Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Monday, October 17, 2011
Treasuries and MBS markets opened flat early this morning but got some support at 9:00 as stock indexes softened a little. Helping the bond market some this morning, the Oct NY Empire State manufacturing index expected -4.4 frm -8.82% in Sept was -8.48; the sub components were a little better but still very weak. At 9:15 Sept industrial production reported +0.2% right on the forecasts. Sept capacity utilization also in line, at 77.4% frm 77.3% in August. No initial reaction to the reports.
Europe will continue to draw attention this week, it may not be obvious but under the radar and other driving events Europe is still unsettled. Last week markets were enthused on comments that the EU has com up with a plan that includes banks taking huge hits. Over the weekend the has been some push-back from Europe's banks. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French President Nicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency. In the end the situation is still unresolved and is unlikely to be resolved by Oct 23, the so-called date to have it all worked out. The significance is that as long as there is no actual resolution the US interest rate markets and the US equity markets will continue with their volatility.
At 9:30 the DJIA opened -50, the 10 yr +9/32 at 2.22% -3 bps; mortgage prices at 9:30 +4/32 (.12 bp).
This Week's Economic Calendar:
Today;
8:30 am NY Empire State index -8.48 frm -8.82
9:15 am Sept Capacity Utilization 77.4% frm 77.3%
Sept industrial production +0.2%
Tuesday;
8:30 am Sept PPI (+0.2%, ex food and energy +0.1%)
10:00 am Oct NAHB housing mkt index (14, unchanged from Sept)
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Sept CPI (+0.3%, ex food and energy +0.2%)
Sept housing starts and permits( starts +4.0%, permits -1.5%)
2:00 pm Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (unch at 404K)
10:00 am Sept existing home sales (-1.8%)
Oct Philly Feed business index (-9.6 frm -17.5)
Sept leading economic indicators (+0.3%)
Treasury 10-year notes better, pushing yields down from the highest level in seven weeks, as concern Europe may take longer to contain sovereign debt turmoil boosted demand for the safest assets. We still believe the 10 yr note yield won't increase past 2.30%; the high in the recent increase has been 2.27%. With continued concerns over how, or if, Europe can solve its debt issues US markets will continue to trade in swings on each comment out of the region. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
Although there is no way Europe can meet the Oct 23rd target that had been thought, markets still believe some kind of resolution, foreign investors in US bond markets are selling on that belief. The Federal Reserve reported its holdings of U.S. government debt on behalf of central bankers and institutional investors outside America has plunged $76.5B in the last seven weeks, the most since August 2007. At the same time, bond mutual funds are adding Treasuries, banks have increased their holdings 45% in the past five years and the Fed has added $656B to its balance sheet this year.
Technically the 10 yr note and MBSs are bearish at the moment.
Showing posts with label home loans. Show all posts
Showing posts with label home loans. Show all posts
Monday, October 17, 2011
Friday, September 30, 2011
Mortgage Market
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, September 30, 2011
In this world of uncertainty and confusion we have been subject to wild gyrations in equity markets that have influenced daily trading in the bond and mortgage markets. Yesterday the DJIA closed up 143, this morning in futures trading the index at 9:00 was down 130. Yesterday mortgages closed better by .12 bp and up .25 bp frm 9:30; the 10 yr traded slightly over 2.00% most of the day but managed to fall back and close at 2.00% a very key level. This morning at 9:00 the 10 yield traded at 1.94% with mortgage prices +.31 bp frm yesterday's close. Rate markets have been tied into a very narrow range this week; conflicting news out of Europe and choppy stock markets keeping interest rates generally higher from last Friday's closes.
At 8:30 August personal income expected up 0.1% fell 0.1%, spending was expected 0.2%, it hit at 0.2%. July income revised to +0.1% frm 0.3% originally reported, spending in July revised from +0.8% to +0.7%. Treasuries and mortgages got a further bounce on the weaker income levels while the stock indexes declined further.
Most recent data on the US and global economies is declining and looking like the US and the world will fall back into recession, or for those like us that have never believed we came out of recession, a double dip. Even though data is confirming the decline there are more optimists that believe these are buying opportunities with good bargains. On the Street the mantra is never admit pessimism even in the face of reality, that was evident in 2008 and the sub-prime bubble. Chinese manufacturing shrank for a third month, the longest contraction since 2009. German sales fell the most in more than four years, while European inflation unexpectedly quickened to the fastest in almost three years this month. Industrial production in Japan grew less than economists had forecast. Concern that Europe’s sovereign-debt crisis will spread and the U.S. economic recovery is faltering has wiped out more than $9 trillion of value from global equities this quarter.
In Germany the upper house of parliament approved the enhanced fund today after the lower house voted 523 in favor and 85 against. Lawmakers approved giving the EFSF powers to buy bonds in secondary markets, enable bank recapitalizations and offer precautionary credit lines. At the moment it looks increasingly like Greece will dodge the inevitable bullet on Oct 13th and avoid what will eventually end in default and restructuring Greece's banks. In less than 2 weeks (Oct 13th) Greece will default unless it gets the funds to get by; it will get the money it needs but it won't change much for Greece and the EU sovereign debt problems.
At 9:30 the DJIA opened -92, the 10 yr note +27/32 to 1.91% -9 bp. Mortgage prices +16/32 (.50 bp) frm yesterday's close.
At 9:45 Sept Chicago purchasing managers' index, expected at 54.0 jumped to 60.4 frm 56.5 in August. New orders component at 65.3 frm 56.9, employment at 606 frm 52.1 and prices pd at 62.3 frm 68.6. The data much better but there was no improvement in the stock market and the rate markets held their gains prior to the report. Any index over 50 is considered expansion, the higher the stronger.
Finally today, at 9:55 the U. of Michigan consumer sentiment index, expected at 57.5 was better at 59.4; current conditions 74.9 frm 74.5, expectations at 49.4 frm 47.0 and the 12 month outlook at 39 frm 38. Treasuries and mortgages slipped slighty on the better data and a stronger Chicago PM index.
The volatility in the equity markets show little chance it will decline any time soon. Many reasons and extruded rational explanations; Europe's debt mess, US fiscal stand-off with our political system, and a housing sector still in deep depression----and the list goes on. For all of the talk and ink on what is happening, the reality is investors and consumers get it more than any other entity, politician or Wall Street gurus. There is no end in sight for this choppy highly volatile condition.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, September 30, 2011
In this world of uncertainty and confusion we have been subject to wild gyrations in equity markets that have influenced daily trading in the bond and mortgage markets. Yesterday the DJIA closed up 143, this morning in futures trading the index at 9:00 was down 130. Yesterday mortgages closed better by .12 bp and up .25 bp frm 9:30; the 10 yr traded slightly over 2.00% most of the day but managed to fall back and close at 2.00% a very key level. This morning at 9:00 the 10 yield traded at 1.94% with mortgage prices +.31 bp frm yesterday's close. Rate markets have been tied into a very narrow range this week; conflicting news out of Europe and choppy stock markets keeping interest rates generally higher from last Friday's closes.
At 8:30 August personal income expected up 0.1% fell 0.1%, spending was expected 0.2%, it hit at 0.2%. July income revised to +0.1% frm 0.3% originally reported, spending in July revised from +0.8% to +0.7%. Treasuries and mortgages got a further bounce on the weaker income levels while the stock indexes declined further.
Most recent data on the US and global economies is declining and looking like the US and the world will fall back into recession, or for those like us that have never believed we came out of recession, a double dip. Even though data is confirming the decline there are more optimists that believe these are buying opportunities with good bargains. On the Street the mantra is never admit pessimism even in the face of reality, that was evident in 2008 and the sub-prime bubble. Chinese manufacturing shrank for a third month, the longest contraction since 2009. German sales fell the most in more than four years, while European inflation unexpectedly quickened to the fastest in almost three years this month. Industrial production in Japan grew less than economists had forecast. Concern that Europe’s sovereign-debt crisis will spread and the U.S. economic recovery is faltering has wiped out more than $9 trillion of value from global equities this quarter.
In Germany the upper house of parliament approved the enhanced fund today after the lower house voted 523 in favor and 85 against. Lawmakers approved giving the EFSF powers to buy bonds in secondary markets, enable bank recapitalizations and offer precautionary credit lines. At the moment it looks increasingly like Greece will dodge the inevitable bullet on Oct 13th and avoid what will eventually end in default and restructuring Greece's banks. In less than 2 weeks (Oct 13th) Greece will default unless it gets the funds to get by; it will get the money it needs but it won't change much for Greece and the EU sovereign debt problems.
At 9:30 the DJIA opened -92, the 10 yr note +27/32 to 1.91% -9 bp. Mortgage prices +16/32 (.50 bp) frm yesterday's close.
At 9:45 Sept Chicago purchasing managers' index, expected at 54.0 jumped to 60.4 frm 56.5 in August. New orders component at 65.3 frm 56.9, employment at 606 frm 52.1 and prices pd at 62.3 frm 68.6. The data much better but there was no improvement in the stock market and the rate markets held their gains prior to the report. Any index over 50 is considered expansion, the higher the stronger.
Finally today, at 9:55 the U. of Michigan consumer sentiment index, expected at 57.5 was better at 59.4; current conditions 74.9 frm 74.5, expectations at 49.4 frm 47.0 and the 12 month outlook at 39 frm 38. Treasuries and mortgages slipped slighty on the better data and a stronger Chicago PM index.
The volatility in the equity markets show little chance it will decline any time soon. Many reasons and extruded rational explanations; Europe's debt mess, US fiscal stand-off with our political system, and a housing sector still in deep depression----and the list goes on. For all of the talk and ink on what is happening, the reality is investors and consumers get it more than any other entity, politician or Wall Street gurus. There is no end in sight for this choppy highly volatile condition.
Wednesday, September 28, 2011
Mortgage Market
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, September 28, 2011
A slightly weaker open this morning for bonds and mortgages with the key stock indexes pointing to a higher open at 9:30. Europe still holds markets by the throat; will Greece meet the terms outlined to avoid default? Experts from the European Commission, European Central Bank and International Monetary Fund will return to Athens tomorrow as officials race to put in place a package of measures that will save Greece. Euro-area finance ministers will hold an extra meeting on Greece in October amid international concerns that a default could plunge the global economy into recession.
There is reason to believe that Greece will avoid default, at least based on the rallies in equity markets around the world in the last few days. It isn't official and there are still a lot of hurdles to leap; German banks continue to object to further write downs on their Greek debt, banks and insurance companies might have to increase their contribution to the rescue package as Greece’s economy has deteriorated, Greek bonds have tumbled in recent weeks and credit insurance has soared, putting the chance of default at more than 90%. Meanwhile the European Commission refuted reports that euro-area nations are pushing for private Greek bondholders to accept larger writedowns. And the beat goes on, in over a year now the EU and ECB have been unable to create a plan to avoid sovereign debt defaults in Greece and other struggling economies. There is increasing comments from various experts that Greece will eventually default, while European officials and the IMF stand by their work that will avoid default. At the moment markets are believing a deal will get done soon.
August durable goods orders were about what was expected, down 0.1% overall and -0.1% when transportation orders are extracted. Not strong but about what was thought after durables jumped 4.1% in July.
At 9:30 the DJIA opened +65, the 10 yr note -4/32 at 1.99% and mortgage prices were down 4/32 (.12 bp).
The MBA weekly mortgage applications were strong last week; the composite index jumped 9.3% driven by re-financing as interest rates fell on the FOMC policy statement that the Fed would increase buying of MBSs and buy more treasuries at the long end of the curve while selling shorter maturities. The refinancing index jumped 11.2% in the September 23 week while the purchase index rose 2.1%. The rise in purchase applications was due to a 4.9% rise in conventional purchase applications that offset a 0.6% decline in applications for government loans which MBA tied to the pending decline in FHA loan limits. The purchase index has been on the rise in recent weeks and the gains hint at welcome strength in tomorrow's pending home sales report. The average rate for 30-year mortgages with conforming loans ($417,500 or less) fell four basis points in the week to 4.25% with the jumbo loans ($417,500 or more) also falling four basis points to 4.51%. FHA 30-year loans fell two basis points to 4.05%.
At 1:00 Treasury will auction $35B of 5 yr notes; yesterday's 2 yr note auction met with very good demand, expectations are that the 5 yr will also see strong demand.
The bellwether 10 yr note is working on 2.00%, it held yesterday on the close and so far this morning sits at 1.99%. 2.00% is our first support, if it falls a number of our technical models will change to a more negative outlook. If that were to occur, given the Fed's support for the long end, rates are not likely to increase much. That said, the uncertainty of the outlook is high; the economic outlook, Europe's debt mess---neither is given in the outlook.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, September 28, 2011
A slightly weaker open this morning for bonds and mortgages with the key stock indexes pointing to a higher open at 9:30. Europe still holds markets by the throat; will Greece meet the terms outlined to avoid default? Experts from the European Commission, European Central Bank and International Monetary Fund will return to Athens tomorrow as officials race to put in place a package of measures that will save Greece. Euro-area finance ministers will hold an extra meeting on Greece in October amid international concerns that a default could plunge the global economy into recession.
There is reason to believe that Greece will avoid default, at least based on the rallies in equity markets around the world in the last few days. It isn't official and there are still a lot of hurdles to leap; German banks continue to object to further write downs on their Greek debt, banks and insurance companies might have to increase their contribution to the rescue package as Greece’s economy has deteriorated, Greek bonds have tumbled in recent weeks and credit insurance has soared, putting the chance of default at more than 90%. Meanwhile the European Commission refuted reports that euro-area nations are pushing for private Greek bondholders to accept larger writedowns. And the beat goes on, in over a year now the EU and ECB have been unable to create a plan to avoid sovereign debt defaults in Greece and other struggling economies. There is increasing comments from various experts that Greece will eventually default, while European officials and the IMF stand by their work that will avoid default. At the moment markets are believing a deal will get done soon.
August durable goods orders were about what was expected, down 0.1% overall and -0.1% when transportation orders are extracted. Not strong but about what was thought after durables jumped 4.1% in July.
At 9:30 the DJIA opened +65, the 10 yr note -4/32 at 1.99% and mortgage prices were down 4/32 (.12 bp).
The MBA weekly mortgage applications were strong last week; the composite index jumped 9.3% driven by re-financing as interest rates fell on the FOMC policy statement that the Fed would increase buying of MBSs and buy more treasuries at the long end of the curve while selling shorter maturities. The refinancing index jumped 11.2% in the September 23 week while the purchase index rose 2.1%. The rise in purchase applications was due to a 4.9% rise in conventional purchase applications that offset a 0.6% decline in applications for government loans which MBA tied to the pending decline in FHA loan limits. The purchase index has been on the rise in recent weeks and the gains hint at welcome strength in tomorrow's pending home sales report. The average rate for 30-year mortgages with conforming loans ($417,500 or less) fell four basis points in the week to 4.25% with the jumbo loans ($417,500 or more) also falling four basis points to 4.51%. FHA 30-year loans fell two basis points to 4.05%.
At 1:00 Treasury will auction $35B of 5 yr notes; yesterday's 2 yr note auction met with very good demand, expectations are that the 5 yr will also see strong demand.
The bellwether 10 yr note is working on 2.00%, it held yesterday on the close and so far this morning sits at 1.99%. 2.00% is our first support, if it falls a number of our technical models will change to a more negative outlook. If that were to occur, given the Fed's support for the long end, rates are not likely to increase much. That said, the uncertainty of the outlook is high; the economic outlook, Europe's debt mess---neither is given in the outlook.
Thursday, September 22, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, September 22, 2011
Yesterday 30 yr mortgages had one of its best days in over a year; the 3.5 Oct MBS increased 41/32 (1.28 bp). The Fed did what markets were expecting plus more. The view prior to the FOMC policy statement at 2:22 yesterday was that the Fed would institute "Operation Twist" as it has been tabbed, selling shorter dated notes and replacing them with longer term notes and bonds to drive down long term rates. The amount of shifting was expected to be about $300B, the Fed said it will be $400B. There was not much consideration in markets about anything directly impacting the mortgage markets; the Fed however surprised markets with the announcement it would turn back to buying MBSs with principle pay downs on MBSs it holds and instead of investing back into treasuries as it had been doing, investing in more MBSs. The reaction was swift in the mortgage market as MBSs out ran the 10 yr note by a mile. MBSs gained 1.28 basis points while the 10 yr gained just 24/32 (.75 bp).
This morning in early activity had mortgage prices up as much as 22/32 (.69 bp) frm yesterday's closes (8:00 am). At 9:00 +16/32 (.50 bp); at 9:30 MBSs +18/32 (.56 bp). The 10 yr at 9:30 +24/32 at 1.78%-8 bp. The DJIA opened -192, NASDAQ -72 and the S&P -21.
The equity markets took a huge hit yesterday, in futures trading early this morning the DJIA traded down 277 at 9:00. All European markets were hit hard this morning on the Fed's statement, weaker economic reports and the continued difficulty in getting anything accomplished with Greece's debt mess. Euro-area services and manufacturing output shrank for the first time in more than two years in September as the region’s worsening debt crisis added to concerns that the economy could slide back into a recession. German bonds rose, with 10- and 30- year yields dropping to record lows, as speculation the world economy is headed for another recession increased demand for safer securities. And it isn't just Europe and the US; a preliminary index of China purchasing managers was 49.4 this month, a reading below 50 indicates contraction.
Most of the headlines from the FOMC meeting were focused on the confirmation that the Fed would move out the curve with its balance sheet to push long term rates down. It didn't escape markets though that the FOMC lowered its economic outlook from previous meetings. In the statement the Fed said "Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets". The addition of the word significant was inserted from previous statements, confirming the Fed is becoming more fearful of falling back into recession.
Weekly jobless claims this morning were down 9K to 423K, last week's claims were revised up frm 428K to 432K. Continuing claims continue to decline, 3.727 mil frm 3.755 mil last week. At 10:00 the FHFA July price index increased 0.8% for the month, yr.yr prices are down 3.3%. August leading economic indicators at 10:00 +0.3%, better than +0.1% expected. No reaction to the two 10:00 data points.
It is a good last 24 hours for the bond and mortgage market; a serious whipping for stocks. These kinds of moves usually lead to increased volatility; we expect to see wide swings in the bond and stock markets over the next week. Attempting to anticipate how much lower interest rates can go is difficult and we won't even try now until markets settle down. Europe's problems and the Fed's lowering its outlook for economic growth will continue to play out. This week doesn't have much economic data, next week there isn't a lot either. Next week Treasury will auction about $99B of 2s, 5s and 7 yr notes.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, September 22, 2011
Yesterday 30 yr mortgages had one of its best days in over a year; the 3.5 Oct MBS increased 41/32 (1.28 bp). The Fed did what markets were expecting plus more. The view prior to the FOMC policy statement at 2:22 yesterday was that the Fed would institute "Operation Twist" as it has been tabbed, selling shorter dated notes and replacing them with longer term notes and bonds to drive down long term rates. The amount of shifting was expected to be about $300B, the Fed said it will be $400B. There was not much consideration in markets about anything directly impacting the mortgage markets; the Fed however surprised markets with the announcement it would turn back to buying MBSs with principle pay downs on MBSs it holds and instead of investing back into treasuries as it had been doing, investing in more MBSs. The reaction was swift in the mortgage market as MBSs out ran the 10 yr note by a mile. MBSs gained 1.28 basis points while the 10 yr gained just 24/32 (.75 bp).
This morning in early activity had mortgage prices up as much as 22/32 (.69 bp) frm yesterday's closes (8:00 am). At 9:00 +16/32 (.50 bp); at 9:30 MBSs +18/32 (.56 bp). The 10 yr at 9:30 +24/32 at 1.78%-8 bp. The DJIA opened -192, NASDAQ -72 and the S&P -21.
The equity markets took a huge hit yesterday, in futures trading early this morning the DJIA traded down 277 at 9:00. All European markets were hit hard this morning on the Fed's statement, weaker economic reports and the continued difficulty in getting anything accomplished with Greece's debt mess. Euro-area services and manufacturing output shrank for the first time in more than two years in September as the region’s worsening debt crisis added to concerns that the economy could slide back into a recession. German bonds rose, with 10- and 30- year yields dropping to record lows, as speculation the world economy is headed for another recession increased demand for safer securities. And it isn't just Europe and the US; a preliminary index of China purchasing managers was 49.4 this month, a reading below 50 indicates contraction.
Most of the headlines from the FOMC meeting were focused on the confirmation that the Fed would move out the curve with its balance sheet to push long term rates down. It didn't escape markets though that the FOMC lowered its economic outlook from previous meetings. In the statement the Fed said "Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets". The addition of the word significant was inserted from previous statements, confirming the Fed is becoming more fearful of falling back into recession.
Weekly jobless claims this morning were down 9K to 423K, last week's claims were revised up frm 428K to 432K. Continuing claims continue to decline, 3.727 mil frm 3.755 mil last week. At 10:00 the FHFA July price index increased 0.8% for the month, yr.yr prices are down 3.3%. August leading economic indicators at 10:00 +0.3%, better than +0.1% expected. No reaction to the two 10:00 data points.
It is a good last 24 hours for the bond and mortgage market; a serious whipping for stocks. These kinds of moves usually lead to increased volatility; we expect to see wide swings in the bond and stock markets over the next week. Attempting to anticipate how much lower interest rates can go is difficult and we won't even try now until markets settle down. Europe's problems and the Fed's lowering its outlook for economic growth will continue to play out. This week doesn't have much economic data, next week there isn't a lot either. Next week Treasury will auction about $99B of 2s, 5s and 7 yr notes.
Wednesday, September 21, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, September 21, 2011
Tedious open this morning; the rate markets flat and the early action in the stock index trade had the indexes about unchanged. The bond and mortgage markets tried to hold slight gains but at 9:00 were slipping. The mortgage market continues to look weaker than treasuries, that has been the case for a week now. FHFA swinging a big axe, adding fees and suing every company it can is causing lenders to price defensively, not pricing to the MBS market but pricing lower.
Today is all about the Fed and what the FOMC policy statement will say regarding another potential Fed easing move. Known as "Operation Twist", many are expecting the Fed to announce it will begin selling its short dated notes while increasing purchases of 5s, 10s and 30s. Until 2:15 markets are likely to be generally unchanged. Not sure whether or not Operation Twist has been built into present yields at the long end (10s and MBSs); markets not even sure what the Fed will say in the policy statement. This afternoon after the 2:15 announcement markets will likely be volatile.
The soap opera known as the Greek bailout continues with nothing accomplished----again. Officials said they need to return to Greece to complete a review of the economy, for two days the IMF and EU people have been meeting with Greece leaders yet still haven't determined whether Greece has met the austerity plans that were a condition for getting more financial assistance to avoid default. Meanwhile Europe's economy is slipping quickly and the US markets are held captive to every syllable coming from the EU, IMF and Greek political leaders.
Weekly Mortgage Applications Survey for the week ending September 16, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 0.6% on a seasonally adjusted basis from one week earlier. The Refinance Index increased 2.2% from the previous week. The seasonally adjusted Purchase Index decreased 4.7% from one week earlier. The four week moving average for the seasonally adjusted Market Index is down 3.15%. The four week moving average is down 0.54% for the seasonally adjusted Purchase Index, while this average is down 3.91% for the Refinance Index. The refinance share of mortgage activity increased to 78.3% of total applications from 76.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.7% from 7.3% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 4.29%, with points increasing to 0.41 from 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (> $417,500) decreased to 4.55% from 4.57%, with points increasing to 0.46 from 0.42 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.07% from 4.08%, with points increasing to 0.51 from 0.48 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.46% from 3.52%, with points increasing to 0.45 from 0.38 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened a little weaker but quickly turned slightly positive; the bond and mortgage markets marching to what the equity markets do; the two markets remained tied together as traders have almost total control of both markets these days. Normal type investors are not investing much. It has become one of the easiest trades these days; stock indexes weaker, buy the 10 yr, stock indexes better sell the 10 yr-----and vice versa.
The only data today; at 10:00 August existing home sales, expected up 1.4%, increased 7.7% to 5.03 mil. The median sales price $168,300 -5.1% frm August 2010, 31% of the sales were distressed sales, based on sales in August there is an 8.5 month supply, the inventory level declined 3.0%. No reaction to the data in the bond and mortgage markets, but the stock indexes did improve on the better sales.
US financial markets will likely stay generally flat until 2:15 when the FOMC policy statement is released. Based on what the statement says markets will likely be somewhat volatile after that.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, September 21, 2011
Tedious open this morning; the rate markets flat and the early action in the stock index trade had the indexes about unchanged. The bond and mortgage markets tried to hold slight gains but at 9:00 were slipping. The mortgage market continues to look weaker than treasuries, that has been the case for a week now. FHFA swinging a big axe, adding fees and suing every company it can is causing lenders to price defensively, not pricing to the MBS market but pricing lower.
Today is all about the Fed and what the FOMC policy statement will say regarding another potential Fed easing move. Known as "Operation Twist", many are expecting the Fed to announce it will begin selling its short dated notes while increasing purchases of 5s, 10s and 30s. Until 2:15 markets are likely to be generally unchanged. Not sure whether or not Operation Twist has been built into present yields at the long end (10s and MBSs); markets not even sure what the Fed will say in the policy statement. This afternoon after the 2:15 announcement markets will likely be volatile.
The soap opera known as the Greek bailout continues with nothing accomplished----again. Officials said they need to return to Greece to complete a review of the economy, for two days the IMF and EU people have been meeting with Greece leaders yet still haven't determined whether Greece has met the austerity plans that were a condition for getting more financial assistance to avoid default. Meanwhile Europe's economy is slipping quickly and the US markets are held captive to every syllable coming from the EU, IMF and Greek political leaders.
Weekly Mortgage Applications Survey for the week ending September 16, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 0.6% on a seasonally adjusted basis from one week earlier. The Refinance Index increased 2.2% from the previous week. The seasonally adjusted Purchase Index decreased 4.7% from one week earlier. The four week moving average for the seasonally adjusted Market Index is down 3.15%. The four week moving average is down 0.54% for the seasonally adjusted Purchase Index, while this average is down 3.91% for the Refinance Index. The refinance share of mortgage activity increased to 78.3% of total applications from 76.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.7% from 7.3% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 4.29%, with points increasing to 0.41 from 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (> $417,500) decreased to 4.55% from 4.57%, with points increasing to 0.46 from 0.42 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.07% from 4.08%, with points increasing to 0.51 from 0.48 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.46% from 3.52%, with points increasing to 0.45 from 0.38 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened a little weaker but quickly turned slightly positive; the bond and mortgage markets marching to what the equity markets do; the two markets remained tied together as traders have almost total control of both markets these days. Normal type investors are not investing much. It has become one of the easiest trades these days; stock indexes weaker, buy the 10 yr, stock indexes better sell the 10 yr-----and vice versa.
The only data today; at 10:00 August existing home sales, expected up 1.4%, increased 7.7% to 5.03 mil. The median sales price $168,300 -5.1% frm August 2010, 31% of the sales were distressed sales, based on sales in August there is an 8.5 month supply, the inventory level declined 3.0%. No reaction to the data in the bond and mortgage markets, but the stock indexes did improve on the better sales.
US financial markets will likely stay generally flat until 2:15 when the FOMC policy statement is released. Based on what the statement says markets will likely be somewhat volatile after that.
Tuesday, September 20, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, September 20, 2011
The back and forth pattern that characterizes the US financial markets continues today; after a strong rally yesterday in the bond and mortgage markets this morning both markets started weaker. Ditto for the equity markets, down yesterday and up this morning. The every other day direction is so predictable these days, it can be traded with little concern by day traders that are currently dominating markets.
At 8:30 August housing starts, expected down 2.4% to 590K, declined 5.0% to 571K. August building permits expected down 2.0% to 585K were up 3.2% to 620K. Not much reaction to the data; these days US economic data is a second tier concern with markets completely and totally fixated on every word coming out of Europe over Greece's debt issues. Europe continues to grapple with a solution for debt insolvent countries; Greece, Portugal and Ireland and the bigger economies of Spain and Ireland.
Greece held “productive” discussions with European officials yesterday about the country’s bailout. The government will hold another call today as European leaders squabble over the terms of a July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union. The IMF said that the program carried out by the government had produced “impressive fiscal consolidation,” while the EU in Brussels yesterday that the European Commission has not demanded more of Greece than was agreed to in the international aid program for the country.
The IMF said the global economies are in a dangerous situation with another recession increasingly likely. German investor confidence fell less in September than analysts had estimated. Its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 43.3 from minus 37.6 in August. Economists had projected a drop to minus 45, according to the median of 37 estimates in a Bloomberg News survey.
S&P, as expected, downgraded Italy's debt to A frm A+, saying slower growth and a “fragile” government may derail the nation’s ability to reduce its debt burden. Portugal’s 10-year yield rose by the most in two weeks.
The FOMC meeting gets started today, a two day affair leading to tomorrow's policy statement and belief the Fed will officially announce "Operation Twist" as it is being dubbed. Many now are confident the Fed will act; if it doesn't the long end of the curve (10s and 30s as well as mortgage markets) will likely be hit hard. The Fed will decide to replace short-term treasuries in its $1.65 trillion portfolio with long- term bonds, according to 71% of 42 surveyed economists. The move, is to bend the yield curve, will probably fail to reduce the 9.1% unemployment rate, 61% of the economists said. Among those, 15% predict it will be “somewhat harmful.”
Looking over the wires this morning it appears there is little in the way of understanding what "Operation Twist" will do for the economy. Stories hitting that the stock indexes are better this morning on belief the Fed's expected move will help the economy. Wed don't subscribe to that thinking; lower long term interest rates that are supposed to go lower on the Fed move will have little if any impact on unemployment, will not likely motivate small businesses to spend or hire, and won't do much for the housing sector. Banks are scared to death to lend with regulators stepping down on them with more red tape and not understandable regulations. The we have the FHFA launching law suits against the large mortgage lenders demanding re-payment of as much as $800B for what FHFA is saying were faulty loans; and telling Fannie and Freddie to increase fees by as much as 10 basis points. Washington continues to be unable to get out of its own way, suing banks so late in the game is counter-productive and sends a message that lenders are at risk for anything they do and hindsight will be the way bureaucrats will do things; is it any wonder banks won't lend?
The MBS markets are dragging today; at 9:50 the 10 yr note had recovered its earlier price declines and traded up 5/32 at 1.94% -1 bp while mortgage prices at 9:50 -6/32 (.18 bp). The stock indexes opened a little better at 9:30 but at 10:00 were weakening.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, September 20, 2011
The back and forth pattern that characterizes the US financial markets continues today; after a strong rally yesterday in the bond and mortgage markets this morning both markets started weaker. Ditto for the equity markets, down yesterday and up this morning. The every other day direction is so predictable these days, it can be traded with little concern by day traders that are currently dominating markets.
At 8:30 August housing starts, expected down 2.4% to 590K, declined 5.0% to 571K. August building permits expected down 2.0% to 585K were up 3.2% to 620K. Not much reaction to the data; these days US economic data is a second tier concern with markets completely and totally fixated on every word coming out of Europe over Greece's debt issues. Europe continues to grapple with a solution for debt insolvent countries; Greece, Portugal and Ireland and the bigger economies of Spain and Ireland.
Greece held “productive” discussions with European officials yesterday about the country’s bailout. The government will hold another call today as European leaders squabble over the terms of a July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union. The IMF said that the program carried out by the government had produced “impressive fiscal consolidation,” while the EU in Brussels yesterday that the European Commission has not demanded more of Greece than was agreed to in the international aid program for the country.
The IMF said the global economies are in a dangerous situation with another recession increasingly likely. German investor confidence fell less in September than analysts had estimated. Its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 43.3 from minus 37.6 in August. Economists had projected a drop to minus 45, according to the median of 37 estimates in a Bloomberg News survey.
S&P, as expected, downgraded Italy's debt to A frm A+, saying slower growth and a “fragile” government may derail the nation’s ability to reduce its debt burden. Portugal’s 10-year yield rose by the most in two weeks.
The FOMC meeting gets started today, a two day affair leading to tomorrow's policy statement and belief the Fed will officially announce "Operation Twist" as it is being dubbed. Many now are confident the Fed will act; if it doesn't the long end of the curve (10s and 30s as well as mortgage markets) will likely be hit hard. The Fed will decide to replace short-term treasuries in its $1.65 trillion portfolio with long- term bonds, according to 71% of 42 surveyed economists. The move, is to bend the yield curve, will probably fail to reduce the 9.1% unemployment rate, 61% of the economists said. Among those, 15% predict it will be “somewhat harmful.”
Looking over the wires this morning it appears there is little in the way of understanding what "Operation Twist" will do for the economy. Stories hitting that the stock indexes are better this morning on belief the Fed's expected move will help the economy. Wed don't subscribe to that thinking; lower long term interest rates that are supposed to go lower on the Fed move will have little if any impact on unemployment, will not likely motivate small businesses to spend or hire, and won't do much for the housing sector. Banks are scared to death to lend with regulators stepping down on them with more red tape and not understandable regulations. The we have the FHFA launching law suits against the large mortgage lenders demanding re-payment of as much as $800B for what FHFA is saying were faulty loans; and telling Fannie and Freddie to increase fees by as much as 10 basis points. Washington continues to be unable to get out of its own way, suing banks so late in the game is counter-productive and sends a message that lenders are at risk for anything they do and hindsight will be the way bureaucrats will do things; is it any wonder banks won't lend?
The MBS markets are dragging today; at 9:50 the 10 yr note had recovered its earlier price declines and traded up 5/32 at 1.94% -1 bp while mortgage prices at 9:50 -6/32 (.18 bp). The stock indexes opened a little better at 9:30 but at 10:00 were weakening.
Friday, September 16, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, September 16, 2011
Treasuries and mortgages being hit again this morning; the 10 yr note again testing its 20 day average, an average that works well for near term changes in direction. So far the 10 has found support at its 20, at 9:15 this morning the average is at 2.09% with the note trading at 2.11%. Mortgage prices at 9:15 -8/32 (.25 bp) and below its 20 day average; hart support for 20 yr MBSs is at 100-09/32, presently at 100-25/32.
In the last couple of days news out of Europe, while not close to definitive on the debt crisis with Greece and other countries struggling with default, has been somewhat more encouraging. Geithner saying there is absolutely no way Europe will suffer a Lehman event that about took down the US financial system. Germany re-affirming it will not let Greece be pushed out of the EU. Merkel, Germany's Chancellor, expanded her defense of the euro, saying Germany has a “duty” to preserve the joint currency because it helps exports, makes the country richer and underpins Europe. “The euro has proven itself, it’s good for us as an export nation” and has increased growth and prosperity in Europe’s biggest economy, Merkel said in a speech in Berlin today. “That is why it is our duty, very much in our own interest, to make our contribution to secure the euro’s future. Everything that serves the goal of securing the euro’s future must be done.” It appears Greece will dodge its next bullet with additional money to fend off default; euro-region ministers are meeting in Poland today over collateral to backstop Greece’s rescue loans as the country’s next 109 billion-euro ($151 billion) financial aid package hangs in the balance.
The debt mess in Europe is nowhere near any significant resolution or definitive plans to restructure debt in Greece, Portugal or Ireland---and Spain and Italy. There have been countless times over the last year where it was thought Europe was getting its act together, only to be dashed on the rocks of disappointment. This time is no different; there has been a huge amount of speeches and talks that all sound encouraging only to end in derision and nothing accomplished.
As long as traders believe there is a chance of dealing with Europe's banks the safety move to US treasuries lessens. Yesterday and today that is what we are seeing in the bond market, taking some of the risk trade off. Whether it will change the wider direction of interest rates is not clear; that said, taking the 10 yr note below 2.00% and sustaining it is not going to be an easy move. Although the 10 has fallen below 2.00% it hasn't held and selling quickly pushed the yield back up.
The US bond and mortgage markets still holding but weakening recently; we expect continued volatility but now with an upside bias for interest rates. It all will change however if the outlook over Europe changes. IN the end it is a touchy and uncertain environment on the rate markets now.
At 9:30 the DJIA opened +52 in a background of uncertainty. The 10 yr at 2.11% +2 bp and mortgage prices at 9:30 -8/32 (.25 bp) on 30s.
At 9:55 the only data today, the U. of Michigan consumer sentiment index. At the end of August the index was a weak 55.6, it was expected at 56.3; as reported the index was better at 57.8; the current conditions index at 74.5 up frm 68.7 in August, the expectations index at 47.0 frm 47.4, and the 12 month outlook index at 38 frm 40 in August----the expectations index is the lowest since Feb 2009. The initial reaction improved the 10 yr a little but not much. Overall the report wasn't good but so far not much reaction to it in the equity or bond markets.
Next Tuesday and Wednesday the FOMC meeting; likely the bond and mortgage markets won't change much until the statement on policy is released Wednesday afternoon. Still a lot of thinking the Fed will start another easing move of some sort. It isn't clear what the Fed may do, or whether it has anymore bullets left to help the economy. That said, the Fed does have the ability to push interest rates at the long end of the curve lower.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, September 16, 2011
Treasuries and mortgages being hit again this morning; the 10 yr note again testing its 20 day average, an average that works well for near term changes in direction. So far the 10 has found support at its 20, at 9:15 this morning the average is at 2.09% with the note trading at 2.11%. Mortgage prices at 9:15 -8/32 (.25 bp) and below its 20 day average; hart support for 20 yr MBSs is at 100-09/32, presently at 100-25/32.
In the last couple of days news out of Europe, while not close to definitive on the debt crisis with Greece and other countries struggling with default, has been somewhat more encouraging. Geithner saying there is absolutely no way Europe will suffer a Lehman event that about took down the US financial system. Germany re-affirming it will not let Greece be pushed out of the EU. Merkel, Germany's Chancellor, expanded her defense of the euro, saying Germany has a “duty” to preserve the joint currency because it helps exports, makes the country richer and underpins Europe. “The euro has proven itself, it’s good for us as an export nation” and has increased growth and prosperity in Europe’s biggest economy, Merkel said in a speech in Berlin today. “That is why it is our duty, very much in our own interest, to make our contribution to secure the euro’s future. Everything that serves the goal of securing the euro’s future must be done.” It appears Greece will dodge its next bullet with additional money to fend off default; euro-region ministers are meeting in Poland today over collateral to backstop Greece’s rescue loans as the country’s next 109 billion-euro ($151 billion) financial aid package hangs in the balance.
The debt mess in Europe is nowhere near any significant resolution or definitive plans to restructure debt in Greece, Portugal or Ireland---and Spain and Italy. There have been countless times over the last year where it was thought Europe was getting its act together, only to be dashed on the rocks of disappointment. This time is no different; there has been a huge amount of speeches and talks that all sound encouraging only to end in derision and nothing accomplished.
As long as traders believe there is a chance of dealing with Europe's banks the safety move to US treasuries lessens. Yesterday and today that is what we are seeing in the bond market, taking some of the risk trade off. Whether it will change the wider direction of interest rates is not clear; that said, taking the 10 yr note below 2.00% and sustaining it is not going to be an easy move. Although the 10 has fallen below 2.00% it hasn't held and selling quickly pushed the yield back up.
The US bond and mortgage markets still holding but weakening recently; we expect continued volatility but now with an upside bias for interest rates. It all will change however if the outlook over Europe changes. IN the end it is a touchy and uncertain environment on the rate markets now.
At 9:30 the DJIA opened +52 in a background of uncertainty. The 10 yr at 2.11% +2 bp and mortgage prices at 9:30 -8/32 (.25 bp) on 30s.
At 9:55 the only data today, the U. of Michigan consumer sentiment index. At the end of August the index was a weak 55.6, it was expected at 56.3; as reported the index was better at 57.8; the current conditions index at 74.5 up frm 68.7 in August, the expectations index at 47.0 frm 47.4, and the 12 month outlook index at 38 frm 40 in August----the expectations index is the lowest since Feb 2009. The initial reaction improved the 10 yr a little but not much. Overall the report wasn't good but so far not much reaction to it in the equity or bond markets.
Next Tuesday and Wednesday the FOMC meeting; likely the bond and mortgage markets won't change much until the statement on policy is released Wednesday afternoon. Still a lot of thinking the Fed will start another easing move of some sort. It isn't clear what the Fed may do, or whether it has anymore bullets left to help the economy. That said, the Fed does have the ability to push interest rates at the long end of the curve lower.
Wednesday, September 14, 2011
Mortgage Rates
:
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, September 14, 2011
Prior to 8:30 the 10 yr note yield had increased to 2.03% +4 basis points from yesterday's close. Mortgage prices were down 3/32 (.09 bp). At 8:30 two data points, both weaker than expectations, improved treasuries and mortgages momentarily but it didn't last. August retail sales were expected to be up 0.2% overall and ex autos +0.3%; as reported sales were unchanged and ex autos +0.1%. July retail sales were revised to +0.3% frm +0.5%. August producer price index was expected down 0.1% overall and +0.2% when food and energy are removed, as reported PPI was unchanged and ex food and energy +0.1%. The weaker PPI supports the view that inflation isn't a problem. Yr/yr overall PPI +6.5%, ex food and energy +2.5%; at 2.5% it is at the Fed's target range. By 9:00 the 10 yr note yield was back to 2.02% and mortgage prices down 5/32 (.15 bp).
Sec Treasury Geithner on CNBC this morning saying Europe has the financial strength to avoid defaults in the countries that are on the edge with debt. He said he doesn't know whether there is the political will to do it. He said the obvious, that Europe's problems are causing a lack of confidence in the US. He encouraged Congress to pass the jobs bill offered up by the Administration. Europe's banks remain troubled; asked if the banks could pass the US bank stress tests, Geithner didn't answer pointing to the audience of funds managers saying they will be the judges. He admitted US growth isn't what the Administration had expected. His interview with Jim Cramer didn't move markets. His take away in the interview; he said there is no chance Europe will let their institutions fail.
Stocks rose for a second day in Europe, reversing earlier losses, on speculation China may still offer support for the region’s most-indebted nations. Greek Prime Minister George Papandreou will hold a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy amid speculation Greece will default.
Pessimism about the economy has deepened and confidence in both U.S. political parties has fallen, with only 20 saying the country is on the right course. As little as 9% of Americans say they are confident the economy won’t slide into a recession, according to a Bloomberg National Poll.
Mortgage markets were choppy this morning; at 9:00 mortgage markets -6/32 (.18 bp), at 9:15 -4/32 (.12 bp) and at 9:30 +1/32 (.03 bp). The 10 yr at 9:00 -7/32 at 2.02%, at 9:30 -4/32 at 2.01%; 2.00% continues to be a heavy lift to keep it below that key psychological level. Yesterday the 10 yr note auction wasn't met with strong demand, it was mediocre based on demand. At 9:30 the DJIA opened +24, lower than where the index traded at 9:00 am.
At 10:00 July business inventories, expected up 0.5%, were up 0.4%; June revised to +0.4% frm 0.3%. Sales were up 0.7%, the inventory to sales ratio to 1.27 months from +1.28 months in June. Business inventory growth is very weak recently reflecting the economic outlook. No reaction to the report in treasuries; the 10 yr had climbed back to unchanged from -11/32 early this morning.
At 1:00 Treasury will auction $13B of 30 yr bonds completing $66B of borrowing this week. The 3 yr and 10 yr auctions were OK but demand didn't match recent auctions; the 30 today should get more interest.
As long as the 10 yr note doesn't climb above 2.10% the positive outlook will continue, a break above it would set up a run up to 2.30% and take mortgage rates up with it. The treasury market remains slightly overbought based on momentum readings while the US stock market is equally oversold. Next week the FOMC will hold a two day meeting, some traders looking for more Fed help, while others including some FOMC members don't believe more easing is necessary.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, September 14, 2011
Prior to 8:30 the 10 yr note yield had increased to 2.03% +4 basis points from yesterday's close. Mortgage prices were down 3/32 (.09 bp). At 8:30 two data points, both weaker than expectations, improved treasuries and mortgages momentarily but it didn't last. August retail sales were expected to be up 0.2% overall and ex autos +0.3%; as reported sales were unchanged and ex autos +0.1%. July retail sales were revised to +0.3% frm +0.5%. August producer price index was expected down 0.1% overall and +0.2% when food and energy are removed, as reported PPI was unchanged and ex food and energy +0.1%. The weaker PPI supports the view that inflation isn't a problem. Yr/yr overall PPI +6.5%, ex food and energy +2.5%; at 2.5% it is at the Fed's target range. By 9:00 the 10 yr note yield was back to 2.02% and mortgage prices down 5/32 (.15 bp).
Sec Treasury Geithner on CNBC this morning saying Europe has the financial strength to avoid defaults in the countries that are on the edge with debt. He said he doesn't know whether there is the political will to do it. He said the obvious, that Europe's problems are causing a lack of confidence in the US. He encouraged Congress to pass the jobs bill offered up by the Administration. Europe's banks remain troubled; asked if the banks could pass the US bank stress tests, Geithner didn't answer pointing to the audience of funds managers saying they will be the judges. He admitted US growth isn't what the Administration had expected. His interview with Jim Cramer didn't move markets. His take away in the interview; he said there is no chance Europe will let their institutions fail.
Stocks rose for a second day in Europe, reversing earlier losses, on speculation China may still offer support for the region’s most-indebted nations. Greek Prime Minister George Papandreou will hold a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy amid speculation Greece will default.
Pessimism about the economy has deepened and confidence in both U.S. political parties has fallen, with only 20 saying the country is on the right course. As little as 9% of Americans say they are confident the economy won’t slide into a recession, according to a Bloomberg National Poll.
Mortgage markets were choppy this morning; at 9:00 mortgage markets -6/32 (.18 bp), at 9:15 -4/32 (.12 bp) and at 9:30 +1/32 (.03 bp). The 10 yr at 9:00 -7/32 at 2.02%, at 9:30 -4/32 at 2.01%; 2.00% continues to be a heavy lift to keep it below that key psychological level. Yesterday the 10 yr note auction wasn't met with strong demand, it was mediocre based on demand. At 9:30 the DJIA opened +24, lower than where the index traded at 9:00 am.
At 10:00 July business inventories, expected up 0.5%, were up 0.4%; June revised to +0.4% frm 0.3%. Sales were up 0.7%, the inventory to sales ratio to 1.27 months from +1.28 months in June. Business inventory growth is very weak recently reflecting the economic outlook. No reaction to the report in treasuries; the 10 yr had climbed back to unchanged from -11/32 early this morning.
At 1:00 Treasury will auction $13B of 30 yr bonds completing $66B of borrowing this week. The 3 yr and 10 yr auctions were OK but demand didn't match recent auctions; the 30 today should get more interest.
As long as the 10 yr note doesn't climb above 2.10% the positive outlook will continue, a break above it would set up a run up to 2.30% and take mortgage rates up with it. The treasury market remains slightly overbought based on momentum readings while the US stock market is equally oversold. Next week the FOMC will hold a two day meeting, some traders looking for more Fed help, while others including some FOMC members don't believe more easing is necessary.
Tuesday, September 13, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, September 13, 2011
A quiet but little weaker start this morning; the 10 yr-2/32 and mortgage prices -.06 bp at 9:00. At 8:30 August import prices declined -0.4% against forecasts of -0.8%; export prices +0.5% against unchanged expected; no reaction to the data as usual. Today has no real data to look at; at 1:00 Treasury will auction $21B of 10 yr notes re-opening the 10 yr issued in August. Yesterday's $32B of 3 yr notes was mediocre, not bad but no strong demand for 3 yr yield at 0.334%. At 2:00 this afternoon Treasury will report the August budget deficit at -$132B.
Markets in the US still being driven by lack of events with Europe's debt mess. In early Europe activity this morning there was a report that France and Germany were about to make a statement on Greece's debt, later the French government said that wasn't the case, there is no announcement. Europe's stocks turned lower. German Chancellor Merkel said overnight she won’t let Greece go into an “uncontrolled insolvency” because of the risk of contagion for other countries. Italy sold 3.9 billion euros ($5.3B) of a new five-year benchmark bond as borrowing costs rose and demand fell. A government official said yesterday the nation held talks with China about potential investments in the euro area’s third- largest economy. The rate was 5.6%, compared with 4.93% at the previous auction and demand was 1.28 times the amount on offer, down from 1.93 times earlier.
The National Federation of Independent Business’s optimism index decreased to 88.1, the weakest reading since July 2010 and the sixth-consecutive decline, from 89.9 in July. The number of small-business owners saying they expected the economy will improve six months from now fell to the lowest level since 1980. Six of the index’s 10 components decreased. The gauge of expectations for better business conditions six months from now led the decline, falling 11 points to a net minus 26 percent in August. The drop brought business assessment of the economy to the lowest level since the second quarter of 1980, when the measure fell to minus 37, according to Dunkelberg. Based on the NFIB report today Obama's jobs bill isn't going to light a fire under small businesses where most all new jobs come from.
Obama's jobs bill, if passed, does not appear to add permanent jobs to the work force or encourage businesses to hire workers. Most of the jobs that would be created in his plan would be teachers, state union workers and construction workers for the "shovel ready" jobs. Shovel ready didn't add many jobs with the first stimulus and likely won't do so this time; as for teachers, a good idea but after the initial subsidy to pay them, who will continue to pay their salaries? Based on the markets' reactions since last Thursday evening, there isn't much enthusiasm for his plan so far.
At 9:30 the DJIA opened -10, the 10 yr note ahead of this afternoon's auction -4/32 at 1.96% +1 bp and mortgage prices -2/32 (.06 bp) on 30s, -6/32 (.18 bp) on FHAs.
By 10:00 the rate markets were weaker than when most lenders priced; the 10 yr note yield up to 1.98% and mortgage prices -4/32 (.12 bp). The stock market is essentially unchanged; nothing of substance out of Europe debt crisis, the main issue driving US equities and bond markets. This afternoon Treasury will sell $21B of 10 yr notes, likely will keep treasuries from improving much unless the stock market declines. Technically the bond market is approaching overbought readings on the momentum oscillators. No reason to become bearish in the bond market unless Europe finds a way out of the current debt crisis.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, September 13, 2011
A quiet but little weaker start this morning; the 10 yr-2/32 and mortgage prices -.06 bp at 9:00. At 8:30 August import prices declined -0.4% against forecasts of -0.8%; export prices +0.5% against unchanged expected; no reaction to the data as usual. Today has no real data to look at; at 1:00 Treasury will auction $21B of 10 yr notes re-opening the 10 yr issued in August. Yesterday's $32B of 3 yr notes was mediocre, not bad but no strong demand for 3 yr yield at 0.334%. At 2:00 this afternoon Treasury will report the August budget deficit at -$132B.
Markets in the US still being driven by lack of events with Europe's debt mess. In early Europe activity this morning there was a report that France and Germany were about to make a statement on Greece's debt, later the French government said that wasn't the case, there is no announcement. Europe's stocks turned lower. German Chancellor Merkel said overnight she won’t let Greece go into an “uncontrolled insolvency” because of the risk of contagion for other countries. Italy sold 3.9 billion euros ($5.3B) of a new five-year benchmark bond as borrowing costs rose and demand fell. A government official said yesterday the nation held talks with China about potential investments in the euro area’s third- largest economy. The rate was 5.6%, compared with 4.93% at the previous auction and demand was 1.28 times the amount on offer, down from 1.93 times earlier.
The National Federation of Independent Business’s optimism index decreased to 88.1, the weakest reading since July 2010 and the sixth-consecutive decline, from 89.9 in July. The number of small-business owners saying they expected the economy will improve six months from now fell to the lowest level since 1980. Six of the index’s 10 components decreased. The gauge of expectations for better business conditions six months from now led the decline, falling 11 points to a net minus 26 percent in August. The drop brought business assessment of the economy to the lowest level since the second quarter of 1980, when the measure fell to minus 37, according to Dunkelberg. Based on the NFIB report today Obama's jobs bill isn't going to light a fire under small businesses where most all new jobs come from.
Obama's jobs bill, if passed, does not appear to add permanent jobs to the work force or encourage businesses to hire workers. Most of the jobs that would be created in his plan would be teachers, state union workers and construction workers for the "shovel ready" jobs. Shovel ready didn't add many jobs with the first stimulus and likely won't do so this time; as for teachers, a good idea but after the initial subsidy to pay them, who will continue to pay their salaries? Based on the markets' reactions since last Thursday evening, there isn't much enthusiasm for his plan so far.
At 9:30 the DJIA opened -10, the 10 yr note ahead of this afternoon's auction -4/32 at 1.96% +1 bp and mortgage prices -2/32 (.06 bp) on 30s, -6/32 (.18 bp) on FHAs.
By 10:00 the rate markets were weaker than when most lenders priced; the 10 yr note yield up to 1.98% and mortgage prices -4/32 (.12 bp). The stock market is essentially unchanged; nothing of substance out of Europe debt crisis, the main issue driving US equities and bond markets. This afternoon Treasury will sell $21B of 10 yr notes, likely will keep treasuries from improving much unless the stock market declines. Technically the bond market is approaching overbought readings on the momentum oscillators. No reason to become bearish in the bond market unless Europe finds a way out of the current debt crisis.
Friday, August 19, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, August 19, 2011
Very early this morning global stock markets have been hit hard again from Asia to Europe and in the US futures pre-opening trading. Last night the US 10 yr note traded down to 2.03%, it may have been lower but at 2:00 am this morning that is where it sat. At 8:00 this morning even with stocks expected to open lower again. the 10 yr note was off 10/32 at 2.10% +3 bp and mortgages were down as much as 14/32 (.44 bp) frm yesterday's close. Volatility continues to increase, as it does the risks increase, whether trading interest rates, currencies or stocks.
Today is going to be very interesting in the bond and mortgage markets; at 9:00 the 10 yr note traded down 5/32 at 2.09% +2 bp and mortgage prices were down 14/32 (.44 bp) frm yesterday's close. At 9:00 the DJIA -137, NASDAQ -22, and S&P -15, and gold up $31.00. That US treasuries and mortgages are trading lower with the stock market also being hit goes contrary to what has been the norm for months. The question now, and one that I don't have an answer, have the US interest rate markets hit their lows in yields? Yesterday the 10 yr made a run down to 1.97% but it quickly jumped back above 2.00% ending the day at 2.07%, last night the 10 made another run towards 2.00% and failed again.
Just about every firm has now lowered the growth forecasts for the US economy. Recession is now the new word of the day. In Europe the banking system remains fragile; earlier this week France and Germany met, avoiding any comments about issuing euro bonds to shore up banks. Early this morning the EU reported it may present draft legislation along with a report on the feasibility of common bonds. More than $6 trillion has been erased from the value of global equities this month on signs the U.S. recovery is stumbling, while the cost of insuring European sovereign debt is back to levels that triggered the region’s central bank to buy Italian and Spanish bonds on Aug. 8.
Bank of America, troubled by increasing losses on mortgage foreclosures and penalties for improper foreclosure processes, announced it will cut another 3500 jobs; previously the bank cut 2500 jobs. Its stock is tumbling as are all the big banks in the US that may have counter-party risks with banks in Europe that are suffering huge losses on their stocks and losses expected when those banks have to write down sovereign debt to the Fab five countries unable to pay their debts.
There are no economic releases to think about today; the stock market trading will dominate all news again today. Going into the weekend traders are likely to level off some of the bearish trades. Although the stock market is opening lower, we wouldn't be surprised that by the end of the day losses may be pared back. Investors are scrambling for liquidity as the economic outlook has turned 180 degrees in just three weeks.
At 9:30 the DJIA opened -95, NASDAQ -24, S&P -9; the open wasn't quite as bad as futures markets were implying. The 10 yr note at 9:30 improved to -3/32 while mortgage prices were -9/32 (.28 bp) frm yesterday's closes. Trade is unusual this morning, there is no movement into US treasuries on additional safe haven buying, it looks like investors are choosing to go into gold and not treasuries, at least so far. The day is setting up for even more potential of volatility; the bond and mortgage markets are surprising traders, actually weaker on another decline in equities.
Treasuries and mortgage markets are unusually soft this morning with the stock market weaker, if the equity markets reverse and improve this afternoon treasuries and mortgages may take additional hits. Technically the 10 failing to hold at 2.00% is momentarily troubling, we have to back 60 years to find interest rates this low. By 10:00 the stock indexes have already shed their opening levels, although still weaker markets are finding some support. Be extremely careful now in floating loans; we suggest locking until the 10 yr can move below 2.00% (it can). Rates are increasing this morning. Interest rate markets at the moment are questionable as to how they will trade the rest of the day. Be very careful now.
Thursday, August 18, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, August 18, 2011
The US stock market is being hit hard this morning on continued weakness in Europe's bank stocks that are seeing heavy selling. This morning the bond and mortgage markets opened strong, the 10 yr note at 2.10% at 8:30, mortgage prices +8/32 (.25 bp), the DJIA futures index -231. The situation in Europe over sovereign debt problems in five of its EU countries isn't getting any closer to a resolution. Tuesday France and German leaders met, it was in market terms a non-event; neither country is willing to do much more to come up with a workable plan, assuming of course there is a chance. Investors are increasingly more concerned the banks in Europe are unprepared for the possibility that there could be actual defaults. The infection in Europe is quickly moving to the US and the economic outlook. Banks in Europe are being hit hard today, down about 8.0% on many bank stocks, even with short selling bans in place in many countries; US and Asian banks are increasingly unwilling to lend the Europe's banks.
The WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe’s largest banks on concern that the sovereign debt crisis may lead to funding problems. The Federal Reserve Bank of New York has been holding talks with the lenders and sought information about their access to funds to maintain operations in the U.S., the newspaper said, citing people it didn’t identify. Europe and its regulators, the IMF and the ECB have made little or no progress toward a plan to avoid defaults; the result is dragging US stocks lower this morning and increasing the idea the US economy will decline further.
Two data points at 8:30; weekly jobless claims increased 9K to back above 400K to 408K, its been 16 weeks with clams at or above 400K (last week's claims revised to 399K frm 395K). Continuing claims increased 7K to 3.702 mil. July consumer price index jumped 0.5%, over twice the expected increase (0.2%); the core rate however was up 0.2% as expected. Yr/yr overall CPI +3.6%, yr/yr on the core rate +1.8%. CPI more tame than producer prices, but may see increase next month if producers have to push through their increasing costs. There was no reaction in markets over the 8:30 data.
At 9:30 the DJIA opened down 230 points, the 10 yr note +30/32 at 2.06% -11 bp and mortgages +17/32 (.53 bp). Gold jumping over $1800.00 to $1821.00. Not a pretty picture to start the day.
Three key economic releases at 10:00. August Philadelphia Fed business index, expected at 4.0 frm 3.2 in July, shocked, down to -30.7, new orders index -26.8, employment component -5.2 frm +8.9 in July. The report is rocking markets even more than prior to the data; any index read under zero is considered contraction, this was a huge hit. More bad news; July existing home sales were expected to be up 3.0%, sales as reported declined 3.5% to 4.67 mil against forecasts of 4.92 mil. The only bright point today, July leading economic indicators were up 0.5%, a little higher but always overlooked by traders. The 10:00 data pushed the 10 yr note yield to 1.97% on the knee jerk reaction.
Interest rates crumbling this morning as the stock market is being hit hard. Mortgage rates and prices improving but will likely drag treasuries with lenders still facing huge problems with re-financing locks that for the most part are falling through the cracks; one lender pointing out the pull-through rate is a low as 20%. That seems extremely low, but it indicates that many of the re-finance applications will not make it to closing, either because of appraisals, credit scores, lack of equity or just backing off as rates decline.
Wednesday, August 17, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, August 17, 2011
Yesterday the bond and mortgage markets improved, the stock market declined; on Monday the bond and mortgage markets declined while the stock market rallied. This morning markets continue their now almost predictable moves; since yesterday was a down day for stocks, today is likely an up day and will keep mortgage prices lower. It is becoming a trend; whatever markets do one day, the next day will be the opposite. Meanwhile mortgage lenders continue to set prices that don't always follow the actual market to control flow. Some lenders appear to be unable to keep up with the increased volume and price defensively.
July producer price index at 8:30 was a little stronger than expected; overall PPI increased 0.2% but the core, ex food and energy expected up 0.2% increased 0.4%, Yr/yr overall PPI +7.2% and yr/yr core +2.5%. Treasuries and mortgage markets didn't show any reaction to the hotter inflation core rate. With the US and global economies sluggish there is little concern that inflation will take hold. I am somewhat surprised that the bond market didn't react to the increase on the core inflation rate at 2.5% yr/yr, that is the level of the Fed's target range for the core.
European stocks are little changed, paring earlier losses after German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday rejected an expansion of the region’s rescue fund and rebuffed calls for joint euro borrowing. Asian shares and U.S. index futures are doing a little better this morning in pre-market trading, at 9:00 the DJIA was up 22 points but had backed off better levels seen at 8:00 am.
At 9:30 the DJIA opened +34, the 10 yr note +1/32 at 2.22% and mortgage prices +2/32 (.06 bp) frm yesterday's close. At 9:15 mortgage prices were down 1.32 (.03 bp). By 10:00 stock indexes are moving higher (+91 on the DJIA), the 10 yr note -4/32 and mortgage prices +1/32 (.03 bp).
At 7:00 this morning the weekly MBA mortgage applications. The ongoing drop in interest rates is driving refinancing demand higher but, unfortunately, has yet to drive up demand for home purchases. The refinancing index extended its run of jumps in the August 12 week with an 8.0% gain after a 30% increase last week. The purchase index continues to show weakness, down a very steep 9.1%. The rate for 30-year mortgages fell five basis points in the week to 4.32% with the 15-year rate also down five basis points, to 3.47%; a new low rate. Consumers still not stepping up to buy, very low prices and interest rates have yet to show and positive impact in the housing sector. After the Washington clown act over the debt ceiling and spending cuts, consumer sentiment took a dip. Job insecurity continues, debt deleveraging by consumers is continuing.
Pres Obama will make a Labor Day speech calling on Congress for more money to increase employment. The president also will call for long-term cuts beyond the $1.5 trillion that Congress charged a 12-member bipartisan “super- committee” of lawmakers to trim. His plan will likely have a mix of tax cuts and infrastructure spending and will include proposals beyond the ideas that he has mentioned on his current Midwest bus tour, such as extending a payroll tax cut for workers and unemployment insurance benefits. In addition to tax cuts and infrastructure spending, Obama will offer proposals targeted for the long-term unemployed. The dollar amount of the additional long-term deficit reduction measures will exceed the cost of the new short-term spending that he will propose. On his bus tour the president outlined a number of measures that he wants Congress to approve, including renewing a payroll tax cut for workers, revamping the patent process, approving free-trade deals and setting up a so-called infrastructure bank to help fund construction projects such as road-building.
Friday, August 12, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, August 12, 2011
Rate markets a little better this morning after heavy selling yesterday took mortgage prices down 41/32 (128 bp). The see saw continues in the stock market, down one day hard, up strong the next day; uncertainty still rules markets. Yesterday the stock indexes jumped 423 (DJIA) after dumping 520 on Wednesday; this morning the key indexes are actually better. Can we have two up days in a row? We will have to wait until the close to see, the volatility remains extreme and not possible to predict where markets will trade the next five minutes let alone for the next six hours.
At 8:30 July retail sales were up 0.5% overall and up 0.5% when auto sales are extracted; a little better than forecasts on the ex autos sales. June retail sales, originally reported up a very weak 0.1% were revised to +0.3%. There was no noticeable reaction to it. Sales in July were the best in four months suggesting consumers, while conservative, are still buying.
At 9:30 the DJIA opened up 90, the 10 yr note at 2.28% -5 bp and mortgage prices +16/32 (.50 bp) frm yesterday's close.
At 9:55 the U. of Michigan mid-month consumer sentiment index, expected at 63.0 frm 63.7 at the end of July, tumbled to 54.9, the lowest index read since May 1980. The current conditions component fell to 69.3 frm 75.8 and the 12 month outlook index fell to 40 frm 55. A very weak report that has pushed mortgage prices higher from 9:30 and took some wind out of the stock indexes although still holding gains. Not really much of surprise given the current economic outlook and consumer anger over Was
At 10:00 June business inventories expected up 0.6%, were up 0.3%; sales up 0.4%leaving a 1.28 month supply unchanged from May.
This morning France reported its quarterly GDP at zero, no growth. More evidence that Europe's economies are softening just as we have here. European industrial production unexpectedly fell in June, it fell 0.7% from May. European economic confidence weakened in July and manufacturing growth slowed, based on a survey of purchasing managers. Euro-region growth probably weakened in the second quarter from 0.8% in the previous three months, European Central Bank President Jean-Claude Trichet said on Aug. 4. In the year, the economy may expand about 1.9% before cooling to 1.7% in 2012.
Turkey, Greece and South Korea trying to stem the heavy selling in equity markets have banned short sales. The take away is that by doing so the volatility will lessen and remove some of the panic. Likely the bans have helped our market in early trade this morning. Banning shot sales has never really worked before where it has been implemented, but the initial reaction generally does slow it down. In the longer perspective the markets will go where investors want it to go, based on underlying fundamentals.
Renewed talk this morning that most economists are now expecting another QE move from the Fed. If the Fed does another easing move it isn't likely to increase employment anytime soon. The advantage, and possibly the logic in another easing, is that the Fed could drive long term rates even lower and push mortgage rates down to levels never seen before. Doing so would likely keep re-financing going, lowering debt service for consumers thus increasing consumer spending. Taking it further, if consumers increase spending the hope is that businesses will increase hiring. From my perspective, driving rates lower won't meet the expectations; homeowners will take advantage of it but won't open purses for much increase in discretionary spending. Until consumer confidence increases about our leadership in this country, consumers rightly will continue to be cautious. New polls out show citizens have very little confidence in Washington, Republicans, Democrats and Pres Obama. After the embarrassing performance over the debt ceiling America is fed up. Any QE move from the Fed will likely be announced on August 26th at Jackson Hole.
The mortgage market is continuing to exhibit extreme day to day volatility. Mortgage rates will stay low with the Fed intent on keeping rates down, however until the 10 yr treasury note falls below 2.00% (now 2.27%) prices in the mortgage markets will continue to trade in wide interday swings. The bond and mortgage markets are still technically overbought, that may keep mortgage rates vulnerable for awhile. The wider perspective remains bullish, the near term outlook is for continued choppy trading.
Thursday, August 11, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, August 11, 2011
Early this morning, prior to 8:30 interest rate markets were somewhat better; at 8:30 weekly jobless claims were better than expected. Claims fell 7K to 395K to a four-month low, signaling the recent slowdown in payroll gains is due to a lack of hiring rather than more firings. Continuing claims fell to 3.688 mil frm 3.748 mil last week. Although claims were better they are still weak but after the serious beatdown of stocks recently and the big decline in rates markets it was enough to stop selling. The mortgage markets continue to be exceptionally volatile, at 9:00 mtg prices down 10/32 (.31 bp). Yesterday MBS markets were swinging back and forth in rapid fashion, one of the most volatile days in mortgage markets in over a year.
The stock market is way oversold based on technicals and psychological readings; the rate markets are equally overbought. Taking any positions in these markets has been risky, this morning the DJIA at 8:00 was down 130 points, at 9:15 +45; mortgage prices at 8:30 +5/32 (.15 bp) at 9:15 -11/32 (.34 bp).
News coming out of Europe has helped the US equity markets a little so far this morning. The NY Times is reporting regulators in Europe are considering barring any short sales in the various stock markets and shorting financial stocks. No solid info yet but when the report hit the wires it did boost stock index trading in pre-market futures. Turkey moved to curb short sales and threatened “severe penalties” for stock manipulation, joining nations from Greece to South Korea in trying to stem bearish bets after the worst tumble in global shares since 2008.
The June Treasury budget balance out at 8:30 was monthly deficit of $53.1B, markets were expecting -$48.0B. It is the highest level since October 2008 as a slump in exports exceeded a decline in shipments from overseas. Red ink continues at record levels while our leaders seem to be living in a fog and apparently do not get it yet.
At 9:30 the DJIA opened +123, the 10 yr note -7/32 at 2,20% +3 bp and mortgage markets, very volatile so far this morning down 11/32 (.34 bp). Prices of MBSs this morning are moving in 4/32 to 10/32 swings from minute to minute, difficult to say just how various lenders priced this morning.
At 1:00 this afternoon Treasury will complete the quarterly refunding with $16B of 30 yr bonds up for sale. The 10 and 3 yr auctions both were very well bid, the 30 should also see strong bidding.
Extreme volatility continuing this morning led by the stock indexes. The US bond market, based on the bellwether 10 yr note is ripe for a retracement as is the stock market. Recent activity has been based on panic and short selling by savvy traders and some hedge funds. The 10 yr hit 2.08% yesterday before closing at 2.16%; since back in the late 40s and early 50s the low yield for the 10 yr has been 2.03% hit in Dec 2008. The rate market is unlikely to push below 2.00% on the 10 yr without some consolidation at present to higher levels. Mortgage rates are also likely to settle down here for a few days. There are no bulls now in stock markets, no bears in the bond market; a perfect set up for rebounds in both markets, although the wider perspective will remain bearish on the economic outlook and bullish for rates, but lower rates from here may be a struggle for awhile. Markets have to settle down now, we expect they will. Lenders are likely to continue defensive pricing, concerns that product locked at prices a week ago may not close is a problem not having much confidence on closings as rates have crashed lower over the past two weeks.
Friday, August 5, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, August 05, 2011
At 8:30 the BLS employment report; always a surprise and today no different. The unemployment rate was expected at 9.2%, as reported 9.1%. Non-farm jobs expected up 86K increased 117K; private jobs expected +100K increased 154K. The average hourly earnings up 0.4%, much stronger than expected. Revisions to May and June non-farm jobs; increased to 53K frm 25K in May, June to +46K frm +18K. Factory jobs in July increased 24K, factory jobs in June revised to +11K frm +6K.
Markets were extremely volatile on the knee jerk reaction to the better jobs report. The 10 yr note jumped to 2.52% frm 2.42% at yesterday's close; mortgage prices fell 25/32 (.78 bp). The DJIA futures index jumped 150 points. It was however short-lived and markets settled somewhat by 9:00, by 9:30 however the 10 yr was back to 2.52% and mtgs -22/32 (.69 bp).
The DJIA opened +140, NASDAQ +30, S&P +14; 10 yr note 2.52% +10 bp and mortgage prices -23/32 (.72 bp). (see below for 10:00 levels)
Markets were on the edge of even more damage today had the employment report been soft, that it wasn't will help settle things down today. We don't however, believe the report will radically change the sentiment that the economy is slowing, but it should at least take us back from the cliff of more panic selling that we had yesterday. Yesterday hot money stampeded to US bond markets in search of liquidity and a hedge against the crashing stock market. The action yesterday in the equity markets did a lot of technical damage to the key stock indexes, even a little better market today will not likely be strong enough to overcome the damage. The bond market is very overbought technically and is overdue for some retracement, we can expect that the next few days the rate markets will settle and prices will decline. The bullish bias how ever will remain in tact; it would take the 10 yr to climb back above 2.85% to change our outlook to negative.
Part of the heavy selling yesterday was motivated by events out of Europe, that situation is still out there. The banking system in Europe continues to deteriorate, as it does the economy in Europe will slow just as it is doing here. The ECB yesterday announced it would provide loans to euro banks for six months with repurchase agreements , a needed move as the banks are running out of liquidity and eventually will have to take huge hits from Greece, Spain, Italy, Portugal and Ireland. Europe's economy is slowing more rapidly than in the US. Although the US employment report will slightly improve the economic outlook, the problems in Europe will continue to weigh on US markets.
Although the employment data wasn't as weak as thought, the US economy is still soft and our outlook hasn't changed. Growth will continue to slow with only fractional growth. The report this morning was better than thought but it is still confirming jobs are not increasing much and unemployment remains high. Small businesses still face uncertain health care costs and inability to borrow; consumers will continue the deleveraging that has been occurring for two years, home prices still falling----nothing has changed from yesterday except momentary relief that employment wasn't as bad as thought in July, the data confirms a very slow improvement in jobs, almost meaningless. The bond and mortgage markets will remain positive and rates are likely to continue lower but with less pace and and increase in two way trading. After a better open the stock market has already rolled over.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, August 05, 2011
At 8:30 the BLS employment report; always a surprise and today no different. The unemployment rate was expected at 9.2%, as reported 9.1%. Non-farm jobs expected up 86K increased 117K; private jobs expected +100K increased 154K. The average hourly earnings up 0.4%, much stronger than expected. Revisions to May and June non-farm jobs; increased to 53K frm 25K in May, June to +46K frm +18K. Factory jobs in July increased 24K, factory jobs in June revised to +11K frm +6K.
Markets were extremely volatile on the knee jerk reaction to the better jobs report. The 10 yr note jumped to 2.52% frm 2.42% at yesterday's close; mortgage prices fell 25/32 (.78 bp). The DJIA futures index jumped 150 points. It was however short-lived and markets settled somewhat by 9:00, by 9:30 however the 10 yr was back to 2.52% and mtgs -22/32 (.69 bp).
The DJIA opened +140, NASDAQ +30, S&P +14; 10 yr note 2.52% +10 bp and mortgage prices -23/32 (.72 bp). (see below for 10:00 levels)
Markets were on the edge of even more damage today had the employment report been soft, that it wasn't will help settle things down today. We don't however, believe the report will radically change the sentiment that the economy is slowing, but it should at least take us back from the cliff of more panic selling that we had yesterday. Yesterday hot money stampeded to US bond markets in search of liquidity and a hedge against the crashing stock market. The action yesterday in the equity markets did a lot of technical damage to the key stock indexes, even a little better market today will not likely be strong enough to overcome the damage. The bond market is very overbought technically and is overdue for some retracement, we can expect that the next few days the rate markets will settle and prices will decline. The bullish bias how ever will remain in tact; it would take the 10 yr to climb back above 2.85% to change our outlook to negative.
Part of the heavy selling yesterday was motivated by events out of Europe, that situation is still out there. The banking system in Europe continues to deteriorate, as it does the economy in Europe will slow just as it is doing here. The ECB yesterday announced it would provide loans to euro banks for six months with repurchase agreements , a needed move as the banks are running out of liquidity and eventually will have to take huge hits from Greece, Spain, Italy, Portugal and Ireland. Europe's economy is slowing more rapidly than in the US. Although the US employment report will slightly improve the economic outlook, the problems in Europe will continue to weigh on US markets.
Although the employment data wasn't as weak as thought, the US economy is still soft and our outlook hasn't changed. Growth will continue to slow with only fractional growth. The report this morning was better than thought but it is still confirming jobs are not increasing much and unemployment remains high. Small businesses still face uncertain health care costs and inability to borrow; consumers will continue the deleveraging that has been occurring for two years, home prices still falling----nothing has changed from yesterday except momentary relief that employment wasn't as bad as thought in July, the data confirms a very slow improvement in jobs, almost meaningless. The bond and mortgage markets will remain positive and rates are likely to continue lower but with less pace and and increase in two way trading. After a better open the stock market has already rolled over.
Friday, July 29, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, July 29, 2011
Treasuries and mortgages were better early this morning on the failure of the House to pass its "plan" yesterday as was expected based on comments frm Speaker Boehner through the day. Safety moves into treasuries as Congress and the Administration move closer to a possible default is driving longer dated treasuries lower and with them mortgage rates. There is a lot of talk as you know, that the US will suffer a decline in its credit rating by the rating agencies. Based on reports this morning 75% of investors in treasuries said they would not change their investments or jettison treasuries if in fact the downgrade actually happens.
At 8:30 more improvement in treasuries and mortgages with the advance GDP report for Q2 showing the economy grew just 1.3% against general estimates of +1.9%. Q1 GDP was revised lower, from +1.9% on the final read last month to +0.4%, a huge revision lower. Forecasts of 85 economists in the survey ranged from 0.9% to 2.9%. At $13.27 trillion in the second quarter, GDP has yet to surpass the pre-recession peak. The GDP estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available. Consumer spending from April through June showed the smallest gain since the second quarter of 2009, when the economy was in recession. The slump reflected a 4.4% decline in purchases of durable goods like automobiles. Q2 employment cost index increased 0.7%; yr/yr up 2.2%.
Markets spent a lot of gray matter yesterday on the idea the Boehner plan would pass the House late yesterday; it didn't happen as conservative Tea Party members refused to go along even with Boehner flexing his leadership muscle. Even if the House would have passed its plan the Senate had made it clear it would be dead on arrival if it had reached the chamber. The next step isn't' clear; that said there are countless opinions about what will happen and what the impact will be under various scenarios.
President Obama is scheduled to talk about the impasse on the debt ceiling at 10:20 this morning.
More data at 9:45 when the July Chicago purchasing mgrs index hit; forecasts were for an unchanged index at 61.1, as reported 58.8; employment at 51.5 frm 58.7, new orders at 59.4 frm 61.2 and prices pd at 71.7 frm 70.5. Another weak report however the stock market didn't seem to react much to it, as the key indexes were already down hard from yesterday's closes. Treasuries and mortgage markets did add to their gains on the release, the 10 yr note yield dipped to 2.86% down 2 bp below its level prior to the report; mtgs jumped 4/32 (.12 bp in price)
At 9:55 the U. of Michigan consumer sentiment index, expected at 64.0 frm 63.8; was 63.7. The 12 month out expectations index at 55 frm 52. No reaction to it.
The bellwether 10 yr note this morning fell to 2.87% close to the 2.85% seen a month ago. With Washington in current gridlock on the debt ceiling investors are piling into safety positions, in US treasuries. That Congress and this Administration are at an impasse at the moment is surprising to me; I really believed they would act responsibly, always overestimate the will of politicians even though I set the bar exceptionally low.
At 9:30 the DJIA opened -130, the 10 yr note +20/32 at 2.88% -8 bp and mortgage prices +10/32 (.31 bp).
The bond and mortgage markets are testing last month's low yields this morning. Given the mess in Washington the potential for even lower rates has increased; however, we have to respect the technicals and the momentary double bottom in yields if rates don't push lower. The next few days are critical.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, July 29, 2011
Treasuries and mortgages were better early this morning on the failure of the House to pass its "plan" yesterday as was expected based on comments frm Speaker Boehner through the day. Safety moves into treasuries as Congress and the Administration move closer to a possible default is driving longer dated treasuries lower and with them mortgage rates. There is a lot of talk as you know, that the US will suffer a decline in its credit rating by the rating agencies. Based on reports this morning 75% of investors in treasuries said they would not change their investments or jettison treasuries if in fact the downgrade actually happens.
At 8:30 more improvement in treasuries and mortgages with the advance GDP report for Q2 showing the economy grew just 1.3% against general estimates of +1.9%. Q1 GDP was revised lower, from +1.9% on the final read last month to +0.4%, a huge revision lower. Forecasts of 85 economists in the survey ranged from 0.9% to 2.9%. At $13.27 trillion in the second quarter, GDP has yet to surpass the pre-recession peak. The GDP estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available. Consumer spending from April through June showed the smallest gain since the second quarter of 2009, when the economy was in recession. The slump reflected a 4.4% decline in purchases of durable goods like automobiles. Q2 employment cost index increased 0.7%; yr/yr up 2.2%.
Markets spent a lot of gray matter yesterday on the idea the Boehner plan would pass the House late yesterday; it didn't happen as conservative Tea Party members refused to go along even with Boehner flexing his leadership muscle. Even if the House would have passed its plan the Senate had made it clear it would be dead on arrival if it had reached the chamber. The next step isn't' clear; that said there are countless opinions about what will happen and what the impact will be under various scenarios.
President Obama is scheduled to talk about the impasse on the debt ceiling at 10:20 this morning.
More data at 9:45 when the July Chicago purchasing mgrs index hit; forecasts were for an unchanged index at 61.1, as reported 58.8; employment at 51.5 frm 58.7, new orders at 59.4 frm 61.2 and prices pd at 71.7 frm 70.5. Another weak report however the stock market didn't seem to react much to it, as the key indexes were already down hard from yesterday's closes. Treasuries and mortgage markets did add to their gains on the release, the 10 yr note yield dipped to 2.86% down 2 bp below its level prior to the report; mtgs jumped 4/32 (.12 bp in price)
At 9:55 the U. of Michigan consumer sentiment index, expected at 64.0 frm 63.8; was 63.7. The 12 month out expectations index at 55 frm 52. No reaction to it.
The bellwether 10 yr note this morning fell to 2.87% close to the 2.85% seen a month ago. With Washington in current gridlock on the debt ceiling investors are piling into safety positions, in US treasuries. That Congress and this Administration are at an impasse at the moment is surprising to me; I really believed they would act responsibly, always overestimate the will of politicians even though I set the bar exceptionally low.
At 9:30 the DJIA opened -130, the 10 yr note +20/32 at 2.88% -8 bp and mortgage prices +10/32 (.31 bp).
The bond and mortgage markets are testing last month's low yields this morning. Given the mess in Washington the potential for even lower rates has increased; however, we have to respect the technicals and the momentary double bottom in yields if rates don't push lower. The next few days are critical.
Tuesday, July 12, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, July 12, 2011
In early trade, equity futures were down on debt concerns in Greece and the possibility of contagion in Spain, Italy, Portugal, and Ireland. Problems in Greece are still unresolved despite the Band-Aides that been applied. It is now becoming more accepted that there will be some sort of Greek default. Fears over Italian solvency and political stability have now infected European markets and many are questioning the EU’s ability to handle the damage. This put pressure on the euro and US equity futures indicating that stocks would open lower in the US. EU finance ministers promised yesterday that they would offer cheaper loans and make the rescue fund for Greece more palatable but investors are losing confidence that these bigger problems in Greece will be contained.
Treasury yields fell significantly overnight on European fears but recovered somewhat near the 9:30am stock market opening. The 10-year note yield traded as low as 2.80%, the lowest yield since November, and then settled back to the 2.90% level. At the 9:30am opening, the 10-year was trading at 2.91% and the DJIA was lower by only about 5 points.
At 8:30am the trade deficit for May came in bigger than expected -$50.23B versus -$43.63B in April. This is the largest trade deficit since October 2008. The main growth in the deficit is due to petroleum demand. Imports and exports are growing but imports are outpacing exports. The big issue becomes that this negatively affects GDP and makes the advance 2nd quarter GDP report in two weeks possibly revised lower.
There is little for the markets to chew on today so focus will remain on European sovereign debt issues. The debt ceiling issue is essentially accepted as a done deal in that Congress will raise the limit and avoid a downgrading but media pundits will continue to talk about it. The focus will hopefully change to the spending cuts that will be agreed to that will come along with the increase in the debt ceiling limit.
Next on the calendar for today is at 1:00pm when the US Treasury will auction $32B in 3-year notes. We are in the midst of summer trading activity when many top decision makers are on holiday. This may make the markets more volatile with greater swings intraday.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, July 12, 2011
In early trade, equity futures were down on debt concerns in Greece and the possibility of contagion in Spain, Italy, Portugal, and Ireland. Problems in Greece are still unresolved despite the Band-Aides that been applied. It is now becoming more accepted that there will be some sort of Greek default. Fears over Italian solvency and political stability have now infected European markets and many are questioning the EU’s ability to handle the damage. This put pressure on the euro and US equity futures indicating that stocks would open lower in the US. EU finance ministers promised yesterday that they would offer cheaper loans and make the rescue fund for Greece more palatable but investors are losing confidence that these bigger problems in Greece will be contained.
Treasury yields fell significantly overnight on European fears but recovered somewhat near the 9:30am stock market opening. The 10-year note yield traded as low as 2.80%, the lowest yield since November, and then settled back to the 2.90% level. At the 9:30am opening, the 10-year was trading at 2.91% and the DJIA was lower by only about 5 points.
At 8:30am the trade deficit for May came in bigger than expected -$50.23B versus -$43.63B in April. This is the largest trade deficit since October 2008. The main growth in the deficit is due to petroleum demand. Imports and exports are growing but imports are outpacing exports. The big issue becomes that this negatively affects GDP and makes the advance 2nd quarter GDP report in two weeks possibly revised lower.
There is little for the markets to chew on today so focus will remain on European sovereign debt issues. The debt ceiling issue is essentially accepted as a done deal in that Congress will raise the limit and avoid a downgrading but media pundits will continue to talk about it. The focus will hopefully change to the spending cuts that will be agreed to that will come along with the increase in the debt ceiling limit.
Next on the calendar for today is at 1:00pm when the US Treasury will auction $32B in 3-year notes. We are in the midst of summer trading activity when many top decision makers are on holiday. This may make the markets more volatile with greater swings intraday.
Monday, May 23, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Monday, May 23, 2011
Treasuries have been bid from the get go in Asia as continued problems in the euro zone peripheries have sparked a flight to safety bid. On Saturday, S&P downgraded Italy's credit outlook to negative. Spanish citizens went to the polls over the weekend and dealt a devastating blow to Prime Minister Jose Luis Rodriguez's Socialist party as it witnessed its worst defeat in more than 30 years amid its plan for austerity. Manufacturing readings from China and the euro zone showed manufacturing slowed from previous readings. All of these developments have been grounds for a move into the safety of US Treasuries as maturities across the complex are seeing modest gains.
The Chicago Fed national index, which draws on 85 economic indicators, was -0.45 in April versus +0.32 in March. A reading below zero indicates below-trend-growth in the national economy and a sign of easing pressures on future inflation. The index decline follows last week's Philadelphia Fed index which also fell substantially.
US interest rates this morning are falling, following rate declines in Germany and France. Greece's debt, Spain's elections and new reports from Asian countries that their economies may not be as strong as what was widely believed. The US stock market is opening very soft this morning and bonds and mortgages benefiting from continuing safe haven moves out of more risky investments to US treasuries.
Crude oil this morning down over $3.00, the dollar stronger against the euro and other currencies. The dollar index is seeing strong gains on the heels of continued problems in euro zone peripheries. The index touched a session high of 76.37, its best level since mid-March. EUR/USD dipped below 1.40 for the first time since late-March, bogged down by S&P lowering Italy's credit outlook to negative, the Spanish election results, and slowing manufacturing numbers in the euro zone, France and Germany.
At 9:30 the bellwether 10 yr note is again at its lowest yield since last Dec; the DJIA opened -145, the 10 yr note at 3.10% -5 bp (lowest rate since last Dec); mortgage prices +8/32 (.25 bp) frm Friday's close.
This Week's Economic Calendar:
Tuesday;
10:00 am April new home sales (unchanged at 300K annualized units)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Apr durable goods orders (-2.0% frm +4.1% in March; ex transportation +0.6% frm +2.3% in March)
10:00 am FHFA housing price index (N/A)
1:00 pm $35B 5 yr note auction
Thursday;
8:30 am Q1 prelim GDP (+2.0%, up frm +1.8% in the advance report last month)
weekly jobless claims (-9K to 400K; con't claims 3.70 mil frm 3.711 mil)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am April personal income and spending (income +0.4%, spending +0.5%)
9:55 am U. of Michigan consumer sentiment index (72.4 unchanged)
10:00 am Mar pending home sales (-1.8%)
With all the bearish news over the weekend from China to Germany to France to the BRICs to Greece to Spain and here in the US with the Chicago Fed economic index reading negative; the safety moves to US bonds will keep mortgage rates lower. At 10:00 the 10 yr note is trading at its lowest yield seen in this run and the lowest since last Dec (3.10%). This week will likely be more volatile in the bond and mortgage markets with rates at these very low levels.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Monday, May 23, 2011
Treasuries have been bid from the get go in Asia as continued problems in the euro zone peripheries have sparked a flight to safety bid. On Saturday, S&P downgraded Italy's credit outlook to negative. Spanish citizens went to the polls over the weekend and dealt a devastating blow to Prime Minister Jose Luis Rodriguez's Socialist party as it witnessed its worst defeat in more than 30 years amid its plan for austerity. Manufacturing readings from China and the euro zone showed manufacturing slowed from previous readings. All of these developments have been grounds for a move into the safety of US Treasuries as maturities across the complex are seeing modest gains.
The Chicago Fed national index, which draws on 85 economic indicators, was -0.45 in April versus +0.32 in March. A reading below zero indicates below-trend-growth in the national economy and a sign of easing pressures on future inflation. The index decline follows last week's Philadelphia Fed index which also fell substantially.
US interest rates this morning are falling, following rate declines in Germany and France. Greece's debt, Spain's elections and new reports from Asian countries that their economies may not be as strong as what was widely believed. The US stock market is opening very soft this morning and bonds and mortgages benefiting from continuing safe haven moves out of more risky investments to US treasuries.
Crude oil this morning down over $3.00, the dollar stronger against the euro and other currencies. The dollar index is seeing strong gains on the heels of continued problems in euro zone peripheries. The index touched a session high of 76.37, its best level since mid-March. EUR/USD dipped below 1.40 for the first time since late-March, bogged down by S&P lowering Italy's credit outlook to negative, the Spanish election results, and slowing manufacturing numbers in the euro zone, France and Germany.
At 9:30 the bellwether 10 yr note is again at its lowest yield since last Dec; the DJIA opened -145, the 10 yr note at 3.10% -5 bp (lowest rate since last Dec); mortgage prices +8/32 (.25 bp) frm Friday's close.
This Week's Economic Calendar:
Tuesday;
10:00 am April new home sales (unchanged at 300K annualized units)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Apr durable goods orders (-2.0% frm +4.1% in March; ex transportation +0.6% frm +2.3% in March)
10:00 am FHFA housing price index (N/A)
1:00 pm $35B 5 yr note auction
Thursday;
8:30 am Q1 prelim GDP (+2.0%, up frm +1.8% in the advance report last month)
weekly jobless claims (-9K to 400K; con't claims 3.70 mil frm 3.711 mil)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am April personal income and spending (income +0.4%, spending +0.5%)
9:55 am U. of Michigan consumer sentiment index (72.4 unchanged)
10:00 am Mar pending home sales (-1.8%)
With all the bearish news over the weekend from China to Germany to France to the BRICs to Greece to Spain and here in the US with the Chicago Fed economic index reading negative; the safety moves to US bonds will keep mortgage rates lower. At 10:00 the 10 yr note is trading at its lowest yield seen in this run and the lowest since last Dec (3.10%). This week will likely be more volatile in the bond and mortgage markets with rates at these very low levels.
Friday, May 20, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: http://www.equityinvestmentcapital.com/
Building Strong, Lasting Relationships; One Client at a Time.
Friday, May 20, 2011
Yesterday's shocking surprise on the May Philly Fed business index turned what was likely to be a run to slightly higher rates around on a dime. The index was expected to increase from 18.5 in April to 20 in May' as released the index plunged to 3.9 and the new orders component fell substantially, from 18.8 to 5.4. Until that hit at 10:00 the bond and mortgage markets were not looking good; the 10 yr note yield had spiked from 3.11% on Tuesday to 3.25% at 9:59 yesterday and mortgage prices had declined 24/32 (.75 bp) with the 30 yr rate up 10 basis points. The very closely monitored Philly Fed decline temporarily reversed heavy selling that was predicated on the FOMC minutes from the 4/27 meeting in which there was a lot of discussion about the Fed ending easing moves and how the Fed would begin to exit and the first move to tighten. The take away on Wednesday; the Fed believes the economic recovery will continue, no more QE and with interest rates so low investors and traders started toward the exit.
Already this morning we have seen a little volatility; at 8:00 the 10 yr note traded up 4/32 at 3.15%; at 9:00 the 10 yr note -4/32 at 3.19%. Mortgages followed, trading up 3/32 (.09 bp) at 8:00, -3/32 (.09 bp) at 9:00. At 9:30 the DJIA, NASDAQ and S&P all opened weaker; at 9:30 the 10 yr note unchanged and mortgage prices down 3/32 (.09 bp) frm yesterday's close.
There are no economic releases scheduled today and nothing next Monday. With no data points to either confirm the weak Philly Fed data or refute it the bond and mortgage markets will look to the action in the equity markets for direction today. Next week Treasury will auction $99B of notes, with the markets presently uncertain today well be a quiet one.
Crude oil started a little better but has turned lower, while the key stock indexes are starting a little soft after some minor improvement yesterday. By 10:00 the DJIA was down 61, mortgage prices at 10:00 up 6/32 (.18 bp) frm 9:30 levels and the 10 yr note yield 3.15 -2 bp. As equity indexes fall the rate markets will benefit and helps erase the bearishness that had developed on Wednesday.
News out of Germany's central bank today that the economy will likely slow suggests Germany will not likely have to increase rates again. The reaction is strengthening dollar against the euro and indirectly adds some support to the US bond market. The US economic outlook has been lowered, if Europe's economies slow our bond and mortgage markets should hold up well. German growth is “likely to ease somewhat in the foreseeable future,” the Frankfurt-based Bundesbank said in its monthly bulletin published today. Not only Europe; Japan is now in its third recession in the last 10 yrs, this time the March 11th earthquake is causing deeper spending cuts by consumers than what had been expected. Household spending had the largest back-to-back quarterly drop since the global financial crisis in 2008, the Cabinet Office said yesterday. The figures contrast with comments by Japan’s central bank, which refrained from adding more stimulus today, that the economy’s main challenge is one of supply chain disruptions caused by the earthquake, tsunami and nuclear crisis.
Earlier this week we were expecting a small increase in rates when the bellwether 10 yr note continued to fail at its resistance level (3.14%/3.11%). Until yesterday's Philly Fed business index collapsed rates were gathering momentum with rates increasing. The Philly Fed changed our view somewhat; with increasing evidence of economic slowing what appeared to be the beginning of a little increase in rates has been alleviated, at least momentarily. Technically the 10 yr, 30 yr futures contracts as well as the 30 yr 4.0 FNMA coupon all testing their respective 200 day moving averages, so far all of those averages have held.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: http://www.equityinvestmentcapital.com/
Building Strong, Lasting Relationships; One Client at a Time.
Friday, May 20, 2011
Yesterday's shocking surprise on the May Philly Fed business index turned what was likely to be a run to slightly higher rates around on a dime. The index was expected to increase from 18.5 in April to 20 in May' as released the index plunged to 3.9 and the new orders component fell substantially, from 18.8 to 5.4. Until that hit at 10:00 the bond and mortgage markets were not looking good; the 10 yr note yield had spiked from 3.11% on Tuesday to 3.25% at 9:59 yesterday and mortgage prices had declined 24/32 (.75 bp) with the 30 yr rate up 10 basis points. The very closely monitored Philly Fed decline temporarily reversed heavy selling that was predicated on the FOMC minutes from the 4/27 meeting in which there was a lot of discussion about the Fed ending easing moves and how the Fed would begin to exit and the first move to tighten. The take away on Wednesday; the Fed believes the economic recovery will continue, no more QE and with interest rates so low investors and traders started toward the exit.
Already this morning we have seen a little volatility; at 8:00 the 10 yr note traded up 4/32 at 3.15%; at 9:00 the 10 yr note -4/32 at 3.19%. Mortgages followed, trading up 3/32 (.09 bp) at 8:00, -3/32 (.09 bp) at 9:00. At 9:30 the DJIA, NASDAQ and S&P all opened weaker; at 9:30 the 10 yr note unchanged and mortgage prices down 3/32 (.09 bp) frm yesterday's close.
There are no economic releases scheduled today and nothing next Monday. With no data points to either confirm the weak Philly Fed data or refute it the bond and mortgage markets will look to the action in the equity markets for direction today. Next week Treasury will auction $99B of notes, with the markets presently uncertain today well be a quiet one.
Crude oil started a little better but has turned lower, while the key stock indexes are starting a little soft after some minor improvement yesterday. By 10:00 the DJIA was down 61, mortgage prices at 10:00 up 6/32 (.18 bp) frm 9:30 levels and the 10 yr note yield 3.15 -2 bp. As equity indexes fall the rate markets will benefit and helps erase the bearishness that had developed on Wednesday.
News out of Germany's central bank today that the economy will likely slow suggests Germany will not likely have to increase rates again. The reaction is strengthening dollar against the euro and indirectly adds some support to the US bond market. The US economic outlook has been lowered, if Europe's economies slow our bond and mortgage markets should hold up well. German growth is “likely to ease somewhat in the foreseeable future,” the Frankfurt-based Bundesbank said in its monthly bulletin published today. Not only Europe; Japan is now in its third recession in the last 10 yrs, this time the March 11th earthquake is causing deeper spending cuts by consumers than what had been expected. Household spending had the largest back-to-back quarterly drop since the global financial crisis in 2008, the Cabinet Office said yesterday. The figures contrast with comments by Japan’s central bank, which refrained from adding more stimulus today, that the economy’s main challenge is one of supply chain disruptions caused by the earthquake, tsunami and nuclear crisis.
Earlier this week we were expecting a small increase in rates when the bellwether 10 yr note continued to fail at its resistance level (3.14%/3.11%). Until yesterday's Philly Fed business index collapsed rates were gathering momentum with rates increasing. The Philly Fed changed our view somewhat; with increasing evidence of economic slowing what appeared to be the beginning of a little increase in rates has been alleviated, at least momentarily. Technically the 10 yr, 30 yr futures contracts as well as the 30 yr 4.0 FNMA coupon all testing their respective 200 day moving averages, so far all of those averages have held.
Thursday, May 12, 2011
Interest Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: http://www.equityinvestmentcapital.com/
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, May 12, 2011
Three data points at 8:30 this morning; weekly jobless claims were expected to have declined 50K last week, as reported claims were down 44K after increasing 43K the previous week. Continuing claims 3.756 mil frm 3.751; the 4 wk average of claims 436K from 432K the previous week. April retail sales were reported up 0.5% overall, when auto ales are taken out sales were up 0.6%; about in line with estimates. April producer price index hit a little hot, up 0.8% overall, excluding food and energy up 0.3%; both were a little higher than forecasts. Yr/yr overall PPI +6.8%, ex food and energy +2.1%.
The 8:30 data taken well by all markets initially; the bond and mortgage markets were fractionally better prior to 8:30 and showed no movement on the data but we are somewhat concerned about how the bond market will take the increases in the PPI data. The increase, although minor, won't likely sit well for rate markets. With interest rates at these low levels any sniff that inflation may increase, whether real or imagined, will hinder bond markets.
The stock market supporting rate markets this morning with the indexes trading weaker prior to the 9:30 open. At 9:00 the DJIA -42, the 10 yr note about unchanged from yesterday's auction when a new 10 yr note was issued. Mortgage prices at 9:00 +.03 bp. At 9:30 the DJIA opened -23, the 10 yr note rate at 3.19% up frm 3.16% on the old 10 yr yesterday but -2 bp frm the auction yesterday; mortgage prices -.06 bp.
At 10:00 March business inventories expected up 0.9%, were up 1.0%, sales up 2.2%, Feb revised from +0.2% to +0.5%. The inventory to sales ratio a record low at 1.23 months from 1.24 months in Feb. No reaction.
Crude oil and gold, along with most other commodities continue to fall as the commodity trade that pushed most every commodity higher and to excess is ending with huge declines. Crude oil on Monday climbed back up to $103.50, at 9:00 this morning trading at $97.00. Yesterday gasoline futures came under heavy selling pressure pushing prices to limit down in the futures markets.
The Senate Banking Committee is starting hearings today on the Dodd Frank bill that in our view was Congress running amok. Bernanke along with FDIC Chair Sheila Bair, SEC Chair Mary Schapiro, CFTC Chair Gary Gensler, and Deputy Treasury Secretary Neal Wolin. There had to be some legislation to rein in the large banks that clearly demonstrated they have little self control and really demonstrated in the sub prime catastrophe that management of these huge banks didn't have a clue about what was happening in their banks. Most of the other stuff in the Dodd Frank bill was mostly unnecessary in its detail and complexity. Bernanke is expected to support the bill, many Republicans want the bill tossed into the trash.
At 1:00 Treasury will auction $16B of 30 yr bonds, it will be a new issue of 30s. Yesterday the 10 yr auction met with good demand; today's auction will also likely see firm demand according to traders we talk with. If however the 30 doesn't meet expectations rates will likely come under additional pressure. The 10 yr note still cannot clear 3.14%, the yield level achieved in early March before running up to 3.60%. Technically the bond and mortgage markets are still in overbought conditions; as noted yesterday, the longer the 10 yr fails to break resistance the more likelihood rates will notch up a little. Logic being, why continue to hold the 10 yr if this is the best the market can do; there is always hot money in the bond markets (trading on short term outlooks), that money moves quickly when the markets seems to run out of momentum.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: http://www.equityinvestmentcapital.com/
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, May 12, 2011
Three data points at 8:30 this morning; weekly jobless claims were expected to have declined 50K last week, as reported claims were down 44K after increasing 43K the previous week. Continuing claims 3.756 mil frm 3.751; the 4 wk average of claims 436K from 432K the previous week. April retail sales were reported up 0.5% overall, when auto ales are taken out sales were up 0.6%; about in line with estimates. April producer price index hit a little hot, up 0.8% overall, excluding food and energy up 0.3%; both were a little higher than forecasts. Yr/yr overall PPI +6.8%, ex food and energy +2.1%.
The 8:30 data taken well by all markets initially; the bond and mortgage markets were fractionally better prior to 8:30 and showed no movement on the data but we are somewhat concerned about how the bond market will take the increases in the PPI data. The increase, although minor, won't likely sit well for rate markets. With interest rates at these low levels any sniff that inflation may increase, whether real or imagined, will hinder bond markets.
The stock market supporting rate markets this morning with the indexes trading weaker prior to the 9:30 open. At 9:00 the DJIA -42, the 10 yr note about unchanged from yesterday's auction when a new 10 yr note was issued. Mortgage prices at 9:00 +.03 bp. At 9:30 the DJIA opened -23, the 10 yr note rate at 3.19% up frm 3.16% on the old 10 yr yesterday but -2 bp frm the auction yesterday; mortgage prices -.06 bp.
At 10:00 March business inventories expected up 0.9%, were up 1.0%, sales up 2.2%, Feb revised from +0.2% to +0.5%. The inventory to sales ratio a record low at 1.23 months from 1.24 months in Feb. No reaction.
Crude oil and gold, along with most other commodities continue to fall as the commodity trade that pushed most every commodity higher and to excess is ending with huge declines. Crude oil on Monday climbed back up to $103.50, at 9:00 this morning trading at $97.00. Yesterday gasoline futures came under heavy selling pressure pushing prices to limit down in the futures markets.
The Senate Banking Committee is starting hearings today on the Dodd Frank bill that in our view was Congress running amok. Bernanke along with FDIC Chair Sheila Bair, SEC Chair Mary Schapiro, CFTC Chair Gary Gensler, and Deputy Treasury Secretary Neal Wolin. There had to be some legislation to rein in the large banks that clearly demonstrated they have little self control and really demonstrated in the sub prime catastrophe that management of these huge banks didn't have a clue about what was happening in their banks. Most of the other stuff in the Dodd Frank bill was mostly unnecessary in its detail and complexity. Bernanke is expected to support the bill, many Republicans want the bill tossed into the trash.
At 1:00 Treasury will auction $16B of 30 yr bonds, it will be a new issue of 30s. Yesterday the 10 yr auction met with good demand; today's auction will also likely see firm demand according to traders we talk with. If however the 30 doesn't meet expectations rates will likely come under additional pressure. The 10 yr note still cannot clear 3.14%, the yield level achieved in early March before running up to 3.60%. Technically the bond and mortgage markets are still in overbought conditions; as noted yesterday, the longer the 10 yr fails to break resistance the more likelihood rates will notch up a little. Logic being, why continue to hold the 10 yr if this is the best the market can do; there is always hot money in the bond markets (trading on short term outlooks), that money moves quickly when the markets seems to run out of momentum.
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