Todays Rates: Purchase - 30 Year Fixed: 3.125%   APR: 3.201%     15 Year Fixed: 2.375%   APR: 2.494%      30 Year Fixed High Balance: 3.125%   APR: 3.205%      15 Year Fixed High Balance: 2.500%   APR: 2.608%          Refinance - 30 Year Fixed : 3.375%   APR: 3.432%     15 Year Fixed: 2.625%   APR: 2.726%      30 Year Fixed High Balance: 3.375%   APR: 3.436%      15 Year Fixed High Balance: 2.625%   APR: 2.769%

The Casil Report – A Financial Commentary on the Mortgage Markets by Lyons Vice President, Stephen Casil

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Good afternoon,

Today, Friday (04/15/16): The 10 Year Treasury Yield dropped to 1.75%, meaning generally lower mortgage rates than yesterday.

– March 2016 U.S. Industrial Production (output at factories, utilities and mines) decreased by 0.6% (0.6% decrease during the previous month), coming in worse than market expectations (no change this month). This month’s drop in industrial production, mostly due to a decline in all three factors: manufacturing, utilities, and mining, could be an indicator of a possible slowdown in U.S. economic growth.

– The April 2016 Empire (New York) Manufacturing Report rose to an Index Reading of +9.6 (+0.6 Index Reading during the previous month), coming in better than market expectations (+2.3 Index Reading). This month’s rise in manufacturing activity, due to a rise in new manufacturing orders, manufacturing shipments, and manufacturing employment, is a positive indicator for the New York region’s manufacturing portion of the economy. 

– The preliminary April 2016 U.S. Michigan Consumer Confidence Sentiment dropped to an Index Level of 89.7 (91.0 Index Level during the previous month), coming in worse than market expectations (Index Level of 92.0).  This month’s drop in consumer confidence, due to decreases in both the current conditions and expectations portions of this report, could be a negative signal for future U.S consumer spending and economic growth.

Here are the U.S. Market Data / Releases for next week that could drive treasury yields / mortgage rates up or down:

Monday (04/18/16): NAHB Housing Market Index

Tuesday (04/19/16): Building Permits / Housing Starts

Wednesday (04/20/16): Existing Home Sales

Thursday (04/21/16): Weekly Jobless Claims, FHFA Housing Price Index, Leading Economic Indicators, Philadelphia Fed Manufacturing Index

Friday (04/22/16): No Major U.S. Economic Releases

Here is a recap of the major economic reports from the prior three weeks (a declining 10 Year Treasury Yield means generally lower mortgage rates):

 

Thursday (04/14/16): The 10 Year Treasury Yield rose to 1.78%.
– U.S. Weekly Jobless Claims dropped to a 253K reading this week (266K during the previous week), coming in lower than market expectations (268K).  In addition, the less volatile, four week moving address for jobless claims also dropped, to a to 265K level. Once again, this continued low level of jobless claims shows a continued decline in Americans filing for unemployment insurance, which is a positive indicator for continuing recovery of the U.S. Labor Market. 
– March 2016 U.S. CPI (consumer price levels) increased by 0.1% (0.2% decrease during the previous month), coming in lower than market expectations increase of 0.3%).  In addition, Core CPI (excluding food and energy) rose by 0.1%, (0.3% increase during the previous month), also coming in lower than market expectations (increase of 0.2%). This smaller than expected rise in overall CPI was primarily due to lower food and apparel prices holding back inflation price levels gains, due to higher gasoline prices. Overall, both yearly regular and Core CPI levels still remain very low, showing that consumer inflation is still increasing only moderately.
Wednesday (04/13/16): The 10 Year Treasury Yield dropped to 1.76%.
– March 2016 U.S. Retail Sales decreased by 0.3% (no change during the previous month), coming in lower than market expectations (0.1% increase).  However, excluding gasoline and auto sales, retail sales rose slightly 0.1% from the prior month.  This drop in retail sales although, mostly due to lower auto sales, might lead to a slowdown in U.S. economic growth, since approximately 70% of U.S. GDP consists of consumer spending. 
– March 2016 U.S. PPI (wholesale price levels) decreased by 0.1% (0.2% decrease during the previous month), coming in lower market expectations (0.3% increase). In addition, Core PPI (excluding volatile food and energy prices) decreased by 0.1%, also coming in lower than market expectations (0.2% increase). This month’s drop in wholesale services was the major factor for the decline in the PPI reading.  This continued muted PPI reading is showing that U.S. inflation might still be holding steady, which could possibly delay the next Fed (FOMC) interest rates hike. 
– February 2016 U.S. Business Inventories dropped by 0.1% from the prior month, meeting market expectations (0.1% decrease).  This means that businesses are not keeping higher inventory levels as a result of not being able to recently sell all of their existing products (a decline in retail sales possible stemming from the overall drop in exports) which could be a negative sign for U.S. economic growth.
Tuesday (04/12/16): The 10 Year Treasury Yield rose to 1.78%.  
– No major U.S. economic reports were released today.
Monday (04/11/16): The 10 Year Treasury Yield remained even at 1.72%.  
– No major U.S. economic reports were released today.
Friday (04/08/16): The 10 Year Treasury Yield rose to 1.72%.
– February 2016 U.S. Wholesale Inventories decreased by 0.5% (0.2% decrease during the previous month), coming in lower than market expectations (0.2% decrease).  This month’s drop in wholesale inventories shows that U.S. wholesalers are keeping lower inventory levels due to decreased confidence that they will sell all of their products, could be a negative sign for future U.S. economic growth. 
Thursday (04/07/16): The 10 Year Treasury Yield dropped to 1.69%.
– U.S. Weekly Jobless Claims dropped to a 267K reading this week (276K during the previous week), coming in lower than market expectations (270K).  However, the less volatile, four week moving address for jobless claims rose, to a to 267K level. Again, this continued low level of jobless claims shows a continued decline in Americans filing for unemployment insurance, which is a positive indicator for continuing recovery of the U.S. Labor Market. 
Wednesday (04/06/16): The 10 Year Treasury Yield rose to 1.76%.
– The Fed (FOMC) Minutes report was released this afternoon, which is the minute by minute discussion during the last Fed Meeting by all the Federal Reserve policy makers.  The Fed policy makers discussed that the U.S. economy and Labor Market are continuing to improve, which could mean another rate increase will probably be upcoming in the near future.  However, the Fed noted that there are still risks to our economy, including Fed concerns regarding the global economy and inflation expectations.  Therefore, there will probably not be a rate hike during this end of the month Fed meeting; however, there still might be one during the June Fed meeting.
Tuesday (04/05/16): The 10 Year Treasury Yield dropped to 1.73%.  
– The March 2016 U.S. ISM (Institute for Supply Management) Non-Manufacturing (Services) Index increased to an Index Level of 54.5 (53.4 Index Level during the previous month), coming in better than market expectations (54.0 Index Level).  This report shows continued strength in the U.S. service industry, especially in relation to the ISM Manufacturing Report, and was due to a continued rise in new service orders and backlog service orders.
– The February 2016 U.S. Trade Deficit rose to -$47.1 Billion (-$45.9 Billion the prior month), coming in greater than market expectations (-$46.2 Billion).  This rise in the U.S. Trade Deficit, mostly due to a rise in U.S. imports that was greater than a similar rise in U.S. exports, could possibly lead to a contraction in future U.S. GDP and weaker economic growth (due to the lower Net Exports portion of the U.S. GDP calculation).
– The February 2016 JOLTS Job Openings Report showed that there were 5.45 Million job openings this month, which is an decrease from the 5.60 Million job openings the prior month.  This report shows that the number of available jobs declined this month, which could be a negative sign for the U.S. Labor Market.
Monday (04/04/16): The 10 Year Treasury Yield dropped to 1.78%.
– February 2016 U.S. Factory Orders dropped by 1.7% from the previous month (last month’s reading increased by 1.2% from December 2015), meeting market expectations (1.7% decrease).  This month’s decline in factory orders was primarily due to drops in factory orders of both durable and non-durable goods, which could be a negative sign for future U.S. manufacturing growth.
Friday (04/01/16): The 10 Year Treasury Yield remained even at 1.79%.
– The March 2016 U.S. Employment (Jobs) Report was released this day.
-> The Unemployment Rate rose slightly to 5.0%, coming in greater than market expectations (4.9% Unemployment Rate).  However, this increase was primarily due to more workers re-entering the workforce, which is reflected in the officially counted Labor Participation Rate (rose to 63.0% – another slight pickup from its lowest levels since 1978). 
-> In addition, the Non-Farm Payrolls Report increased by 215K (increased by a 245K the prior month), coming in better than market expectations (200K increase). This means that 215K new jobs were created in March.
-> Average hourly earnings / wages rose 0.3% from the previous month (0.1% decrease during the month before), meeting market expectations (0.3% increase).  This means that U.S. wage growth could be starting to pick up again.
->Therefore, this month’s U.S. Employment Report showed that the U.S. job growth again remained steady, even with the slight rise in the unemployment rate.  In addition, average hourly earnings / wage started to rise again.  However, it still remains weak for the past year, so wage inflation remains stable. Overall, this mixed jobs report shouldn’t have much of a bearing on the Fed’s (FOMC) timeline to raise interest rates this year, especially since the Fed is looking more towards weakness in the global economy in their rate decision making.
– The March 2016 U.S. ISM (Institute for Supply Management) Manufacturing Index increased to a 51.8 Index Level (49.5 Index Level during the previous month), coming in better than market expectations (50.6 Index Level). This report shows that U.S. factories manufacturing output could be starting to expand, due to strength in new manufacturing orders, export orders and backlog orders.
– The March 2016 U.S. Motor Vehicle Sales report showed domestic vehicle sales declined to a 13.3 Million annualized rate and total vehicle sales also declined, to a 16.6 Million annualized rate.  This drop in overall motor vehicle sales could signal a slowdown to this big retail segment of the U.S. economy.
– February 2016 U.S. Construction Spending decreased by 0.5% (2.1% increase during the previous month), coming in worse than market expectations (0.2%increase).  This month’s drop in construction activity was mostly to a decline in non-residential projects, which more than offset a rise in private residential projects.
Thursday (03/31/16): The 10 Year Treasury Yield dropped to 1.79%.
– U.S. Weekly Jobless Claims rose to a 276K reading this week (265K during the previous week), coming in greater than market expectations (265K).  In addition, the less volatile, four week moving address for jobless claims also rose, to a to 264K level. Even with this week’s rise, the continued low level of jobless claims shows a continued decline in Americans filing for unemployment insurance, which is a positive indicator for continuing recovery of the U.S. Labor Market. 
– The March 2016 Chicago PMI Manufacturing Index increased to an Index Level of 53.6 (Index Level of 47.6 during the previous month), coming in greater than market expectations (Index Level of 49.9).  This report shows that overall factory production in the Chicago region of the county is growing, due to increases in new manufacturing orders, manufacturing production, manufacturing backlog orders and manufacturing employment.
Wednesday (03/30/16): The 10 Year Treasury Yield rose to 1.83%.
– ADP (One of the Major U.S. Payroll Companies) showed an increase in U.S. March 2016 private employment of 200K (205K increase during the prior month), coming in slightly greater than market expectations (196K increase). This reading shows continued strength in private sector employment, which could be a positive indicator for hiring in the private sector of the U.S. Labor Market.
Tuesday (03/29/16): The 10 Year Treasury Yield dropped to 1.81%.  
– The January 2016 U.S. S&P / Case-Shiller Home Price Index showed that house prices (for 20 major cities in the U.S.) increased by 5.7% from January 2016 (5.7% y/o/y increase during the previous month), meeting market expectations (5.7% increase). This reading shows that U.S. housing price appreciation is remaining stable in the largest U.S. cities, which could be a positive indicator going forward for the U.S. housing market. 
– The March 2016 U.S. Consumer Confidence Report increased to an Index Level of 96.2 (94.0 Index Level during the previous month), coming in greater than market expectations (Index Level 94.5).  This month’s rise in consumer confidence was due to a pick up the expectations sentiment portion that more than offset a drop in the current sentiment portion of this report.  Overall, this rise in U.S. consumer confidence could be a positive indicator for future consumer-driven economic growth, since approximately 70% of U.S. economic activity is derived from consumer spending.
Monday (03/28/16): The 10 Year Treasury Yield dropped to 1.87%.  
– February 2016 U.S Personal Income increased by 0.2% (previous month increased by 0.5%), coming in greater than market expectations (0.1% increase).  In addition, February 2016 U.S. Personal Spending increased by 0.1% (previous month revised down to an increase of 0.1%), meeting market expectations (0.1% increase). This drop in consumer spending was primarily driven by a decrease in spending as people put a portion of the added income towards savings.  However, a continued rise in wages could eventually be a positive indicator for future U.S. consumption and economic growth, if personal spending does picks back up.
– The February 2016 PCE (Personal Income and Consumption) Index increased by 0.1% from the prior month (previous month increased by 0.3%), coming in lower than market expectations (0.2% increase).  This drop in PCE inflation shows that consumer prices are starting to slow down again, which could make the Fed possibly push back any upcoming rate hikes (since higher rates could lead to an even greater downward pull on inflation).
– February 2016 U.S. Pending Home Sales (contracts to buy previously owned homes rose by 3.5% (3.0% decrease during the previous month), coming in better than market expectations (1.1% increase). This positive growth in pending home sales market was mostly due to the recent decline in mortgage rates, and could continue to grow as long as more homes become available for sale.
Thank you,
Steve
 
 
 
Stephen Casil
Vice President
Secondary Marketing Manager
scasil@elyons.com

 

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