Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Once again this morning markets started unchanged from the day before. There is simply not much to trade on with Congress out and no economic data this week (weekly jobless claims tomorrow). Scanning the news wires this morning didn’t reveal anything of consequence that might motivate traders or investors. Interest rates have moderated from the strong selling last week but still hold a bearish bias based on our technical models. If we are to expect additional price gains it will require some driving news; that doesn’t look likely this week. The weekly MBA mortgage applications report out early this morning was better than what had been the case the last two weeks with shortened weeks and holidays distorting data. The overall composite index increased 11.7% frm the prior week that saw a decline of 21.6%. Purchases increased 10.0% frm -14.8% previously; the refinance index +12.0% after being down 23.3% last week. These movements are too volatile to make assessments on underlying trends. Rates moved a bit higher in the week with 30-year mortgages for conforming loans ($417,500 or less) rising three basis points to 3.78%. Yesterday began the Q4 earnings season with Alcoa leading the way as always. The company’s report beat analysts’ estimates; sales fell to $5.9B from $5.99B, beating the $5.6B average of 11 estimates. Aluminum prices are rising as demand in China and the U.S. increases while record amounts are being shut away in warehouses as part of financing deals. The better report is causing the early trade in stock indexes to be better so far. This afternoon at 1:00 Treasury will auction $21B of 10 yr notes. The demand will be closely watched after the recent increase in the rate on 10 yr notes. Last month the 10 yr note rate was 1.70%, 1.86% this morning. If the demand is weak the potential of additional selling is possible. At 9:30 the DJIA opened +46, NASDAQ +10, S&P +6. 10 yr note at 9:30 +1/32 1.87% unch; 30 yr MBSs +3 bp. The bellwether 10 yr note at 1.87% is one basis point above its first technical resistance at 1.85%; if it closes below 1.85% the next, and more important resistance is at 1.80%. 30 yr FNMA 3.0 coupon has minor resistance at 104.49, 8 bp frm present price; the more significant resistance is 104.81. We continue to suggest locking in rates on rallies; the outlook for substantially lower rates isn’t favorable now. Net week Congress and the Administration will be back to tackle a number of very serious issues; the markets will likely experience increased volatility after the very quiet week this week.