Primary Pulse 1/14/2015

 

Wednesday, January 14, 2015 4:45 PM

Good evening,

 

What a difference a coupon makes!

 

TEAM, below are two charts which will help explain to borrowers who might be looking at rates at 4.250% or higher who have not seen the rates improve or keep up with the market.  The divergence between low and high rates continue as a result of recent developments with FHA and lower interest rates.  These two occurrences have ramped up prepayment speeds on servicing rights which are causing 3.5 and lower coupons (left chart) to see greater demand and 4.0 and higher coupons (right chart) to see no demand thus a continuing sell off.

 

Fed Saw Consumer Spending Rise Amid Concern on Lower Oil Prices

2015-01-14 19:17:47.967 GMT

 

 

By Jeff Kearns and Christopher Condon

     (Bloomberg) -- A Federal Reserve survey showed most regions saw “modest” or “moderate” economic growth driven by gains in consumer spending, while the energy-rich Dallas district slowed as oil prices plunged.

     “Consumer spending increased in most districts, with generally modest year-over-year gains in retail sales,” the Fed said today in its Beige Book, based on reports from its 12 districts gathered on or before Jan. 5. “Auto sales showed moderate to strong growth.”

     The report follows Commerce Department data earlier today showing that retail sales slumped in December from the prior month. From a year earlier, sales increased 3.2 percent in December following a 4.7 percent gain in November.

     Several districts “expect somewhat faster growth over the coming months,” the Fed report showed. “Payrolls in a variety of sectors expanded moderately” and “significant wage pressures were largely limited to workers with specialized technical skills.”

     The Beige Book offers Fed policy makers, who meet Jan.

27-28, anecdotal evidence about the state of the economy as they consider when to raise interest rates for the first time since 2006. Oil prices have plunged by more than half since June.

 

 

Capital Markets

Primary Residential Mortgage, Inc.

1480 North 2200 West| Salt Lake City|  Utah| 84116

Toll Free 1.800.255.2792

www.primaryresidentialmortgage.com capitalmarkets@primeres.com

 

o         Tick       1/32 or .03125

o         MBS       Mortgage Backed Security

o         TBA       To Be Announced (MBS with unknown future delivery)

o         Spec      Specified Pool

 

The contents in this memo are not an endorsement of any financial products or investments. PRMI assumes no liability, and will not make any recommendations with respect to the purchase or sale of any investment security or its derivatives.

 

Primary Pulse 1/8/2015

Good evening TEAM,

 

Be Careful For What You Wish For!

 

As mentioned yesterday, the ADP Jobs number did affect the markets today causing equities to rally and securities (FNMA) to mildly sell off.  GNMA’s on the other hand sold off quite severely as the contents of President Obama’s speech tomorrow was released.  Basically there is fear in the market of significant FHA refinances on the horizon that will drive up prepayment speeds which devalues existing servicing portfolios.  The below chart show’s one year FNMA’s with the insert showing GNMA’s.  Wow that is almost a 3 multiple worse magnitude sell off for GNMAs!

 

Below is the official MBA announcement regarding President Obama’s speech.

 

 

	Dear MBA Member: As you may be aware, President Obama will be delivering a major housing speech tomorrow in Phoenix, AZ.  We are excited that MBA's Chairman Bill Cosgrove has been invited to attend the speech and a small gathering with the President afterwards. Also in attendance at the speech will be MBA members Cody Pierce and Jamie Korus (our new MORPAC Chair).  In addition to discussing the current state of the market and how we got here, we expect the President will address several important policy changes/issues to address the current tight credit environment and further grow the housing market (see a White House fact sheet here). Among the announcements, the President will: Unveil a 50 basis point reduction in the annual FHA MIP, a move designed to make mortgages more affordable for first time and low and moderate income homebuyers.   Reference the coming changes to Fannie and Freddie's rep and warrant framework that should help lessen the high level of uncertainty that lenders face and allow lenders to use the full extent of the GSE credit box.   Call for GSE reform, which would be a strong signal to Congressional leadership that they need to take up the future of Fannie Mae and Freddie Mac. These are three key policy initiatives that MBA has been lobbying for, some over multiple years. Our presence at this event is yet another a sign of the position MBA holds when it comes to the public debate over housing issues in this country.    You can expect MBA to continue to be out front and leading on these issues.  In fact, if you are interested, I did an interview on CNBC this afternoon on the expected MIP announcement, which you can see here. As always, let me know if you have any questions and thank you for your continued support of MBA.   If you have difficulties reading this HTML email, please view the online version.

 

 

Capital Markets

Primary Residential Mortgage, Inc.

1480 North 2200 West| Salt Lake City|  Utah| 84116

Toll Free 1.800.255.2792

www.primaryresidentialmortgage.com capitalmarkets@primeres.com

 

o         Tick       1/32 or .03125

o         MBS       Mortgage Backed Security

o         TBA       To Be Announced (MBS with unknown future delivery)

o         Spec      Specified Pool

 

The contents in this memo are not an endorsement of any financial products or investments. PRMI assumes no liability, and will not make any recommendations with respect to the purchase or sale of any investment security or its derivatives.

Economic Calendar

Date/Time(Central)	Indicator	Period	Est.	Actual	Prior	Revised
1/6/2015 9:00 AM	Factory Orders	NOV	-0.5%	-0.7%	-0.7%
1/6/2015 9:00 AM	ISM Non-Manf. Composite	DEC	58.0	56.2	59.3
1/7/2015 6:00 AM	MBA Mortgage Apps.	2-Jan	--	11.1%	-18.2%
1/7/2015 7:15 AM	ADP Employment Change	DEC	225K	241K	208K	227K
1/7/2015 7:30 AM	Trade Balance	NOV	-$42.0B	-39.0B	-43.4B	-42.2B
1/8/2015 7:30 AM	Initial Jobless Claims	3-Jan	290K		298K
1/8/2015 7:30 AM	Continuing Jobless Claims	27-Dec	2360K		2353K
1/8/2015 2:00 PM	Consumer Credit	NOV	$15.000B		$13.226B
1/9/2015 7:30 AM	Change in Nonfarm Payrolls	DEC	243K		321K
1/9/2015 7:30 AM	Change in Manufact. Payrolls	DEC	15K		28K
1/9/2015 7:30 AM	Unemployment Rate	DEC	5.7%		5.8%
1/9/2015 7:30 AM	Avg. Hourly Earnings (MoM)	DEC	0.2%		0.4%
1/9/2015 9:00 AM	Wholesale Inventories	NOV	0.3%		0.4%
1/9/2015 9:00 AM	Wholesale Trade	NOV	0.0%		0.2%

Primary Pulse 1/6/2015

Good evening,

 

The positive rate ride continues as MBS’s continue their trajectory towards higher prices / lower rates.  Three trading days on the books this year and all have set 52 week highs!  It’s plausible that a good ADP Employment number tomorrow could pause not only the existing equity sell off but also the securities rally.  At 6:15 AM MT tomorrow, my eyes will be focused on the ADP release.

Global Concerns Weigh on U.S. Markets

by Dan Stimpson

The Dow closed Monday down 331 points and the 10-year Treasury yield fell almost 8 bps to 2.03%, the lowest yield since May 2013. This morning the 10-year Treasury is trading at 1.97%. The 30 year Treasury yield of 2.60% is 14 bps below the all-time low reached in August 2012, and this morning is trading at 2.54%. The difference between the yields on 2-year notes and 30-year bonds is the lowest since January 2009 impacted by slowing global inflation driving the long end of the curve and the expectation of rising rates by the Federal Reserve driving the short end. The chance of a Fed rate increase by the September 2015 meeting is currently 63%. The yield on 2-year notes was virtually unchanged Monday.

German inflation slowed to the weakest level in more than five years, a sign that prices in Europe are declining bolstering the case for more stimulus from the ECB. Additional inflation data on Wednesday may push the ECB to begin sovereign-bond purchases when they meet later this month. ECB officials are debating whether to expand stimulus to including buying government bonds, similar to multiple rounds of QE employed by the Federal Reserve, as plunging oil prices increase the risk of deflation in Europe. Germany, the strongest country in Europe, has been the strongest opponent against expanding stimulus and QE.

The economic calendar was light in the U.S. yesterday. Auto sales came in slightly below expectations totaling 16.80M units and 13.46M units in domestic sales, but automakers reported strong U.S. sales, boosted by falling gasoline prices. However, executives and analysts cautioned that growth would slow in 2015. Sales in December rose almost 11 percent to more than 1.5 million vehicles, according to research firm Autodata, a leading indicator of consumer spending. In December, sales of pickup trucks and large SUVs surged as sales of GM pickup trucks rose 35 percent, driven higher by lower gas prices. Gas prices in the U.S. are 34 percent lower than a year ago, and in much of the country are less than $2 per gallon. Kelley Blue Book reported the average transaction price for a new vehicle sold in the U.S. market in December was a record $34,367, up 2.5 percent from a year ago.

The economic calendar today in the U.S. is highlighted by the ISM non-manufacturing index, which is expected fall from 59.3 to 58.0 in December.

 

 

 

Capital Markets

Primary Residential Mortgage, Inc.

1480 North 2200 West| Salt Lake City|  Utah| 84116

Toll Free 1.800.255.2792

www.primaryresidentialmortgage.com capitalmarkets@primeres.com

 

o         Tick       1/32 or .03125

o         MBS       Mortgage Backed Security

o         TBA       To Be Announced (MBS with unknown future delivery)

o         Spec      Specified Pool

 

The contents in this memo are not an endorsement of any financial products or investments. PRMI assumes no liability, and will not make any recommendations with respect to the purchase or sale of any investment security or its derivatives.

Economic Calendar

Date/Time(Central)	Indicator	Period	Est.	Actual	Prior	Revised
1/6/2015 9:00 AM	Factory Orders	NOV	-0.5%		-0.7%
1/6/2015 9:00 AM	ISM Non-Manf. Composite	DEC	58.0		59.3
1/7/2015 6:00 AM	MBA Mortgage Apps.	2-Jan	--		0.9%
1/7/2015 7:15 AM	ADP Employment Change	DEC	226K		208K
1/7/2015 7:30 AM	Trade Balance	NOV	-$42.0B		-$43.4B
1/8/2015 7:30 AM	Initial Jobless Claims	3-Jan	290K		298K
1/8/2015 7:30 AM	Continuing Jobless Claims	27-Dec	2360K		2353K
1/8/2015 2:00 PM	Consumer Credit	NOV	$15.000B		$13.226B
1/9/2015 7:30 AM	Change in Nonfarm Payrolls	DEC	243K		321K
1/9/2015 7:30 AM	Change in Manufact. Payrolls	DEC	15K		28K
1/9/2015 7:30 AM	Unemployment Rate	DEC	5.7%		5.8%
1/9/2015 7:30 AM	Avg. Hourly Earnings (MoM)	DEC	0.2%		0.4%
1/9/2015 9:00 AM	Wholesale Inventories	NOV	0.3%		0.4%
1/9/2015 9:00 AM	Wholesale Trade	NOV	0.0%		0.2%