Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Generally quiet early this morning, prior to 8:30 the 10 yr note yield was down 1 bp to 1.82% and 30 yr MBSs +3 bp frm yesterday’s close. At 8:30 weekly jobless claims were better than expected, estimates were for an increase of 25K to 365K after the 37K decline last week; as reported claims dropped 5K to 330K. The four week average down 8,250 and continuing claims at 3.157 mil frm 3.228 mil. The weekly clams were the lowest since Jan 2008. ON the surface the numbers look good but claims may reflect challenges adjusting the data during the holiday period and at the start of quarters. This year’s changes are following patterns seen in prior years, a Labor Department spokesman said. In 2008, claims dropped for consecutive weeks in early January and then rebounded at the end of the month. The number of applications was estimated for California, Virginia and Hawaii because of the holiday-shortened week. Employment gains still anemic; in Dec Labor said 155K jobs were added, in line with the 2012 average of 153K monthly jobs created. Nothing in the data this morning increases the view that the Fed may be talking about exiting its easing move that buys $85B of treasuries and MBSs each month. The bond market reaction to the claims pushed the 10 yr yield a little higher but MBSs at 9:00 were still holding minor gains, up 3 bp frm yesterday’s close. The reaction in the stock market was not much, the DJIA at 9:00 +19 while the NASDAQ futures trading was down 38 points on weaker Apple earnings that were released late yesterday. At 9:30 the DJIA opened +20, NASDAQ -28, S&P -4. The 10 yr 1.84% +1 bp; 30 yr MBSs -15 bp. At 10:00 the last data today; Dec leading economic indicators were expected up 0.5%, as reported up 0.5%. The World Economic Forum is underway in Davos, Switzerland. Most big economists and financial leaders gather every year in Davos. Bob Shiller of the Case/Shiller home price index fame was less optimistic about the US housing market than most recent data on the sector have shown….. “The housing market has been declining for something like six years now, it could go on, that’s my worry.”…. “The short-term indicators are up now, it definitely looks better, but we saw that in 2009.” …. “It’s a good housing market in the sense that mortgage rates are very low and prices have come down to normal levels, so yes, it’s a good time to buy if nothing bad happens.” ….. “But it’s also a very bad housing market in that most of the mortgages are being supported by the government, and we have the Fed and this buying program. It’s a very abnormal market. There’s a lot of uncertainty going forward.”…. “We’ve been five years in a slow economy, and it could go quite a bit longer”….. “We’ve seen gross domestic product growth at sub-normal levels.” …..“I think we’re pretty far from irrational exuberance, maybe 50 years away.”…. Talk about raining on the parade! He is well respected but likely, hopefully, way off target on his outlook. Yesterday the IMF was out revising US and Global growth lower than what the organization was saying last Oct the last time it released its forecast. Recent data out of China and Europe are not showing a decline in the data reported over the past few days. In Europe ECB President Draghi suggested the worst is over on the debt crisis in the EU, Germany investor confidence rose to its highest in 2.5 years, China’s manufacturing grew at the fastest pace in two years and euro-area services and factory output shrank less than economists forecast in surveys for January, responses from purchasing managers in both industries rose to 48.2 from 47.2 in December, London-based Markit Economics said today. Economists forecast a reading of 47.5. China’s factory index at 51.9 was up frm 51.5 in Dec. The bond and mortgage markets continue to work in very narrow ranges with interday swings back and forth with not much change in rates over the last couple of weeks. The technicals still hold bearish biases, although there has been little movement. Holding bonds together; unsure outlook on the coming debates in Washington over coming spending cuts and the debt ceiling. Yesterday the House sent a bill to the Senate suspending the debt ceiling until May 19th, Senate leaders say the Senate will pass it and the President is saying he will sign it. Next Congress must deal with the sequester on automatic spending cuts due to kick in on March 1st. Also supporting the bond market; the Fed is still buying MBSs and treasuries. Next Tuesday and Wednesday the FOMC will meet, hopefully clearing the air on an exit strategy than emerged from the minutes of the Dec meeting two weeks ago.