Market Analysis

This will be an active week in the bond market.   This afternoon we appear to be benefiting from short sellers who have been betting that mortgage rates would increase (bond prices decrease) and are now buying positions to cash in their profits.  This is very short term activity and does not represent a trend.  Now is a very good time to watch the market carefully.  While it is possible we can get some additional gains (slightly better rates) it is also far too early to tell if the march towards higher rates will abate.   Our position if you are closing within 30 days is that we are either recommending locking now or waiting till tomorrow morning to see if the improvement from this afternoon carries forward.  If you wait to lock and the market opens down (higher rates) tomorrow we think that will be much safer to lock tomorrow and then renegotiate rather than float while the market awaits the Fed's action and post meeting commentary on Wednesday.   If you would like to lock with us, the first step is to be pre-approved.  You can access a short application form at http://www.ironharbormortgage.com/xSites/Mortgage/IronHarbor/Content/UploadedFiles/Iron%20Harbor%20Short%20Application.pdf
If you lock and the market improves dramatically, we are able to renegotiate once and get within .375 points in closing costs of current market.  For example if the market improves to 5.625% with 0 points, we can renegotiate once to 5.625% with .375 points.  It is important to note that even though when renegotiating there is a .375 point adjustment to closing costs, usually we renegotiate rates to a rate sheet that is very short-lived and, therefore, most of our borrowers get a better rate renegotiating than if they were just trying to call in and get their loan registered and locked to start with.

Below I am pasting a chart published this weekend by Larry Baer of Market Alert which gives his analysis of this week's releases and their possible impact.

Release Date & Time	Economic Indicator	Consensus Estimate	Analysis
Mon. April 28, 8:30 a.m. ET	Apr. Consumer Confidence	62.0 vs. last 64.5	No one doubts that rising energy and food prices are taking a massive bite out of consumer confidence. This data will be so sharply overshadowed by big reports yet to come this week that it will almost surely have no impact on the direction of interest rates today.
Tue. April 29, 8:30 a.m. ET	First day of a two day Federal Open Market Committee meeting
Wed. April 30, 8:30 a.m. ET	First estimate Q1 Gross Domestic Product	+0.2% vs. last +0.6%	This data will be supportive of lower mortgage interest rates only in the off chance that it posts a negative reading for the quarter. The more positive the reading for first-quarter economic growth -- the more upward pressure will be put on mortgage interest rates.
Wed. April 30, 8:30 a.m. ET	Q1 Employment Cost Index	+0.8% vs. last +0.8%	This data will likely have little impact on the trend trajectory of mortgage interest rates.
Wed. April 30, 2:15 p.m. ET	Fed Open Market Committee concludes	25 basis-point fed fund cut	The tone of the committee’s post-meeting statement is as important as their monetary policy decision. Investors have already priced in the rate cut and expectations that the post meeting statement will indicate that the Fed has likely made its last cut for this cycle. If my assessment proves accurate, look for mortgage interest rates to edge fractionally higher.
Thurs. May 1, 8:30 a.m. ET	Mar. Personal Income Spending Personal Expenditure Index	+0.4% vs. last +0.5% +0.2% vs. last +0.1% +0.1% vs. last +0.1%	The reading on core consumer inflation contained in the personal consumption expenditure index easily trumps the other two components of this data series. As long as the PCE index does not post a gain greater than 0.2% -- this report will tend to be supportive of steady mortgage interest rates. Anything more will almost surely push rates notably higher before the end of the day.
Thurs. May 1, 8:30 a.m. ET	Initial jobless claims for the week ended 4/26	Up 18,000	As long as this value remains in positive territory it will likely have little impact on the level of mortgage interest rates today. An unlikely decline in the number of jobless claims to a value less than zero will probably push mortgage interest rates higher.
Thurs. May 1, 10:00 a.m. ET	Apr. Institute of Supply Mgmt.	+48.0 vs. +48.6	The modest expected slump in this measure of activity in the manufacturing sector is already priced into the mortgage market. In my judgment, it will take an unlikely reading of 49.0 or higher to create enough pressure to push rates higher.
Fri. May 2, 8:30 a.m. ET	Apr. Nonfarm Payrolls Unemployment Rate Avg. hourly earnings	-80,000 vs. last +80,000 5.2% vs. last 5.1% +0.3% vs. last 0.3%	Numbers that match (or closely match) the consensus estimate will likely have little impact on the mortgage market. It will almost surely take a lost of 100,000 or more jobs and/or an unemployment rate of 5.3% or higher to shock investors into pushing mortgage interest rates notably lower.
Fri. May 2, 10:00 a.m. ET	Mar. Factory Orders	+0.2% vs. last -1.3%	Foreign demand remains high and has likely significantly contributed to the anticipated month-over-month gain. Investors will likely give this stale bit of data nothing more than a passing glance.
Mon. May 5, 10:00 a.m. ET	Apr. Institute of Supply Mgt. Service Index	49.5 vs. last 49.6	As long as this number remains below 50.0 investors will probably consider this report nothing more than a “yawner”. A reading of 50.0 or higher will almost certainly put upward pressure on mortgage interest rates.