Weekly Mortgage Overview: 1/13/2014

By January 13, 2014Mortgage Overview
This week
 
Lots of data on inflation: There are several reports (Import Prices, CPI and PPI) which will give a good picture of the inflation picture. The market is expecting very mild to low inflation and this should provide continued support for bonds.

Retail Sales: This is one of those reports that is very important and has the potential to shift the markets. The consensus estimate is for a change of 0.0%.

Key Technical Test:  Mortgage backed securities (MBS) are still benefiting from the big miss on Friday’s Non-Farm Payroll report and are now testing to very important resistance levels. The 50-day moving average and the 100-day moving average are very close to each other. If we can manage to close above the 100-day moving average this week, then that would signal that the rally on Friday is a true trend reversal and will lead to better pricing all week. But if the 100-day moving average holds, then we know the top end of the range.
 
What happened last week?
 
MBS gained +67 basis points (BPS) from last Friday’s close which caused 30-year fixed rates to move lower for the week. We saw the best rates on Friday and the worst rates on Monday morning.

MBS, and therefore rates, moved sideways for most of the week, making a gain of +26BPS one day but then loosing -32BPS the next day. This sideways trend continued until we got Friday’s Non-Farm Payroll data.

Last week was all about jobs data. The table was set on Wednesday after the much better than expected ADP Private Payrolls hit 238K. This caused everyone to raise their estimates for the Non-Farm Payroll numbers on Friday. But the Non-Farm Payroll data shocked the markets by coming in at just 74K when the markets were expecting something in the 190K-200K range. This weaker than expected data was favorable for bonds and MBS rallied +80BPS which caused mortgage rates to drop.

Once again the 10-year Treasury yield stayed below 3.000%, which continued to provide support for bonds across the board.
 
What is on the agenda for this week?
 

Date

Time (ET)

Economic Release

Market Expects

Prior

13-Jan

2:00 PM

Treasury Budget

+$44.0B

-$1.2B

14-Jan

8:30 AM

Retail Sales

0.00%

0.70%

14-Jan

8:30 AM

Retail Sales ex-auto

0.40%

0.40%

14-Jan

8:30 AM

Export Prices ex-ag.

NA

0.10%

14-Jan

8:30 AM

Import Prices ex-oil

NA

0.00%

14-Jan

10:00 AM

Business Inventories

0.30%

0.70%

15-Jan

7:00 AM

MBA Mortgage Index

NA

2.60%

15-Jan

8:30 AM

PPI

0.30%

-0.10%

15-Jan

8:30 AM

Core PPI

0.10%

0.10%

15-Jan

8:30 AM

Empire Manufacturing

3.5

1

15-Jan

10:30 AM

Crude Inventories

NA

-2.675M

15-Jan

2:00 PM

Fed’s Beige Book

–

–

16-Jan

8:30 AM

Initial Claims

333K

330K

16-Jan

8:30 AM

Continuing Claims

2835K

2865K

16-Jan

8:30 AM

CPI

0.30%

0.00%

16-Jan

8:30 AM

Core CPI

0.20%

0.20%

16-Jan

9:00 AM

Net Long-Term TIC Flows

NA

$35.4B

16-Jan

10:00 AM

Philadelphia Fed

8

6.4

16-Jan

10:00 AM

NAHB Housing Market Index

57

58

16-Jan

10:30 AM

Natural Gas Inventories

NA

-157 bcf

17-Jan

8:30 AM

Housing Starts

986K

1091K

17-Jan

8:30 AM

Building Permits

1000K

1007K

17-Jan

9:15 AM

Industrial Production

0.30%

1.10%

17-Jan

9:15 AM

Capacity Utilization

79.10%

79.00%

17-Jan

9:55 AM

Mich Sentiment

83

82.5

17-Jan

10:00 AM

JOLTS – Job Openings

NA

3.925M