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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, January 31, 2011


Treasuries and mortgages started a little soft this morning, prior to 8:30 the 10- yr note was off 9/32 at 3.36% once again finding resistance at 3.31% which was Friday's low before closing at 3.33%. Mortgage prices prior to 8:30 -5/32 (.15 bp). At 8:30 Dec personal income and spending were reported; income up 0.4% with forecasts of +0.5%, spending +0.7% against expectations of +0.6%. In 2010 income was up 3.0% while spending increased 3.5%. There was little reaction to the data, the 10 yr improved a few 32nds. Stock indexes after the report, the DJIA up 40 points after falling 166 points on Friday. The personal consumption index, slowed further below the central bank’s long-term forecast. The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 0.7% from December 2009, the smallest increase since records began in 1959. The core price index was unchanged in December for the fifth time in the past six months. The gauge was forecast to increase 0.1% from November and 0.8% from December 2009.

The unrest in Egypt continued over the weekend but is having little or no affect on US markets. Mubarak is on his way out after 30 years but markets believe the transition to a new government will not disrupt US/Egypt relations or disturb oil flows through the Suez Canal with only about 3.0% of oil moves through it. Mubarak, Egypt's president, has sworn in a new cabinet in a bid to quell days of mass uprising against him and the government. The changes are unlikely to save Mubarak, riots and protesters still occurring; meantime a lot of press on it but markets seem non-plused.

At 10:00 the Chicago purchasing mgrs index, expected at 65.0, jumped to 68.6 frm 66.8 in Dec; the highest index reading since July 1998. New orders increased to 75.7 frm 68.7, prices pd increased to 81.7 frm 78.0 and employment component increased to 64.1 frm 58.4 (any index reading over 50 is considered expansion, the higher the stronger). The initial reaction wasn't much in the bond market.

Last Friday the DJIA fell 166 points in what may be the start of the expected correction in the equity markets. This morning the all key indexes opened better and at 10:00 still a little better but struggling a little. The 10 yr note rate fell to 3.31% on Friday on the stock market weakness, the recent level that has stopped any rallies in the past couple of weeks. This morning, after opening higher the 10 yr at 10:00 is firming at 3.34% up just 1 bp and mortgage prices at 10:00 unchanged.

The stock market is presently hanging in there but looks soft. If the 10 has any chance to break to lower rates the equity markets will need to roll over. A rally in equities today will keep rate markets from improving much. With the employment report on Friday the financial markets are more likely to sit still with some choppiness and no real changes until later this week.

This Week's Economic Calendar:
Tuesday;
10:00 am Dec construction spending (-0.5%)
Jan ISM manufacturing index (58.2 frm 57.0)
3:00 pm Jan Auto and Truck sales
Wednesday;
7:00 am weekly MBA mortgage applications
8:15 am ADP employment estimate for Jan (+150K private jobs)
Thursday;
8:30 am weekly jobless claims (-19K at 425K, con't claims 3.925 mi frm 3.991 mi)
10:00 am ISM manufacturing index (57.0 frm 57.1 in Dec)
Dec factory orders (-0.7%)
Friday;
8:30 am Jan employment data (non-farm jobs +150K, private jobs +163K; unemployment rate 9.6% frm 9.4% in Dec)

Mortgage Rates

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

Building Strong, Lasting Relationships; One Client at a Time.

Monday, January 31, 2011

Treasuries and mortgages started a little soft this morning, prior to 8:30 the 10- yr note was off 9/32 at 3.36% once again finding resistance at 3.31% which was Friday's low before closing at 3.33%. Mortgage prices prior to 8:30 -5/32 (.15 bp). At 8:30 Dec personal income and spending were reported; income up 0.4% with forecasts of +0.5%, spending +0.7% against expectations of +0.6%. In 2010 income was up 3.0% while spending increased 3.5%. There was little reaction to the data, the 10 yr improved a few 32nds. Stock indexes after the report, the DJIA up 40 points after falling 166 points on Friday. The personal consumption index, slowed further below the central bank’s long-term forecast. The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 0.7% from December 2009, the smallest increase since records began in 1959. The core price index was unchanged in December for the fifth time in the past six months. The gauge was forecast to increase 0.1% from November and 0.8% from December 2009.

The unrest in Egypt continued over the weekend but is having little or no affect on US markets. Mubarak is on his way out after 30 years but markets believe the transition to a new government will not disrupt US/Egypt relations or disturb oil flows through the Suez Canal with only about 3.0% of oil moves through it.  Mubarak, Egypt's president, has sworn in a new cabinet in a bid to quell days of mass uprising against him and the government. The changes are unlikely to save Mubarak, riots and protesters still occurring; meantime a lot of press on it but markets seem non-plused.

At 10:00 the Chicago purchasing mgrs index, expected at 65.0, jumped to 68.6 frm 66.8 in Dec; the highest index reading since July 1998. New orders increased to 75.7 frm 68.7, prices pd increased to 81.7 frm 78.0 and employment component increased to 64.1 frm 58.4 (any index reading over 50 is considered expansion, the higher the stronger). The initial reaction wasn't much in the bond market.

Last Friday the DJIA fell 166 points in what may be the start of the expected correction in the equity markets. This morning the all key indexes opened better and at 10:00 still a little better but struggling a little. The 10 yr note rate fell to 3.31% on Friday on the stock market weakness, the recent level that has stopped any rallies in the past couple of weeks. This morning, after opening higher the 10 yr at 10:00 is firming at 3.34% up just 1 bp and mortgage prices at 10:00 unchanged.

The stock market is presently hanging in there but looks soft. If the 10 has any chance to break to lower rates the equity markets will need to roll over. A rally in equities today will keep rate markets from improving much. With the employment report on Friday the financial markets are more likely to sit still with some choppiness and no real changes until later this week.

This Week's Economic Calendar:
         Tuesday;
             10:00 am Dec construction spending (-0.5%)
                           Jan ISM manufacturing index (58.2 frm 57.0)
             3:00 pm Jan Auto and Truck sales
        Wednesday;
             7:00 am weekly MBA mortgage applications
             8:15 am ADP employment estimate for Jan (+150K private jobs)
        Thursday;
             8:30 am weekly jobless claims (-19K at 425K, con't claims 3.925 mi frm 3.991 mi)
             10:00 am ISM manufacturing index (57.0 frm 57.1 in Dec)
                           Dec factory orders (-0.7%)
       Friday;
             8:30 am Jan employment data (non-farm jobs +150K, private jobs +163K; unemployment rate 9.6% frm 9.4% in Dec)

Mortgage Rates


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.

Sunday, January 30, 2011


This Week is employment week on Friday, between Monday and Friday however there are a number of key economic reports. The markets start Monday with developments over the weekend in Egypt and the equity markets looking toppy and possibly headed for a long overdue correction. At the end of last week the famous 10 yr treasury note yield fell to 3.31% on Friday and closed at 3.33%, the bottom of its six week trading range (33 market days). A break in stocks and increased fears about the uprisings in Tunisia and Egypt should push interest rates lower on safety moves, if however stocks hold and there is no escalation of concerns in the mid-east the 10 yr and mortgages will move back to the top of their ranges on yields.

Economic data this week has Dec personal income and spending, the ISM manufacturing and service sectors indexes, Jan auto sales, Dec construction spending and the employment report. Early forecasts for all non-farm job growth is for an increase of 150K jobs, private non-farm jobs up 163K and the unemployment rates at 9.6%, up 0.2% from Dec. There are no Treasury auctions this week.

Mortgage interest rates have been very stable now for the past five weeks, not a bad thing as consumers continue to digest the spike up in rates last Nov and early Dec. If the rate markets do improve this week it will present an opportunity to get deals done, unlikely any rate improvements will last long with the economic outlook improving. Lots of talk about inflation, although it hasn't shown itself yet with rates so low just the thought of it will keep longer term rates for holding these low levels for long.

Mortgage Rates

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

Building Strong, Lasting Relationships; One Client at a Time.
Sunday, January 30, 2011

This Week is employment week on Friday, between Monday and Friday however there are a number of key economic reports. The markets start Monday with developments over the weekend in Egypt and the equity markets looking toppy and possibly headed for a long overdue correction. At the end of last week the famous 10 yr treasury note yield fell to 3.31% on Friday and closed at 3.33%, the bottom of its six week trading range (33 market days). A break in stocks and increased fears about the uprisings in Tunisia and Egypt should push interest rates lower on safety moves, if however stocks hold and there is no escalation of concerns in the mid-east the 10 yr and mortgages will move back to the top of their ranges on yields.

Economic data this week has Dec personal income and spending, the ISM manufacturing and service sectors indexes, Jan auto sales, Dec construction spending and the employment report. Early forecasts for all non-farm job growth is for an increase of 150K jobs, private non-farm jobs up 163K and the unemployment rates at 9.6%, up 0.2% from Dec. There are no Treasury auctions this week.

Mortgage interest rates have been very stable now for the past five weeks, not a bad thing as consumers continue to digest the spike up in rates last Nov and early Dec. If the rate markets do improve this week it will present an opportunity to get deals done, unlikely any rate improvements will last long with the economic outlook improving. Lots of talk about inflation, although it hasn't shown itself yet with rates so low just the thought of it will keep longer term rates for holding these low levels for long.

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


Building Strong, Lasting Relationships; One Client at a Time.

Friday, January 28, 2011

Two very key economic releases at 8:30 this morning. Q4 GDP was expected to be up to 3.6% frm +2.6% growth in Q3 2010, the advance report showed growth at 3.2%; the miss occasioned by the biggest drag from inventories in two decades. Q4 employment cost index was at +0.4% as expected. Those were the headlines but the details revealed better comparisons. Final sales in the fourth quarter increased 7.1%, the best showing in sales since 1984. The employment cost index for all of 2010 at +2.0%, was the second lowest on record at 2.0%, in 2009 the employment cost annual index was up 1.4%. GDP growth in 2010 at +2.9% was the strongest in five years. Household purchases, about 70% of the economy, rose at a 4.4% pace, the most since the first quarter of 2006. Retailers’ holiday sales jumped 5.5% for the best performance in five years. The report this morning is the first of three that will be released over the next two months before the final GDP hits in March, nevertheless there is little doubt that the economy is recovering at a pace better than what we were expecting, still however, we want to see retail sales data for Jan and Feb  for confirmation. That may be a problem though in that Jan will be negatively impacted by many snow storms through the month.

Treasuries and mortgage markets were soft into the 8:30 releases, initially weakened more before settling down by 9:00; at 9:00 the 10 yr note -11/32 at 3.43% +4 bp, mortgage prices down 7/32 (.22 bp). (see below for 10:00 levels). The economic improvement is increasing the possibility that the six week trading range for the 10 yr and mortgages is going break to higher rates soon. There are two factors that are still holding rates stable; inflation is low and there is nothing out there that suggests it is about to increase, and there is a potential for the equity markets are due for a correction after the huge improvement over the past six months.

The stock indexes opened better at 9:30; DJIA +4 points. The indexes are struggling recently; although improving the equity markets are showing some signs of exhaustion after the very strong rally over the past six months. Most of the optimism that drove stocks higher have now been about completely discounted; the economic rebound has essentially met market expectations. To take the market higher now it will need an infusion of new news and data. Many analysts that remain bullish in the long run are talking about a correction, a few are looking for as much as 10%. If (when) a correction begins it will support the rate markets on safety moves.

The 10 yr note still is holding in its 25 basis point yield range; mortgages following along. This week so far the 10 yr note and mortgages are unchanged from last Friday's closes. So far there isn't enough momentum to drive the 10 yr note above 3.50%, however recent action is less optimistic. Rallies have been weaker than days when prices fall and yields increase. The rest of the session for the bond and mortgage markets will depend on how stock indexes trade.

The final economic data point this week; at 9:55 the U. of Michigan consumer sentiment index, expected at 73.0 frm 72.7. Sentiment came at 74.2; the current conditions index at 81.8 frm 79.8 and the 12 month out expectations unchanged at 87.0. No noticeable initial reaction to the report as it was in line with investors' forecasts. The stock indexes did back off a little but not much.

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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, January 27, 2011


Prior to 8:30 interest rate markets were lower in price with the 10 yr note yield at 3.47%, touching its support level at 3.50%, mortgage prices traded down 9/32 (.28 bp). Two data points at 8:30 stopped the selling while leaving traders trying to square with the data. Weekly jobless claims were expected to increase 1K, as reported claims increased 51K to 454K the highest weekly claims since last Oct. Continuing claims also increased for the first time in four weeks, to 3.99 mil frm 3.87 mil. Unemployment claims were distorted by the winter weather in the South with four states reporting claims higher than normal. It took 30 minutes but by 9:00 the 10 yr note moved back to unchanged at 3.42% and mortgages at 9:00 +2/32 (.06 bp).

Dec durable goods orders were out at 8:30; orders were expected to be up 1.5%, as reported orders fell 2.5%. When transportation orders were excluded orders were thought to be up 0.6%, as reported +0.5%. Durables is a very volatile series and usually sees revisions later when factory orders are released (Feb 3rd), markets normally don't get too worked up over any deviations and with the volatile transportation orders excluded orders were generally in line with forecasts. Bookings for goods like computers and communications gear excluding aircraft climbed 1.4% after a 3.1% gain in November that was larger than previously estimated, figures from the Commerce Department showed today in Washington. Total orders fell 2.5% as noted, depressed by volatile demand for aircraft, which plunged 99%.

Stock indexes were looking good prior to the 8:30 data then backed off; at 9:30 the DJIA opened -2 points but within a few minutes managed to move a little higher. Mtgs at 9:30 +3/32 (.09 bp) and the 10 yr note +2/32 at 3.42%; by 9:45 however the 10 traded lower by 3/32.

Nov pending home sales released at 10:00 were expected to be down 0.5%; sales increased 2.0%, pending sales are sales with contracts but net closed. Yr/yr sales however down 2.2%. The NAR said better employment and good values were forces that improved the sales report. The initial reaction pushed prices on the 10 and mortgages off a little but no major reaction, nevertheless it is another measurement that beat the estimates.

Later this afternoon Treasury will complete this week's auctions with $29B of 7 yr notes. Yesterday's 5 yr note auction was met with strong demand, Tuesday's 2 yr auction however was not well bid.

The bond and mortgage markets continue to show bearish technicals, fundamentals also are working against the rate markets. The economy is improving, while data this morning is weaker investors will likely dismiss them as anomalies as most reports support the improving outlook for the US economy. We believe it is only a matter of time before the 10 yr note and MBSs break their ranges to higher rates. That said, as long as the 10 yr note and MBSs hold within their respective six week ranges there remains the potential of improvement but the potential is lessening with each economic release.

Mortgage Rates

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

Building Strong, Lasting Relationships; One Client at a Time.
Thursday, January 27, 2011

Prior to 8:30 interest rate markets were lower in price with the 10 yr note yield at 3.47%, touching its support level at 3.50%, mortgage prices traded down 9/32 (.28 bp). Two data points at 8:30 stopped the selling while leaving traders trying to square with the data. Weekly jobless claims were expected to increase 1K, as reported claims increased 51K to 454K the highest weekly claims since last Oct. Continuing claims also increased for the first time in four weeks, to 3.99 mil frm 3.87 mil. Unemployment claims were distorted by the winter weather in the South with four states reporting claims higher than normal. It took 30 minutes but by 9:00 the 10 yr note moved back to unchanged at 3.42% and mortgages at 9:00 +2/32 (.06 bp).

Dec durable goods orders were out at 8:30; orders were expected to be up 1.5%, as reported orders fell 2.5%. When transportation orders were excluded orders were thought to be up 0.6%, as reported +0.5%. Durables is a very volatile series and usually sees revisions later when factory orders are released (Feb 3rd), markets normally don't get too worked up over any deviations and with the volatile transportation orders excluded orders were generally in line with forecasts. Bookings for goods like computers and communications gear excluding aircraft climbed 1.4% after a 3.1% gain in November that was larger than previously estimated, figures from the Commerce Department showed today in Washington. Total orders fell 2.5% as noted, depressed by volatile demand for aircraft, which plunged 99%.

Stock indexes were looking good prior to the 8:30 data then backed off; at 9:30 the DJIA opened -2 points but within  a few minutes managed to move a little higher. Mtgs at 9:30 +3/32 (.09 bp) and the 10 yr note +2/32 at 3.42%; by 9:45 however the 10 traded lower by 3/32.

Nov pending home sales released at 10:00 were expected to be down 0.5%; sales increased 2.0%, pending sales are sales with contracts but net closed. Yr/yr sales however down 2.2%. The NAR said better employment and good values were forces that improved the sales report. The initial reaction pushed prices on the 10 and mortgages off a little but no major reaction, nevertheless it is another measurement that beat the estimates.

Later this afternoon Treasury will complete this week's auctions with $29B of 7 yr notes. Yesterday's 5 yr note auction was met with strong demand, Tuesday's 2 yr auction however was not well bid.

The bond and mortgage markets continue to show bearish technicals, fundamentals also are working against the rate markets. The economy is improving, while data this morning is weaker investors will likely dismiss them as anomalies as most reports support the improving outlook for the US economy. We believe it is only a matter of time before the 10 yr note and MBSs break their ranges to higher rates. That said, as long as the 10 yr note and MBSs hold within their respective six week ranges there remains the potential of improvement but the potential is lessening with each economic release.

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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, January 26, 2011


Like clock work! Yesterday the 10 yr note rallied taking the yield to 3.31% intraday and closing at 3.33%, the yield fell to its key resistance area (again); this morning the 10 yr yield at 9:00 back up to 3.37%. You can almost guarantee any rally taking the 10 yr note back to 3.00%-3.28% will fail the following day; equally it is almost 100% sure that when the rate climbs to the 3.45%-3.50% it will also fail to climb higher. Mortgage rates follow; yesterday mortgage prices increased 10/32 (.31 bp) this morning at 9:00 -10/32 (.31 bp)----running on a tread mill.

Last night the President had an opportunity to take a huge step toward setting the agenda this year on cutting federal spending. He could have laid out his ideas and strategy to address the exploding budget deficit that if left unchanged will eventually send interest rates a lot higher and drag the economy down. He didn't; he spoke eloquently as always but most of his speech was shallow on specifics, lots of platitudes and lots of feel good comments but he left with no details. Pres Obama is caught in the cross hairs of his political party; liberal Democrats do not want smaller government and less spending, they want more; the President knows he has to move more to the center. He knows the federal deficit has to be reigned in, he realizes he has to work with Republicans toward that end. His speech last night seemed designed to not alienate the far Left in his party while also trying to appear conservative and tough on spending. He failed to take up the challenge.

The MBA released its Weekly Mortgage Applications Survey for the week ending January 21, 2011. The Market Composite Index, a measure of mortgage loan application volume, decreased 12.9% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 15.3% from the previous week and reached its lowest level since January 2010. The seasonally adjusted Purchase Index decreased 8.7% from one week earlier. The Purchase Index is at its lowest level since October 2010. The unadjusted Purchase Index decreased 3.1 percent compared with the previous week and was 20.8% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 1.0%. The four week moving average is down 3.7% for the seasonally adjusted Purchase Index, while this average is down 0.1% for the Refinance Index. The refinance share of mortgage activity decreased to 70.3% of total applications from 73.0% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.2% from 5.0% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.8% from 4.77%, with points decreasing to 1.19 from 1.20 (including the origination fee) for 80% loans. This week the increase in the rate followed three consecutive weekly decreases. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.12% from 4.16%, with points increasing to 1.26 from 0.90 (including the origination fee) for 80% loans.

At 10:00, a few minutes ago, Dec new home sales expected up 3.4%, increased 17.5%, just like last week's existing home sales spiked 12.3%. The headline looks good, the guts were less so. In the west sales increased 71.9%?, 2010 sales declined 14.4%, and it still leaves a 6.9 month supply. In Dec rates increased and may have contributed to better sales as buyers made their moves before rates moved even higher. The initial reaction to the report added more selling in the treasury markets, mortgage prices slipped a little so far but not as much as the 10 yr note fell on the report.

At 1:00 Treasury auction $35B of 5 yr notes, the second of three auctions this week raising $99B. Yesterday the 2 yr auction was not met with very strong demand.

At 2:15 the FOMC meeting will conclude with the short policy statement. The Fed will not increase interest rates, will sound supportive on the economy, say it wants inflation levels a little higher. Essentially about the same as the statement after the Dec 15th meeting.

Mortgage Rates

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

Building Strong, Lasting Relationships; One Client at a Time.

Wednesday, January 26, 2011

Like clock work! Yesterday the 10 yr note rallied taking the yield to 3.31% intraday and closing at 3.33%, the yield fell to its key resistance area (again); this morning the 10 yr yield at 9:00 back up to 3.37%. You can almost guarantee any rally taking the 10 yr note back to 3.00%-3.28% will fail the following day; equally it is almost 100% sure that when the rate climbs to the 3.45%-3.50% it will also fail to climb higher. Mortgage rates follow; yesterday mortgage prices increased 10/32 (.31 bp) this morning at 9:00 -10/32 (.31 bp)----running on a tread mill.

Last night the President had an opportunity to take a huge step toward setting the agenda this year on cutting federal spending. He could have laid out his ideas and strategy to address the exploding budget deficit that if left unchanged will eventually send interest rates a lot higher and drag the economy down. He didn't; he spoke eloquently as always but most of his speech was shallow on specifics, lots of platitudes and lots of feel good comments but he left with no details. Pres Obama is caught in the cross hairs of his political party; liberal Democrats do not want smaller government and less spending, they want more; the President knows he has to move more to the center. He knows the federal deficit has to be reigned in, he realizes he has to work with Republicans toward that end. His speech last night seemed designed to not alienate the far Left in his party while also trying to appear conservative and tough on spending. He failed to take up the challenge.

The MBA released its Weekly Mortgage Applications Survey for the week ending January 21, 2011.  The Market Composite Index, a measure of mortgage loan application volume, decreased 12.9% on a seasonally adjusted basis from one week earlier.  The Refinance Index decreased 15.3% from the previous week and reached its lowest level since January 2010.  The seasonally adjusted Purchase Index decreased 8.7% from one week earlier. The Purchase Index is at its lowest level since October 2010.  The unadjusted Purchase Index decreased 3.1 percent compared with the previous week and was 20.8% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 1.0%.  The four week moving average is down 3.7% for the seasonally adjusted Purchase Index, while this average is down 0.1% for the Refinance Index. The refinance share of mortgage activity decreased to 70.3% of total applications from 73.0% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.2% from 5.0% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.8% from 4.77%, with points decreasing to 1.19 from 1.20 (including the origination fee) for 80% loans. This week the increase in the rate followed three consecutive weekly decreases. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.12% from 4.16%, with points increasing to 1.26 from 0.90 (including the origination fee) for 80% loans.

At 10:00, a few minutes ago, Dec new home sales expected up 3.4%, increased 17.5%, just like last week's existing home sales spiked 12.3%. The headline looks good, the guts were less so. In the west sales increased 71.9%?, 2010 sales declined 14.4%, and it still leaves a 6.9 month supply. In Dec rates increased and may have contributed to better sales as buyers made their moves before rates moved even higher. The initial reaction to the report added more selling in the treasury markets, mortgage prices slipped a little so far but not as much as the 10 yr note fell on the report.

At 1:00 Treasury auction $35B of 5 yr notes, the second of three auctions this week raising $99B. Yesterday the 2 yr auction was not met with very strong demand.

At 2:15 the FOMC meeting will conclude with the short policy statement. The Fed will not increase interest rates, will sound supportive on the economy, say it wants inflation levels a little higher. Essentially about the same as the statement after the Dec 15th meeting.

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Mortgage Rates

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.


Tuesday, January 25, 2011


Treasuries and mortgage markets opened better this morning on lower US stock indexes following very weak British Q4 GDP report this morning. Britain’s gross domestic product sank 0.5% in the three months through December after increasing 0.7% in the previous quarter. Economists had predicted 0.5% growth in the U.K.’s GDP. By 9:45 however all the early gains in mortgage markets were gone and the bellwether 10 yr after being up 12/32 early was +5/32.

The Nov S&P/Case-Shiller index of home values in 20 U.S. cities fell 1.6% from November 2009, the biggest 12-month decrease since December 2009. Home values fell 0.4% for the 10 largest markets.

Treasury starts the week's borrowing this afternoon with $35B of 2 yr notes; should see good demand but recent auctions have been spotty with some issues seeing strong bidding while others don't do so well. Two weeks ago Treasury auctioned a 3 yr note that was not well bid. Tomorrow $35B of 5 yr notes and Thursday $29B of 7 yr notes.

The Fed begins two days of the FOMC meeting today, nothing today but at 2:15 tomorrow the policy statement will be released to fanfare and potential trepidation. The Fed is highly unlikely to alter its $600B purchases of treasuries even though business lending is increasing and the economic outlook appears stronger. Recent Treasury auctions amount to a little over $200B a month, the Fed is buying about half that amount in seasoned notes lessening the supply a little and adding some support for longer term rates.

The Johnson Redbook chain store sales increased 2.3% for the week ended 1/22 versus the same week a year ago. Yr/yr chain store sales increased 2.5% (Jan 2011/Jan 2010). Month to month sales however declined 0.7% in Jan compared to last month (Dec).

The Jan Conference Board's consumer confidence index, expected at 54.4 frm 53 (revised frm 52.5).5 in Dec, increased to 60.6. The expectations index also climbed, to 80.3 frm 72.3. The huge increase in confidence is the highest reading since last May. The reaction took mortgage prices lower and the 10 yr back to unchanged from +4/32 prior to the report. Also at 10:00 the FHFA housing price index was unchanged from Oct which was up 0.7%.

Gold and crude oil continue their fall this morning; gold is off about $80.00 frm its recent highs over the past couple of weeks, now at a two month low. Crude oil, widely expected to increase to $100.00 this spring, hit $91.00 levels recently but has been sliding recently, this morning early crude was off another $1.00 at $87.00 (see below for 10:00 levels for gold and crude).

The DJIA opened -21, the 10 yr note at 9:30 +8/32 3.37% -4 bp and mortgage prices +3/32 (.09 bp). The infamous 10 yr note still confined to its six week cage between 3.50% and 3.25%, nothing seems to shake it, a traders delight; no directional trend. Traders moving the note in its range and doing quite well with not much risk; buy 10 yr note futures when the yield hits above 4.45%, sell at 3.28%.

The 10:00 data (consumer confidence) took everything out of the early gains; lenders that priced prior to 9:30 this morning may already be setting up for re-pricing lower. At 9:30 mortgage prices were +3/32 (.09 bp) and 10:05 -5/32 (.15 bp) a drop of 8/32 (.25 bp).

Mortgage Rates

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

Building Strong, Lasting Relationships; One Client at a Time.

Tuesday, January 25, 2011

Treasuries and mortgage markets opened better this morning on lower US stock indexes following very weak British Q4 GDP report this morning.  Britain’s gross domestic product sank 0.5% in the three months through December after increasing 0.7% in the previous quarter. Economists had predicted 0.5% growth in the U.K.’s GDP. By 9:45 however all the early gains in mortgage markets were gone and the bellwether 10 yr after being up 12/32 early was +5/32.

The Nov S&P/Case-Shiller index of home values in 20 U.S. cities fell 1.6% from November 2009, the biggest 12-month decrease since December 2009. Home values fell 0.4% for the 10 largest markets.

Treasury starts the week's borrowing this afternoon with $35B of 2 yr notes; should see good demand but recent auctions have been spotty with some issues seeing strong bidding while others don't do so well. Two weeks ago Treasury auctioned a 3 yr note that was not well bid. Tomorrow $35B of 5 yr notes and Thursday $29B of 7 yr notes.

The Fed begins two days of the FOMC meeting today, nothing today but at 2:15 tomorrow the policy statement will be released to fanfare and potential trepidation. The Fed is highly unlikely to alter its $600B purchases of treasuries even though business lending is increasing and the economic outlook appears stronger. Recent Treasury auctions amount to a little over $200B a month, the Fed is buying about half that amount in seasoned notes lessening the supply a little and adding some support for longer term rates.

The Johnson Redbook chain store sales increased 2.3% for the week ended 1/22 versus the same week a year ago. Yr/yr chain store sales increased 2.5% (Jan 2011/Jan 2010). Month to month sales however declined 0.7% in Jan compared to last month (Dec).

The Jan Conference Board's consumer confidence index, expected at 54.4 frm 53 (revised frm 52.5).5 in Dec, increased to 60.6. The expectations index also climbed, to 80.3 frm 72.3. The huge increase in confidence is the highest reading since last May. The reaction took mortgage prices lower and the 10 yr back to unchanged from +4/32 prior to the report. Also at 10:00 the FHFA housing price index was unchanged from Oct which was up 0.7%. 

Gold and crude oil continue their fall this morning; gold is off about $80.00 frm its recent highs over the past couple of weeks, now at a two month low. Crude oil, widely expected to increase to $100.00 this spring, hit $91.00 levels recently but has been sliding recently, this morning early crude was off another $1.00 at $87.00 (see below for 10:00 levels for gold and crude).

The DJIA opened -21, the 10 yr note at 9:30 +8/32 3.37% -4 bp and mortgage prices +3/32 (.09 bp). The infamous 10 yr note still confined to its six week cage between 3.50% and 3.25%, nothing seems to shake it, a traders delight; no directional trend. Traders moving the note in its range and doing quite well with not much risk; buy 10 yr note futures when the yield hits above 4.45%, sell at 3.28%.

The 10:00 data (consumer confidence) took everything out of the early gains; lenders that priced prior to 9:30 this morning may already be setting up for re-pricing lower. At 9:30 mortgage prices were +3/32 (.09 bp) and 10:05 -5/32 (.15 bp) a drop of 8/32 (.25 bp).

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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, January 24, 2011


The bond and mortgage markets started rather quietly this morning, stock indexes slightly better early but mostly unchanged. There are no economic data points to think about today. This week markets will contend with Treasury auctions and the FOMC meeting on Wednesday. Economic reports include two measures of consumer attitudes, new home sales for Dec and Q4 GDP advance look.

Treasuries and mortgage markets continue to trade in their narrow ranges that is now going on five weeks with interest rates contained in a 25 bp range for the 10 yr note and 15 bp for 30 yr mortgages. Investors still holding bonds, not yet willing to believe completely that the economy will improve as much as most now believe and not being influenced by all the talk about inflation. How much longer interest rates can stay at these low levels depends on economic reports for Jan, most we won't see until Feb when the key points are reported. While recent trading has been well defined, the outlook is for rates to move up as the year moves on.

This week the FOMC meeting with its short policy statement in Wednesday afternoon, The State of the Union address on Tuesday eve, and Treasury auctions are the critical elements. On Friday the first report on Q4 GDP is expected to show growth increase of 3.7%, up frm +2.6% in Q3.

At 9:30 the DJIA opened unchanged, NASDAQ +5 and S&P 500 unch; mortgage prices +1/32 (.03 bp) and the 10 yr note +2/32 at 3.40% -1 bp.

This Week's Economic Calendar:
Tuesday;
9:00 am Case/Shiller home price index for Nov (-1.5%)
10:00 am Conference Board's consumer confidence index (54.2 frm 52.5)
FHFA Nov housing price index (N/A)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
10:00 am Dec new home sales (+3.4% to 300K annualized)
1:00 pm $35B 5 yr note auction
2:15 FOMC policy statement (no change in interest rates)
Thursday;
8:30 am weekly jobless claims (+6K to 410K, con't claims 3.835 mil frm 3.861 mil)
Dec durable goods orders (+1.5%, ex transportation orders +0.6%)
10:00 am Nov pending home sales (-0.5%)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am Q4 advance GDP (+3.5%)
Q4 employment cost index (+0.4%)
9:55 am U. of Michigan consumer sentiment index (73.2 frm 72.7)

President Barack Obama said in a video to supporters that tomorrow’s State of the Union address will focus on cutting the deficit, reducing unemployment and ensuring the U.S. can compete with economic rivals. “My principal focus, my number one focus, is going be making sure that we are competitive, that we are growing, and we are creating jobs not just now but well into the future,” Obama said in a video released over the weekend.
Inflation worries appear to be lessening; Goldman/Sachs successfully sold 20 yr bonds on Friday with good demand. Economists are lowering forecasts for consumer price rises next year, with the median estimate declining to 1.9% this month from 2% in December, according to a Bloomberg survey. The record $13B auction of 10-year Treasury Inflation-Protected Securities last Thursday attracted lower-than- average demand and the difference between yields on 10-year notes and TIPS narrowed the most since May. Businesses are not likely to have much pricing power, consumers will likely not spend as much on discretionary purchases with food and energy prices expected to continue increasing, keeping price pressures low and business earnings subdued.

This year we will experience 4 unusual dates 1/1/11, 1/11/11, 11/1/11, and 11/11/11. Now figure this out; Take the last 2 digits of the year you were born plus the age you Will be this year, and IT WILL EQUAL 111. Very Strange...
________________________________________

Mortgage Rates

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

Building Strong, Lasting Relationships; One Client at a Time.

Monday, January 24, 2011

The bond and mortgage markets started rather quietly this morning, stock indexes slightly better early but mostly unchanged. There are no economic data points to think about today. This week markets will contend with Treasury auctions and the FOMC meeting on Wednesday. Economic reports include two measures of consumer attitudes, new home sales for Dec and Q4 GDP advance look.

Treasuries and mortgage markets continue to trade in their narrow ranges that is now going on five weeks with interest rates contained in a 25 bp range for the 10 yr note and 15 bp for 30 yr mortgages. Investors still holding bonds, not yet willing to believe completely that the economy will improve as much as most now believe and not being influenced by all the talk about inflation. How much longer interest rates can stay at these low levels depends on economic reports for Jan, most we won't see until Feb when the key points are reported. While recent trading has been well defined, the outlook is for rates to move up as the year moves on.

This week the FOMC meeting with its short policy statement in Wednesday afternoon, The State of the Union address on Tuesday eve, and Treasury auctions are the critical elements. On Friday the first report on Q4 GDP is expected to show growth increase of 3.7%, up frm +2.6% in Q3.

At 9:30 the DJIA opened unchanged, NASDAQ +5 and S&P 500 unch; mortgage prices +1/32 (.03 bp) and the 10 yr note +2/32 at 3.40% -1 bp.

This Week's Economic Calendar:
          Tuesday;
              9:00 am Case/Shiller home price index for Nov (-1.5%)
             10:00 am Conference Board's consumer confidence index (54.2 frm 52.5)
                            FHFA Nov housing price index (N/A)
              1:00 pm $35B 2 yr note auction
         Wednesday;
              7:00 am weekly MBA mortgage applications
              10:00 am Dec new home sales (+3.4% to 300K annualized)
              1:00 pm $35B 5 yr note auction
              2:15 FOMC policy statement (no change in interest rates)
        Thursday;
              8:30 am weekly jobless claims (+6K to 410K, con't claims 3.835 mil frm 3.861 mil)
                           Dec durable goods orders (+1.5%, ex transportation orders +0.6%)
              10:00 am Nov pending home sales (-0.5%)
              1:00 pm $29B 7 yr note auction
        Friday;
              8:30 am Q4 advance GDP (+3.5%)
                           Q4 employment cost index (+0.4%)
              9:55 am U. of Michigan consumer sentiment index (73.2 frm 72.7)

President Barack Obama said in a video to supporters that tomorrow’s State of the Union address will focus on cutting the deficit, reducing unemployment and ensuring the U.S. can compete with economic rivals. “My principal focus, my number one focus, is going be making sure that we are competitive, that we are growing, and we are creating jobs not just now but well into the future,” Obama said in a video released over the weekend.
Inflation worries appear to be lessening; Goldman/Sachs successfully sold 20 yr bonds on Friday with good demand. Economists are lowering forecasts for consumer price rises next year, with the median estimate declining to 1.9% this month from 2% in December, according to a Bloomberg survey. The record $13B auction of 10-year Treasury Inflation-Protected Securities last Thursday attracted lower-than- average demand and the difference between yields on 10-year notes and TIPS narrowed the most since May. Businesses are not likely to have much pricing power, consumers will likely not spend as much on discretionary purchases with food and energy prices expected to continue increasing, keeping price pressures low and business earnings subdued.

This year we will experience 4 unusual dates 1/1/11, 1/11/11, 11/1/11, and 11/11/11. Now figure this out; Take the last 2 digits of the year you were born plus the age you Will be this year, and IT WILL EQUAL 111. Very Strange...
________________________________________

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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, January 21, 2011


Treasuries and mortgages opened a little better this morning after rates increased yesterday on strong economic data in housing, weekly jobless claims and the Philly Fed business data. The benchmark 10 yr note yield increased to 3.45% close to 3.50% level that has supported long term rates for 25 trading sessions, mortgage prices fell and their rate increased but also still in their trading range.

There is nothing on the schedule today, no data and no Fed speakers now until after the FOMC meeting next Wednesday. The bond market will likely take direction from how equity markets perform today. In early pre-market trade the key stock indexes were pointing to a better open at 9:30. With the indexes improving at 9:15 this morning the rate markets, after opening better were losing momentum. At 8:30 mtgs +.25 bp, at 9:15 -.03 bp; the 10 yr note at 8:30 up 10/32 at 9:13 +3/32 at 3.44% -1 bp.

US stock market is opening better this morning following Europe's markets higher. The euro currency is strong against the dollar this morning on News out of Germany; he Ifo Institute’s business climate index, based on a survey of 7,000 German executives, was 110.3 in January, up from the 109.9 median of 41 forecasts in a Bloomberg News survey. That’s the highest since records for a reunified Germany began in 1991.

I realize we speak of the 10 yr trading range almost everyday, but it is important especially now where the 10 yr is trading this morning and what lies ahead next week. With the 10 yr at 3.45% at 9:30, the stock market strong on the open and next week's Treasury borrowing and the FOMC meeting, the 10 today may make a move to test its high yield at 3.50% that has held the rate increases in check since mid-Dec. Technicians are well aware of the easily noted range, a break above 3.50% would likely add more selling and push the rate up to 3.55% the reactionary high of a few weeks ago that was immediately rejected.

At 9:30 the DJIA opened +50, the 10 yr note -1/32 at 3.46% and mortgage prices -4/32 (.12 bp).

With interest rate markets close to their key support levels this morning today's trading needs close attention. Its early, but so far so good, the 10 is still holding its range as is the mortgage market-----but it is early. Hard to handicap today with nothing in the way of news or data to think about.

Mortgage Rates

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, January 21, 2011


Treasuries and mortgages opened a little better this morning after rates increased yesterday on strong economic data in housing, weekly jobless claims and the Philly Fed business data. The benchmark 10 yr note yield increased to 3.45% close to 3.50% level that has supported long term rates for 25 trading sessions, mortgage prices fell and their rate increased but also still in their trading range.

There is nothing on the schedule today, no data and no Fed speakers now until after the FOMC meeting next Wednesday. The bond market will likely take direction from how equity markets perform today. In early pre-market trade the key stock indexes were pointing to a better open at 9:30. With the indexes improving at 9:15 this morning the rate markets, after opening better were losing momentum. At 8:30 mtgs +.25 bp, at 9:15 -.03 bp; the 10 yr note at 8:30 up 10/32 at 9:13 +3/32 at 3.44% -1 bp.

US stock market is opening better this morning following Europe's markets higher. The euro currency is strong against the dollar this morning on News out of Germany; he Ifo Institute’s business climate index, based on a survey of 7,000 German executives, was 110.3 in January, up from the 109.9 median of 41 forecasts in a Bloomberg News survey. That’s the highest since records for a reunified Germany began in 1991.

I realize we speak of the 10 yr trading range almost everyday, but it is important especially now where the 10 yr is trading this morning and what lies ahead next week. With the 10 yr at 3.45% at 9:30, the stock market strong on the open and next week's Treasury borrowing and the FOMC meeting, the 10 today may make a move to test its high yield at 3.50% that has held the rate increases in check since mid-Dec. Technicians are well aware of the easily noted range, a break above 3.50% would likely add more selling and push the rate up to 3.55% the reactionary high of a few weeks ago that was immediately rejected.

At 9:30 the DJIA opened +50, the 10 yr note -1/32 at 3.46% and mortgage prices -4/32 (.12 bp).

With interest rate markets close to their key support levels this morning today's trading needs close attention. Its early, but so far so good, the 10 is still holding its range as is the mortgage market-----but it is early. Hard to handicap today with nothing in the way of news or data to think about.

Mortgage Rates

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, January 21, 2011


Treasuries and mortgages opened a little better this morning after rates increased yesterday on strong economic data in housing, weekly jobless claims and the Philly Fed business data. The benchmark 10 yr note yield increased to 3.45% close to 3.50% level that has supported long term rates for 25 trading sessions, mortgage prices fell and their rate increased but also still in their trading range.

There is nothing on the schedule today, no data and no Fed speakers now until after the FOMC meeting next Wednesday. The bond market will likely take direction from how equity markets perform today. In early pre-market trade the key stock indexes were pointing to a better open at 9:30. With the indexes improving at 9:15 this morning the rate markets, after opening better were losing momentum. At 8:30 mtgs +.25 bp, at 9:15 -.03 bp; the 10 yr note at 8:30 up 10/32 at 9:13 +3/32 at 3.44% -1 bp.

US stock market is opening better this morning following Europe's markets higher. The euro currency is strong against the dollar this morning on News out of Germany; he Ifo Institute’s business climate index, based on a survey of 7,000 German executives, was 110.3 in January, up from the 109.9 median of 41 forecasts in a Bloomberg News survey. That’s the highest since records for a reunified Germany began in 1991.

I realize we speak of the 10 yr trading range almost everyday, but it is important especially now where the 10 yr is trading this morning and what lies ahead next week. With the 10 yr at 3.45% at 9:30, the stock market strong on the open and next week's Treasury borrowing and the FOMC meeting, the 10 today may make a move to test its high yield at 3.50% that has held the rate increases in check since mid-Dec. Technicians are well aware of the easily noted range, a break above 3.50% would likely add more selling and push the rate up to 3.55% the reactionary high of a few weeks ago that was immediately rejected.

At 9:30 the DJIA opened +50, the 10 yr note -1/32 at 3.46% and mortgage prices -4/32 (.12 bp).

With interest rate markets close to their key support levels this morning today's trading needs close attention. Its early, but so far so good, the 10 is still holding its range as is the mortgage market-----but it is early. Hard to handicap today with nothing in the way of news or data to think about.

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Anthony Hood
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Email: tony@equityinvestmentcapital.com
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Thursday, January 20, 2011


Not a good start in the bond and mortgage markets early this morning; weekly jobless claims at 8:30 were expected to have declined 20K last week, as reported claims fell 37K to 404K filings. Last week claims were revised from 445K to 441K; continuing claims continue to decline, 3.86 mil last week from 3.887 mil the previous week. The 4 week average declined to 411,750 frm 415,750. Unemployment claims are declining furthering the optimistic outlook for this year, still a long way to go but looks like we are on the right track. The reaction drove mortgage prices down .34 bp on mortgages and -16/32 to 3.40% +6 bp on the 10 yr treasury.

Keeping pace; at 9:15 30 yr mtg prices -9/32 (.28 bp) frm the close yesterday. The 10 yr note -13/32 at 3.39% +5 bp. At 9:30 mtgs -11/32 (.34 bp) and -2/32 (.06 bp) frm 9:30 yesterday. The 10 yr at 9:30 -15/32 3.39% +5 bp; the DJIA opened -30.

More data; at 10:00 Dec existing home sales, expected up 4.1% (earlier this week the forecast was an increase of 2.5%), jumped 12.3% to 5.28 mil units annualized, the best sales report in months.

Dec leading economic indicators, expected +0.6%, increased 1.0%.

Finally today and for the remainder of the week, the last data point. The Jan Philadelphia Fed business index was expected at 20.5 was 19.3; new orders component 23.6 frm 10.6, employment component 17.6 frm 4.3 in Dec and prices pd increased to 54.3 frm 47.9.

The four economic reports this morning were all better than forecasts and is fueling more selling in the rate markets after the 10:00 data. The 10 yr note creeping up to 3.41% at 10:07 with mortgage prices -11/32 (.34 bp) about where mortgages traded at 9:30. The stock market didn't rally much on the data, the DJIA made an attempt to get back to unchanged but failed, the DJIA at 10:07 -22.

At 1:00 Treasury will auction $13B of 10 yr inflation indexed notes; normally TIPs auctions don't generate any significant movement in the market.

Every time the interest rate rally to resistance levels buying dries up, the 10 yr note this morning is reeling over the better economic data and momentary fears of inflation increases. There is no way the rate markets will give up inflation fears with rates at these historic lows. The bearish technicals cannot be shaken, although interest rates have been stable for the past few weeks the direction remains up for rates as long as the economic data continues to confirm the optimistic outlook for 2011 growth.

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Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com



Building Strong, Lasting Relationships; One Client at a Time.

Tuesday, January 18, 2011


After the three day week-end treasuries opened better this morning, at 8:45 the 10 yr note back testing its five week resistance levels at 3.29% with mortgages off .06 bp from Friday's close. At 8:30 the Fed's NY Empire State manufacturing index, expected at 12.0 was almost right on at 11.92 frm 9.89 in Dec; the new orders component increased to 12.39 frm 2.03, employment index at 8.42 frm -3.41 and prices pd index at 35.79 frm 28.11 (any index over zero is considered expansion, under zero contraction). Overall it didn't garner any interest among traders in rate or equity markets.

The Jan NAHB housing market index at 10:00 was expected unchanged at 16, it came at 16, the third month in a row it has been at 16---a very weak reading.

Once again, right on queue, early trade this morning had the 10 yr note +11/32 at 3.39% and mortgage prices +4/32 (.12 bp). By 9:30 the 10 yr unable to break the wall of resistance at 3.28%-3.25% rate flipped; the 10 yr -10/32 at 3.37% and mortgage prices -14/32 (.44 bp). Any pricing from lenders prior to 9:30 is likely to be re-priced. The DJIA opened +13; the stock market being impacted some early on new Steve Jobs will take a leave due to his health.

A four day work week with not much data, what there is is mainly on the housing sector.
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Dec housing starts (-1.0%)
Dec building permits (+4.4%)
Thursday;
8:30 weekly jobless claims (-20K to 425K, con't claims 3.90 mil frm 3.879 mil)
10:00 am Dec existing home sales (+2.5%)
Dec leading economic indicators (+0.6%)
Jan Philadelphia Fed business index (20.5 frm 20.8, revised from 24.3 originally released last month)

Are you watching Barney and Chris? Pres Obama has ordered a complete review of all regulations to remove or overhaul those that inhibit economic expansion without helping consumers, advancing his outreach to the business community. Obama wrote in an opinion piece in the Wall Street Journal today that he’s mandating “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.” He said the initiative is part of an executive order he will sign today codifying a “balanced” approach to regulation. “This order requires that federal agencies ensure that regulations protect our safety, health, and environment while promoting economic growth,” Obama wrote. “We are seeking more affordable, less intrusive means to achieve the same ends.” Since the big recession ended the last Congress led by Barney Frank and Chris Dodd went wild with new regulations, many added in a mood of panic and ignorance, with little understanding about consequences. The President is moving away from big government, realizing that citizens have had a gut full of Washington, we say hooray. Not a watershed but a step in the right direction.

We call your attention to the charts; the 10 yr yield chart clearly shows that every time the yield falls to 3.29%-3.25% any buying dries up and traders are free to sell. On the MBS FNMA 30 yr chart the technicals are better than the treasury note but won't improve much as long as the 10 yr fails at resistance. The MBS is holding its 20 day average but failing when the price moves to the 40 day average; the two averages are converging, something has to give.

So far this morning the interest rate markets have demonstrated high volatility; the 10 yr yield spiked up 8 basis points in fifteen minutes between 9:10 and 9:20, mortgage prices fell 14/32 (.44 bp) in the same timeframe. Some rebound at 9:35 but still weaker than the opens this morning.

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Daily Rate Lock Advisory

This week brings us the release of only three pieces of economic data to digest, but none of them are considered to be highly important to the markets or mortgage rates. It is a shortened trading week with the stock and bond markets closed tomorrow in observance of the Martin Luther King Jr. holiday. The financial and mortgage markets will reopen Tuesday morning for regular trading hours. Accordingly, there will be no update to this report tomorrow morning.

Wednesday’s release of December's Housing Starts will be the first report of the week. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don’t see it causing much movement in mortgage rates Wednesday.

Thursday has the remaining two monthly reports- December’s Existing Home Sales and Leading Economic Indicators (LEI) reports. Both will be released at 10:00 AM ET and considered moderately important to mortgage rates. The National Association of Realtors will give us the housing report, which tracks home resales in the U.S. It is expected to show an increase in home sales last month, meaning that the housing sector strengthened. Ideally, the bond market would prefer to see a decline in sales, but a small increase should not negatively affect mortgage rates Thursday.

The LEI attempts to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting the Conference Board to post a 0.6% increase, meaning that economic growth over the next few months will likely rise. Generally speaking, this would be bad news for the bond market because a strengthening economy makes long-term securities such as mortgage bonds less attractive to investors. However, a smaller than expected increa se would be taken as fairly good news for the bond market and mortgage rates, but a larger than expected rise could lead to bond selling and a minor increase to mortgage pricing Thursday.

Overall, Tuesday or Friday will probably be the least active days for mortgage rates with nothing of relevance scheduled in a pretty light week. Look for the stock markets to be the biggest influence on bond trading and mortgage pricing those days. The most important day will likely turn out to be Thursday with the two monthly reports scheduled (in addition to weekly unemployment figures). But, I don’t see rates moving significantly any day unless something unexpected happens in the markets. Accordingly, I am holding the optimistic approach towards floating an interest rate, at least for the time being.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place bet ween 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.

Daily Rate Lock Advisory

Daily Rate Lock Advisory

This week brings us the release of only three pieces of economic data to digest, but none of them are considered to be highly important to the markets or mortgage rates. It is a shortened trading week with the stock and bond markets closed tomorrow in observance of the Martin Luther King Jr. holiday. The financial and mortgage markets will reopen Tuesday morning for regular trading hours. Accordingly, there will be no update to this report tomorrow morning.

Wednesday’s release of December's Housing Starts will be the first report of the week. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don’t see it causing much movement in mortgage rates Wednesday.

Thursday has the remaining two monthly reports- December’s Existing Home Sales and Leading Economic Indicators (LEI) reports. Both will be released at 10:00 AM ET and considered moderately important to mortgage rates. The National Association of Realtors will give us the housing report, which tracks home resales in the U.S. It is expected to show an increase in home sales last month, meaning that the housing sector strengthened. Ideally, the bond market would prefer to see a decline in sales, but a small increase should not negatively affect mortgage rates Thursday.

The LEI attempts to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting the Conference Board to post a 0.6% increase, meaning that economic growth over the next few months will likely rise. Generally speaking, this would be bad news for the bond market because a strengthening economy makes long-term securities such as mortgage bonds less attractive to investors. However, a smaller than expected increa se would be taken as fairly good news for the bond market and mortgage rates, but a larger than expected rise could lead to bond selling and a minor increase to mortgage pricing Thursday.

Overall, Tuesday or Friday will probably be the least active days for mortgage rates with nothing of relevance scheduled in a pretty light week. Look for the stock markets to be the biggest influence on bond trading and mortgage pricing those days. The most important day will likely turn out to be Thursday with the two monthly reports scheduled (in addition to weekly unemployment figures). But, I don’t see rates moving significantly any day unless something unexpected happens in the markets. Accordingly, I am holding the optimistic approach towards floating an interest rate, at least for the time being.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place bet ween 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.

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Mortgage Rate Update


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, January 14, 2011


Prior to 8:30 the rate markets were lower in price; the 10 yr -6/32 and mortgage prices -5/32 (.15 bp). At 8:30 two very key data points pushed prices and rates back to unchanged briefly. Dec retail sales were weaker than expected, up 0.6% against +0.7% thought, ex auto sales up 0.5% with forecasts of +0.6%, ex autos and gasoline +0.4%. One of the keys to the optimistic outlook for this year is consumer spending that is expected to increase; the Dec sales while not bad were not as strong as thought and leads to concerns that Jan won't be strong either. We have noted in previous comments that we are withholding our judgment on 2011 until we see how consumers are doing in Jan after the Christmas shopping.

Also at 8:30 Dec consumer price index, expected up 0.4% increased to 0.5%, ex food and energy up 0.1% in line with estimates. The headline CPI was the highest since June 2009. yr/yr CPI +1.5%, ex food and energy +0.8%. Inflation so far remains subdued but markets will still worry over it.

More data at 9:15. Dec industrial production expected +0.5% jumped 0.8%. Capacity utilization in Dec was expected at 75.6%, it increased to 76.0% the highest factory use since Aug 2008. Nov use was revised from 75.2% to 75.4%. Prior to the two reports the 10 yr note was yielding 3.29% and mortgage prices were up .12 bp. Rate markets moved slightly better on the initial reaction, a little surprising given that both were better than estimates. At 9:20 the 10 yr yield at 3.276% and mortgage prices +.15 bp.

At 9:55 the U. of Michigan consumer sentiment index, expected at 75.0 frm 74.5, was lower at 72.7---very disappointing. The current conditions index fell to 79.8 frm 85.3 at the end of Dec; the 12 month outlook however jumped to 87 frm 79. The initial reaction lent support to the bond and mortgage markets.

Finally, at 10:00 Nov business inventories, expected +0.7%, came at +0.2%. Sales were up 1.2% with a 1.25 month supply from 1.27 months in Oct.

The two reports at 9:55 and 10:00 added more buying in treasuries and mortgages sending the 10 yr note to the very critical 3.25%/3.26% level and mortgage prices +25 bp on the day slightly better than at 9:30.

European stocks retreated for a second day, led by a selloff in commodity producers, after China moved to cool its overheating economy. Asian shares and U.S. index futures fell. Inflation in Germany, Europe’s largest economy, accelerated to the fastest pace in more than two years in December, data from the Federal Statistics Office in Wiesbaden showed today. European Central Bank council member Axel Weber said the economic outlook in the euro area has improved markedly and inflation risks “could well move to the upside.” (Bloomberg News)
Crude oil and gold are trading lower this morning on China's moves to cool their economy raising their bank reserves; the declines helping the interest rate markets.
Markets today will have to consider that US markets will be closed on Monday (MLK). Generally major moves are unlikely with a holiday that closes our markets.
The bellwether 10 yr note is now traded at its key five week resistance level at 3.26%, the lowest rate we have had since 12/20 when the note fell to 3.25% but closed at 3.35%. T As we have said, a close below 3.25% for the note will likely set up a nice improvement in mortgage rates. There is still a lot of trading left today, as noted in the hold/lock advise, today and Tuesday will be critical from a technical perspective.

Mortgage Rates

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, January 14, 2011



Prior to 8:30 the rate markets were lower in price; the 10 yr -6/32 and mortgage prices -5/32 (.15 bp). At 8:30 two very key data points pushed prices and rates back to unchanged briefly. Dec retail sales were weaker than expected, up 0.6% against +0.7% thought, ex auto sales up 0.5% with forecasts of +0.6%, ex autos and gasoline +0.4%. One of the keys to the optimistic outlook for this year is consumer spending that is expected to increase; the Dec sales while not bad were not as strong as thought and leads to concerns that Jan won't be strong either. We have noted in previous comments that we are withholding our judgment on 2011 until we see how consumers are doing in Jan after the Christmas shopping.

Also at 8:30 Dec consumer price index, expected up 0.4% increased to 0.5%, ex food and energy up 0.1% in line with estimates. The headline CPI was the highest since June 2009. yr/yr CPI +1.5%, ex food and energy +0.8%. Inflation so far remains subdued but markets will still worry over it.

More data at 9:15. Dec industrial production expected +0.5% jumped 0.8%. Capacity utilization in Dec was expected at 75.6%, it increased to 76.0% the highest factory use since Aug 2008. Nov use was revised from 75.2% to 75.4%. Prior to the two reports the 10 yr note was yielding 3.29% and mortgage prices were up .12 bp. Rate markets moved slightly better on the initial reaction, a little surprising given that both were better than estimates. At 9:20 the 10 yr yield at 3.276% and mortgage prices +.15 bp.

At 9:55 the U. of Michigan consumer sentiment index, expected at 75.0 frm 74.5, was lower at 72.7---very disappointing. The current conditions index fell to 79.8 frm 85.3 at the end of Dec; the 12 month outlook however jumped to 87 frm 79. The initial reaction lent support to the bond and mortgage markets.

Finally, at 10:00 Nov business inventories, expected +0.7%, came at +0.2%. Sales were up 1.2% with a 1.25 month supply from 1.27 months in Oct.

The two reports at 9:55 and 10:00 added more buying in treasuries and mortgages sending the 10 yr note to the very critical 3.25%/3.26% level and mortgage prices +25 bp on the day slightly better than at 9:30.

European stocks retreated for a second day, led by a selloff in commodity producers, after China moved to cool its overheating economy. Asian shares and U.S. index futures fell. Inflation in Germany, Europe’s largest economy, accelerated to the fastest pace in more than two years in December, data from the Federal Statistics Office in Wiesbaden showed today. European Central Bank council member Axel Weber said the economic outlook in the euro area has improved markedly and inflation risks “could well move to the upside.” (Bloomberg News)
Crude oil and gold are trading lower this morning on China's moves to cool their economy raising their bank reserves; the declines helping the interest rate markets.
Markets today will have to consider that US markets will be closed on Monday (MLK). Generally major moves are unlikely with a holiday that closes our markets.
The bellwether 10 yr note is now traded at its key five week resistance level at 3.26%, the lowest rate we have had since 12/20 when the note fell to 3.25% but closed at 3.35%. T As we have said, a close below 3.25% for the note will likely set up a nice improvement in mortgage rates. There is still a lot of trading left today, as noted in the hold/lock advise, today and Tuesday will be critical from a technical perspective.

Mortgage Rate Update!! Improvement!
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Mortgage Rates

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, January 13, 2011


Markets got three data points at 8:30 this morning. Weekly jobless claims were expected to have declined 4K, claims increased 35K to 445K the largest increase in 6 months and back over the pivotal 400K level. After three weeks of declining claims reality is back, the holiday shortened week likely caused the recent declines. Continuing claims however are continuing to decline as unemployment insurance runs out; continuing claims fell to 3.879 mil frm 4.127 mil last week. Dec PPI jumped 1.1% against forecasts of an increase of 0.8%; excluding food and energy components up 0.2% in line with estimates. The Nov trade deficit was slightly better than expected at -$38.3B with estimates at -$41.2B. Businesses are benefiting from growing demand abroad and a lower dollar that is making American goods more competitive, propelling a factory-led economic recovery. The gain in exports exceeded an increase in imports that mainly reflected a price-driven surge in purchases of crude oil.

The market reaction to the data didn't move markets; at 9:00 the 10 yr note unchanged and mortgage prices also generally unchanged. Stock indexes in futures markets were lower, the DJIA at 9:00 down 16 points. Overall not much initial reaction to the data this morning. Mortgage prices held slight improvements at 9:15 while the 10 yr treasury note hovered close to unchanged. Mortgage markets from a technical perspective are performing better than the bellwether 10 yr note over the last three sessions, nevertheless still with little directional changes recently.

The ECB met and left its benchmark rate unchanged at 1.0%. ECB's Trichet said inflation pressures in the euro region have picked up, while signaling that policy makers have no immediate plans to raise interest rates. The euro currency is strengthening against the dollar on renewed belief that when Europe's finance ministers meet next week they may increase the size of aid reserves and lower rates on bailout loans. Yesterday Spain sold notes with strong demand, about a 2.1 bid/cover ratio; the rate was higher than in their Nov sale however.

At 1:00 this afternoon Treasury will auction $13B of 30 yr bonds, yesterday's 10 yr note auction was a good one.

The stock market opened at 9:30 with the DJIA off 13 points, the 10 yr note -2/32 and mortgages unchanged (+0.03 bp).

Bernanke is scheduled to speak at 1:00 at the FDIC on small business lending, likely nothing that will move markets.

Estimates for 2011 consumer spending continue to be ratcheted higher; in Dec most economists were saying consumer spending this year would increase 2.6% now the consensus is at +3.0% increase. The optimism for this year is gaining momentum yet we remain unconvinced and as stated previously we want to see consumer spending data for Jan that will not be reported until next month. Food prices will increase substantially this year as will oil prices; how will consumers react to higher base spending costs?

Morgage Rate Update


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, January 12, 2011


Starting weaker today, after the 10 yr note once again fell to 3.28% on Monday yesterday selling put the yield back to 3.34%. The 10 is well defined now in a 20+ basis point range, on any rallies in the past month it finds heavy resistance at 3.28%/3.29% level (five times) and moves back up. This morning at 9:00 the 10 yr rate at 3.40%, moving back toward 3.50%. Mortgages this morning, following the 10 yr note, lower in price; down 9/32 (.28 bp). The stock index futures adding pressure in rate markets with key indexes early pointing to a strong opening at 9:30. At 9:30 the DJIA opened +60 points.

This afternoon's $21B 10 yr note auction and the stronger stock market this morning will likely keep the note and mortgages in check until the results of the auction are reported at 1:00. A good auction should support the note, a weak one will add more selling but will still keep the note and mortgages in their respective trading ranges.

Dec import prices were +1.1% about in line with estimates, non petroleum import prices up 0.4%; yr/yr import prices increased 4.8%, non petro +2.7%. Export prices were up 0.7% right on forecasts; yr/yr +6.5%, a record increase. No reaction to the data, it rarely gets much.

The weekly MBA mortgage applications index up 2.2% last week; the purchase index did decline 3.7% but re-fi index was up 4.9%. The average rate on a 30-year fixed loan dropped to 4.78% last week from 4.82% the prior week. The rate reached 4.21% in October, the lowest since the group’s records began in 1990. At the current 30-year rate, monthly payments for each $100,000 of a loan would be $523.46, or about $21 less than the same week the prior year, when the rate was 5.13%. The average rate on a 15-year fixed mortgage declined to 4.15%, from 4.23%. The rates include a 1.00% origination fee for 80% loans. The share of applicants seeking to refinance a loan rose to 72.1% last week from 71% the prior week.

The Fed's Beige Book will be released at 2:00; markets like it because of its detail but in terms of overall assessments on the economy nothing new is expected.

Later this afternoon at 2:00 Treasury will report the Dec budget balance, normally Dec has a surplus with end of yr tax payments. This Dec the budget is expected at a deficit of $80.0B. No market reaction is expected.

Mortgage Rates

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, January 12, 2011


Starting weaker today, after the 10 yr note once again fell to 3.28% on Monday yesterday selling put the yield back to 3.34%. The 10 is well defined now in a 20+ basis point range, on any rallies in the past month it finds heavy resistance at 3.28%/3.29% level (five times) and moves back up. This morning at 9:00 the 10 yr rate at 3.40%, moving back toward 3.50%. Mortgages this morning, following the 10 yr note, lower in price; down 9/32 (.28 bp). The stock index futures adding pressure in rate markets with key indexes early pointing to a strong opening at 9:30. At 9:30 the DJIA opened +60 points.

This afternoon's $21B 10 yr note auction and the stronger stock market this morning will likely keep the note and mortgages in check until the results of the auction are reported at 1:00. A good auction should support the note, a weak one will add more selling but will still keep the note and mortgages in their respective trading ranges.

Dec import prices were +1.1% about in line with estimates, non petroleum import prices up 0.4%; yr/yr import prices increased 4.8%, non petro +2.7%. Export prices were up 0.7% right on forecasts; yr/yr +6.5%, a record increase. No reaction to the data, it rarely gets much.

The weekly MBA mortgage applications index up 2.2% last week; the purchase index did decline 3.7% but re-fi index was up 4.9%. The average rate on a 30-year fixed loan dropped to 4.78% last week from 4.82% the prior week. The rate reached 4.21% in October, the lowest since the group’s records began in 1990. At the current 30-year rate, monthly payments for each $100,000 of a loan would be $523.46, or about $21 less than the same week the prior year, when the rate was 5.13%. The average rate on a 15-year fixed mortgage declined to 4.15%, from 4.23%. The rates include a 1.00% origination fee for 80% loans. The share of applicants seeking to refinance a loan rose to 72.1% last week from 71% the prior week.

The Fed's Beige Book will be released at 2:00; markets like it because of its detail but in terms of overall assessments on the economy nothing new is expected.

Later this afternoon at 2:00 Treasury will report the Dec budget balance, normally Dec has a surplus with end of yr tax payments. This Dec the budget is expected at a deficit of $80.0B. No market reaction is expected.

Mortgage Rate Update



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.


Tuesday, January 11, 2011


The rate markets started quiet and about unchanged this morning after a nice move technically yesterday for the bellwether 10 yr note. The note yield closed under its 20 day moving average and the 9 day RSI moved below 50 to 48, the first time the RSI index is below 50 (bullish) since mid-Nov, good but not good enough yet. For over a month on any improvement in its yield the 10 yr note has run into a wall at 3.28%, that occurred yesterday and this morning the 10 yr at 9:30 at 3.31%. Mortgage prices unchanged at 9:00 this morning. No direct news for the markets overnight; Japan announced it would join China in buying debt issues in Europe to assist in the sovereign debt problems that continue to plague the region.

Japan will buy bonds issued by Europe’s financial-aid funds, Finance Minister Yoshihiko Noda said in Tokyo today, joining China in signaling support for the region as Portugal, Spain and Italy prepare to sell debt this week. China’s foreign- exchange reserves jumped by a record last quarter to $2.85 trillion, the central bank said today. The announcement improved Europe's stock markets and supported US stock index futures in pre-market trading.

Somewhat of a negative this morning for the economic outlook; the National Federation of Independent Business index of sentiment of small businesses fell for the first time in six months, down 0.6%. For six months the index had been very slowly improving. According to Wm Dunkelberg, chief economist for the group small businesses are reluctant to spend and hire until they have more evidence consumers will increase spending; the view we have had and continue to have. As we have noted previously, we want to see Jan data before we commit to the current consensus that the US growth in 2011 will meet the 4.0% GDP forecast that has driven equity markets higher. The NFIB monthly report didn't hurt the stock market, the DJIA opened +57 this morning.

The only economic data today, at 10:00 Nov wholesale inventories, expected up 1.0%, were down 0.2%. Oct revised from +0.9% to +1.7%. Nov sales +1.9% with the inventory to sales ratio 1.15 months from +1.17 months in Oct. No initial reaction to the data.

At 1:00 this afternoon Treasury will auction $32B of 3 yr notes; two weeks ago the 2 yr note auction met with soft demand. Likely the bond and mortgage markets will be quiet until the auction results hit.

The Fed will be buying treasuries with matures between 2016 and 2017 today as part of the $600B QE 2, not a big deal though.

Mortgage Rates

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.


Tuesday, January 11, 2011


The rate markets started quiet and about unchanged this morning after a nice move technically yesterday for the bellwether 10 yr note. The note yield closed under its 20 day moving average and the 9 day RSI moved below 50 to 48, the first time the RSI index is below 50 (bullish) since mid-Nov, good but not good enough yet. For over a month on any improvement in its yield the 10 yr note has run into a wall at 3.28%, that occurred yesterday and this morning the 10 yr at 9:30 at 3.31%. Mortgage prices unchanged at 9:00 this morning. No direct news for the markets overnight; Japan announced it would join China in buying debt issues in Europe to assist in the sovereign debt problems that continue to plague the region.

Japan will buy bonds issued by Europe’s financial-aid funds, Finance Minister Yoshihiko Noda said in Tokyo today, joining China in signaling support for the region as Portugal, Spain and Italy prepare to sell debt this week. China’s foreign- exchange reserves jumped by a record last quarter to $2.85 trillion, the central bank said today. The announcement improved Europe's stock markets and supported US stock index futures in pre-market trading.

Somewhat of a negative this morning for the economic outlook; the National Federation of Independent Business index of sentiment of small businesses fell for the first time in six months, down 0.6%. For six months the index had been very slowly improving. According to Wm Dunkelberg, chief economist for the group small businesses are reluctant to spend and hire until they have more evidence consumers will increase spending; the view we have had and continue to have. As we have noted previously, we want to see Jan data before we commit to the current consensus that the US growth in 2011 will meet the 4.0% GDP forecast that has driven equity markets higher. The NFIB monthly report didn't hurt the stock market, the DJIA opened +57 this morning.

The only economic data today, at 10:00 Nov wholesale inventories, expected up 1.0%, were down 0.2%. Oct revised from +0.9% to +1.7%. Nov sales +1.9% with the inventory to sales ratio 1.15 months from +1.17 months in Oct. No initial reaction to the data.

At 1:00 this afternoon Treasury will auction $32B of 3 yr notes; two weeks ago the 2 yr note auction met with soft demand. Likely the bond and mortgage markets will be quiet until the auction results hit.

The Fed will be buying treasuries with matures between 2016 and 2017 today as part of the $600B QE 2, not a big deal though.

Mortgage Rates

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, January 10, 2011


Treasuries and mortgages opened a little better this morning with stock index futures trading weaker. There is no data to think about today, most of the key economic reports hit on Thursday and Friday; in the meantime the rate markets will contend with $66B of Treasury auctions beginning Tuesday. Today and tomorrow not much scheduled, in the meantime it is a waiting game and focus on the action in the equity markets that continue to discount the increasing view that the US economy will rebound nicely in 2011.

This Week's Economic Calendar:
Tuesday;
10:00 am Nov wholesale inventories (+0.9%)
1:00 pm $32B 3 yr note auction
Wednesday;
7:00 am Weekly MBA mortgage applications
8:30 Dec import and export prices
1:00 pm $21B 10 yr note auction
2:00 pm Dec Treasury budget balance (-$80.0B)
Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (+6K to 415K; con't claims 4.09 mil from 4.103 mil)
Dec producer price index (+0.8%, ex food and energy +0.2%)
Nov trade balance (-$41.2B)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am Dec consumer price index (+0.4%; ex food and energy +0.1%)
Dec retail sales (+0.7%, ex auto sales +0.6%)
9:15 am Dec industrial production (+0.4%)
Dec capacity utilization (75.5% frm 75.2%)
9:55 am Jan U. of Michigan consumer sentiment index (75.4 frm 74.5)
10:00 am Nov business inventories (+0.8%)

Concerns about potential inflation have not diminished, just pausing for the moment. That traders have turned attention to other issues like the decline in stock markets today, doesn't alter the global concerns that inflation is about to increase. Likely will get a a toe old in emerging markets first, the Europe and the US. The global economic recovery has been stronger and quicker than had been thought, particularly in emerging markets. In Europe the ECB is sounding the warning bell with commodity prices increasing and food prices escalating rapidly. IN the US we look at inflation without consideration of food and energy prices because historically those areas are considered too volatile; that was then, this is now. We believe food and energy costs are going to continue to increase and spill over to all commodities; that has already started and will continue.

The increase in food and energy prices is a two way street for the rate markets; higher food and energy will slow consumer discretionary spending lessening any chance retailers and goods producers will be able to increase prices as consumers slow spending. That however won't hold prices down much longer for other consumer goods, so far producers and retailers have not passed along increases, they simply are cutting back quantities and sizes to offset their price increases. Sooner rather than later those increases will work down the chain to consumers and will send interest rates higher. The caveat, and there always is one, if consumers don't meet current market expectations the economic outlook will weaken and if it does inflation worries will go back in the box and rates will stay historically low.

Technically the 10 yr and mortgages still have slightly bearish tones but slowly that may be changing. If the 10 yr note can clear 3.25% it will likely have a run to 3.00%. The MBS markets are in slightly better technical position but won't launch anything significant until the 10 yr makes its move. The 2011 economic outlook is improving, however skepticism still hangs over markets.

Most every global stock market traded weaker today, Europe still weak. Asian emerging markets took the biggest hits on increasing fears of inflation on exceptionally strong growth. The US equity markets opened weak and getting weaker as the day moves along. Interest rates benefiting on weaker global equities. Crude higher on the closure of the Alaska pipeline due to a leak at a pumping station.