Mortgage Rates

Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com


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Monday, December 13, 2010


Started lower again today; the 10 yr note overnight it 3.39% +7 bp from Friday's close, a little improvement by 9:00, at 3.36%. Mortgage prices at 9:00 down 6/32 (.18 bp) frm Friday's close. Looks more and more likely that the 10 yr may eventually drive to 3.50%. The exit from fixed income investments at those low yields is not over although we believe the near term remains excessively overdone. Still looking for a bounce but it is clear now that to see that it is going to take some kind of disappointment in the economic data being reported this week, meanwhile the trend is firmly higher for rates and it is not appropriate to bet on when a bounce will occur.

No economic releases today but the rest of the week has a lot to consider. Today the FOMC meeting begins with the statement coming tomorrow afternoon at 2:15. No supply this week from Treasury; today the Fed is scheduled to buy Treasuries dated 06/30/16 - 11/30/17. China did not increase interest rates as many were fearful they would. Inflation fears are one of the reasons we are seeing rates increase, China is making efforts to slow their inflation rate which is now at 6.0%, that and the Fed's desire to get the US inflation higher is dealing a blow to US rates. Inflation fears and the increasingly better economic outlook with tax cuts, payroll tax cuts, tuition credits and the extension of emergency unemployment benefits are combining to paint a smiley face on the economic future. A huge leap of faith, nevertheless it is what investors are increasingly expecting. The Senate is sure to pass the bill put together by Obama and Republicans, the House however is fighting it with many Democrats resisting the plan because it keeps the tax cuts for "the wealthy". Over the weekend the House was decorating the Tree, and not the National Christmas Tree, adding pork to the bill to bribe some of the dissenters. Subsidies for ethanol, wind farms and a few other ornaments; it isn't possible for Congress to pass a bill on its merits without hanging pork on it.

This Week's Economic Calendar:
Tuesday;
8:30 am Nov PPI (+0.5%, ex food and energy +0.2%)
Nov retail sales (+0.5%, ex auto sales +0.6%)
10:00 am Oct business inventories (+1.1%)
2:15 pm FOMC policy statement
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Nov CPI (+0.2%, ex food and energy +0.1%)
Dec NY Empire State manufacturing index (+3.0 frm -11.14 in Nov)
9:15 am Nov industrial production (+0.3%)
Nov capacity utilization (75.0% frm 74.8%)
10:00 am Dec NAHB housing market index (17 frm 16 in Nov)
Thursday;
8:30 am weekly jobless claims (+4K to 425K; continuing claims 4.078 mil frm 4.086 mil)
Nov housing starts (+4.8% to 545K annualized)
Nov building permits (+2.5% to 558K annualized)
Q3 current account (-$125.3B)
10:00 am Dec Philadelphia Fed business index (12.5 frm 22.5)
Friday;
10:00 am Nov leading economic indicators (+1.2% frm +0.5% in Oct)

Core Logic out this morning saying the number of U.S. homes worth less than the debt owed on them dropped in the third quarter, largely because of mounting foreclosures rather than a rise in property values. 10.8 million homes, or 22.5% of those with mortgages, were “underwater” as of Sept. 30, the Santa Ana, California-based real estate information company said in a report today. That was down from 11 million, or 23%, at the end of June, the third straight quarterly decline. Falling property values and unemployment near 10% have spurred a surge in foreclosures. The number of homes offered in foreclosure auctions averaged 110,000 a month in the third quarter compared with about 98,000 in the same period a year earlier, said Mark Fleming, CoreLogic’s chief economist. “There are two ways to reduce negative equity,” Fleming said in a telephone interview today. “Price appreciation or disposition, which means people getting taken out of their homes. At the moment, there’s more disposition.” A further decline in prices threatens to increase the number of homeowners with negative equity, Fleming said. U.S. home values will probably drop $1.7 trillion this year after rising foreclosures and the expiration of buyer tax credits that boosted demand early in the year, Zillow Inc. said Dec. 9. More than $1 trillion of the drop came in the second half, according to Zillow, a Seattle-based real estate data company. (Bloomberg)