Mortgage Rates Waiting Game Continues. Positive Signs Seen

The movements of mortgage rates higher and lower throughout the week have become progressively more tame. There was almost an entire point of difference between the highs and lows on Monday, whereas today's range has held within a mere quarter of a point.

That's the good news as it implies the QEII bond market cleansing process is in its final stages. The bad news is that even though the movements were tame compared to earlier in the week, rates still traveled in the wrong direction.

Reason? When MBS prices move down precipitously, lenders tend to reprice for the worse more aggressively and more quickly than they would reprice for the better on improved MBS prices. Because the rally we discussed yesterday occurred late in the day moving into the close, and was maintained into this morning, it painted a more stable picture for lenders--one in which they didn't need to respond to a precipitous price change. All that to say that even though we've seen prices move down a bit today, the net effect is mortgage-backed securities (MBS) ended the week largely where they began and the best conventional/FHA/VA 30 year fixed mortgage rates remain in the 4.25% to 4.50% range for well-qualified borrowers. The best conventional/FHA/VA 15 year fixed mortgage rates are in a range between 3.500% and 3.875%.

Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on agency conforming loan amounts to borrowers who are have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest)

And although I know it may sound like a broken record at this point... VOLATILITY WAS THE NAME OF THE GAME THIS WEEK! But for today, we'll leave it there and skip right to the picture of said volatility.

And while it may seem like a good thing that the range is becoming more stable, this is the sort of pattern that can sometimes be seen in price movements right before they make a big movement in one direction or the other. So again... Volatility PERSISTS. Not a time to be taking significant risks with the shortened holiday week ahead and another round of Treasury debt auctions. Things could still get worse before they get better, but we do expect rates to get better once the QEII cleansing process is complete.

Mortgage Rates

Rate Lock Advisory - Wednesday Nov. 10th



Wednesday’s bond market has opened flat after this morning’s employment figures showed unexpected strength last week. The stock markets are showing losses, helping to prevent bonds from falling into negative ground. The Dow is currently down 46 points while the Nasdaq has lost 10 points. The bond market is nearly unchanged from yesterday’s close, but we will still likely see an increase of approximately .250 - .375 of a discount point in this morning’s mortgage rates due to weakness late yesterday.

This morning brought two pieces of economic data, but neither is considered to be highly important. September’s Goods and Services Trade Balance report showed that the U.S. trade deficit stood at $44.0 billion. This was a little smaller than the $44.8 billion that was expected, but was not a wide enough variance to affect mortgage rates.

The Labor Department said that 435,000 new claims for unemployment benefits were filed last week. This was short of expectations and a 4-month low, indicating that the labor market was stronger than thought last week. This is negative news for the bond market, but since it is only a single week’s worth of new claims it’s impact on today’s mortgage rates has been minimal.

Also worth noting is today’s 30-year Bond auction that may influence mortgage rates. Yesterday’s 10-year Note sale did not go very well, so there is little optimism that today’s auction will be much better. The bond market was in selling mode late yesterday, causing some lenders to revise rates upward during afternoon trading. Those losses are the biggest portion of this morning’s increase in mortgage pricing. I don’t believe that today’s sale will cause significant movement in mortgage rates, regardless if the sale goes well or not. But it could lead to a minor revision after results are posted at 1:00 PM ET.

The bond market will be closed tomorrow in observance of the Veterans Day holiday. The stock markets will be open for trading though. None of the markets will close early ahead of the holiday, so I would not be surprised to see some movement in rates before closing today as investors and lenders prepare for the day off.

PLEASE NOTE: Since the bond market is closed tomorrow, there will be no update to this report. Some lenders may be open for business, but will likely use this afternoon’s mortgage rates until Friday morning.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers

Mortgage Market Snapshot

Forwarded exclusively by:	Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Monday, November 08, 2010
Interest rate markets are flat this morning with no driving news and ahead of this afternoon's $32B 3 yr note auction. No economic data today, a few Fed speakers but not expected to rock the boat. Treasury is conducting its quarterly refunding this week, auctioning a total of $72B of treasuries; today the 3 yr note, tomorrow $24B of 10 yr notes and o Wednesday $16B of 30 yr bonds. Not much in the data world this week; on Thursday the bond and mortgage markets will be closed for Veteran's Day while equity and futures markets will stay open. At 9:30 the DJIA opened down 43, the 10 yr note at 9:30 +2/32 with its rate at 2.53%, mortgage prices that traded unchanged until 9:30 were up 2/32 (.06 bp). Still a lot of hand-wringing around the world over the Fed's decision to buy $600B of treasuries. Most central bankers worry over the potential of currency wars with countries trying to drive their currencies lower to capture export business. Unlikely that will occur but with the Fed out at the edge with its QE uncertainty is the dominating concern now. Over the weekend Bernanke commented the Fed isn't aiming at an increase in inflation, really? What Bernanke meant to imply (we suppose) is that the Fed isn't trying to set off an inflationary spiral but in an attempt to drive off deflation fears, the Fed does want the level of inflation to increase to its general target of 2.0% to 2.5% frm 1.0% presently. “I have rejected any notion that we are going to raise inflation to a super-normal level in order to have effects on the economy,” Bernanke said in a panel discussion at a Fed conference in Jekyll Island, Georgia. “It’s critical for us to maintain inflation at an appropriate level.” Friday G-20 meets with leaders of their countries; looks like the US will have a lot to convince other G-20 countries that we are on the correct path. Since the FOMC meeting on 9/21 when the Fed said it was prepared to add additional stimulus with another QE the bellwether 10 yr note and mortgage rates have rallied, then retreated to leave those rates slightly lower but so far there has not been the move many were expecting. Many analysts and economists were forecasting the 10 yr note would fall to 2.25% frm 2.50% area now. We thought then, and now, that rates would not likely fall much on the easing. If, as the Fed believes, interest rates at the short and belly of the curve stay generally low it will add growth in the economy and likely edge inflation up a tad; hard to paint the picture of much lower long term rates under those circumstances. This Week's Economic Calendar: Today; 1:00 pm $32B 3 yr note auction Tuesday; 10:00 am Sept wholesale inventories (+0.6%) 1:00 pm $24B 10 yr note auction Wednesday; 7:00 am MBA mortgage applications (N/A) 8:30 am weekly jobless claims (-7K to 450K) Sept trade deficit (-$45.0B) Oct import and export prices (N/A) 1:00 pm $16B 30 yr bond auction 2:00 pm Oct Treasury budget (-$140B) Thursday; Veteran's Day bond and mtg markets closed; stocks trade Friday; 9:55 am U. of Michigan mid-month consumer sentiment index (69.0 frm 67.7) We expect a generally quiet day in the rate markets with little changes by the end of the day.
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Mortgage Market Snapshot

Forwarded exclusively by:	Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, November 05, 2010
Oct job gains were substantially stronger than the overall consensus; non-farm payrolls were expected to increase by 60K, as reported jobs increased 151K. Not only Oct jobs out-stripped estimates, there were sizeable upward revisions in Sept and Aug; Sept non farm jobs was revised from -95K to -41K and August revised to -1K from -57K originally reported----a total of 110K increase from what had been reported. The unemployment rate was unchanged at 9.6%. Average hourly earnings increased 0.2% and is up 1.7% since last Oct. Private hiring, which excludes government agencies, rose 159,000 in October, the biggest gain since April. Economists projected an 80,000 gain, the survey showed. Manufacturing payrolls unexpectedly decreased by 7,000 last month. Economists had projected a gain of 5,000. Government payrolls decreased by 8,000. State and local governments reduced employment by 7,000, while the federal government trimmed 1,000 jobs. The employment report is good news for the economy, but keep it in perspective. Over the past three months based on the Oct data and revisions in Sept and August non-farm jobs increased a total of 269K, averaging 89K a month; any increases are welcome news but employment is still not gaining much. With 80K to 100K new job entrants each month it would take job increases of 300K a month to even dent the unemployment picture. The initial reaction sent treasuries and mortgages down in price and up in yield. The 10 yr note price plunged 27/32, mortgages started -12/32 (.37 bp). By 9:00 some stability; the 10 yr -12/21 and mortgages -5/32 (.15 bp). Not much reaction in the equity markets early on after the recent strong rallies recently. The dollar is stronger this morning on the payroll data, hindering equity advances in early activity. At 9:30 the DJIA opened -17, the 10 yr -6/32 at 2.51% +2 bp, mortgages getting hit harder, down 10?32 (.31 bp) frm yesterday's close. By 10:00 the 10 yr note back to about unchanged but mortgages still pressured. The Fed's QE on Wednesday pushed the 10 yr note down just 10 basis points, mortgage rates down 5 basis points. Today's job report has momentarily taken the wind out of the sails on the QE easing. A lot of day left to work over the better report on jobs; a solid report but on the margin the reaction in the financial markets isn't as strong as we might have expected. Comments on CNBC calling the jobs report a very strong report, and the President applauding; although any improvement is welcome, the job market remains impaired and not even meeting the increase in population increases. The dollar rallied on the data but since is slipping, the stock indexes firmed but on the open the DJIA opened weaker and is about unchanged at 10:00, the treasury market is weaker but given recent volatility, not that bad. The hit is coming most in the mortgage market so far; lenders sitting on large long positions selling mortgages. Nothing left today but a couple for Fedsters making speeches that won't reveal anything of substance. Next week however, adding a little more pressure on interest rates, the Nov quarterly refunding with auctions totaling $72B; less than the August refunding but auctions on 10 yr and 30 yr bonds may drag on any significant price improving until the auctions are completed. Next week's economic calendar is very skimpy with weekly claims about it.
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Mortgage Market Update

Forwarded exclusively by:	Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, November 04, 2010
Markets opened substantially better this morning after a very volatile trade yesterday afternoon on the FOMC statement and the details on what the Fed will do on the QE. $600B of additional treasury purchases and $250B to $300B more from the pay down of principle from the $1.25T of MBSs bought over the past 18 months (ended last March) over the next six to eight months. The long end of the yield curve crumbled, the 30 yr bond yield increased 12 basis points in rate to 4.06%, the 10 yr yield by the end of the session was down 1 basis point in rate to 2.58%, the 5 yr note yield declined 5 basis points to 1.11%. Mortgages took an initial hit but rebounded by the end of the session to close better in price by .15 bp), but still slightly weaker than at 9:30 yesterday. The DJIA opened at 9:30 +80 points, the 1`0 yr note +21/32 at 2.50% and mortgage prices +17/32 (.53 bp). The Fed's easing is steepening the yield curve, rates lower at the short end and higher at the long end of the curve. This morning the rate markets are improving and settling down somewhat from the initial confusion yesterday on how the easing may impact interest rates. At 9:30 the 10- yr note price up 23/32, its yield 2.50% -8 basis points, mortgage prices at 9:30 +18/32 (.56 bp) on 30s. +18/32 (.56 bp) on 30 yr FHAs and +12/32 (.37 bp) on 15s. The Fed will likely buy treasuries at the belly of the curve, 5 yr and 7 yr notes. The plan apparently, drive down short term rates to motivate borrowing by businesses that hopefully then will start hiring. At 8:30 this morning weekly jobless claims were higher than forecasts, up 20K back over 450K to 457K, continuing claims did decline to 4.34 mil from 4.382 mil last week. The 4 wk average for claims at 456K. The increase in claims provided a boost for the rate markets. Also at 8:30 Q3 productivity expected up 0.9% was up 1.9% after falling 1.8% in Q2. Unit labor costs down 0.1% after increasing 1.3% in Q2. The opinions about the Fed's easing are all over the map. There are many that believe the easing is a mistake and won't help much to increase the speed of the recovery; while many others fear that the Fed may be successful in increasing the inflation rate as the Fed has said it wants for many months now. While the Fed won't make a point of it, they want the dollar to weaken, and that is happening. A weaker dollar is inflationary, not what investors want at the long end of the curve----the 30 yr bond got ripped apart yesterday and is weaker again this morning. The Fed's plan is to drive investors out of the safe treasury market and into equities and higher yielding bonds such as MBSs and high grade corporates. Attempting to force investors away from safety and into other investments that provide better returns is supposed to change the economic outlook to more optimistic. Expect markets to remain edgy through today and into the employment report tomorrow. So far so good after the volatility yesterday, the 10 yr and mortgages are improving; however traders remain unsure about what the actual impact will be for mortgage rates and the key 10 yr note.
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Mortgage Market Snapshot

Forwarded exclusively by:	Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 03, 2010
Today is the day the world awaited (since 9/21); at 2:15 the FOMC statement will come and finally markets will know for sure what the Fed is about to do on the QE 2 easing move. Going in to it, there is widespread belief that the treasury buying will total $500B and accomplished over a six month period. The Fed is always concerned not to shock financial markets so it is unlikely that whatever their plan it won't rattle markets with something well off target. The election results are about what was expected; the House to Republicans, the Senate stays with the Democrats. No noticeable market reaction to the results as they were widely expected. Treasuries and mortgages opened better this morning; at 8:15 the Oct ADP non-farm private jobs report hit, expectations were for an increase of 23K jobs as reported ADP said private jobs increased 43K. In Sept ADP reported private jobs were down 39K, today it was revised to -2K. Better than expected but still no real new hiring; there was no reaction to the report in either the stock or bond markets. At 9:30 the DJIA opened +10, the 10 yr note +12/32 at 2.55% -4 bp and mortgage prices much better; +12/32 (.37 bp) on 30s and +7/32 (.22 bp) on 15s. At 10:00 Sept factory orders were expected up 1.7%; orders increased 2.1% and Aug orders were revised to unch frm -0.5% originally reported. Also at 10:00 the Oct ISM services sector index, expected at 53.5 frm 53.2 in Sept, was better at 54.3. The new orders components increased to 56.7 frm 54.9, employment component at 50.9 frm 50.2 in Sept and price index at 68.3 frm 61.1. There was no initial reaction to the data; although stronger with the FOMC statement later today markets are storing the data but not reacting yet. Waiting now for the FOMC policy statement this afternoon. How the Fed will do the so-called easing, how much, when and comments about the economic outlook should be included in the normally short statement that concludes the meeting. It is uncertain how traders will take the easing move, how the dollar trade will occur, and what the market expectations will be on any direct benefits of an easing move. As noted previously, the Fed appears determined to increase the inflation rate by weakening the dollar with the QE. Fixed income investments in US treasuries at the current low levels may be a hard sell to investors if markets believe the Fed will be successful in bringing up the inflation rate back to their perceived target range of 2.0% to 2.5%. A quantative easing will bring interest rates down as long as economic data points are weak, however recent data has been fractionally better than estimates on some of the key data. The markets may not react much on the FOMC statement with Oct employment scheduled Friday. Present estimates after the ADP report this morning are being revised better than prior to the ADP, from estimates of 60K non-farm private job gains to 80K to 100K, still very weak but may bother traders with inflation concerns resting right under the surface. No rally in the bond market and mortgage market if inflation fears increase. The MBA today released its Weekly Mortgage Applications Survey for the week ending October 29, 2010 at 7:00 am. The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0%. The Refinance Index decreased 6.4% from the previous week. This is the third straight week the Refinance Index has decreased. The seasonally adjusted Purchase Index increased 1.4% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 0.1%. The four week moving average is down 2.7% for the seasonally adjusted Purchase Index, while this average is up 0.8% for the Refinance Index. The refinance share of mortgage activity decreased to 81.3% of total applications from 82.3% the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.28% from 4.25%, with points increasing to 1.07 from 1.00 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.64% from 3.67%, with points increasing to 1.08 from 0.96 (including the origination fee) for 80% loans. Treasury announced the details for next week's quarterly refunding; $32B of 3 yr notes on Monday, $24B of 10 yr notes on Tuesday, and $16B of 30 yr bonds on Wednesday. Not looking for much movement now until 2:15 with the FOMC policy statement release.
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