Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The Federal Reserve made a huge error yesterday; it sent out the FOMC minutes yesterday afternoon to members of Congress; a day ahead of when the minutes were supposed to be released. The minutes were expected at 2:00 this afternoon, after the mistake yesterday the minutes were released this morning at 9:00 am. The announcement of the misstep release yesterday wasn’t known until 8:55 am this morning. • Committee members saw the information received over the intermeeting period as suggesting that moderate economic growth had resumed following a pause late last year. • Labor market conditions had shown signs of improvement, but the unemployment rate remained elevated. • all but one member judged that a highly accommodative stance of monetary policy was warranted in order to foster a stronger economic recovery in a context of price stability. • The Committee agreed that it would be appropriate to continue purchases of MBS at a pace of $40 billion per month and purchases of longer-term Treasury securities at a pace of $45 billion per month, as well as to maintain the Committee's reinvestment policies. • A few members felt that the risks and costs of purchases, along with the improved outlook since last fall, would likely make a reduction in the pace of purchases appropriate around midyear, with purchases ending later this year. It was also noted that were the outlook to deteriorate, the pace of purchases could be increased. • Household spending and business fixed investment had advanced, and the housing sector had strengthened further, but fiscal policy had become somewhat more restrictive. The main take away from the minutes is that there are increasing discussions within the Fed about ending the QEs. While there are more discussions, the Fed isn’t likely to end its monetary stimulus without more strength in the economy. Keep in mind that these minutes were frm the 3/21 meeting and before last week’s March employment report that was very soft. At 9:30 the DJIA opened +70, NASDAQ +13, S&P +7; 10 yr note 1.78% +3 bp, 30 yr MBS price -18 bps. At 1:00 this afternoon Treasury will sell $21B of 10 yr notes, yesterday Treasury sold $32B of 3 yr notes that didn’t show great demand. Recent Treasury auctions over the last couple of months have not shown a high degree of demand. At 2:00 Treasury will report the March budget, expected at a deficit of $172.4B frm -$203.5B in Feb. Treasury will likely run an annual deficit this year of about $900B, fiscal 2013 ends at the end of Sept 2013. The weekly MBA mortgage applications out early this morning; the overall composite index increased 4.5% after falling 4.0% the previous week. The purchase index declined 1.0% after being up 1.0% the previous week. The re-finance index up 6.0% after being down 6.0% the week before. Recent weeks have seen large shifts within the purchase category with demand rising for government loans heading into an April 1 increase on FHA insurance premiums then falling following the increase. With demand now thin for government loans, demand for conventional loans is at a recovery high. Re-finances boosted by a sharp weekly drop in mortgage rates to an average of 3.68% for 30-year conforming loans ($417,500 or less).