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Wednesday, April 11, 2012
Mortgage Rates
Treasuries and mortgages are lower in price this morning, driven by the stock market opening better. After five sessions sending the DJIA down 546 points this morning a bounce; not unusual. The bond and mortgage markets have declined in yield on the weak employment report, soft US and global equity markets and renewed thinking that the Fed will have to do another QE. The current decline in rates has about totally discounted another easing into present rates. Going back to early August last year the 10 yr note has traded in a 50 basis point yield range frm 2.40% to 1.90% with the exception of 15 days when it dropped under 1.90%. Yesterday the 10 yr fell to 1.97% before closing at 1.99%; based on the last eight months the 10 is nearing its best levels on weaker global economic outlooks and the belief the Fed will ease again.
At 8:30 March import prices were up more than expect at +1.3%, mostly on energy imports; export prices +0.8%. Yr/yr import prices +3.4%, yr/yr export prices +0.9%. No reaction to the report.
Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2012. The Refinance Index decreased 3.1% from the previous week. The seasonally adjusted Purchase Index decreased 0.5% from one week earlier. The four week moving average for the seasonally adjusted Market Index is down 2.08%. The four week moving average is up 2.19% for the seasonally adjusted Purchase Index, while this average is down 3.45% for the Refinance Index. The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5% of total applications from 71.2% the previous week. This is the lowest refinance share since July 29, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5% 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) decreased to 4.10% from 4.16%, with points remaining unchanged at 0.43 (including the origination fee) for 80% loans. This is the lowest 30-year fixed rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.43% from 4.46%, with points decreasing to 0.36 from 0.49 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% from 3.89%, with points decreasing to 0.55 from 0.58 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37% from 3.40%, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.89% from 2.93%, with points increasing to 0.38 from 0.35 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened +90, NASDAQ +28 and S&P 500 +12. The 10 yr note -14/32 at 2.03 and mortgage prices -6/32 (.18 bp) on 30s and -5/32 (.15 bp;) on 15s.
1:00 this afternoon Treasury will auction $21B of 10 yr notes, a re-open of the 10 yr note issued in February. Yesterday’s 3 yr note was OK, today’s 10 yr should also get solid bidding; if not look for yields to increase.
The Fed’s Beige Book will be released at 2:00 pm. Details from each of the 12 Fed districts. After the weak employment report for March and other recent data points the Book will get a lot of attention. The Book is used by the FOMC when it meets on April 25th.
European stocks rebounded from a two-month low and U.S. equities halted the longest slump of the year as Alcoa Inc. opened the earnings season with an unexpected profit. Spanish bonds rose as a European Central Bank official signaled the ECB may revive its bond-purchase program. The euro strengthened from a seven-week low against the yen as Spain’s bonds climbed after a board member of the European Central Bank indicated it may buy the nation’s debt to reduce borrowing costs. “Spain shows the markets remain nervous,” ECB Executive Board member Benoit Coeure said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.” Last week Spain’s Prime Minister’s comments renewed fears of another debt crisis and it is one of the issues that has led to the decline in US interest rates.
Treasuries and mortgages are lower in price this morning, driven by the stock market opening better. After five sessions sending the DJIA down 546 points this morning a bounce; not unusual. The bond and mortgage markets have declined in yield on the weak employment report, soft US and global equity markets and renewed thinking that the Fed will have to do another QE. The current decline in rates has about totally discounted another easing into present rates. Going back to early August last year the 10 yr note has traded in a 50 basis point yield range frm 2.40% to 1.90% with the exception of 15 days when it dropped under 1.90%. Yesterday the 10 yr fell to 1.97% before closing at 1.99%; based on the last eight months the 10 is nearing its best levels on weaker global economic outlooks and the belief the Fed will ease again.
At 8:30 March import prices were up more than expect at +1.3%, mostly on energy imports; export prices +0.8%. Yr/yr import prices +3.4%, yr/yr export prices +0.9%. No reaction to the report.
Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2012. The Refinance Index decreased 3.1% from the previous week. The seasonally adjusted Purchase Index decreased 0.5% from one week earlier. The four week moving average for the seasonally adjusted Market Index is down 2.08%. The four week moving average is up 2.19% for the seasonally adjusted Purchase Index, while this average is down 3.45% for the Refinance Index. The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5% of total applications from 71.2% the previous week. This is the lowest refinance share since July 29, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5% 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) decreased to 4.10% from 4.16%, with points remaining unchanged at 0.43 (including the origination fee) for 80% loans. This is the lowest 30-year fixed rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.43% from 4.46%, with points decreasing to 0.36 from 0.49 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% from 3.89%, with points decreasing to 0.55 from 0.58 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37% from 3.40%, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.89% from 2.93%, with points increasing to 0.38 from 0.35 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened +90, NASDAQ +28 and S&P 500 +12. The 10 yr note -14/32 at 2.03 and mortgage prices -6/32 (.18 bp) on 30s and -5/32 (.15 bp;) on 15s.
1:00 this afternoon Treasury will auction $21B of 10 yr notes, a re-open of the 10 yr note issued in February. Yesterday’s 3 yr note was OK, today’s 10 yr should also get solid bidding; if not look for yields to increase.
The Fed’s Beige Book will be released at 2:00 pm. Details from each of the 12 Fed districts. After the weak employment report for March and other recent data points the Book will get a lot of attention. The Book is used by the FOMC when it meets on April 25th.
European stocks rebounded from a two-month low and U.S. equities halted the longest slump of the year as Alcoa Inc. opened the earnings season with an unexpected profit. Spanish bonds rose as a European Central Bank official signaled the ECB may revive its bond-purchase program. The euro strengthened from a seven-week low against the yen as Spain’s bonds climbed after a board member of the European Central Bank indicated it may buy the nation’s debt to reduce borrowing costs. “Spain shows the markets remain nervous,” ECB Executive Board member Benoit Coeure said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.” Last week Spain’s Prime Minister’s comments renewed fears of another debt crisis and it is one of the issues that has led to the decline in US interest rates.
Tuesday, April 10, 2012
Mortgage Rates
A quiet start this morning in the bond, mortgage and stock markets. At 9:00 the 10 yr +3/32 at 2.04% unch, MBS prices on 30 yr fixed +2/32 (.06 bp) and the DJIA index +9. By 9:30 the 10 yr yield down 1 bp, +5/32 and MBS prices on 30s +5/32 (.15 bp); the DJIA opened -20 points. European stocks fell to a two-month low and Asian equities retreated on concern growth is slowing after China’s imports missed economists’ forecasts. Bernanke said in a speech yesterday that the U.S. was still “far from having fully recovered.” The Bank of Japan kept its key interest rate unchanged today and no policy maker proposed extra stimulus. China reported a trade surplus for March as import growth trailed forecasts; March exports rose 8.9% from a year earlier, after an 18.4% increase in February. Growing concerns that China’s economy is slowing as imports slide.
The German 10 yr note yield sits at 1.67%; Spain’s 10 yr note at 5.94%, the spread the largest since late Nov as Spain struggles to cut expenses; Spain’s 10 yr up 18 basis points from last week. The euro region as the debt problem hasn’t gone away despite the liquidity support from the European Central Bank, a strong support for US treasuries as safety moves increase to treasuries.
Today begins earnings season for Q1 with Alcoa reporting late this afternoon. There is concern that earnings in Q1 may be lower than in Q4 when very strong earnings dominated; economic slowing in China and Europe will likely push earnings lower. The U.S. economy will accelerate 2.2% this year, up from 1.7% in 2011, according to the average of 72 estimates compiled by Bloomberg.
10 yr treasury yields would have to rise about 120 basis points to track the estimated price-earnings ratio for the S&P 500 as they did during the first three quarters of 2011; the differential primarily reflects the Federal Reserve’s plan to keep its benchmark interest rate close to zero at least through late 2014.
Last Friday’s very soft employment data for March is continuing to dominate traders’ thoughts. Was the data a one and out thing with job growth likely to bounce back in April? Or was it the beginning of a downturn in job growth that will continue as the global economic outlook declines. Europe’s economies with the exception of Germany and France are declining as cost cutting and job losses widen. Talk of QE 3 increased immediately on the employment data. While still uncertain what the fed will do, the momentum is building for another easing. The Fed however isn’t likely to move quickly, wanting to see more key data and possibly the April employment report on May 4th. Whether or not the Fed does ease again, the outlook for another easing has increased in the rate markets.
The only data point today, Feb wholesale inventories were expected +0.5%; as reported up 0.9%. Sales were up 1.2%, the inventory to sale ratio 1.17 months unchanged from January. Stock indexes sold off while the bond and mortgage markets gained a little on the report.
This afternoon at 1:00 Treasury will begin three days of auctions with $32B of 3 yr notes, the auction is expected to see strong bidding.
A quiet start this morning in the bond, mortgage and stock markets. At 9:00 the 10 yr +3/32 at 2.04% unch, MBS prices on 30 yr fixed +2/32 (.06 bp) and the DJIA index +9. By 9:30 the 10 yr yield down 1 bp, +5/32 and MBS prices on 30s +5/32 (.15 bp); the DJIA opened -20 points. European stocks fell to a two-month low and Asian equities retreated on concern growth is slowing after China’s imports missed economists’ forecasts. Bernanke said in a speech yesterday that the U.S. was still “far from having fully recovered.” The Bank of Japan kept its key interest rate unchanged today and no policy maker proposed extra stimulus. China reported a trade surplus for March as import growth trailed forecasts; March exports rose 8.9% from a year earlier, after an 18.4% increase in February. Growing concerns that China’s economy is slowing as imports slide.
The German 10 yr note yield sits at 1.67%; Spain’s 10 yr note at 5.94%, the spread the largest since late Nov as Spain struggles to cut expenses; Spain’s 10 yr up 18 basis points from last week. The euro region as the debt problem hasn’t gone away despite the liquidity support from the European Central Bank, a strong support for US treasuries as safety moves increase to treasuries.
Today begins earnings season for Q1 with Alcoa reporting late this afternoon. There is concern that earnings in Q1 may be lower than in Q4 when very strong earnings dominated; economic slowing in China and Europe will likely push earnings lower. The U.S. economy will accelerate 2.2% this year, up from 1.7% in 2011, according to the average of 72 estimates compiled by Bloomberg.
10 yr treasury yields would have to rise about 120 basis points to track the estimated price-earnings ratio for the S&P 500 as they did during the first three quarters of 2011; the differential primarily reflects the Federal Reserve’s plan to keep its benchmark interest rate close to zero at least through late 2014.
Last Friday’s very soft employment data for March is continuing to dominate traders’ thoughts. Was the data a one and out thing with job growth likely to bounce back in April? Or was it the beginning of a downturn in job growth that will continue as the global economic outlook declines. Europe’s economies with the exception of Germany and France are declining as cost cutting and job losses widen. Talk of QE 3 increased immediately on the employment data. While still uncertain what the fed will do, the momentum is building for another easing. The Fed however isn’t likely to move quickly, wanting to see more key data and possibly the April employment report on May 4th. Whether or not the Fed does ease again, the outlook for another easing has increased in the rate markets.
The only data point today, Feb wholesale inventories were expected +0.5%; as reported up 0.9%. Sales were up 1.2%, the inventory to sale ratio 1.17 months unchanged from January. Stock indexes sold off while the bond and mortgage markets gained a little on the report.
This afternoon at 1:00 Treasury will begin three days of auctions with $32B of 3 yr notes, the auction is expected to see strong bidding.
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