Mortgage Rates----



The elections in Europe in Greece and France over the weekend continue to be played out, and it isn’t likely to end anytime soon. The elections in the two countries is sending serious shock waves in global markets that Europe is year away from solving its debt and economic problems. Greek citizens roundly rejected the austerity plan forced on them while in France voters said enough to the idea of severe spending cuts at the expense of jobs and being aligned with Germany’s insistence for increased austerity. In short, no matter that spending cuts are necessary and understandable, people are saying enough. Europe is now in complete disarray with no plan in the face of the rejections by voters over the weekend. Not just France and Greece; governments in the Netherlands have been turned out as well as in Germany itself with a resounding defeat in one German state against Angela Merkel’s government.

Denmark’s Financial Supervisory Authority told banks in February to comply with stricter write-down standards, a requirement it said would have limited impact on loan losses as it estimated most banks already followed the revised rules. Since then, the country’s second- and third-largest listed lenders, respectively, raised their forecasts for impairments this year, citing the new regulatory standards. Greece’s Syriza party expects former finance minister who leads the Pasok party, to send a letter to the EU revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. The risk of Greece leaving the euro by the end of 2013 has risen to as high as 75 percent, Citigroup Inc. said on Monday. If Greece leaves the EU there is fear Spain will need more bail-out money as well as increased pressure from its citizens to resist austerity. Spain’s interest rates spiked today od increasing fears of defaults as voters rebel.

Europe is nowhere close to any successful plan to solve its sovereign debt problems or improving it’s economies. Europe’s economies will continue to decline and there will be defaults of sovereign debts in Greece and a number of other countries. It will be years before Europe can right itself, in the meantime the global economic outlook must be lowered in the minds of investors. Money from around the world continues to flood US treasury markets as fears of defaults and uncertainties drive US rates to new historical lows.

Adding another negative; Moody’s is about the cut the credit ratings on 100 banks following moves earlier by S&P and Fitch. Moody’s said in January it would overhaul how it rates European banks and firms with global securities operations to reflect the adverse effects of the sovereign-debt crisis, dwindling economic growth and the latest round of capital rules set by the Basel Committee on Banking Supervision. In addition to the ele3ctions and failing governments in Europe, a cut in ratings adds another element of fear for investors.

At 9:30 the DJIA opened down -108, NASDAQ -36, S&P -14; the 10 yr note 1.81% after early trade at 1.80%. Mortgage prices +3/32 (.09 bp).

At 10:00 March wholesale inventories expected +0.6% was up just 0.3%; sales up 0.5% with an inventory to sales ratio unchanged at 1.17 months.

The MBA Market Composite Index increased 1.7% on a seasonally adjusted basis from one week earlier. Increases to the seasonally adjusted Market Composite and Purchase indices were driven by increases in their Conventional components. Application activity within the Government market decreased for both of these measures from last week. Likewise, the Refinance Index increased 1.3% from the previous week, driven by a 1.8% increase to the Conventional Refinance Index, while the Government Refinance Index decreased 2.3%. The seasonally adjusted Purchase Index increased 3.4% from one week earlier, spurred by a 5.4% increase in the seasonally adjusted Conventional Purchase Index.

In the entire history of the 10 yr treasury note there have been three days when the yield was below where it is this morning; on Sept 22nd and 23rd and Oct 4th 2011. How much lower US interest rates will decline is hard to handicap; we are like fish out of water when it comes to forecasting markets in the face of the uncertainty and unprecedented crisis in Europe and the implications for the EU and Europe’s banks as well as economic concerns. Greece is cooked, they will default as we have previously indicated; the focus now is on Spain and Italy, two much larger economies but with heavy debts they can’t pay.