Mortgage Rates

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. US treasuries early this morning were better, the 10 yr note yield down 4 bp to 1.74%. The decline fueled by disappointing Spanish 3 yr note auction pushing investors to seek safety in German bunds and US treasuries. German 10-year government bonds advanced for a fourth day, the longest run of gains this month. The German 10 yr declined 3 bp today to 1.59%, our 10 yr down 4 bp to 1.74% at 9:00 am. The yield on Spain’s 10-year bond increased nine basis points to 5.78%. The rate on similar-maturity Italian securities climbed 10 basis points to 5.02%. Weekly jobless claims at 8:30 were expected to have declined 9 to 10K, they were down 3K to 382K; last week’s claims were revised from 382K to 385K. the 4 wk average a smoother way to look at claims was up 2K to 375,750. Claims have been in a narrow range recently, not increasing but not declining, suggesting employers are not firing nor are they hiring. Until Congress and the Administration deal with expiration of the tax cuts and SS payroll cuts businesses are likely to sit tight; hard to plan when these issues hang over the economy. A Labor Department spokesman said there was nothing unusual in the state data last week. States and territories that reported an increase in claims as a result of Tropical Storm Isaac two weeks ago, including Louisiana and Puerto Rico, didn’t indicate the weather had any influence last week, the spokesman said as the data was released to the press. Dallas Fed President Fisher, one that is opposed to the Fed’s easing moves, speaking out yesterday. He said the central bank’s third round of bond purchases will probably fail to create jobs while risking higher inflation. “I do not see an overall argument for letting inflation rise to levels where we might scare the market,” Fisher said yesterday on Bloomberg Radio’s “The Hays Advantage”. “We have seen a sharp rise in inflation expectations. If you let this get out of hand, then I think we will have a market reaction.” Congress’s inaction on fiscal policy and excessive government regulation are holding back businesses from spending on hiring and investment, Fisher said in a Bloomberg Television interview. The Fed’s stimulus efforts, or so-called quantitative easing, won’t work because the central bank can’t address those obstacles to growth, he said. “I question the efficacy of these large-scale asset purchases,” Fisher said. “What we are doing is not having the impact on employment.” We comp[lately agree with Fisher that while the $40B a month purchases of MBSs is nice for mortgage markets but won’t create jobs over the economy. Euro-area services and manufacturing output fell to a 39-month low in September as European leaders struggled to reverse the single-currency bloc’s slide into recession. A composite index based on a survey of purchasing managers in both industries in the 17-nation euro area dropped to 45.9 from 46.3 in August, London-based Markit Economics said today in an initial estimate. A reading below 50 indicates contraction. Crude oil is trading at six week lows this morning after U.S. stockpiles climbed the most since March; Chinese manufacturing shrank and Japanese exports fell, signaling fuel demand may be slowing among the world’s biggest crude users. At 9:30 the DJIA opened -52, NASDAQ -17, S&P -7. The 10 yr note 1.73% -5 bp; 30 yr MBSs +20 bp. At 10:00 the Sept Philly Fed business index was expected at -4.0 frm -7.1 in August. As released the index was better at -1.9. August leading economic indicators was down 0.1% as expected. Interest rate lower today on Spain’s weak auction. The 10 yr has been able to hold at its 200 day average, testing it five times over the last month on any selling pressure. MBS markets continue to hold bullish trends on the Fed easing announced a week ago. This morning the 10 is testing its 20 day average at 1.72%, a break below it will add additional bullish bias. Today’s move is also fueled by weak stock markets in Europe and the US; although the DJIA did improve on the Philly Fed release at 10:00.