Mortgage Rates

Forwarded exclusively by: Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com As far as civilization is concerned the Mayans appear to be wrong; we are still here. As far as the fiscal Cliff is concerned the Mayans may have got it right. Last night the Republican controlled House couldn’t even get enough Republicans to pass the Boehner Plan B that would have increased taxes on those making over a million a year. The Tea Party reigns. The Plan B was supposed to move Republicans closer to Boehner’s original proposal to the President on revenue increase and spending cuts. Even after House Majority Leader Eric Cantor said yesterday that the measure had sufficient support, last night the bill was pulled as there wasn’t enough votes to pass it. Even had the bill passed it would have died a quick death in the Senate; but it is a blow to Republicans and possibly will take the country over the Cliff. Now there won’t be any votes on anything until after Christmas. Until now the Senate was supposed to end today and not re-convene until next Thursday; whether the turn of events will keep legislators at work will be an issue. The clock is ticking down, unless there is a big change in sentiment on both sides falling over the Cliff, at least at this moment looks likely. At 10:00 this morning Boehner is scheduled to make a statement. Can the President and Republicans come together? Based on the number of republicans that would not vote for Plan B it is going to take a number of Democrats in the House to join with Republicans to agree on something that is likely to be closer to what the President is seeking. The reaction to last night’s failure is hitting US and European stocks hard this morning and improving US interest rate markets. At 9:00 the DJIA was down 182 points; the 10 yr note yield at 1.76% down 4 bp, 30 yr MBS prices up 18 bp frm yesterday’s close. New factory orders for durables in November rose 0.7% in November, following a 1.1% gain in October. Analysts expected a 0.5% gain. Excluding transportation, orders increased 1.6%, following a boost of 1.9% in October. Market expectations were for a 0.2% rise in orders excluding transportation. Obviously a much better outcome than forecasts, but it is a Nov report. It was ignored in the markets, as is most economic data these days with the Cliff fiasco dominating everything these days. Nov personal income was expected to be up 0.3%, as reported income increased 0.6%. Personal spending in Nov was expected +0.4%, as reported it was right on at +0.4%. Income got some lift in November as businesses in the Northeast re-opened and employees returned to work after Sandy. The two 8:30 reports on durables and personal income would under normal circumstances been met with enthusiasm in the stock market and likely bothered the bond market. These however are not normal times; it is all about the Cliff, economic data is filed away for later after there is something from Washington. Given the circumstances in Dec personal spending and durable goods orders will likely slow. The DJIA opened -63 at 9:30, NASDAQ -53 and S&P -10. The 10 yr note at 9:30 1.74% -6 bp; 30 yr MBS price +25 bp. Within five minute after the open the DJIA traded down 140 points. At 9:55 the final Dec U. of Michigan consumer sentiment index, expected at 75 frm 74.5, the index fell to 72.9. At the end of Nov the index was at 82.7. It is a volatile index but still disappointing. The 10 yr held support at 1.85% on Tuesday, since then a little improvement in the bond and mortgage markets. This morning the 10 yr is back below its 200 day average on the yield but is still bearish I our opinion. There is the potential for more improvement as the fiscal Cliff looms and since the Plan B couldn’t muster enough votes last night there is an increase in the view that we may actually go over it. Not a certain thing however, there are a few more days to pull the mess out of the fire. If that were to occur the bond and mortgage markets will be pressured again. Take advantage of this rally; it’s all about the Cliff as to how low interest rates will decline.