Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Stock indexes in pre-open trading were abut unchanged this morning as was the interest rate market. At 9:15 Oct industrial production was expected to have increased 0.1%, it fell 0.4% and Sept production originally reported +0.4% was revised lower to +0.2%. Oct factory usage was expected at 78.3% unchanged from Sept, it declined to 77.8%, a big decline. On the reports stock indexes came off their best levels but still managed to hold minor gains. The bond and mortgage markets in early activity were unchanged from yesterday, the day before and the day before that. The 10 yr note has closed at 1.59% for the past three sessions, unable to push lower even with weaker equity markets, Europe in recession again, and the Fed continuing to buy MBSs and treasuries. Today the over-riding issue for markets is the meeting this morning between the Administration and Congressional leaders. There is a lot of speculation floating around this morning; from a deal has already been stuck to avoid the cliff to we are going over it and into economic decline. More likely, when the meeting ends what we will hear from both sides is that it was a “good” meeting but there are continuing issues that must be resolved. No matter what comes of the gathering, it is still about posturing; neither political party wants to be seen as capitulating without a fight to defend their principles. At 9:30 the DJIA opened +7, the 10 yr note at 1.59% unchanged and 30 yr MBSs +3 bp frm yesterday’s close. The current sentiment in the bond and mortgage markets is that rates will very likely move lower. Based on the underlying various fundamental factors that is a sensible outlook, however in the very short term the bond market has stalled. There has been no move to lower interest rates this week and most of last week, even with the DJIA down 1000 points, Europe in recession, heightened tensions in the Mid-East with Israel threatening to attack the Gaza Strip, and the potential of continued grid-lock in Washington. Combined, those issues should have driven investors into safe US treasuries; it hasn’t happened. The bond and mortgage markets are stalled although the technical picture based on current price action remains slightly bullish, but weakening daily with strong resistance at present levels. When expectations differ from actual price action there is reason to be concerned, if (and it is a big IF) the stock indexes improve the bond and mortgage markets will likely experience declining prices. The meeting today between Obama and Republican leaders is the main focus. The meeting hosts the same people that couldn’t agree on much over the last two years. Obama wants higher taxes for the wealthy, Republicans oppose and increases. Yesterday on CNBS Simpson and Bowles, the two that did come up with a plan that would accomplish many of the issues facing the economy and budgets, said if you tax the wealthy 100% it would only run the government for 5 months. Also yesterday, retiring Barney Frank the co-author of one of the biggest regulatory bills ever passed and that has slowed potential growth, out saying he wants to tax SS recipients that make over $100K 90% on their SS payments.