Mortgage Rates



Interest rates this morning starting a little lower in price; at 9:00 the 10 yr note -11/32 at 1.81% +4 bp and mortgage prices -5/32 (.15 bp). Prior to 8:30 stock indexes were lower and mortgage prices about unchanged. At 8:30 April housing starts were +2.6%, slightly less than +3.8% expected but March starts were revised to -2.6% frm -5.8% originally reported; single family starts in April increased 2.3%. April building permits expected -2.3% were -7.0%, March permits were revised frm +6.8% to +8.8%.

At 9:15 April industrial production expected up 0.6% increased by 1.1%, March however was revised from unch to -0.6%. April capacity utilization was expected at 79.0%, utilization increased to 79.2 the highest level of factory use since Arp 2008. The better data added a little more support to the equity markets but not much.

The DJIA opened +32 at 9:30, the 10 yr at 9:30 -11/32 at 1.81% +4 bp and MBS prices -4/32 (.12 bp). Prior to 9:30 mortgage prices traded down 5/32 (.15 bp).

Greece has set June 17th for another election after the political parties could not agree on a coalition government after last week’s elections didn’t get any consensus. The country is facing the decision whether or not to exit the EU as the Union has set severe austerity and job cuts as requirements for additional bailout money. Citizens are increasingly unwilling to endure the serious sacrifices demanded. Yesterday the new President of France Francois Hollande met with Angela Merkel; Merkel continues to say she wants Greece to stay in the EU, but she also isn’t in favor of additional bailout funds unless the Greeks are willing to live in almost depression conditions. Opinions and bets are equally divided on what will happen in Greece; some experts are saying Greece will exit while others are believing Greece will stay. In the meantime global markets will continue to be driven on daily news out of Europe.

Treasuries are lower in price as optimism about the economic outlook damped demand for the safety of U.S. debt and as Greece named an interim government before elections to end a political impasse. A Greek caretaker government will prepare elections, probably on June 17, said Greece’s Democratic Left leader amid concern the country will abandon the euro common currency. Germany’s Finance Minister Wolfgang Schaeuble said another Greek election would be a referendum on whether the country retains the euro. “If Greece -- and this is the will of the great majority - - wants to stay in the euro, then they have to accept the conditions,” Schaeuble told reporters yesterday in Brussels.“ Otherwise it isn’t possible.”

Mortgage applications increased 9.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 11, 2012. The Refinance Index increased 13.0% from the previous week. The seasonally adjusted Purchase Index decreased 2.4% from one week earlier. The four week moving average for the seasonally adjusted Market Index is up 1.77%. The four week moving average is up 1.57% for the seasonally adjusted Purchase Index, while this average is up 1.88% for the Refinance Index. The refinance share of mortgage activity increased to 74.9% of total applications from 72.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4% from 5.7% of total applications from the previous week.

This afternoon at 2:00 the minutes from the 4/25 FOMC meeting. Markets want to focus on debate over whether the Fed will launch another QE. We continue to hold the Fed will not ease again; what would be the point? Interest rates are already low and there is little reason to expect they will increase much over the next few months. Unless the Fed can make a case that another easing will increase employment there isn’t much incentive to continue easing.