Savala Team

11/17/10

brian — Wed, 17 Nov 2010 22:53:57 +0000

MBS prices were on the climb this morning on bond-friendly data, but soon reversed their highs after comments from Republican leaders in regards to QE II and future inflation effects. Consumer Price data showed no signs of immediate consumer inflation pressure, and the housing data was worse than expected. Both Housing Starts and Building Permits (550k vs. 570k est.) were below expectations. The early bond boost came on word that European finance officials are headed to Ireland to discuss bailout packages for the struggling EU member. Keep an eye on the headlines for further news out of Europe, and for any inflation-related topics.

Tomorrow, Thursday, 11/18 has Initial Jobless Claims, Leading Indicators, and the Philadelphia Fed. Initial Claims will be watched for further signs of life in the jobs sector, so expect a lower than expected print to potentially send rates lower, while an up-side miss may allow rates to move up. The Philly Fed is usually a market-mover. Look for a higher than expected reading to spur selling (rates up), while a disappointing number may allow rates to stay low.

11/11/10

brian — Thu, 11 Nov 2010 23:04:16 +0000

MBS prices are down on the session for the third straight day following the better than expected Unemployment Report Friday. The stock market is also down. Today’s lone piece of data was the Wholesale Inventories number which was higher than expected. The number seems to have been largely ignored, as the markets are focused on the upcoming 10yr auction. Yesterday’s $32B 3yr note auction was decent, but expectations for today’s $24B 10yr sale seem to be falling lower. Another decent auction may temporarily stop the sell-off, but a poor showing may accelerate it. Auctions are always important when looking to track market movement, but become even more so in the absence of significant economic data.
Tomorrow, Wednesday 11/10 is a big day for data. Due to the Veteran’s Day Holiday, we will see Initial Claims (est. 450k) tomorrow, instead of the usual Thursday release.

10/20/10

brian — Wed, 20 Oct 2010 19:31:57 +0000

Mortgage Bonds are trading slightly higher after a sluggish start this morning, and seem to keep gaining on the back of yesterday’s plunging Stock market. This morning, Stocks are attempting to stabilize and move higher following Tuesday’s poor performance. It seems a major player in the most recent market downfall comes from news that the fed along with a number of other banks are going to force B of A to “buy back” $47 Billion in bad or non–performing loans. This is cause for concern as there may be other banks that fall victim to buying back bad or non performing loans.

10/12/10

brian — Tue, 12 Oct 2010 22:57:19 +0000

Mortgage Backed Securities dropped (rates worse) this afternoon after a weak auction results (3 yr Note). The day started in positive territory until the auction result resulted in a deterioration that continued to slide until closing. The market received some benefit from the news and closed slightly higher on the day.
Tomorrow, Wednesday, 10/13 has Import/Export Prices and the Treasury Budget (-$33.5B). Neither holds much weight, but be wary of any significant uptick in prices. Inflation can be a trigger to rate increase. Any evidence of inflation pressure will likely spook markets in the short-term. We will see the 2nd auction of the week tomorrow; a $21B 10yr offering.

10/5/10

brian — Wed, 06 Oct 2010 18:50:39 +0000

Quantitative Easing or QE2 seem to be the buzz words around the global markets. Ben Bernake, our fearless Fed leader spoke on the expanding Fed Deficit and the markets listened. He didn’t give much info on what the fed’s plans were in the upcoming months but he did voice his concern that if the US doesn’t make adjustments soon we will be in serious trouble. There is mixed emotion of QE2 plans as more money tossed on a smoldering economy will be little to no help. Mortgage bonds will have to wait in the wings to find out what their role will be. More fed spending will likely come at a cost of bonds as inflation will certainly start to rise. For now we must continue to take advantage of the low rates as it seems the fed is putting a stop watch on the rock bottom rates.

Food for Thought

phelan — Mon, 04 Oct 2010 22:26:09 +0000

09/27/2010

In simple terms, every 1% increase in home loan rates decreases the buying power of an individual by 10% in home price. This means that if you qualify for a home priced at $200,000 today and interest rates increase 1%, the amount you could qualify for would be reduced to approximately $180,000 to maintain the same payment. That’s why it’s so important to take advantage of today’s opportunities before there’s even a slight change higher in rates.

Mortgage Bonds started the day higher, adding to yesterday’s gains, and then received an additional boost on a very weak Consumer Confidence report. There are 3 bond auctions this week, that started yesterday with the 2 yr. We will watch to see how the rest of the auctions go as a good bond auction is good for rates.

Coming Soon

phelan — Mon, 27 Sep 2010 19:58:58 +0000

In a week or so, you’ll be able to get the latest industry updates from our Savala Team blog. Check back here soon.