Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The stock market rallied yesterday on comments from Washington that were momentarily constructive about the fiscal cliff. This morning the stock market is starting better again. The bond and mortgage markets were a little weaker yesterday, a few lenders took a negative stance and re-priced to either slow production or in anticipation that rates will worsen; unnecessary based on the MBS price movement. Yesterday the MBS price declined 11 bp frm 9:30 yet Wells and Chase lowered prices much more than what the market did. The debate over the cliff will continue through the month; every day there will be comments that likely will influence traders keeping the interday volatility high. The President and the House speaker were talking yesterday with more of a positive spin. The President met with business leaders, likely hearing that businesses and the economy will suffer, unemployment increase unless there is a deal to cut spending on entitlements and loop holes in the tax code. Today Treasury Sec Geithner will meet with congressional leaders, the President will have lunch with Mitt Romney. Weekly jobless claims at 8:30 this morning were down 23K to 393K about where markets were expecting, last week’s claims were revised from 410K to 416K. Claims still being impacted by Sandy, the storm that ravaged a lot of the east coast. Also at 8:30 the revision to Q3 GDP, the preliminary report showed the growth rate in the quarter was +2.7% also in line with forecasts. Last month the advance Q3 GDP was at 2.0%. Q2 GDP growth was +1.3%. At 9:30 the DJIA opened +43, NASDAQ +16, S&P +6. 10 yr note at 9:30 unch at 1.63%, MBS 30 yr price unch. Oct NAR pending home sales (contracts signed but not yet closed) was expected +1.0%; it increased 5.2% with Sept revised higher. The index is now the highest since March 2007 and is up 13.2% yr/yr. Is the Fed going to continue its QE initiatives? Most likely; although the Operation Twist will expire due primarily that the Fed is running out of short-dated maturities to sell while buying longer-dated maturities. Likely the Fed will continue buying MBSs and increase the buying of treasuries after the first of the year. The economy is just muddling along, unemployment still high and Congress still will be struggling with budgets and entitlement discussions. The next FOMC meeting on Dec 11th and 12th is likely to be when the Fed announces its plan(s). Within the FOMC there is some increasing concern the Fed isn’t accomplishing much with the easing and money printing; it hasn’t lowered the unemployment rate that is one of the two Fed mandates. Whatever is happening on a daily basis, the bond and mortgage markets are not changing. The 10 yr treasury note is in a 10 basis point yield range since early Nov., unable to crack 1.60% and finding strong support when it climbs to 1.70%. MBSs are in an even narrower range, and likely to stay relatively flat while the debate on the cliff continues. In Europe there is a slight increase in optimism over the Greek debt crisis but so far after 3 years the country is still broke and isn’t likely to improve without ECB, EU, and IMF assistance; it is about keeping Greece in the EU for fear that if it left it would encourage other debt reddened countries to exit.