Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Until this weekend the most important event this week was the FOMC meeting on Wednesday. Over the weekend though the euro zone took center stage with debt issues in Cyprus; its banks are teetering on collapse. The plan that emerged calls for taxing all depositors in the banks in the country; the tax calls for 10% tax for deposits over 100K euros and 6.75% on deposits less than 100K euros. After months of little news from the euro zone, it is back now with another crisis that could threaten the euro nation. Taxing depositors to shore banks had been talked about over the years of crisis in the zone, but had always been dismissed. It leaves the question now about other countries in the EU and resurrects the debt crisis that hasn’t gone away even after months of quiet in the zone. Early this morning the stock markets in Europe and here are under pressure and has led to a decline in US treasuries on safety concerns. The overall fear over the plan to tax depositors is fueling concerns over all banks in Europe that deposits may be subject to taxing. At 9:00 the 10 yr note yield down to 1.94% -6 bp frm Friday’s close; 30 yr MBSs +30 bps. The stock indexes at 9:00; DJIA -87, NASDAQ -24, S%P -14. At 9:30 the DJIA opened -97, NASDAQ -36, S&P -14; the 10 yr note 1.94% -6 bp and 30 yr FNMA price +29 bps. By 10:00 the DJIA and NASDAQ have climbed back and cut the initial losses by half from the opening levels. The only data today at 10:00 the NAHB housing market index was expected at 47 frm 46 in Feb, as reported, not a good number at 44, the lowest since last Oct. Somewhat of a surprise as the new home market has been hot based on recent data of new home sales and interviews from a number of CEOs of public homebuilders. No reaction to it. The rest of the day will be focused on the renewed fears frm the EU. The banking crisis in Cyprus, their banks all but in solvent and now taking money from depositors to satisfy the ECB and IMF. Cyprus has 8 million people, about the population of Chicago and on its own no one would pay much attention. The fear for the moment is that depositors in Italy, Spain and other soft southern Europe countries may make runs on their banks fearing the same fate levied on Cyprus. In Germany, the anchor for the euro, political debates increasing about the cost Germany is incurring dealing with one crisis after another. Merkel’s coalition government is not as firm today as it has been over the past few years. The banking crisis in Cyprus is playing into the hands of Germans that want an end to the costs to keep the EU frm unwinding. The Cyprus issue may in the end cause the country to leave the EU, something the IMF and EU officials fear would trigger other exits. It is still a developing issue that is renewing the need for safety into German bunds and US treasuries. Wednesday the conclusion of the FOMC meeting with the policy statement. The Fed is likely to continue saying the economy is recovering slowly, unemployment still too high and that the Fed will continue to buy $85B of treasuries and mortgages each month. We won’t know much about the discussions within the meeting about how and when the Fed will exit until the minutes are released in two weeks.