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

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Good afternoon,

Today, Friday (11/03/17): The 10 Year Treasury Yield dropped slightly to 2.33%, meaning generally lower mortgage rates than yesterday.

– The October 2017 U.S. Employment (Jobs) Report was released today.

-> The Unemployment Rate dropped to an almost twenty year low at 4.1%, coming in lower than market expectations (4.2% Unemployment Rate). However, this decrease was primarily due to more workers leaving the workforce, which is reflected in the officially counted Labor Participation Rate (dropped to 62.7% – almost at its lowest level since 1978).

-> In addition, the Non-Farm Payrolls Report increased by 261K (increased by an 18K the prior month), however it came in worse than market expectations (325K increase). This means that 261K new jobs were created in October. The reason why this number is higher in comparison to September was due to the U.S. economy sharply bouncing back from the negative effect of the hurricanes that month.

-> Average hourly earnings / wages didn’t grow at all from the previous month (0.5% increase during the month before), coming in lower than market expectations (0.2% increase). This means that U.S. wage growth is starting to stagnate again.

->Therefore, this month’s U.S. Employment Report showed that the U.S. job growth and the unemployment rate remained strong and steady. Average hourly earnings / wages declined from the previous month, so wage inflation also remains stable. The question still remains when wage growth will start accelerating again.

– September 2017 U.S. Factory Orders rose by 1.4% from the previous month (last month’s reading increased by 1.2% from the month before), coming in greater than market expectations (1.2% increase). This month’s increase in factory orders was primarily due to a pickup in factory orders of durable and non-durable goods, and is another positive sign of future U.S. manufacturing growth.

– The October 2017 U.S. ISM (Institute for Supply Management) Non-Manufacturing (Services) Index increased to an Index Level of 60.1 (59.8 Index Level during the previous month), coming in better than market expectations (58.6 Index Level). This report shows continued strength in the U.S. service industry, and was due to a continued rise in new service orders, backlog service orders, and service employment.

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

Monday (11/06/17): No Major U.S. Economic Releases

Tuesday (11/07/17): NFIB Small Business Optimism Index, JOLTS Job Opening Reports, Consumer Credit Debt Report

Wednesday (11/08/17): No Major U.S. Economic Releases

Thursday (11/09/17): Weekly Jobless Claims, Wholesale Inventories

Friday (11/10/17): Michigan Consumer Confidence Sentiment, Treasury Budget

Here is a recap of the major economic reports from the prior week (a rising 10 Year Treasury Yield means generally higher mortgage rates):

Thursday (11/02/17): The 10 Year Treasury Yield dropped to 2.35%

– U.S. Weekly Jobless Claims dropped to a 229K reading this week (233K during the previous week), coming in lower than market expectations (235K). In addition, the less volatile, four week moving address for jobless claims also dropped, to a to 233K level. 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 (11/01/17): The 10 Year Treasury Yield remained at 2.38%.

– ADP (One of the Major U.S. Payroll Companies) showed an increase in U.S. October 2017 private employment of 235K (135K increase during the prior month), coming in greater than market expectations (210K 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.

– The October 2017 U.S. ISM (Institute for Supply Management) Manufacturing Index decreased to a 58.7 Index Level (60.8 Index Level during the previous month), coming in worse than market expectations (59.5 Index Level). However, even with this decline, manufacturing levels are still a near fifteen year high. In addition, this report shows that U.S. factories manufacturing output is expanding steadily due to strength in new manufacturing orders, manufacturing export orders and manufacturing employment.

Tuesday (10/31/17): The 10 Year Treasury Yield rose to 2.38%.

– The August 2017 U.S. S&P / Corelogic Case-Shiller Home Price Index showed that house prices (for 20 major cities in the U.S.) increased by 5.9% from August 2016 (5.8% increase during the previous month), coming in slightly lower than market expectations (6.0% increase). This month’s reading in overall housing prices shows that U.S. housing price appreciation is still strong in the largest U.S. cities, which is a positive indicator for the overall U.S. housing market recovery.

– The October 2017 U.S. Consumer Confidence Report increased to an Index Level of 125.9 (119.8 Index Level during the previous month), coming in greater than market expectations (Index Level 121.0). This month’s rise in consumer confidence was due to a rise in both the current sentiment and expectations sentiment portions of this report. Overall, this rise in U.S. consumer confidence could be a continued positive indicator sign for future consumer economic growth, since approximately 70% of U.S. economic activity is derived from consumer spending.

– The October 2017 Chicago PMI Manufacturing Index increased to an Index Level of 66.2 (Index Level of 65.2 during the previous month), coming in greater than market expectations (Index Level of 62.0). This report shows that overall factory production in the Chicago region of the county is steadily picking up, due to a rise in new and backlog manufacturing orders.

Monday (10/30/17): The 10 Year Treasury Yield dropped to 2.37%.

– September 2017 U.S Personal Income increased by 0.4% (previous month increased by 0.2%), meeting market expectations (0.4% increase). In addition, January 2017 U.S. Personal Spending increased by 1.0% (previous month increased by 0.1%), coming in greater than market expectations (0.9% increase). This rise in consumer spending was driven mostly by an increase in consumer durable good spending. Overall, a continued rise in wages could be a positive indicator for future U.S. consumption and economic growth, if personal spending continues to pick up.

– The September 2017 PCE (Personal Income and Consumption) Index increased by 0.4% from last month (the previous month increased by 0.2%), meeting market expectations (0.4% increase). This slight rise in PCE inflation shows that consumer prices are rising, albeit slowly, This is the Fed preferred measure on inflation readings, so it could influence whether there is a rate hike next month.

Thank you,

Steve

____

Stephen Casil
Vice President
Secondary Marketing Manager
scasil@elyons.com

The Casil Report, a Financial Commentary written by Lyons Vice President, Stephen Casil

 

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