Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Miscellaneous: Europe’s stock markets better, the US stocks early this morning pointing to a better 9:30 open. Treasuries and mortgage prices generally unchanged from Friday’s closes. The calendar of data this week is full of key data with Sept employment report hitting on Friday. The minutes from the Sept 13th FOMC meeting will be released on Wednesday; they should be interesting as it was at the meeting the Fed decided to buy MBSs each month with no limit. The Fed is still pushing on that string, but any help keeping mortgage rates low is welcome. This morning on CNBC Chicago President Evans, one Fed official who wants the Fed to continue to ease, trying to justify why the Fed should continue to ease….possibly QE Infinity? The Fed wants to drive investors to stocks by keeping rates so low that eventually investors will be forced to equities. The thinking being that the economy will improve if stocks increase is difficult to understand. Spanish government bonds rose for a third day after stress tests of the country’s banking system showed a smaller deficit than earlier estimated, spurring optimism the region’s debt crisis is being contained. the Spanish banking system will need a recapitalization amounting to 59.3B euros ($76.6B). Spain’s securities pared last week’s declines after Moody’s Investors Service said the recapitalization of the nation’s banks was positive for its credit rating. Italy’s 10-year yields dropped to the lowest in a week after an industry report showed manufacturing output shrank at a slower pace in September. German bonds declined as demand for safer assets waned. The European Central Bank meets to review monetary policy this week. The unemployment rate in the euro area reached the highest on record (11.4%) as the festering debt crisis pushed the economy toward a recession, prompting companies to cut jobs. Oil is up for a third day in New York as stress-test results bolstered confidence in the Spanish banking system, buoying optimism that Europe’s debt crisis can be contained. With the Fed committed to buy $40B a month of MBSs until the end of time inflation concerns are being debated. We don’t see any inflation on the e horizon and markets are not worrying but Bill Gross at PIMCO isn’t seeing it that way. He believes that the Fed’s flooding markets with constant money printing will set of inflation fears as the US dollar weakens. With more dollars out there the value of those dollars declines and usually increases inflation concerns, but the US and global economies are s weak inflation isn’t likely to be an issue for the dollar and the bond market for at least a couple of years. At 9:30 the DJIA opened +32, NASDAQ +13, S&P +4. 10 yr note at 1.63% unchanged while 30 yr MBS price up 26 bp after starting unchanged this morning. At 10:00, Sept ISM manufacturing index expected at 49.7, it climbed back over 50 for the first time in three months to 51.5. The initial reaction sent the DJIA up 138 points on the day. With the backdrop from Charles Evans (Chicago Fed) this morning on CNBC saying the Fed will stay in the game of easing for much longer than most think now, the 10 yr note and MBS prices initially didn’t give up on the stronger manufacturing report even with stock indexes rallying strongly, but by 10:10 the 10 yield increased by 2 bp to 1.65% but MBSs continued to hold earlier gains. August construction spending also out at 10:00 was expected +0.4% but declined 0.6%. Ben Bernanke is in town today, (Indianapolis) speaking at 12:30. Likely more of the same from is speech but we will listen closely for anything new but that isn’t likely.