Mortgage Rates

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. Weekly jobless claims this morning were up 8K to 365K frm the revised 357K last week (originally 353K). The median forecast of 47 economists surveyed by Bloomberg News called for an increase to 370,000. The past three weeks of claims have been less reliable as a true read on unemployment filings. Starting next week, the data should be clear of any influence from the annual auto plant re-tooling closures that make it difficult to adjust the data for seasonal variations, a Labor Department spokesman said as the report was released to the press. The four-week moving average for jobless claims, a less volatile measure than the weekly figures, fell to 365,500 last week, the lowest since March, from 368,250. The number of people continuing to receive jobless benefits dropped by 19,000 in the week ended July 21 to 3.27 million, a two-month low. Early this morning the US financial markets (stocks and bonds) were volatile. The stock indexes traded higher at about 8:00, the 10 yr note yield jumped to 1.58%, up 5 bp frm yesterday’s close. About 8:30 the ECB press conference started and turned markets over; the DJIA went from +84 early to -87 at 9:15 prior to the open. The 10 yr note yield declined to 1.47% as Spain and Italy saw selling in their markets. While the ECB did not announce any details of specific plans, Draghi made it clear the bank was ready to move after working out details over the next few weeks. He signaled the bank will join forces with governments to buy sovereign bonds in sufficient quantities to remove all doubts about the future of the euro. The yield on Italy’s 10-year government bond rose 23 basis point to 6.129% and the yield on Spain’s 10-year bond climbed 7 basis points to 6.716% on disappointment that it so far is just more talk The ECB intends to join forces with governments to buy bonds in sufficient quantities to ease the region’s debt crisis, while conceding that Germany’s Bundesbank has reservations about the plan. ECB bond purchases would likely focus on shorter-term maturities, would be conducted in a way to soothe investors’ concerns about seniority, and wouldn’t breach European Union rules prohibiting the financing of government deficits, Draghi told reporters in Frankfurt. ECB officials are working on the plan and details will be fleshed out in coming weeks, he said. While Draghi’s proposals go further than the ECB’s market interventions to date, he signaled that the 23-member Governing Council has yet to reach a final agreement. “It is clear and it is known that Mr. Weidmann and the Bundesbank have their reservations about programs that buy bonds,” Draghi said, referring to the head of the German central bank. The reaction to the ECB meeting so far is bolstering the US bond market on disappointment that there were no specifics from the meeting. Traders have been conditioned over the last three years to take whatever comes from the Europe debt problems with a handful of salt; at the moment safety moves are returning to treasuries and Europe and US stock markets decline on concerns that there are still huge hurdles that the ECB has to jump before anything actually will occur. At 9:30 the DJIA opened down 84, NASDAQ -26; the 10 yr note yield at 1.48% -5 bp and 30 yr MBSs +24 bp frm yesterday’s close. At 10:00 June factory orders expected +0.6%, declined 0.5%; another poor reading for the manufacturing sector that is slowing quickly now. Although the bond and mortgage markets are doing better this morning, the 10 yr note remains unable to break below 1.47%, the low yield that has been tested now four out of the last five sessions. Technically the wider perspective remains bullish but the short term outlook is at best neutral with momentum slowing.

Mortgage RATES

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. Once again this morning the ADP private jobs data was stronger than what had been expected. ADP said private jobs increased 163K, estimates were for 125K. Last month the BLS reported private jobs at +84K; last month’s ADP data was revised to +172K. The gap between the two reports (ADP and BLS) continues to confuse the job gains. Since April 2010, ADP’s initial estimate has either overstated or understated the Labor Department’s initial reading on private payrolls by 72,000 on average. Goods-producing industries, which include manufacturers and construction companies, increased workers by 15,000, today’s figures showed. Employment in construction rose by 5,000, while factories added 6,000 jobs. Service providers increased payrolls by 148,000 workers. Companies employing more than 499 workers took on 23,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 67,000 positions and small companies increased payrolls by 73,000, ADP said. This afternoon at 2:15 the FOMC policy statement will be released at the conclusion of the meeting. General belief now is that the Fed will not announce another easing move that is expected. The consensus now is that the Fed will wait until the Sept meeting to decide about buying more treasuries and MBSs to keep rates low. There will be two more employment reports between now and the Sept meeting, along with more monthly economic measurements. The Fed is at a point where the law of diminishing returns is occurring. The physics law says that at some point anymore efforts to improve something begins to lessen, eventually having no impact at all. That is where we see the Fed now; any easing won’t create more jobs, get small businesses to spend or consumers to loosen their wallets. Monthly retail sales have been declining for 3 months now as consumers have increased savings over 4.0%. Lower interest rates have little effect now. What happens tomorrow at the ECB monthly meeting is more critical to markets----stocks and US bonds. Last week ECB President Draghi surprised markets with is very strong statement that the ECB will not let the euro currency fall and keep the makeup intact. Saying the ECB will do whatever it takes, adding that the bank has ample ammo to do it. He wants to buy sovereign debt from the struggling economies and lower the borrowing requirements at the ECB. Germany on the other hand is against outright bond buying by the ECB saying it is against the EU charter. In many past episodes there have been moments where the world thought there was light at the end of the tunnel, running stocks higher and taking some safety trades out of the bond markets. What comes from the meeting tomorrow, based on the last three year history of the European debt crisis there will likely be disappointment on what comes out of the meeting. At 9:30 the DJIA opened 58, NASDAQ +11, S&P +4. The 10 yr note at 1.51%, MBS prices -16 bp on 30s and -7 bp on 15s. The increase over estimates on ADP was putting pressure on the bond and mortgage markets ahead of the July ISM data at 10:00. The July national ISM manufacturing index at 10:00, forecasts were for the index at 49.9 frm 49.7 in June. The index was at 49.8, in line; t is the second month in a row under 50 (under 50 is considered contraction) but still at a neutral area. The new orders component fell to 48. Also at 10:00 June construction spending, expected up 0.5%, spending up 0.4%. Last month’s spending was revised to +1.6% frm +0.9% originally reported. Construction looking better. The bond and mortgage markets still hanging on with slightly positive momentum oscillators but the momentum in the bond and mortgage markets is slowing. The 10 yr note is trading this morning at its 20 day average which has in the past rendered nice support. That said, we are a little more concerned now that rates might back up a little. Tomorrow’s ECB meeting outcome will likely be the trigger for more rally or some selling. \

Mortgage Rates

Mortgage Rates Recover A Portion Of Friday's Weakness Mortgage Rates bounced back into slightly lower territory after rising abruptly on Friday afternoon. Thursday and Friday of last week marked the biggest 2-day move higher in rates since March, but unlike then, the current move took place very close to all-time lows on Wednesday. We begin the week in stronger territory in terms of markets, but with lenders still slightly hesitant to pass along all of the improvement to rate sheets. Nevertheless, Best-Execution for 30yr Fixed Conventional loans remains at 3.5% with some of the best-priced lenders still close to 3.375%. Part of the "long term guidance" section below discusses "going with the flow of gradually lower rates until we see the pattern definitively break." Friday was the first major risk of such a definitive break since early June. If rates were higher again today, we may well have been discussing a break and be changing the ongoing guidance to a more cautious tone. As it stands, we're still well within the scope of the long-term trend, but that doesn't mean that it will necessarily be a long time between now and the next threat to the pattern. The best candidates for confirming or changing the prevailing pattern of "low and sideways" will arrive in the last 3 days of the week with important central bank announcements at home and abroad, as well as the important Employment Situation Report on Friday. The frustrating thing about this week's big-ticket events is that Wednesday might make it look like we're heading one direction and Thursday might completely reverse that move.

Mortgage Rates

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 27, 2012 Global markets continue to focus on the comments yesterday from the President of the ECB; Draghi’s remark that the ECB is ready to use its firepower to print money to underpin the euro currency by re-starting purchases of EU member debt. He signaled central bank officials are prepared to do whatever is needed to ensure the euro’s survival and act on surging bond yields. ‘‘Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,’’ Draghi said during a speech in London yesterday, adding the comment ‘‘And believe me, it will be enough.’’ That very forceful quote is presently increasing optimism that next week at the ECB meeting the bank will re-start its Securities Markets Program, buying sovereign debt from the troubled countries in the Union (Spain and Italy along with Greece. Draghi’s speech yesterday was the most direct and psychological remark from anyone in the EU in recent weeks. Now he has to deliver, the risk in doing so is alienating key policy makers on the ECB council, such as Bundesbank President Jens Weidmann. The Bundesbank reiterated its opposition to bond purchases today. The US and Europe equity markets rallied yesterday and are continuing to gain this morning. The US 10 yr note yield closed at 1.40% Wednesday, this morning at 1.48%. Mortgage rates also edging higher the last three days. Markets were extremely negative about the impact on global growth, for weeks there was nothing coming from any official Europe as the euro currency fell and interest rates in Spain and Italy increased to levels that the two countries couldn’t meet future payments. Q2 advance gross domestic product, the value of all goods and services produced, rose at a 1.5% annual rate after a revised 2% gain in the prior quarter (previously +1.9%). Forecasts were for Q2 GDP at +1.2% to +1.4%. 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. The Commerce Debt also revised GDP data going back to 2009; GDP grew 2.5% in the 12 months after the contraction ended in June 2009, compared with the 3.3% gain previously reported, the final quarter of last year was revised up to a 4.1% gain the fourth quarter gain was previously reported as 3%. At 9:30 the DJIA opened +24, NADSAQ +14, S&P +5. The 10 yr note at 9:30 at 1.48% +4 bp, 30 yr MBSs -24 bp frm yesterday’s close; 15 yr MBSs -12 bp. The U. of Michigan consumer sentiment index, expected at 72.0, increased to 72.3. The index based on the month end final reading is the lowest since last Dec when compared to the end of the month index. Next week is shaping up to be one of key weeks in months. The ECB meeting, the Bank of England meeting and the Fed’s FOMC meeting. Three key banks talking of potential easing moves. The Fed is expected to launch another easing move purchasing treasuries and mortgage-backed securities. The ECB meeting will focus on Draghi’s comments and either reject it or confirm with stimulus of bond buying. The US rate markets are seeing unwinding of some of the safety moves into treasuries sending the 10 yr down to 1.39%, now at 1.48%. Mortgage rates moving in tandem with the note as rates are increasing. The 10 yr, driver for mortgage rates, is testing its 20 day moving average; there have been only two days since early last April that the 10 yr yield traded above it, each time the yield fell back under the 20 the following day. The various technical studies we use are still holding but have weakened this week on the optimism about Europe. The surprise statement from Draghi has taken a lot of wind out of the bond and mortgage markets at the moment.

Mortgage Rates

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, July 26, 2012 The US and global stock markets rallying hard early this morning on comments from ECB Pres. Draghi saying policy makers will do whatever it takes to preserve the euro. Markets continue to react on any comments from any official in Europe; Draghi’ s comment this morning just one more snippet that in one way or another has been said before. What else would he be expected to say? Nevertheless it is moving markets. He signaled central bank officials are prepared to do whatever is needed to ensure the euro’s survival and act on surging bond yields. His comments came as Spanish policy makers called on the central bank to fight a renewed bout of financial turmoil that pushed the yields on Spain’s bonds to euro-area records this week. He said high yields on sovereign debt was within the central bank’s mandate. German bunds declined as his comments damped demand for the region’s safest assets, and US bond and mortgage markets also weaker. Talk is cheap, we have heard this for two years but in the end nothing has happened, can’t fight the emotions though, and this morning they are running on high levels. The euro currency rallying on the comment. Europe continues to dominate all global financial markets. Whatever is said seems to be considered the last word. The Draghi comment today that the euro will be saved drove Spain’s and Italy’s bond markets down in yield. The problems in Europe are ones of solvency not liquidity, what can the ECB do to alleviate the debt crisis that is increasing? Spain needs more money, Italy needs more money, Greece needs more money----and on and on. Today Draghi is saying the ECB will do whatever is necessary to save the EU, according to Draghi it is within the ECB authority to do what is necessary, but it is all about debt and insolvent countries. The way out would be for the ECB to begin buying much of the debt from Spain and Italy and other debt ladened countries. What has changed in the last six months; the ECB ceased purchases in February amid concern from some officials that it was a form of monetary financing, which is prohibited under the institution’s founding treaty? Weekly jobless claims this morning were down 36K to 363K, the decline much more than 6K expected. Last week’s claims revised from 386K to 399K. Headlines look good but claims these days are being distorted by the annual auto makers change over, we don’t take claims in July as representative of the true claims picture. That said, it’s all about the headline regardless of the specifics and details. June durable goods orders were expected to be up 0.%, orders as reported jumped 1.6% however the more important ex transportation orders were down 1.1%. Aircraft orders tend to be volatile, markets look more at the ex-transportation data. At 10:00 the NAR reported June pending home sales, expected up 0.9%; sales fell 1.1%; yr/yr +9.5%. The NAR blames the lack of inventory for the decline, saying banks should put more properties on the market. This is the third June sales report that were weaker than expected (new and existing sales the other two). At 9:30 the DJIA opened +149, NASDAQ +47, S&P +17. The 10 yr note at 1.42% +2 bp, MBS prices on 30 yr mtgs down 8 bp frm yesterday’s close, 15 yr mtgs -3 bp At 1:00 this afternoon Treasury will auction $29B of 7 yr notes to complete this week’s $99B borrowing. Yesterday’s 5 yr note didn’t see the demand that the 2 yr saw on Tuesday. Looking ahead; next week on Wednesday the FOMC meeting policy statement, Thursday brings the ECB policy meeting and the Bank of England’s policy meeting. What will the central banks do to attempt to fuel the declining global economy? The Fed is expected to launch anther easing move, the questions are when and what? Some are expecting a move by the Fed next week while an equal number of analysts are looking to the Sept meeting for the Fed to act. It isn’t will they, it’s what will the Fed do and when. Talk of lowering the FF rate to zero to motivate banks to lend instead of leaving reserves at the Fed; more Treasury buying, and a big increase of MBS buying. We continue to believe interest rates will decline from current levels but with some increase in interday volatility as seen so far this morning. Central banks will step up easing moves. Whatever the banks do though won’t likely help economies. In the US the tax cuts at the end of the year will likely be extended but how long before the entire tax problem is faced next year. The SS payroll cut also will expire. Small businesses face the health care issue as well as the other uncertainties and won’t likely hire under those clouds.

Mortgage Rates

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. Treasuries and mortgages starting a little weaker this morning after the drop in prices yesterday afternoon when the stock indexes rallied off the lows seen yesterday morning. The DJIA traded down 200+ points yesterday morning, but cut the loss by half at the close to -101. The rate markets do what they do, when stock indexes improve it takes yields a little higher. This morning in pre-market trade the stock indexes were fractionally better with the bond and mortgage markets weaker. Yesterday mortgage prices drifted lower in the afternoon as the stock market cut losses. Late yesterday Moody’s lowered the outlooks on the Aaa credit ratings of Germany, the Netherlands and Luxembourg, citing the “rising uncertainty” about Europe’s debt crisis. This morning the German 10 yr bund is trading about 7 bp higher at 1.25% contributing to the higher yield on the US 10 yr note. Moody’s didn’t downgrade the Aaa rating on German debt but said the outlook has weakened as Europe’s debt crisis continues to grow. The ratings company cited the risk that Greece will leave the 17-nation euro currency and the “increasing likelihood” of collective support for European countries such as Spain and Italy, according to a statement. German manufacturing and services output contracted in July more than economists had forecast. An index based on a survey of purchasing managers in the manufacturing industry declined to 43.3 this month from 45 in June, London-based Markit Economics said in a report. Economists had predicted a reading of 45.1. The measure of Germany’s services industries slipped to 49.7 from 49.9. Economists had projected 50. At 9:30 the DJIA opened +3, NASDAQ +5, S&P +1. The 10 yr note -8/32 at 1.45% +1 bp; mortgage prices -3/32 (.09 bp) frm yesterday’s close. The only data today; the May FHFA housing price index expected +0.3% The Federal Reserve plans to buy as much as $2B of Treasuries due from February 2036 to May 2042 today as part of a program known as Operation Twist. This afternoon at 1:00 Treasury starts the monthly auctions of 2s, 5s and 7s. The total unchanged from previous months, $99B; 2 yr and 5 yr $35B each, the 7 yr note $29B. Demand for the 2 yr should be strong. The market is expecting good demand for the auctions, if it is weak look for the rate markets to edge higher in yield. The 10 yr note fell to 1.41% early yesterday morning with mortgage prices nicely higher, by the end of the session however the 10 yr moved back up to 1.44% and mortgage prices while still higher on the session were lower than at 9:30. This morning the negative outlook Moody’s did on Germany yesterday put some pressure on German rate markets, the move higher on German 10 yr bunds is forcing US interest rates higher even with the stock market, after opening a little better by 10:00 trading weaker. The 10 yr note is back to 1.46%, what was resistance is now a minor support level.

Mortgage Rates

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. The Europe debt crisis is back with a major sell-off in US and global equity markets, and a move into US treasuries pushing the bellwether 10 yr note and mortgage rates to new historical lows. This week Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund will descend on Greece to review the debt crisis I the country. There is now concern that Greece will fall into depression similar to the US depression in the 30s, and an increasing concerns Greece will exit the EU. It shouldn’t be a shock to markets, there is little chance Greece can survive in the EU, nevertheless after a couple of weeks with not much out of the region it is now back with renewed fears. The reaction is sending US interest rates to record lows and the stock market down hard this morning. After euro finance ministers failed to staunch a decline in the single currency with the approval of a 100 billion-euro ($122 billion) aid package for Spanish banks last week, the 3 governing bodies will seek to determine the fiscal state of Greece where the crisis began almost three years ago. The euro currency is crumbling setting new lows against the dollar and the Japanese yen. The euro slipped below its lifetime average against the U.S. dollar art $1.2080. The market consensus now is that Greece will not be able to meet the requirements set out when it got bail-out money. Germany over the weekend said it will not agree to reworking the Greek bailout plan. “If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told the media yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.” The repercussions over Greece has sent Spain’s 10 yr note to a record 7.48% this morning up about 30 basis points in the last couple of days. Italy’s cost of borrowing also increasing to levels that will add more problems for it getting more money to fend off another crisis. Spain is next up for the rolling crisis. At 9:30 the DJIA opened -179, NASDAQ -63, S&P -20. The 10 yr note at 9:30 at 1.42% -4 bp and mortgage prices up 6/32 (.18 bp). The renewed concerns over the debt crises in Europe will support the bond and mortgage markets this week. However, although this morning the fear factor and concerns are at high levels, we have experienced this many times in the last couple of years. Markets will react on any comments out of the region. While Greece in the wider perspective is finished in the EU, momentary comments from the IMF, the ECB or the EU that sound more optimistic will get traders’ attention with market swings that could be severe similar to what we are seeing this morning. That said, technically the bond and mortgage markets are increasing their bullish bias. Expect the possibility of volatile markets this week.