| Last | Change | Percent | |
| S&P Futures | 1639.5 | -16.1 | -0.97% |
| Eurostoxx Index | 2766.1 | -68.9 | -2.43% |
| Oil (WTI) | 92.66 | -1.6 | -1.72% |
| LIBOR | 0.273 | -0.001 | -0.37% |
| US Dollar Index (DXY) | 83.92 | -0.433 | -0.51% |
| 10 Year Govt Bond Yield | 2.00% | -0.04% | |
| Current Coupon Ginnie Mae TBA | 103.2 | 0.2 | |
| Current Coupon Fannie Mae TBA | 101.8 | 0.1 | |
| RPX Composite Real Estate Index | 199.5 | 0.5 | |
| BankRate 30 Year Fixed Rate Mortgage | 3.73 |
Markets are lower again after yesterday's massive reversal. Initial Jobless Claims came in at 340,000 down 23k from the week before and 5k below street estimates. Bonds are up about six ticks, which is surprising given that the SPUs are down 16.
Yesterday's moves in the stock and bond markets have a lot of people scratching their heads. I'll give you my explanation: Yesterday's reversal came during Bernake's testimony, which I was listening to in the background. Bernake started his prepared remarks basically saying that the Fed would be guided by data, and noted that they feel like in hindsight, that they stopped QEI and QEII a little too early. As long as inflation remained below their target rate they felt like they had no reason to stop asset purchases. Bonds rallied early and the yield dropped to 1.89%. Then, during the Q&A, one of the questioners tried to pin down Bernake on when they would slow or stop asset purchases. Bernake repeated that the Fed would be guided by the data. When they see a materially better employment market, they will think about tapering. The questioner then asked if that could be before Labor Day. Bernake replied that if the data improves materially, then sure. Bernake's body language was "well, it is a theoretical possibility that the labor market could improve dramatically over the summer and I am not going to rule anything out." The bond market however focused on the statement that the Fed could end QE by Labor Day and sold off. Apparently a big asset allocation trade went through right about the same time where someone sold Treasury futures to buy stocks and that exacerbated the move. The S&P 500 turned on a dime about the same time and did a 40 point intraday swing.
The bond market is just heavy, as it has been since it turned on a dime in the first week of May. Any rally is sold. This is traditional bear market behavior, and I don't know how long it lasts, but until the market feels different, your borrowers are rolling the dice if they are floating. Note Bene: Bear market rallies are fast and furious, so you should expect increased volatility in rates. In both directions.
The National Association of Realtors reported that existing home sales rose to an annualized pace of 4.97 million in April. Total Housing Inventory rose 11.9% at the end of April to 2.16 million units, a 5.2 month supply. Six months' inventory is considered "balanced." The median existing home price increased to 192,800 in April, up 11% from a year ago. One thing to note is that the outsized activity on the West Coast and places like Phoenix is distorting the median price indices. Most of the activity is concentrated in a handful of hot market where prices are rising rapidly after bottoming last year. The rest of the country is not experiencing that at all. Home prices are up in the low / mid single digits elsewhere.
In contrast to the NAR report, the FHFA released its monthly home price index report, which shows prices rose 1.9% in Q1 and are up 6.7% year over year. The FHFA report looks at the prices of houses with mortgages backed by Fannie Mae and Freddie Mac, which means that a lot of the activity on the West Coast is excluded, because it ignores cash transactions. The FHFA report is more of a "central tendency" report.
No comments:
Post a Comment