Thursday, May 29, 2014 - Article by: Joe Shamie - First Choice Loan Services -
Thursday - May 29, 10:40 am ET
Current Trend Direction: Sideways to higher
Float/Lock Bias: Cautiously FloatingCurrent Price of FNMA 4.0% Bond:$106.09, +3bps
Bonds are trading near unchanged after GDP missed an already low estimate - ugh!
The government reported that the 2nd reading on 1st quarter 2014 Gross Domestic Product came in at -1.0% after the initial read of 0.1%. This is the first negative reading since the -1.3% recorded in the 1st quarter of 2011 and below the -0.5% expected. The negative reading was led by declines in private inventory investments, exports, home, office and plant construction, along with state and local government spending. Consumer spending was little changed while the inflation component was also unchanged from the first reading.
Folks in the media are poo-pooing this poor reading and calling for a big, positive snap back in growth in the second quarter. We are not as optimistic as they are as we have seen this movie play out several times over the past 5+ years. Time will tell.
Weekly Initial Jobless Claims declined by 27K to 300K and below the 318K expected. The four week moving average, which irons out seasonal abnormalities, decreased by 11K to 311,500. This weeks claims data will comes ahead of next week's Monthly Payroll Report for May.
April Pending Home Sales rose were up 0.4%, below the 1% expected and down from the 3.4% reading in March - not much reaction to the data. At 1pm ET, the results from today's $29B 7-Year Note auction will be released and comes after yesterday's 5-Year offering, which garnered a "C+" rating. Stay tuned this could be a market mover.
Over in the foreclosure arena, CoreLogic reported that there were 46K completed foreclosures in April, down 18% from the 56K recorded in April 2013 and down 0.4% from March. Before the housing market decline in 2007, completed foreclosures averaged 21K per month between 2000 and 2006.
We are watching yields across the globe very carefully. The US 10-Year Note yielding a paltry 2.42% is amongst the highest in the developed countries on the globe. So there is room for rates to come down further as the global economy appears to have stalled. However, this improvement in rates may be limited if the Eurozone Bond Yields, which have starting moving higher of late, continue to do so in response to a weakened Euro.
There is a lot to think about and watch. Clients can float, especially if you have at least a couple weeks before closing but be mindful that with rates at 1+ year lows, a client could never be disappointed by locking and grabbing what is at hand.
Joe Shamie NMLS # 241432
First Choice Loan Services NMLS # 210764
First Choice Bank NMLS# 177877
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