Monday, June 16, 2014 - Article by: Joe Shamie - First Choice Loan Services -
Monday - June 16, 2014, 11:00am ET
Current Trend Direction: Sideways
Float/Lock Bias: Cautiously Floating
Current Price of FNMA 3.5% Bond:$102.09, +12bp
Breaking News: the International Monetary Fund (IMF) just lowered their 2014 US GDP forecasts significantly to 2% from a previous estimate of 2.8%, citing a very weak first half here in the US. When you consider the second of three readings for 1st Quarter GDP is currently at -1.0%, 2% annual GDP may be a bold proposition. Lets just consider that the -1.0% for the First Quarter GDP remains as the Final Reading, when reported next Wednesday - that means the 2nd, 3rd and 4th Quarters would have to come in at 3%. That is a tall glass of water folks and something that many have forecasted (but not us) for each of the past couple of years but has yet to happen. Hate to be a downer but we will take the under on what may still be a rosy forecast at 2%.
The New York State Manufacturing Index surged to 19.28 in June, well above the 12.8 expected. The report revealed that business conditions improved significantly for a second consecutive month in the region. The employment component increased modestly in both the levels of employment and hours worked. Overall a solid report, but it did little to impact the Bond markets.
The renewed tensions in Ukraine coupled with fighting in Iraq has shifted global investors into safe haven currencies and Bonds, while pushing oil prices to nine-month highs. A barrel of oil has surged to $107.0 due to the geo-political news. This is not good news. Higher oil prices are a tax on the consumer. If prices at the pump increase for a significant amount of time, it will have a negative impact on the economy further making the IMFs 2% 2014 GDP a lofty goal.
The rest of the week's economic calendar features housing news, consumer inflation data (CPI), while the Fed meets this week for its regularly scheduled 2-day FOMC meeting on Tuesday with the monetary policy statement being released at 2:00pm ET on Wednesday. There will be no change in the Fed Funds Rate, currently at 0.25%, but investors will be looking for any clues on the massive Bond buying program. More on that subject as the week progresses.
Technically, the 3.5% coupon continues to hover just above support levels as Stock prices grind lower. We would like to float into the Fed meeting as long as the Bond Market behaves for us.Have a great week!
Joe Shamie NMLS # 241432
First Choice Loan Services NMLS # 210764
First Choice Bank NMLS# 177877
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