Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Very early this morning the bond and mortgage markets were slightly better after selling of treasuries yesterday and the huge rally in the stock indexes on relief Congress got around to keeping taxes from increasing(although SS taxes will increase by 2.0% after two years of lower taxes). It didn't last; at 8:15 ADP Dec private jobs were widely expected to have increased about 150K, as reported Dec private jobs increased by 215K, the biggest monthly gain since last Feb. Adding more strength to the job markets ADP revised Nov private jobs from +118K to +148K. At 8:30 weekly jobless claims were expected at about363K, claims increased to 372K according to the Labor Dept. Last week’s claims were reported at 350K, in this report last week was revised to 362K. Seasonal factors and special factors are distorting the data recently. The 4 wk average at 360K is about 50K less than last week’s average; that isn’t realistic based on the claims data. Continuing claims are also being distorted though trends here also point to improvement. Continuing claims in data for the December 22 week did rise 44,000 to 3.245 million but the four-week average of 3.224 million is roughly 90,000 below the month-ago trend. The BLS is having to make estimates of its own due to missing data from state offices, many of which have been closed for the holidays. Though trends in this report are favorable, there's too many distortions at play to make this report useful as a fore casting tool for tomorrow's employment report. The weekly MBA mortgage applications, also a distorted report, showed the composite index -21.6%, purchases index -14.8% and re-finance index -23.3%. Because of methodology issues surrounding the holidays, the latest data compare the two weeks ended December 28 against the December 14 week. This report is not meaningful for a gauge on the housing sector. Markets still digesting the Cliff legislation. After the strong rally in the stock market yesterday and more selling in the bond and mortgage markets, and after this morning’s overall better employment reports, at 9:30 the DJIA opened -13, NASDAQ -5, S&P -1. The 10 yr note at 9:30-1/32 at 1.84% unch; 30 yr MBSs Now that the preliminaries are over (the Cliff), the next few months Congress and the President will move to even more difficult decisions. Yesterday Moody’s commented that the agreement didn’t do enough to reduce the deficit. Moody’s saying if Congress doesn’t do more it may lower US credit ratings following S&P’s downgrading. The debt ceiling is coming rapidly, at the end of Feb according to the latest estimates Treasury will not have enough money to pay our debts unless the debt ceiling is increased. On March 1st the across the board spending cuts a part of the Cliff that was deferred, are going to kick. On March 27th, according the WSJ, the government will shut down unless Congress approves funding for government operations through the end of Sept (the end of the fiscal year). We are headed again to alas minute showdown and continued market volatility. The increase in taxes for the wealthy that was passed by Congress is relatively meaningless; estimates are for increased revenue of $737B over the next 10 yrs. That is about $73B a year, the recent four years of annual deficits have been about $1 trillion a year of over spending; not much help. The 10 yr note, director for all long term rates, is at its last solid resistance at 1.85%, if it doesn’t hold look for the note rate to increase to 1.90%, then 2.00%. Technically the 10 yr, 30 yr and 5 yr notes areall bearish; 30 yr MBSs also bearish, trading under the 20 and 40 day averages(prices) but so far has held its 100 day average. MBSs are not quite as weak as the 10 yr based on technical indicators; nevertheless MBSs will track along with the note. If markets hold support levels any improvements now should be used to lock in mortgage rates. We continue to believe the low interest rate markets of a few months ago will not likely to be seen again.