg, Wall Street Journal,CNN Money