Todays Rates: Purchase - 30 Year Fixed: 2.875%   APR: 2.979%     15 Year Fixed: 2.250%   APR: 2.327%      30 Year Fixed High Balance: 3.000%   APR: 3.088%      15 Year Fixed High Balance: 2.375%   APR: 2.448%          Refinance - 30 Year Fixed : 3.125%   APR: 3.230%     15 Year Fixed: 2.375%   APR: 2.471%      30 Year Fixed High Balance: 3.250%   APR: 3.303%      15 Year Fixed High Balance: 2.625%   APR: 2.671%

The Casil Report – A Financial Commentary on the Mortgage Markets – April 16, 2014

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Today, Wednesday, (04/16/14): The 10 Year Treasury Yield rose today to 2.64%, meaning higher mortgage rates than yesterday:

– March 2014 U.S. Housing Starts (New Residential Construction) rose to a 946K Annualized Rate (920K Annualized Rate during the previous month); however, they came in slightly lower than market expectations (955K Annualized Rate). March 2014 U.S. Building Permits (Future Residential Construction) dropped to a 990K Annualized Rate (1014K Annualized Rate during the previous month), also coming in lower than market expectations (1003K Annualized Rate). A majority of the increase in housing starts was in single-family homes, which is a positive sign for a continued improvement in the residential real estate market. However, building permits declined, which could be an indicator of a coming slowdown in the overall U.S. housing market.

– March 2014 U.S. Industrial Production (output at factories, utilities and mines) increased by 0.7% (1.2% increase during the previous month); however, it came in better than market expectations (0.5% increase). This month’s continued strength in industrial production, mostly to increases in manufacturing and in utilities, is a positive indicator of U.S. economic growth.

– The Fed (FOMC) Beige Book was released this afternoon, summarizing the current economic situation in the United States for each Fed district over the past few weeks. The Fed stated that U.S. economic activity is increasing modestly / moderately in ten out of the twelve Fed districts in late February to March. There was only a slowdown in economic activity in Cleveland and St. Louis, due to the continued effects of the adverse winter weather in these areas. The Fed also noted manufacturing and tourism also remained strong in most districts. Overall, U.S. economic activity in this Beige Book report was similar to the previous one, so this economic reading should not have a new bearing for the Fed’s future interest rate expectations outlook.

Here are the U.S. Market Data / Releases for the rest of this week that will drive treasury yields / mortgage rates up or down:

Thursday (04/17/14): Weekly Jobless Claims, Philadelphia Fed Manufacturing Report

Friday (04/18/14): No Major U.S. Economic Releases

Here is a recap of the major economic and political data / reports from the prior week (a lower 10 Year Treasury Yield means generally lower mortgage rates and vice-versa):

Tuesday (04/15/14): The 10 Year Treasury Yield dropped to 2.63%.

– March 2014 U.S. CPI (consumer price levels) increased by 0.2% (0.1% increase during the previous month), coming in slightly higher than market expectations (increase of 0.1%). In addition, Core CPI (excluding food and energy) rose by 0.2%, (0.1% increase during the previous month), also coming in slightly higher market expectations (increase of 0.1%). This slight increase in overall CPI was primarily caused by higher medical care and clothing apparel prices. However, the continued low Regular and Core CPI levels show that consumer inflation is still remaining level.

– The April 2014 Empire (New York) Manufacturing Report decreased to an Index Reading of +1.3 (+5.6 Index Reading during the previous month), coming in lower than market expectations (+7.5 Index Reading). This month’s drop in manufacturing activity in this area was due to a decline in new manufacturing orders, and could be a negative indicator for future economic growth in the New York region.

– The April 2014 NAHB (National Association of Homebuilders) Housing Market Index rose to an Index Level of 47 (Index Level of 46 during the previous month); however, it came in lower than market expectations (Index Level of 50). This month’s weakness in the NAHB Housing Market Index was mostly due to the lasting effects of the adverse winter weather and a lack of prospective first-time homebuyers.

Monday (04/14/14): The 10 Year Treasury Yield rose to 2.64%.

– March 2014 U.S. Retail Sales increased by 1.1% (0.7% increase during the previous month), coming in slightly better than market expectations (1.0% increase). This rise in retail sales is the biggest gain in the past eighteen months and was mostly due to increased sales for motor vehicles and home furnishings. This rise in retail sales could lead to future increases in U.S. economic growth, since approximately 70% of U.S. GDP consists of consumer spending.

– February 2014 U.S. Business Inventories increased by 0.4% (0.4% increase during the previous month); however, it came in lower than market expectations (0.6% increase). Even though lower than market expectations, this rise in business inventories is a positive sign for U.S. economic growth, since it shows that businesses are keeping higher inventory levels than expected, due to increased confidence that they will be able to sell all of their products.

Friday (04/11/14): The 10 Year Treasury Yield dropped to 2.62%.

– March 2014 2014 U.S. PPI (wholesale price levels) increased by 0.5% (0.1% decrease during the previous month), coming in greater than market expectations (0.1% increase). In addition, Core PPI (excluding volatile food and energy prices) increased by 0.6%, also coming in higher than market expectations (0.1% increase). This month’s PPI and Core PPI readings could be an indicator that U.S. inflation might soon be rising, which might cause the Fed to raise interest rates sooner than recently anticipated.

– The April 2014 U.S. Michigan Consumer Confidence Sentiment increased to an Index Level of 82.6 (Index Level of 80.0 during the previous month), coming in better than market expectations (Index Level of 81.0). This month’s rise in consumer confidence to the highest level in nine month is a positive indicator for future U.S consumer spending and economic growth.

Thursday (04/10/14): The 10 Year Treasury Yield dropped to 2.63%.

– U.S. Weekly Jobless Claims dropped to a seven year low with a 300K reading this week (332K during the previous week), coming in much lower than market expectations (325K). The less volatile, four week moving address for jobless claims also decreased, to a 317K level. This week’s decline in jobless claims shows a continued overall steady decline in Americans filing for unemployment insurance, which is a positive sign for the ongoing recovery of the U.S. Labor Market. Now, the question becomes is if this continued drop in layoffs will lead to any additional gains in new hiring.

– In China, March 2014 Chinese exports dropped 6.6% from the previous month, coming in worse than market expectations (a 4.8% increase from the previous month). In addition, March 2014 Chinese imports dropped 11.3% from the previous month, also coming in worse than market expectations (a 3.9% increase from the previous month). This drop in Chinese exports / imports could be an indication of a possible upcoming slowdown in China’s economic recovery.

Wednesday (04/09/14): The 10 Year Treasury Yield remained even at 2.68%.
– February 2014 U.S. Wholesale Inventories increased by 0.5% (0.8% increase during the previous month); however, they met market expectations (0.5% increase). This month’s continued strength in wholesale inventories, especially in automobiles and machinery, shows that U.S. wholesalers are keeping higher inventory levels due to increased confidence that they will sell all of their products, which could be a positive sign for future U.S. economic growth.

– 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. This month, Fed policy makers are continuing the $10 billion monthly taper in Q3 (long term bond buying). However, the Fed policy makers wanted to stress that the Fed would keep interest rates low for quite some time. The financial markets had been expecting quicker future Fed interest rate hikes due to the improvements in the U.S. economy, so this pushing back of the timeline of any future interest rate hike expectations is what caused the 10 Year Treasury Yield and mortgage rates to drop this afternoon.


 

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