Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 9:00 this morning the 10 yr note yield fell to 1.69% -2 bp and at its 40 day average. Mortgage prices opened unchanged from yesterday; the stock indexes were better pointing to a stronger opening at 9:30. In Europe’s continuing soap opera; Greece is facing a financing gap that won’t be solved by budget measures being discussed, International Monetary Fund Managing Director Christine Lagarde said yesterday. Nobel Prize-winning economist Joseph Stiglitz said euro members will have to share debts and speed the implementation of a banking union to prevent a situation in which “the whole system falls apart.” In Germany Merkel can’t move without problems from her own political party, providing more money from Germany to feed Greece. Spain continues to hold off asking for the ECB to buy its debt, the country has been able to sell its debt in the markets at decent rates so leaders are reluctant to do what in the end has to be done. In the meantime ECB Pres. Draghi’s plan to buy the debt of cash- strapped nations boosted Spanish bond values and cheapened German debt. Demand for German debt, perceived to be among the safest securities, is being sustained as Spain weighs a sovereign bailout to supplement a 100-billion euro ($129B) bank rescue package and as Europe’s economy falls toward recession. The German 10 yr bund is at 1.52% compared with the US 10 yr note at 1.70% this morning; in late July before ECB’s Draghi said the bank would do whatever it takes to save the euro the 10 yr German 10 yr yielded 1.127%, the US 10 yr was at 1.41%. Both yields have increased since then on optimism the EU will dodge the bullet. Although interest rates did increase on the Draghi announcement the rate markets have improved from the high level seen two weeks ago when the US 10 yr hit 1.86%. The July Case/Shiller home price index at 9:00 was better than expected; the 20 city price index increased 1.2% frm July 2011, the biggest 12 month increase since August 2010. Shiller saying on CNBC that “housing is back”. He said inventories still low but Shiller is saying the data suggest prices may be increasing. Home prices adjusted for seasonal variations increased 0.4% in July from the prior month. Unadjusted prices climbed 1.6% from the previous month as all 20 cities showed gains for a third consecutive month. At 9:30 the DJIA opened +30, NASDAQ +10, S&P +4. The 10 yr note after dropping to 1.69% earlier was back to 1.71% and unable to crack its 40 day average at 1.69%; 30 yr mortgage price up 7 bp frm yesterday’s close. At 10:00 the Sept consumer confidence index was expected at 63.2 frm 60.6 in August, earlier this week the estimate was for 63.0 but analysts revised their forecasts a little higher. As reported the confidence index jumped to 70.3 frm 61.3 in August, the best level since last February. Prior to the release the DJIA had fallen back to +15, the response to the strong confidence jumped the index back to +51 and took the 10 yr note up to 1.73% +2 bp on the day. A little heads up; while the longer outlook for mortgage rates remains quite positive, the current condition I the MBS market is becoming overbought and may be ready for a correction. If there is a pullback it won’t likely change the overall optimism and would present buying opportunities for investors. The 10 yr note isn’t as overbought as MBSs but it isn’t showing much strong support either. With the Fed printing money as fast as it can it isn’t likely interest rates will increase much IF selling were to occur.