There’s a link to my twitter feed on my blog here - or follow me on twitter for current market conditions and my predictions for what’s coming.  www.twitter.com/ken_stone

Let’s look at the week that just passed first - then look ahead to the coming week to see what we can expect moving forward.

Look at the candlestick chart of FNMA Mortgage Backed securities (30-Yr 4.5%) below. The first support line was resistance one week ago - and the 10-day moving average was below support.  I thought the 10-day would hold and mortgage bonds would continue to move higher - and they have. Remember that higher means lower rates.

Tuesday was Fed day (moving the Federal Funds Rate to a target range of 0% to .25% - remember that Prime is FFR + 3%) with many in the media wondering why the Fed moves this year haven’t translated into a commensurate savings in mortgage rates.  It’s a funny thing about the FFR - mortgage rates have nothing directly to do with it.  Many have also wondered why mortgage rates haven’t moved lower in step with the movement in the 10-Year Treasury Note. Once again, mortgage rates aren’t connected to the 10-Year T-Note. It’s all about mortgage backed securities. That’s the beginning and the end when it comes to fixed rate mortgages.

And here’s the strange thing about how the pricing of mortgage bonds has translated into mortgage rates: While mortgage backed securities are being traded throughout the day - and some days improve towards the end of the day (as happened on Friday) - the best pricing is typically seen in the morning regardless of improvement in the afternoon (or a lack of deterioration). It’s as if investors are saying “we’re in the game in the morning - but somewhere between 2p and 3p Eastern, we’re out.”

So here’s your strategy for getting the best possible mortgage rate: Lock in the morning with your mortgage lender. And work with a mortgage lender who offers free float downs to market rate should the market improve further. This makes a big difference when it comes to locking strategies for folks buying a home as well as those refinancing.

So what do I see coming this week? I’m going to continue to believe in the 10-Day Moving Average - and steady progress higher (lower rates). Monday morning should be fantastic as I read Friday’s technicals. To that end, I’ve been telling my clients, get your social security number, and the rest of your vitals in to me - so I can get you locked when pricing comes out in the morning. There’s no risk: should the market improve, I’ll float you down to the lower rate. If the market worsens - you’re locked, and have nothing to worry about!

If you have any questions about financing your home purchase - or refinancing your existing mortgage(s) - please give me a call on my personal cell. I’d love to help! 970-691-9933
Thanks for reading!

I’ll post back soon,

Ken

Second - the trend line held all week - the 10-Day Moving Average continues to point higher - and mortgage bonds continue to move the same way (remember higher means lower rates).

At this point many homeowners are wondering if refinancing now makes sense when there’s talk of mortgage rates going to 4.5% as a function of the Government becoming a buyer of Fannie, Freddie, and Ginnie Mae Mortgage Backed Securities.

It’s an interesting thought.  Keep this in mind: Buyers of mortgage bonds span the world - it’s an open market.  While the government becoming a major purchaser has increased confidence (some economists have suggested the government put their “full faith and backing” behind mortgage bonds - if this happens, mortgage rates will undoubtedly drop - perhaps even lower than 4.5%) they don’t control the market - or where the interest rate is.  The Federal Reserve controls the Federal Funds Rate - and that has influence on the financial markets.  However, contrary to popular opinion, a move lower with the Federal Funds Rates does not necessarily translate into lower mortgage rates.  Many times it causes mortgage rates to move higher since lowering the cost of money has an inflationary impact on the economy.

So back to lower mortgage rates - and it is worth holding your breath for 4.5%?  I’m telling my clients not to get greedy.  If it makes sense to wait and see because the financials don’t make sense at 5% that’s one thing.  If you look at the candlestick chart below you’d be fooled into believing it’s a calm normal market right now.  It has been for the last little bit - but if you want the true picture of things read my earlier postings (remember the elevator falling in the cheesy action flick?).

My prediction for this coming week: I’m sticking with the 10-day moving average for support - and a continued push higher.  The technicals this past week support this prediction - stay tuned to see if I’m right. Remember daily updates are posted to my twitter account - you can read my twitter feed on this site - and at www.twitter.com/ken_stone.

Thanks for reading! Let me know if I can help you with your mortgage questions and origination needs.  I do mortgages for clients all over the country.

I’ll post again soon!

Ken

Last month many days were nail biters to see if the 200 day moving average would hold.  This past week, the question was: will the 10-day moving average hold.  The answer?  Mostly yes!

Here are the details of what happened in the mortgage market last week- along with my predictions for the coming week.

Fannie Mae Mortgage Backed Securities are back to surfing the 10-day moving average and that’s a good thing! Remember that up, or a higher price, is a good thing for mortgage rates. And down (or a lower price) is a bad thing for mortgage rates. Also remember, a green candle is a day where the security opens lower than its close. Red is the opposite. And intra-day is expressed by the candles.

With that in mind, let’s look at the candlestick chart below to see the exciting week in mortgage bonds.

You can see that technical support sits at $101.09 - and resistance at $102.03. That support held is a good thing. Earlier this week on twitter (www.twitter.com/ken_stone) I commented that I was looking at the 10-day moving average (the red line moving up above support) as a new line of technical support. Depends on how technical you want to be about whether this line of support held - Friday’s close was one basis point below the 10-day moving average.

So what will tomorrow and this coming week bring with mortgage rates? Good question - as always stay tuned for my updates on twitter - and weekly insights here.

I’m predicting that the 10-day MA will hold - mortgage bonds will climb back on board and ride that sucker higher. And I’m predicting the 10-day wins over resistance - pushing rates down to new lows this coming week.

My thinking here is based on tested support this week (including no intra-day move below support at $101.09) - and the emergence of the 10-day above support.

Stay tuned to see if I’m right!

Thanks for reading!

I’ll post back soon,

Ken

Well, at this point the exciting week is well known by all.  Tuesday’s announcement by the Fed created the confidence in Mortgage Bonds that we saw several months ago … the difference was that this is the follow through that was anticipated at that time - but never materialized … until Tuesday.

The market’s response to the announcement makes my blog entry of last week look like I’m pretty good at seeing the future.  I’d love to run with that thought - but that would just lead to increased expectations … and that’s never good.

Look to the candlestick charts below - first one is the macro picture including the moving average lines - the second is the micro picture so you can see day by day moves.

As I’ve been getting more active on twitter (follow me at www.twitter.com/ken_stone) I’m noticing that some mortgage lender refer to the 10-year Treasure Note as the critical index to watch for mortgage rates (this is wrong) - and others referring to mortgage bonds (and they’re really talking about the 10-year Treasury Note).  When I talk about mortgage bonds, I’m talking about Fannie Mae Mortgage Backed Securities.  This is what Fannie Mae fixed-rate mortgages are priced from.  That’s it - nothing else. 

I spoke with a analytical type about refinancing his mortgage last week prior to Thanksgiving and he was concerned that mortgage investors are “padding their pockets” due to the spread between the 10-year Treasury Note and where fixed rate mortgages are (sub 5.5% for much of the nation) citing the historic spread between the 10-year and fixed rate mortgages.  I helped him understand what he should be looking at - and pointed him to my prior postings about this spread of late.

So what’s to come?  Look at the candlestick charts.  I’m betting tomorrow will either be a breakout day - with mortgage backed securities moving higher (lower rates) through overhead resistance that has - so far - been enough to stop the upward march … or mortgage bonds will move lower to test support.  I’m hoping for the former … tune in tomorrow morning to learn what’s happening (look to my twitter tab on this blog for daily updates).

Here’s the other thing to keep in mind.  If  you (or your clients) are wanting to lock in your rate - but thinking rates might drop - keep in mind that I offer my clients a free float down to market rate as long as we’re not on top of your closing day.  So you can get a “security” lock at let’s say 5.375% then float down to a lower rate should the current trend continue.

Thanks for reading!

I’ll post back soon,

Ken

But there’s a showdown on the way …

Look at the candlestick charts below. The first shows a 6 month view - the second a one month view (easier to see what happened this week - and last).

The 6 month view is instructive for seeing the larger trends at work. Look at the downward trend line overhead - and the 200 day moving average. They’re converging very soon - and the big question is: which line is stronger?

I’m rooting for the 200 day to win - and I think there may be good support for this outcome. A 200 day moving average win would mean stable mortgage rates - with a strong likelihood for improving mortgage rates (provided the 200 day holds).

Most in the mortgage world looks at the 10-year Note to tell them what’s happening in mortgage rates. As I’ve commented before - this is wrong (mortgage backed securities are the exclusive benchmark for how fixed rate mortgages are priced).  Still, they’re two different examples of the same animal - they’re both bonds, and both should benefit (provided there’s equal confidence) from a flight to quality. This week mortgage bonds didn’t benefit from he flight to quality. Neither were they affected when the money flowed the other way.

With all the talk about deflation, it’s possible mortgage bonds are simply late to the party - and if I’m right, mortgage rates will improve.

If I’m wrong I’m probably very wrong. The overhead trend line downwards (meaning higher mortgage rates) looks to be very strong and since its inception, it hasn’t been broken (pierced, but not broken). And the 200 day moving average is a significant technical line of support, that once broken, tends to (especially lately) result in fairly significant and quick moves lower.

I’ve tended to keep my daily updates to twitter - you can follow them on my blog - I’ve got a twitter feed - or at www.twitter.com/ken_stone

Thanks for reading!

I’ll post back soon,

Ken

That’s taking a larger view than just this week … so let’s focus in on this week first.

The all critical 200 day moving average couldn’t hold on this week - the good news: in spite of this bad news, the fall wasn’t far. Mortgage Backed Securities (MBS) closed today up 12 basis points on the day (from yesterday’s closing) - that’s progress … in between the progress is a bit of bad news: MBS’s started the day above (the 200 day MA) and fell for the day. The 10 day and 40 day moving averages appear to be providing support - though they’re technically beneath the closing price.

You could call this week a slow slide sideways with a mild downward trend.

Speaking of downward trends - through all the excitement over the last two months - you can start to see a larger trend forming. It’s not such a great trend. Look to to the tops of the candles since early September. See how they keep getting lower and lower? That trend line seems to be pointing to higher lows on the mortgage interest rate front as long as this trend line holds.

I was reading the Kiplinger forecast and tax letter this afternoon. They’re projecting 2 Million jobs lost in ‘09 and unemployment at 8% in December of ‘09. If that’s true, you’d tend to believe that mortgage rates would moderate and move lower in that kind of economic environment as long as inflation stays in check.

Given the recent excitement in the financial markets - and the general failure of the financial markets (including the bond market) to behave as I would typically expect it too - it’s not wise to count on anything moving forward. My best advice: seek advice about buying or refinancing early - and make a plan for what you want to do (e.g., refinance at X%) then get your application in and hang tight for the markets to cooperate!

30-year fixed rate mortgages closed the week out at 5.875%

Thanks for reading!

I’ll post back soon,

Ken

I’ve been tweeting about how lethargic mortgage bonds were - and how I expected the climb up the hill to take a lot longer than it had - and be much more difficult.  I was thinking it would take a prolonged climb with checks of support along the way.  I was wrong.

Look at the chart below at how wrong I was. Tuesday was the breakout day - with bonds jumping from support and crashing through critical resistance at the 100 day - 25 day - and most importantly the 200 day moving average. A very happy move for mortgage rates - which was essentially sustained for the balance of the week - with mortgage bonds happy to move between resistance overhead at $101.71 and support at the 200 day moving average (at $101.31). The bad news Friday was a closing price 3 basis points below the 200 day moving average. With the horrible jobs report on Friday the tendency would have been for mortgage bonds to rally. All eyes on tomorrow to see what the market does!

30-year fixed rate mortgages closed the week at 6%.

Thanks for reading!

I’ll post back soon,

Ken

Thanks for reading!

I’ll post back soon,

Ken

Here’s what happened this week: On Monday, mortgage bonds fell from the 100 day moving average (a lofty perch at this point!) and touched current support before rebounding slightly. Still, it was a bloody day by any measure.

The rest of the week has been a wrestling match between the Bears and the Bulls to see who is going to take control. Though Friday, it was a war of technical support - and so far the support is holding. That’s a good sign on the one hand - since a failure of support would cause a further spike in mortgage rates. It’s a bad sign on the other hand - if you look at the chart below you’ll see why. Mortgage bonds fell off the 200 day moving average - came down to current support - then bounced back above the 200 day - then fell back to current levels … where there’s been no bounce so far.

Perhaps the best explanation is that mortgage bonds didn’t like the Fed cut earlier in the week - but since there were other central bank cuts that followed, inflationary concerns were mitigated. The result? Lethargic mortgage bonds.

Stay tuned this coming week - I’m guessing it’s going to be a fun ride however it turns out!

Thanks for reading!

I’ll post back soon,

Ken