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Factory Orders Continue Rebound

factory orders rebound

Businesses ordered more machinery and equipment from U.S. factories in February, a signal that many are investing in their companies despite the expiration of a tax credit.

This is positive news for the housing market as increased demand for manufacturing signals stronger consumer sentiment.

Orders to U.S. factories increased 1.3 percent in February, the Commerce Department said. That offset a similar decline in January.

U.S. factories stepped up hiring and production in March, based on a report Monday from the Institute for Supply Management.

The trade group of purchasing managers said its index of manufacturing activity rose to 53.4 in March, up from a February reading of 52.4. Readings above 50 indicate manufacturing is expanding.

Manufacturing has been a key source of economic growth since the recession ended in June 2009.

What Happened to Rates Last Week?

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Mortgage backed securities (MBS) gained +70 basis points from last Friday to the prior Friday which helped mortgage rates to decrease (Mortgage rates have an inverse relationship to mortgage backed security prices).
The highest rates of the week were on Tuesday and the lowest rates of the week were on Friday.

Mortgage rates shot up Tuesday afternoon after the release of the minuets from the last Fed meeting.

As traders deciphered the minutes, it became clear to them that a third round of quantitative easing would not be in the cards. This caused MBS to sell off and forced mortgage rates higher.
But everything changed on Friday.

The MBS market reacted sharply to the disappointing employment data.

The headline Unemployment Rate dropped from 8.3% to 8.2% but traders largely ignore this data as it is the results of a verbal phone survey.

Traders focus instead on the Non-Farm Payroll data which did show that the economy added 120,000 jobs. While job growth is good, this was a big decrease from the prior month where the economy added 240,000 jobs. This disappointing employment news caused traders to speculate that further Fed action may be needed (a complete reversal in thought from Tuesday afternoon) and made MBS attractive again. This new demand for MBS helped to push mortgage rates lower.

What to Watch Out For This Week:
The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

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It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Quote of the week:

“The biggest source of unfinished business in the financial reform effort is in the housing finance area…Fannie Mae and Freddie Mac are “not a source of systemic risk” now” – Treasury Secretary Geithner

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Vince Reece
Senior Loan Officer
Office: 303-840-0966
Cell: 303-818-0699
19519 E Parker Square Dr
Parker, CO 80134

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