Good Morning … The Fed’s surprise announcement that they would not slow the $85 billion monthly pace of bond buying sent US equities to new all-time highs on Wednesday. Chairman Bernanke’s comments regarding the timing of an eventual pull back seemed much less certain saying “there is no fixed calendar or schedule” and “if the data confirm our basic outlook, then we could begin later this year”. Lost in this risk on frenzy were concerns about recent economic data and the fact that the Fed actually lowered their forecast for US growth. Before the announcement, we saw housing starts rise a disappointing 0.9% versus expectations of 2.3% and building permits fall a larger than expected 3.8% in August on rising borrowing costs. So once again bad news is good news. With tapering on hold for at least the immediate future, the DOW closed up 147.2 points at 15,676.9 while the S&P 500 rose 20.76 to close at 1,725.52, both new all-time highs. U.S. treasuries spiked immediately after the statement pushing yields to their lowest levels in over a month. By the end of the trading session, the 10-year was up 1 point and 11 ticks, pushing the yield down to 2.69%, while the 30-year bond was up 1 point and 15 ticks pushing the yield down to 3.75%. Mortgages were also on fire after the announcement with better buying across the board and very little originator supply. GN/FN swaps were largely unchanged to marginally weaker (under perform), but again, flows were light. By the end of the session, FN 30 year 4.0s closed at 104-04 (up 1 point and 7 ticks), PC 30 year 4.0s closed at 103-27 (up 1 point and 6+ ticks) and the GN 30 year 4.0s closed at 104-28+ (up 1 point and 7 ticks). We will now have to wait and see if origination supply actually picks up over the next few weeks. If it does not, that could spell trouble, particularly in the 4.0 & 4.5 rolls. This morning mortgages are opening up about down a tick to up a tick across the stack. U.S. equity futures are pointing to a higher open this morning and stocks in Europe and Asia are up over 1% across the board. Treasuries are mixed this morning (as of 7:30 AM Eastern), with the 10-year unchanged yielding 2.69% while the 30-year is down 10 ticks increasing the yield to 3.77%. Today we get weekly jobless claims and existing home sales. The Fed has made it clear that any exit from QE3 is subject to the economy living up to expectations. As a result, all eyes will once again focus on picking apart key data and speculating on the eventual exit from QE3. Oddly, we are back in the same place where bad data is likely good for bonds and possibly even equities. That said, we can’t lose focus on what the data is actually supposed to mean. Kelly St. Mary Mortgage Advisor WA MLO - 119497 Office: 509.457.6552 Cell: 509.949.2629 Fax: 509.457.6585 Click Here To Apply TAMC 2013 (640x286) 1415 Lakeside Court Yakima, WA 98902 theadvisorsmortgage A division of American Pacific Mortgage Company.
Posted on: Thu, 19 Sep 2013 16:32:36 +0000
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