Much has been made of the Fed’s Jackson Hole symposium in 2021 and in a general sense throughout the years. On some years, the anticipation has proven to be well justified. Other years, not so much. This time around, there is indeed an opportunity for the Fed share to shift the signaling about asset purchases in one direction or the other, but while a volatile outcome is exceedingly possible, it’s not necessarily guaranteed.
In fact, even if there is an apparent reaction today, the economic data and covid numbers would still have to play along in the…
Bonds began the day with a test of the important technical ceiling at 1.37% in 10yr yields. With some help from geopolitical risk due to bombings in Kabul, bonds managed to stay fairly calm with the 10yr just a hair better than ‘unchanged’ at the 3pm CME close. MBS also found their footing and were 2 ticks (0.06) higher at the same time. We’re not out of the woods yet though. Tomorrow brings Fed Chair…
Mortgage rates stabilized today after moving higher at a moderately quick pace over the past 2 days. To be sure, today’s rates are definitely higher than those seen at the end of last week, despite numerous headlines to the contrary. The headlines in question are based on Freddie Mac’s weekly rate survey which is published on Thursday morning, but tends to capture week-over-week rate movement between Monday and the previous Monday. That ended up being a very favorable comparison this time around. The rising rates of the past 2 days conclusively changed the game.
Why are rates rising though? Rates are dictated by the bond market. As bond prices fall, yields rise, and higher yields coincide with higher rates (indeed, “yield” is simply market jargon for “rate”).
Bonds are either on the doorstep of critical line in the sand, or they soon will be. These lines are drawn on the technical ceilings at 1.37% and 1.43% in 10yr yields. With highs of 1.375% already hit this morning, the first battle is well underway. At this point, Powell’s Jackson Hole speech wouldn’t need to be too terribly hawkish tomorrow in order to tip over some technical dominoes that lead to the next battle at 1.43%. If that battle is lost and covid numbers stabilize, we could be witnessing the confirmation of a longer-term uptrend in rates (the one we were …
Although the week began in forgettable fashion, Tuesday saw yields move up at a moderate pace with no overt provocation. Indeed a quick glance at the 5-day candlestick chart leaves one with the impression that bonds simply targeted the 1.30% technical level and set their selling programs on cruise control. While it’s early yet, yields are trying to challenge that ceiling to start the day. Breaking above wouldn’t be the…
Early in the pandemic (Version I) there were
a lot of theories advanced about its lasting effects on housing. Some of the
theories were fanciful. These included (true story) that new homes would include
covered areas specifically for no-touch delivery of on-line purchases which
would, of course, constitute the bulk of our shopping. Multifamily construction
would have to include no-touch or self-cleaning surfaces throughout common
areas. Private areas for outdoor living would be mandatory Other projections were based on early
observations of housing trends. Among the ones that were most worrisome to many
in the industry was the apparent desire to shift away from density. This was
seen happening both in an increased demand for detached housing and a perceived
exodus from larger cities. The premise was the big cities would see dramatic
declines in their populations as growth exploded in smaller cities and rural areas.
Vacation meccas could gain the most as workers would be able to work in the
areas where they wanted to play. Another, less concerning assumption was
increasing homebuyer demand for more living space to accommodate working and
schooling at home.
Both refinance and
purchase applications increased slightly last week, and the Mortgage Bankers
Association (MBA) said its Market Composite Index, a measure of mortgage loan
application volume, increased 1.6 percent on a seasonally adjusted basis and
1.0 percent on an unadjusted basis from one week earlier. The Refinance
Index increased 1 percent from the previous week and was 3 percent higher than
the same week one year ago. The refinance share of mortgage activity remained
unchanged from the previous week at 67.3 percent of total application The seasonally
adjusted Purchase Index increased 3 percent, 1 percent before adjustment, from
one week earlier. The unadjusted index was 16 percent lower than the same week
one year ago.
The profits of independent mortgage banks
and bank mortgage subsidiaries took their third straight tumble in the second quarter
of this year. Those profits, however, were still stronger than historic
averages. The Mortgage Bankers Association (MBA)
said, in its Quarterly Mortgage Bankers Performance Report, that banks had a net gain of $2,023 on each loan they originated during
the period, down from a reported gain of $3,361 in Q1. (All comparisons that
follow are to the first quarter of 2021 unless otherwise notes.) The average pre-tax production
profit was 73 basis points (bps), down from 124 bps in the previous quarter and
167 bps lower on a year-over-year basis. This is still higher, however, than
the average in records that extend from the third quarter of 2008 to the most
recent quarter, 55 bps.
Although the week began in forgettable fashion, Tuesday saw yields move up at a moderate pace with no overt provocation. Indeed a quick glance at the 5-day candlestick chart leaves one with the impression that bonds simply targeted the 1.30% technical level and set their selling programs on cruise control.
While it’s early yet, yields are trying to challenge that ceiling to start the day. Breaking above wouldn’t be the end of the world as rates are still better described as “broadly sideways at long-term lows.” While that range may come under pressure in the run up…
Bonds sold off moderately and steadily all day without any clear paper trail back to newswires, data, or events. Could it be an evolving narrative on covid? Typical hesitation on a Treasury auction week? Random movement inside a broadly narrow range? Or is this a simple move to the sidelines ahead of this Friday’s Powell speech? While all of these factors could be in play to varying degrees, we…