Mortgage Bonds plunged for the week on taper fears and positive economic data. The 3.5% fell 50bp to end at $99.06. We recommend floating Mortgage Rates into next week. Technically, the Bond is near the lower end of the recent trading range – this is good news as prices could bounce. Couple this with Stocks on shaky ground, gives us cover to start the day Floating. It would not surprise us to see Stocks continue to selloff after yesterday’s drubbing due to the Middle East uncertainty and weak retail earnings and guidance. The Dow fell 30.72 to 15,081.47, the S&P lost 5.49 points to 1,655.83 while the Nasdaq fell 3.33 points to 3,602.77. Oil was last seen at $107.80/barrel up 49 cents.
Dennis Lockhart from the Atlanta Fed said yesterday that economic data remains too mixed for Fed voting members to lay out a clear plan for tapering at the next FOMC meeting. Fed Chairman Bernanke has said that tapering may begin at the end of the year, but could be extended into the first quarter of 2014.
Housing News
Housing Recovery Continues to Heat Up
Despite all odds against the housing recovery, the market is steadily improving and housing experts do not expect the sector to lose its momentum any time soon. Regardless of an inadequately housing supply, rising home prices reacting to strong demand and difficult lending environment, market expectations remain bullish on housing. Nonetheless, housing is in its early stages of recovery and panelists at the Bipartisan Policy Center’s conference believe it’s not time for the Federal Reserve to take their foot off the bond-buying gas pedal just yet. “There is a cyclical and structural nature to the problem,” explained Paul Weech of Housing Partnership Network. He added, “We haven’t solved for the underlying structural problem and if we revert back to the norm, we still have millions of homes trying to get back in the full market recovery.” Read more
Housing Starts rose by 5.9% from June to July to 896K units annualized, inline with estimates while Building Permits were up 2.7% to 943K, above the 934K expected.
Economic News
Weekly Initial Jobless Claims fell by 15K to 320K, a level not seen since October of 2007. The 320K was below 339K expected. There were no apparent seasonal distortions in the numbers. The jobs market has been improving and the Fed will be closely watching the numbers leading up to the mid-September FOMC meeting.
Inflation in July, as measured by the Consumer Price Index (CPI) and the Core CPI, both remained tame at 0.2%, inline with estimates. On a year-over-year basis, CPI is at 2% while the Core is at 1.7% – both numbers within the Fed’s target.
Empire Manufacturing Index fell to 8.6 in August from the 9.4 registered in July but better than the 6.0 expected. At 10:00am the Philly Fed and the NAHB Housing Market Index are set to be released.
Sources: CNBC,MMG, Housingwire,