Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Early this morning the US stock indexes were fractionally weaker while markets in Europe are mixed but with little changes frm yesterday. Treasuries and MBSs traded a little better early, but like the stock markets generally flat prior to the 9:30 open in the equity markets. The Feb NFIB optimism index released early today was better than expected, the index was expected at 90.1 frm 88.9 in Jan; as reported the index increased to 90.8. It isn’t considered a first tier data but that it did increase is another report that is better than forecast. Redbook reported solid strength in same-store sales during the March 9 week, at a year-on-year plus 2.7% which is more than one full percentage point above lows in January. Redbook's month-to-month data call not only for a gain in February but now for a gain in March relative to February. At 9:30 the DJIA opened +2, NASDAQ -9, S&P +1. The 10 yr at 9:30 +8/32 (25 bp) at 2.04% -2 bp; 30 yr MBSs +15 bps. Yesterday the broad based S&P 500 index came within 9 points of a new all-time high; while the DJIA made new highs every day last week the wider market has still not been able to break through. At present levels the S&P is at what is now a triple top for the index going back to March 2000, if it doesn’t break out it could lead to a major decline based on a very serious technical top for the index. We expect it more likely we will see the index break to new highs, it could easily be today or in the next week. If it does not break to a new high very soon expect selling will take it and all the indexes down in the long awaited retracement that draws a lot of talk but so far it continues to move higher. One week from today the next FOMC meeting begins, concluding the following day with the usual policy statement. The meeting is always very critical, this time maybe a little more serious after the surprisingly strong employment report last Friday. Since the report there has been an increase in talk and debate about what the Fed may do with its QE, purchasing $85B of treasuries and mortgages every month. It is unlikely the Fed is going to end or even curtail its purchases now or in the immediate future; one strong employment report isn’t enough for the Fed to make any radical decisions. The QE will continue, however the policy statement after the meeting will be important; how the FOMC characterizes the economy and employment should provide plenty to think about. This afternoon at 1:00 pm Treasury begin three days of borrowing with $35B of 3 yr notes, tomorrow $21B of 10 yr notes and Thursday $13B of 30 yr bonds. At 2:00 Treasury will report the Feb budget balance at $-205B. On the budget front; Republicans have a plan, Democrats have their plan, the President has his also. None of it has any common ground; no tax increases from Republicans, just spending cuts. Democrats have tax increases (increased revenues) and only minor cuts that will not balance the budget in 10 yrs. The President wants no spending cuts, actually more spending, and tax increases. Nothing different than in the last six months. So far this morning markets are sitting quietly with little changes; there is little news to motivate any major movement so far. Mortgages doing better as is the 10 yr with stock indexes hanging around unchanged so far. The bias for interest rates remains bearish, however there will be a nice rebound frm these high rates if the stock market rolls over, we suggest keeping focused day to day but maintain a bearish outlook until the 10 yr can move below 2.00% which isn’t likely unless equity markets succumb to selling and profit-taking.