Utah Rates, Programs, Purchases or Refinaning by Utah's Mortgage Guy

Mortgage Bonds are starting the week higher, as prices test a ceiling of resistance at $99.78, the intraday low of December 7th, 2010. 

There are no economic reports set for release today, but the Treasury will unload $66B worth of securities Tuesday through Thursday this week. 

Let's start the week off with absolutely incredible news!

Are you sitting down?

Here it goes:  The economy is improving!

Even though last Friday's Jobs Report didn't meet the lofty expectations created by ADP, the prior month's readings did show more job growth than previously reported, and the trend is clearly improving.  For those longtime members reading our daily material, you have become familiar with how the Labor Department derives the headline jobs number through the use of what is called the "Birth/Death model" of estimating.  But let's do a quick refresher together.  The Birth/Death ratio comes from the Bureau of Labor Statistics, by their practice of physically calling businesses and tracking how many jobs they have added or removed, and then making some estimations or assumptions based on past trends...and here's where the problem lies. 

When the economy is shifting to an improving trend, like we are seeing at present, this "estimating" of previous trends can cause lower than expected headline numbers within the Jobs Report, and it will then lead to the showing of more jobs created in future revisions to the Jobs Report.  We saw this just last Friday, as 70,000 more jobs were created in October and November than previously reported, and we should not be surprised to see more soft headline numbers followed by upward revisions in later months…but clearly the labor market is on the mend. 

For us in the mortgage and housing world, this is good news on the housing front, as we've been saying that the economy needs to get better in order to see an improvement in housing.  Once people feel better about keeping their job or getting a new job, purchasing activity will rise, and values will follow.  But on the other side of the coin, as the labor market and economy improve, mortgage rates will have to gradually rise as well.  Make this message clear to your referral partners, clients and prospects.

Remember the European wild card we've been discussing?  For weeks we have been talking about how problems in Europe would help benefit the US Bond Market, and we are seeing that now.  In fact, Friday's sharp pricing gains were not just a result of the only mildly disappointing Jobs Report, but also from the ongoing and persistent banking, debt and political problems in Europe…which is driving investors into the relative safe haven of US denominated assets like US Bonds.  The other issue with the European situation is that it hampers global growth, and in turn hurts US Stocks - which are already ripe for some sort of correction - and this can further benefit Bonds.  That said, remember that price improvements could be very fleeting, and go away quickly.

So how much better can Bond pricing get?  Here's where the charts help us.  A peek at the 4.0% Chart shows prices right up against a ceiling of resistance at the $99.78 area.  If prices are able to break through this ceiling, the next clear ceiling lies at the 50-day Moving Average and then the always formidable 200-day Moving Average - which is 100bp above current levels.  But let's not get too ahead of ourselves here, because there are a lot of "ifs" and in order to see any meaningful gains, prices have to bust out and get above the nearby resistance to even have a chance.  On a positive technical note - the Bond does have a Rising Floor of Support beneath it - pull up the chart and check the box for Trendline to see it.

And as if there isn't already enough happening this coming week, today is the start of 4th Quarter corporate earnings season, with Dow component Alcoa kicking it off after the close today.  The earnings and future guidance can surely have an impact on Stocks and thus Bonds - so let's watch this closely and follow the Market News on the Bond page for results as they are reported. 

We will start the day by Floating - but be mindful that there is a lot of pushing and pulling within this volatile Bond market coming from the Euro, economic reports, Treasury auctions, global inflation and rate hikes, QE2, Stocks, 4th Quarter Corporate Earnings, lions and tigers and bears, oh my!

Oh my, oh my, oh my!

Hope you enjoyed reading today's blog post!

Success is yours,

Kelly