Mortgage Rates
Treasuries and mortgages opened weaker this morning ahead of the FOMC statement at 12:30 this afternoon. The consensus is that the Fed will extend Operation Twist at the meeting. The view of more buying at the long end while selling short maturities has grown rapidly this week so it’s likely that the Fed will bow to the markets. Fifty-eight percent of respondents in a June 18 poll said the Fed will prolong the program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio. At the same time, with inflation close to their 2% goal and the Greek election reducing the risk of a euro breakup, they may decide an additional round of quantitative easing isn’t needed for now The current program ends this month. At 2:00 this afternoon Bernanke will hold his press conference, generally just more detail about the meeting but Q&A should be interesting given Europe and its impact on the global economy.
Bank of England Governor King was overruled for the first time in almost three years today as he joined a push to expand stimulus that’s gathering momentum as the danger of Europe’s debt crisis intensifies. The Monetary Policy Committee voted 5-4 to keep its bond-purchase target at 325 billion pounds ($511 billion) this month. That defeated votes by King and two other committee members for a 50 billion-pound expansion.
Now that the Greek election is over and a new government has been formed there is at the moment a sliver of optimism that the various political bodies will act to provide some relief to the region’s massive debt and banking problems. This morning interest rates in Spain and Italy are lower; the yield on the Spanish 10-year bond fell 27 basis points to 6.77%, the Italian 10 yr yield 17 basis points lower. The yield on the German 10-year bund rose eight basis points this morning and US 10 yr is 5 bp higher this morning. Less fear leads to higher US rates; a month ago the German 10 yr yield was 45 basis points lower than US 10 yr, now the spread has tightened to 5 basis points, the tightening is a result of German rates increasing rapidly.
Last week the MBA reported applications for purchases increased 13% while re-finances were up 19% frm the previous week. This week the MBA mortgage applications index fell 0.8%, the purchase index down 9.0% while the re-finance index is up 1.0%. The MBA calls a 9.0% plunge in purchase applications for home mortgages a "recalibration" following the Memorial Day holiday and it notes that activity remains within a narrow 3-year band. The report noting that the refinance composition held up due to FHA loans as related premiums on streamlined loans came fully into effect allowing borrowers to lower their rates without increasing their FHA premiums. Refinances accounted for 83% of all apps last week.
The G-20 meeting in Mexico, as usual when global leaders meet, there isn’t anything of substance; posturing and photo ops and comments that are the same as markets have waded through for the last two years.
The 10 yr note yield has now moved above its 20 day average at 1.65%, and is testing the relative strength index at the 50 level for the first time since early April when the index fell below 50. Technically the rate markets are weakening, although so far haven’t turned completely bearish. The next few days from a purely technical perspective will be important or the outlook for interest rates. With Greece having formed a new government there is a little less push to safety that has contributed to the recent decline in US interest rates
Wednesday, June 20, 2012
Tuesday, June 19, 2012
Mortgage Rates
Mortgage Rates
Started very quietly today; the 10 yr -2/32 at 1.58% unchanged with mortgages unchanged at 8:45 am. 8:30 revealed May housing starts and permits; expected -1.75% starts fell 4.8%, building permits expected -0.7% were up 7.9%. Headlines on starts didn’t look good but April starts originally reported +2.6% were revised to +5.4%. The decline in starts was all n multi-family; single family starts were up 3.2% while multi-family declined 21.3%. There was no noticeable reaction to the data. Building permits climbed to the highest level since September 2008, showing the combination of lower prices and record-low mortgage rates is underpinning demand and encouraging new projects. At the same time, competition from cheaper previously owned properties and stricter lending standards remain hurdles for an industry that’s been the weakest link for the economic expansion.
Yesterday the buzz was all about Spain’s interest rates reaching all-time highs; today Spain tits target selling 2 yr notes and yields on Spanish debt declined. Spain’s two-year note yield fell 12 basis points, or 0.12 percentage point, to 5.33% after rising to 5.59% yesterday (US 2 yr notes at 0.29%). Ten-year Spanish rates declined nine basis points to 7.07%, while yields on similar-maturity Italian debt slipped 15 basis points to 5.93%. (US 10 yr at 1.59%). Spain, which requested as much as 100 billion euros to support its banks on June 9, plans to sell 2 billion euros of notes due in 2014, 2015 and 2017 in two days.
Greece is trying to form a government with comments from various EU people saying it would “work” with Greece to help on austerity and economic improvement. Meanwhile Angela Merkel is throwing water on any additional assistance without serious austerity remaining.
Group of 20 leaders meeting in Mexico focused their response to Europe’s financial crisis on stabilizing banks as the International Monetary Fund raised its lending capacity to shield the rest of the world economy. China, Brazil, India, Mexico and Russia boosted their pledges to the IMF’s global firewall. The US is the major contributor to the IMF. The IMF is likely the center post for any real workouts in Europe, without the IMF the EU, as Greenspan pointed out last week, is a noble but failed experiment.
German investor confidence fell the most in 14 years in June as Europe’s sovereign debt crisis weighed on the economic outlook. An index of investors plunged to minus 16.9 from 10.8 in May. That’s the steepest decline since October 1998. Economists forecast a drop to 2.3.
The Federal Reserve’s Open Market Committee, which sets the course of central bank policy, begins a two-day meeting today to decide whether more monetary stimulus is needed to boost growth as the labor market stumbles and risks from Europe’s sovereign debt crisis rise. There is wide speculation that the FOMC policy statement tomorrow afternoon will signal more easing from the Fed; while no consensus of any easing, if the Fed does “ease” it will likely be an extension of Operation Twist. By the Fed’s own admission it is running out of bullets in the effort to increase employment, hard to square another easing move will have much impact.
Treasures as time moves on today, are weakening taking mortgage prices lower. US stock indexes have traded better all morning and are increasing gains going into the open at 9:30. Technically the US rate markets remain bullish but have been losing momentum recently. Our first minor support on the 10 yr note is at 1.65% (currently 1.60%), the major support is at 1.70%.
Friday, June 15, 2012
Mortgage Rates
Treasuries, mortgages and the stock indexes all better early this morning. Prior to 8:30 stock indexes were higher than at 8:30 after the June NY Empire State manufacturing report was very weak. The index was expected at 10.0 frm 13.5 last month, as reported the index fell to 2.29 with May revised to 17.09. The components also weaker; new orders at 2.18 frm 8.32, employment at 12.37 frm 20.48 and prices pd at 19.59 frm 37.35. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. The last negative reading was in October. Factory executives in the New York Fed’s district were also less optimistic about the future. A measure of the outlook six months from now fell in June to 23.1, the lowest since October, from 29.3 the month earlier.
The next data hit at 9:15; May industrial production and factory usage. Production was expected to be up 0.1%, it declined 0.1%. May factory use expected at 79.2% fell to 79.0% but still the highest level or three years. The reaction was minor initially but by 9:30 treasuries and mortgages were at their best levels of the session so far.
The Greek election on Sunday is the dominating factor for the markets today; Greece will vote on whether it wants to say or leave the EU, meanwhile the EU leaders do not want Greece to depart, fearing other countries will walk. Yesterday afternoon news out of the region that central banks in the EU were prepared to provide additional funds to Greece to help Greece lessen the austerity forced on the country by the EU lead by Germany’s insistence that Greece cut spending, cut employment and increase taxes. Greek citizens are rebelling, the vote for the party that calls for staying in the EU or the party that wants to leave, according to polls is too close to call. Central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election in two days looms as the next flashpoint for investors.
At 9:30 the DJIA opened +50, NASDSAQ +6. The 10 yr note yield at 9:30 1.58% -6 bp and 30 yr MBSs +9/32 (.28 bp) frm yesterday’s close.
The U. of Michigan consumer sentiment index hit at 9:55, thoughts that the index would decline to 77.0 from May final at 79.3, the index fell to74.1; the expectations index at 68.9 frm 74.3, current conditions at 82.1 frm 87.2, both the lowest since last December. The 12 month outlook index at 82.0 frm 91.0. Although the report is weaker than thought it didn’t have any immediate impact on the stock market or the rate markets. Investors continue to believe a Fed easing will turn the economic outlook. That said, these days there isn’t much investor money in the stock market, its all computers and traders; those with a time frame of ore that a week or two are sitting this uncertainty out.
Honk if you heard this before. European Union leaders will press for new efforts to boost economic growth and improve lending conditions when they meet later this month, according to a draft document prepared for a June 28-29 summit in Brussels. The 27-nation bloc will pursue growth measures at a time when, in the words of European Central Bank President Mario Draghi, “there is no inflation risk in any European country” and the ECB will continue to provide liquidity to the banking system.
The recent economic reports have heightened expectations the Fed will ease again when the FOMC meets next week. The data has confirmed the US economy is slowing, being dragged down by Europe’s inability to find a solution to its debt problems. While the softening in the outlook is real, the Fed isn’t likely to ease much, we expect the FOMC to announce an extension to Operation Twist that will expire at the end of this month. Extending the Twist will help keep long term interest rates from increasing much, but there isn’t any evidence that it will help the economy much. Until Europe is settled with plans that make sense to stimulate its economies, growth will continue to stall.
Treasuries, mortgages and the stock indexes all better early this morning. Prior to 8:30 stock indexes were higher than at 8:30 after the June NY Empire State manufacturing report was very weak. The index was expected at 10.0 frm 13.5 last month, as reported the index fell to 2.29 with May revised to 17.09. The components also weaker; new orders at 2.18 frm 8.32, employment at 12.37 frm 20.48 and prices pd at 19.59 frm 37.35. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. The last negative reading was in October. Factory executives in the New York Fed’s district were also less optimistic about the future. A measure of the outlook six months from now fell in June to 23.1, the lowest since October, from 29.3 the month earlier.
The next data hit at 9:15; May industrial production and factory usage. Production was expected to be up 0.1%, it declined 0.1%. May factory use expected at 79.2% fell to 79.0% but still the highest level or three years. The reaction was minor initially but by 9:30 treasuries and mortgages were at their best levels of the session so far.
The Greek election on Sunday is the dominating factor for the markets today; Greece will vote on whether it wants to say or leave the EU, meanwhile the EU leaders do not want Greece to depart, fearing other countries will walk. Yesterday afternoon news out of the region that central banks in the EU were prepared to provide additional funds to Greece to help Greece lessen the austerity forced on the country by the EU lead by Germany’s insistence that Greece cut spending, cut employment and increase taxes. Greek citizens are rebelling, the vote for the party that calls for staying in the EU or the party that wants to leave, according to polls is too close to call. Central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election in two days looms as the next flashpoint for investors.
At 9:30 the DJIA opened +50, NASDSAQ +6. The 10 yr note yield at 9:30 1.58% -6 bp and 30 yr MBSs +9/32 (.28 bp) frm yesterday’s close.
The U. of Michigan consumer sentiment index hit at 9:55, thoughts that the index would decline to 77.0 from May final at 79.3, the index fell to74.1; the expectations index at 68.9 frm 74.3, current conditions at 82.1 frm 87.2, both the lowest since last December. The 12 month outlook index at 82.0 frm 91.0. Although the report is weaker than thought it didn’t have any immediate impact on the stock market or the rate markets. Investors continue to believe a Fed easing will turn the economic outlook. That said, these days there isn’t much investor money in the stock market, its all computers and traders; those with a time frame of ore that a week or two are sitting this uncertainty out.
Honk if you heard this before. European Union leaders will press for new efforts to boost economic growth and improve lending conditions when they meet later this month, according to a draft document prepared for a June 28-29 summit in Brussels. The 27-nation bloc will pursue growth measures at a time when, in the words of European Central Bank President Mario Draghi, “there is no inflation risk in any European country” and the ECB will continue to provide liquidity to the banking system.
The recent economic reports have heightened expectations the Fed will ease again when the FOMC meets next week. The data has confirmed the US economy is slowing, being dragged down by Europe’s inability to find a solution to its debt problems. While the softening in the outlook is real, the Fed isn’t likely to ease much, we expect the FOMC to announce an extension to Operation Twist that will expire at the end of this month. Extending the Twist will help keep long term interest rates from increasing much, but there isn’t any evidence that it will help the economy much. Until Europe is settled with plans that make sense to stimulate its economies, growth will continue to stall.
Thursday, June 14, 2012
Mortgage Rates
Mortgage Rates
Weekly jobless claims this morning were worse than thought; claims were up 6K to 386K, climbing closer to the 400K level markets deem significant. Nevertheless claims are on the increase over the last month, falling to 350K level a month ago, and each week for the last three revisions have been higher. Last week originally at 375K were revised to 380K. Continuing claims fell 33K last week.
May consumer price index was -0.3$ in line with estimates, the core (ex food and energy) +0.2% a little higher than 0.1% expected. Yr/yr overall CPI +1.7% while yr/yr core up 2.3%, a little stronger than thought but not a problem for the inflation outlook.
Q1 current account deficit was much higher than expected, at -$177.3B compared to -$130.9B on the advance look last month; no reaction to it though.
At 9:30 the DJIA opened +12, NASDAQ -3; the 10 yr note traded unchanged and mortgage prices for 30 yr conventional loans -2/32 (.06 bp).
As this week progresses the idea that the FOMC meeting next week will announce another easing move from the Fed is gaining, the idea was further fueled this morning on the increasing weekly unemployment claims. The easiest thing the Fed could do is to extend Operation Twist that is set to expire at the end of the month; the more aggressive move from the Fed would be an outright easing move that keeps the Twist and adds additional Fed buying of notes and bonds. This morning investors and traders are keeping the stock indexes frm falling as they would with the weak claims report, but with increasing belief the Fed will act the equity market is holding well resulting in keeping the bond and mortgage markets in check.
This afternoon Treasury will complete the auctions with $13B of 30 yr bonds; yesterday’s 10 yr auction went OK, not a record setter but in the range of average.
Record-low mortgage rates are triggering a surge in refinancing, which combined with the lowest fuel prices in four months and stabilization in stocks, may be easing constraints on Americans’ financial resources. Consumer confidence in the U.S. climbed for the fourth straight week as more Americans said their personal finances were improving. The Bloomberg Consumer Comfort Index rose to minus 36.4 in the week ended June 10, the highest level since late April, from minus 37.6 the prior period. Each of its three components -- the economy, finances and buying plans -- advanced.
Next week, along with the Greek election and the FOMC meeting, there is a G-20 meeting in Mexico. Germany already setting some of the agenda that the IMF through the G-20 has to help with the debts it cannot pay. Chancellor Angela Merkel rejected quick solutions proposed to fix Europe’s financial crisis such as joint debt sharing, saying Germany can’t save the world economy alone and fellow Group of 20 countries must help. It is unlikely the IMF will step in though with the US unwilling to get too involved at this point. On the Greek elections; the ephemeral view now is that no matter how the elections turn out, Greece will get more money as its exit of the EU would likely set off more countries leaving.
Mortgage Rates
Weekly jobless claims this morning were worse than thought; claims were up 6K to 386K, climbing closer to the 400K level markets deem significant. Nevertheless claims are on the increase over the last month, falling to 350K level a month ago, and each week for the last three revisions have been higher. Last week originally at 375K were revised to 380K. Continuing claims fell 33K last week.
May consumer price index was -0.3$ in line with estimates, the core (ex food and energy) +0.2% a little higher than 0.1% expected. Yr/yr overall CPI +1.7% while yr/yr core up 2.3%, a little stronger than thought but not a problem for the inflation outlook.
Q1 current account deficit was much higher than expected, at -$177.3B compared to -$130.9B on the advance look last month; no reaction to it though.
At 9:30 the DJIA opened +12, NASDAQ -3; the 10 yr note traded unchanged and mortgage prices for 30 yr conventional loans -2/32 (.06 bp).
As this week progresses the idea that the FOMC meeting next week will announce another easing move from the Fed is gaining, the idea was further fueled this morning on the increasing weekly unemployment claims. The easiest thing the Fed could do is to extend Operation Twist that is set to expire at the end of the month; the more aggressive move from the Fed would be an outright easing move that keeps the Twist and adds additional Fed buying of notes and bonds. This morning investors and traders are keeping the stock indexes frm falling as they would with the weak claims report, but with increasing belief the Fed will act the equity market is holding well resulting in keeping the bond and mortgage markets in check.
This afternoon Treasury will complete the auctions with $13B of 30 yr bonds; yesterday’s 10 yr auction went OK, not a record setter but in the range of average.
Record-low mortgage rates are triggering a surge in refinancing, which combined with the lowest fuel prices in four months and stabilization in stocks, may be easing constraints on Americans’ financial resources. Consumer confidence in the U.S. climbed for the fourth straight week as more Americans said their personal finances were improving. The Bloomberg Consumer Comfort Index rose to minus 36.4 in the week ended June 10, the highest level since late April, from minus 37.6 the prior period. Each of its three components -- the economy, finances and buying plans -- advanced.
Next week, along with the Greek election and the FOMC meeting, there is a G-20 meeting in Mexico. Germany already setting some of the agenda that the IMF through the G-20 has to help with the debts it cannot pay. Chancellor Angela Merkel rejected quick solutions proposed to fix Europe’s financial crisis such as joint debt sharing, saying Germany can’t save the world economy alone and fellow Group of 20 countries must help. It is unlikely the IMF will step in though with the US unwilling to get too involved at this point. On the Greek elections; the ephemeral view now is that no matter how the elections turn out, Greece will get more money as its exit of the EU would likely set off more countries leaving.
Weekly jobless claims this morning were worse than thought; claims were up 6K to 386K, climbing closer to the 400K level markets deem significant. Nevertheless claims are on the increase over the last month, falling to 350K level a month ago, and each week for the last three revisions have been higher. Last week originally at 375K were revised to 380K. Continuing claims fell 33K last week.
May consumer price index was -0.3$ in line with estimates, the core (ex food and energy) +0.2% a little higher than 0.1% expected. Yr/yr overall CPI +1.7% while yr/yr core up 2.3%, a little stronger than thought but not a problem for the inflation outlook.
Q1 current account deficit was much higher than expected, at -$177.3B compared to -$130.9B on the advance look last month; no reaction to it though.
At 9:30 the DJIA opened +12, NASDAQ -3; the 10 yr note traded unchanged and mortgage prices for 30 yr conventional loans -2/32 (.06 bp).
As this week progresses the idea that the FOMC meeting next week will announce another easing move from the Fed is gaining, the idea was further fueled this morning on the increasing weekly unemployment claims. The easiest thing the Fed could do is to extend Operation Twist that is set to expire at the end of the month; the more aggressive move from the Fed would be an outright easing move that keeps the Twist and adds additional Fed buying of notes and bonds. This morning investors and traders are keeping the stock indexes frm falling as they would with the weak claims report, but with increasing belief the Fed will act the equity market is holding well resulting in keeping the bond and mortgage markets in check.
This afternoon Treasury will complete the auctions with $13B of 30 yr bonds; yesterday’s 10 yr auction went OK, not a record setter but in the range of average.
Record-low mortgage rates are triggering a surge in refinancing, which combined with the lowest fuel prices in four months and stabilization in stocks, may be easing constraints on Americans’ financial resources. Consumer confidence in the U.S. climbed for the fourth straight week as more Americans said their personal finances were improving. The Bloomberg Consumer Comfort Index rose to minus 36.4 in the week ended June 10, the highest level since late April, from minus 37.6 the prior period. Each of its three components -- the economy, finances and buying plans -- advanced.
Next week, along with the Greek election and the FOMC meeting, there is a G-20 meeting in Mexico. Germany already setting some of the agenda that the IMF through the G-20 has to help with the debts it cannot pay. Chancellor Angela Merkel rejected quick solutions proposed to fix Europe’s financial crisis such as joint debt sharing, saying Germany can’t save the world economy alone and fellow Group of 20 countries must help. It is unlikely the IMF will step in though with the US unwilling to get too involved at this point. On the Greek elections; the ephemeral view now is that no matter how the elections turn out, Greece will get more money as its exit of the EU would likely set off more countries leaving.
Wednesday, June 13, 2012
Mortgage Rates
Prior to 8:30 this morning the rate markets were a little weaker in price; the 10 yr note -6/32 at 1.68% and mortgage prices -3/32 (.09 bp). At 8:30 May retail sales were reported -0.2% about in line with forecasts, the core (ex auto sales) -0.4% weaker than thought. April retail sales was revised from +0.1% to -0.2%, April ex autos revised from +0.1% to -0.3%. The revisions to April caused stock indexes to decline with the DJIA futures -53 at 9:00. Also at 8:30 May producer price index, expected -0.4%, fell 1.0%; ex food and energy +0.2%; yr/yr PPI +0.7% but yr/yr core +2.7%. The April revisions supported the bond and mortgage markets; at 9:00 the 10 yr +6/32 at 1.64% and MBS 30 yr price +3/32 (.09 bp).
European leaders may consider relaxing Greece’s austerity program after election, the Financial Times edition reported without citing anyone. Syriza’s leader, the Greek party that wants to keep Greece in the EU, wrote in the Financial Times that his party is committed to keeping the country in the euro area and will seek to amend a bailout agreement the nation signed in March with the European Union and the International Monetary Fund. In the final polls before this week’s vote showed the New Democracy party retaining its lead over Syriza, with the support of 26.1% of 1,012 Greeks surveyed. Syriza had 23.6%. That poll showed that Syriza gained 3.5 points in a week, compared with less than a percentage point for New Democracy. Sunday Greeks will vote once more after there was no consensus two months ago at the last election.
Escalating borrowing costs and shrinking output are opening divisions among EU leaders who face a series of hurdles in the coming days as bond investors question their ability to hold the euro area together. Spain and Italy appealed to European policy makers to step up their response to the financial crisis after a 100 billion-euro ($125 billion) lifeline for Spanish banks failed to calm markets. Spanish Prime Minister Mariano Rajoy said today he’ll “battle” central bankers refusing to buy debt from peripheral nations. Rajoy published a letter to European Union leaders calling for the European Central Bank to buy debt from the countries struggling to shore up their finances. Still about as much uncertainty today as has been the case for over two years; as long as it continues money of al denominations will continue to seek safety rather than assume risk.
Mortgage applications increased 18.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) the week ending June 8, 2012. The week’s results included an adjustment for the Memorial Day holiday. The Refinance Index increased over 19% from the previous week to the highest index level since April 2009. The seasonally adjusted Purchase Index increased around 13% from one week earlier. The refinance share of mortgage activity increased to 79% of total applications from 78% the previous week. The adjustable-rate mortgage (ARM) share of activity remains around 5 percent of total applications from the previous week. The average loan size of all loans for home purchase in the US was $243,733 in May 2012, up from $238,135 in April 2012. The average loan size for a refinance was $226,576, up from $219,664 in April. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.88% from 3.87%, with points decreasing to 0.43 from 0.46 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.12% from 4.13%, with points increasing to 0.41 from 0.35 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.71% from 3.70%, with points decreasing to 0.59 from 0.60 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.23% from 3.20%, with points increasing to 0.48 from 0.46 (including the origination fee) for 80% loans.
At 9:30 this morning the DJIA opened -38, NASDAQ -12. The 10 yr at 9:30 +5/32 at 1.65% -1 bp and 30 yr mortgage price +3/32 (.09 bp) frm yesterday’s close.
At 10:00 April business inventories expected +0.2% increased 0.4%. Sales up 0.2%; the inventory to sales ratio 1.26 months. March sales were revised frm +0.6% to +0.2%.
At 1:00 Treasury will auction $21B of 10 yr notes, yesterday’s 3 yr note auction was OK but not real solid. The demand for today’s 10 yr will be closely watched as an indication on whether investors are pulling back from the safety moves over Europe.
Technically, the 10 yr note remains in bullish shape; as long as it doesn’t climb over 1.70% the outlook will remain positive. A close over 1.70% on the 10 will likely temper the bullish view, however to change the longer term view the 10 would have to close over 1.76%. MBS prices also still technically bullish; the July 30 yr FNMA coupon must hold above 104.23 bp, presently 104.78 bp. At 10:00 this morning the 10 yr note was at 1.63%, a close under 1.60% would break the uptrend that has increased the yield for the last 8 sessions.
Prior to 8:30 this morning the rate markets were a little weaker in price; the 10 yr note -6/32 at 1.68% and mortgage prices -3/32 (.09 bp). At 8:30 May retail sales were reported -0.2% about in line with forecasts, the core (ex auto sales) -0.4% weaker than thought. April retail sales was revised from +0.1% to -0.2%, April ex autos revised from +0.1% to -0.3%. The revisions to April caused stock indexes to decline with the DJIA futures -53 at 9:00. Also at 8:30 May producer price index, expected -0.4%, fell 1.0%; ex food and energy +0.2%; yr/yr PPI +0.7% but yr/yr core +2.7%. The April revisions supported the bond and mortgage markets; at 9:00 the 10 yr +6/32 at 1.64% and MBS 30 yr price +3/32 (.09 bp).
European leaders may consider relaxing Greece’s austerity program after election, the Financial Times edition reported without citing anyone. Syriza’s leader, the Greek party that wants to keep Greece in the EU, wrote in the Financial Times that his party is committed to keeping the country in the euro area and will seek to amend a bailout agreement the nation signed in March with the European Union and the International Monetary Fund. In the final polls before this week’s vote showed the New Democracy party retaining its lead over Syriza, with the support of 26.1% of 1,012 Greeks surveyed. Syriza had 23.6%. That poll showed that Syriza gained 3.5 points in a week, compared with less than a percentage point for New Democracy. Sunday Greeks will vote once more after there was no consensus two months ago at the last election.
Escalating borrowing costs and shrinking output are opening divisions among EU leaders who face a series of hurdles in the coming days as bond investors question their ability to hold the euro area together. Spain and Italy appealed to European policy makers to step up their response to the financial crisis after a 100 billion-euro ($125 billion) lifeline for Spanish banks failed to calm markets. Spanish Prime Minister Mariano Rajoy said today he’ll “battle” central bankers refusing to buy debt from peripheral nations. Rajoy published a letter to European Union leaders calling for the European Central Bank to buy debt from the countries struggling to shore up their finances. Still about as much uncertainty today as has been the case for over two years; as long as it continues money of al denominations will continue to seek safety rather than assume risk.
Mortgage applications increased 18.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) the week ending June 8, 2012. The week’s results included an adjustment for the Memorial Day holiday. The Refinance Index increased over 19% from the previous week to the highest index level since April 2009. The seasonally adjusted Purchase Index increased around 13% from one week earlier. The refinance share of mortgage activity increased to 79% of total applications from 78% the previous week. The adjustable-rate mortgage (ARM) share of activity remains around 5 percent of total applications from the previous week. The average loan size of all loans for home purchase in the US was $243,733 in May 2012, up from $238,135 in April 2012. The average loan size for a refinance was $226,576, up from $219,664 in April. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.88% from 3.87%, with points decreasing to 0.43 from 0.46 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.12% from 4.13%, with points increasing to 0.41 from 0.35 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.71% from 3.70%, with points decreasing to 0.59 from 0.60 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.23% from 3.20%, with points increasing to 0.48 from 0.46 (including the origination fee) for 80% loans.
At 9:30 this morning the DJIA opened -38, NASDAQ -12. The 10 yr at 9:30 +5/32 at 1.65% -1 bp and 30 yr mortgage price +3/32 (.09 bp) frm yesterday’s close.
At 10:00 April business inventories expected +0.2% increased 0.4%. Sales up 0.2%; the inventory to sales ratio 1.26 months. March sales were revised frm +0.6% to +0.2%.
At 1:00 Treasury will auction $21B of 10 yr notes, yesterday’s 3 yr note auction was OK but not real solid. The demand for today’s 10 yr will be closely watched as an indication on whether investors are pulling back from the safety moves over Europe.
Technically, the 10 yr note remains in bullish shape; as long as it doesn’t climb over 1.70% the outlook will remain positive. A close over 1.70% on the 10 will likely temper the bullish view, however to change the longer term view the 10 would have to close over 1.76%. MBS prices also still technically bullish; the July 30 yr FNMA coupon must hold above 104.23 bp, presently 104.78 bp. At 10:00 this morning the 10 yr note was at 1.63%, a close under 1.60% would break the uptrend that has increased the yield for the last 8 sessions.
Tuesday, June 12, 2012
Mortgage Rates
Yesterday the stock market closed weaker, down 143 on the DJIA, the bond and mortgage markets rallied with mortgage prices gaining .37 bp and the 10 yr yield -6 bp to 1.58%. This morning the stock indexes started stronger, and as usual the bond and mortgage markets started weaker. If one market rallies the other declines; a pattern that is very predictable these days. The stock market was boosted by comments from Chicago Fed President Evans this morning.
At 8:30 May import and export prices; import prices fell 1.0% as expected and April prices were revised from -0.5% to no change. Export prices were expected +0.1% but declined 0.4%. Neither report had any influence on the markets. In pre-market opening the stock indexes traded better with the DJIA futures up 60 points at 8:45. At 9:30 the DJIA opened +30, NASDAQ +10; the 10 yr note -12/32 at 1.63% +5 bp and 30 yr MBS price -3/32 (.09 bp).
Chicago Fed President Evans out today advocating more Fed easing to increase jobs. Evans isn’t a voter on the FOMC and he has been a strong supporter for the Fed to do more. “I’ve been in favor of pretty much any accommodative policy I’ve heard about,” Evans said in an interview on Bloomberg Television today. “Extending the Twist would be useful,” he said, referring to a plan expiring this month that lengthens the average duration of bonds in the Fed’s portfolio. “More asset purchases would be useful. More mortgage-backed securities purchases would be good.” “I would prefer that we worked harder to clarify our forward guidance,” Evans said in the interview recorded yesterday in Chicago, reiterating his call for the central bank to commit to low interest rates until the unemployment rate falls below 7% or inflation breaches 3%. Evans’s remarks contrasted with the views of some officials, including Atlanta Fed President Dennis Lockhart, who said yesterday he doesn’t see a need for more accommodation now partly because Treasury yields are so low. The differences of opinions and views within the Fed are not unusual but with the Fed intent on more clarity we actually hear the differences that were somewhat suppressed in the past.
Next week (June 19th and 20th) the FOMC meeting takes place. Last week in his testimony to the Joint Economic Committee of Congress Bernanke was arguably less dovish than most expected but he was able to stem any major sell off in equities by noting that the Fed stood 'ready to act' if conditions worsened. His past credentials have earned him the nickname 'Helicopter Ben' and thus allow him the ability to provide verbal intervention. But, his rather vague answers regarding the tools that would be used to stimulate the economy were viewed by markets as slightly hawkish for the Chairman. Bernanke is continuing his plea that Congress help out with fiscal measures but this Congress can hardly agree on the time of day let alone tackle serious fundamentals and spur job growth; meanwhile the President is blaming Congress for the weak state of the economy saying he has sent Congress bills that never get passed----a Pontius Pilate thing.
A new survey out frm BofA Merrill Lynch; 34% of investors expect the Fed to ease again; 44% of investors believe Greece will vote to stay in the EU when citizens vote this Sunday while 19% say Greece will exit. The majority is expecting the Fed to announce it will continue Operation Twist whereby the Fed is extending the maturity of its bond portfolio by selling short-dated notes while buying at the long end ( 7s, 10s and 30s).
Yesterday Spain got 100B euros ($125B) to shore up its declining banking sector; this morning Spain’s interest rates are increasing as global markets are not impressed with the infusion and likely there will need to be more. 100B euros is seen as being just a down payment to save the banks; then Italy will come to call on the EU to do the same for its banks. In our opinion unless the IMF becomes involved with money the EU can’t get out of this mess, there just isn’t any desire on Germany’s part to take on the debt burdens of other EU crumbling countries.
Treasury will begin this week’s auctions this afternoon with $32B of 3 yr notes, the auctions are expected to meet with decent demand. We do not expect much movement in the bond, mortgage and stock markets this week ahead of what will occur next week. The FOMC meeting, the G-20 meeting and the Greek vote next Sunday. This week the bond market will take its lead from the stock index trading; not the bond market leading, it’s the stock market that will set the tone on reactions to news and comments from Fed officials.
Yesterday the stock market closed weaker, down 143 on the DJIA, the bond and mortgage markets rallied with mortgage prices gaining .37 bp and the 10 yr yield -6 bp to 1.58%. This morning the stock indexes started stronger, and as usual the bond and mortgage markets started weaker. If one market rallies the other declines; a pattern that is very predictable these days. The stock market was boosted by comments from Chicago Fed President Evans this morning.
At 8:30 May import and export prices; import prices fell 1.0% as expected and April prices were revised from -0.5% to no change. Export prices were expected +0.1% but declined 0.4%. Neither report had any influence on the markets. In pre-market opening the stock indexes traded better with the DJIA futures up 60 points at 8:45. At 9:30 the DJIA opened +30, NASDAQ +10; the 10 yr note -12/32 at 1.63% +5 bp and 30 yr MBS price -3/32 (.09 bp).
Chicago Fed President Evans out today advocating more Fed easing to increase jobs. Evans isn’t a voter on the FOMC and he has been a strong supporter for the Fed to do more. “I’ve been in favor of pretty much any accommodative policy I’ve heard about,” Evans said in an interview on Bloomberg Television today. “Extending the Twist would be useful,” he said, referring to a plan expiring this month that lengthens the average duration of bonds in the Fed’s portfolio. “More asset purchases would be useful. More mortgage-backed securities purchases would be good.” “I would prefer that we worked harder to clarify our forward guidance,” Evans said in the interview recorded yesterday in Chicago, reiterating his call for the central bank to commit to low interest rates until the unemployment rate falls below 7% or inflation breaches 3%. Evans’s remarks contrasted with the views of some officials, including Atlanta Fed President Dennis Lockhart, who said yesterday he doesn’t see a need for more accommodation now partly because Treasury yields are so low. The differences of opinions and views within the Fed are not unusual but with the Fed intent on more clarity we actually hear the differences that were somewhat suppressed in the past.
Next week (June 19th and 20th) the FOMC meeting takes place. Last week in his testimony to the Joint Economic Committee of Congress Bernanke was arguably less dovish than most expected but he was able to stem any major sell off in equities by noting that the Fed stood 'ready to act' if conditions worsened. His past credentials have earned him the nickname 'Helicopter Ben' and thus allow him the ability to provide verbal intervention. But, his rather vague answers regarding the tools that would be used to stimulate the economy were viewed by markets as slightly hawkish for the Chairman. Bernanke is continuing his plea that Congress help out with fiscal measures but this Congress can hardly agree on the time of day let alone tackle serious fundamentals and spur job growth; meanwhile the President is blaming Congress for the weak state of the economy saying he has sent Congress bills that never get passed----a Pontius Pilate thing.
A new survey out frm BofA Merrill Lynch; 34% of investors expect the Fed to ease again; 44% of investors believe Greece will vote to stay in the EU when citizens vote this Sunday while 19% say Greece will exit. The majority is expecting the Fed to announce it will continue Operation Twist whereby the Fed is extending the maturity of its bond portfolio by selling short-dated notes while buying at the long end ( 7s, 10s and 30s).
Yesterday Spain got 100B euros ($125B) to shore up its declining banking sector; this morning Spain’s interest rates are increasing as global markets are not impressed with the infusion and likely there will need to be more. 100B euros is seen as being just a down payment to save the banks; then Italy will come to call on the EU to do the same for its banks. In our opinion unless the IMF becomes involved with money the EU can’t get out of this mess, there just isn’t any desire on Germany’s part to take on the debt burdens of other EU crumbling countries.
Treasury will begin this week’s auctions this afternoon with $32B of 3 yr notes, the auctions are expected to meet with decent demand. We do not expect much movement in the bond, mortgage and stock markets this week ahead of what will occur next week. The FOMC meeting, the G-20 meeting and the Greek vote next Sunday. This week the bond market will take its lead from the stock index trading; not the bond market leading, it’s the stock market that will set the tone on reactions to news and comments from Fed officials.
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