Mortgage Rates

Mortgage Rates Happy New Years! Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgage markets starting strong this morning as traders seek safety against the potential failure to come to any agreement on the Cliff discussions. Yesterday Sen. majority leader Harry Reidsaid he didn’t think a deal would get done before the first of the year; the stock market took a huge hit with the DJIA down 150 points, then in the afternoon Republicans announced a special session of the House on Sunday evening. After the announcement the stock market recovered and interest rates came well off their best levels. This morning the fear factor is back; the 10 yrat 9:00 at 1.70% -3 bp with 30 yr MBSs +14 bp. Pre-opening trade in the stock indexes had the DJIA down 60 points. President Obama has called a meeting this afternoon at the White House to discuss the pending failure to deal with the Cliff. If there is a deal worked out it won’t be a wide-ranging one that deals with spending cuts or entitlement reforms. The headline will likely be that taxes won’t increase next year. If a deal isn’t accomplished there is still no reason to believe taxes will increase. Neither party, at the core, wants taxes to increase except for those high income people. Both parties have to understand the implications of driving the economy back into recession. In Jan. when Congress returns those tax increases will be retroactively dismissed. The issues of entitlements, the debt ceiling, and spending cuts will occupy legislators in Jan. but we don’t believe there will be much progress until the new Congress is installed, even then it will drag on for months. 2013 isn’t going to be easy for investors or markets. From the bond and mortgage markets’ perspective the next three days will likely be volatile. Normally on New Year’s eve there is nothing to grab much attention but this year is going to be different with the continual negotiations on the Cliff. Monday the stock market will traded all day while the bond and mortgage markets are set to close early at 2:00. At 9:30 the DJIA -73, NASDAQ -19, S&P -8. 10 yr note 1.70% -3 bp, 30yr mortgage price +11 bp. 9:45 the Dec Chicago purchasing mgrs. index was expected at 51.0 frm50.4, it increased to 51.6, the best level since last August, but the employment index at 45.9 was the lowest since Nov 2009. The decline in employment is due to the storm Sandy that hit the NE in Oct. No reaction to the data; economic reports are less significant at the moment with the Cliffhanging over markets. At 10:00 Nov pending home sales from NAR, expected+1.8%, was +1.7%; yr/yr +8.9%. Pending home sales are contracts signed but not yet closed. The potential of high volatility today with talks and comments coming from Washington. We had it yesterday with Reid and Boehner.