Mortgage Rates

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