Mortgage Rates
Prior to 8:15 this morning the 10 yr and mortgage markets were slightly weaker in price. At 8:15 ADP reported its estimate for May private jobs, thought to be up 150K, increased 133K; the average for the first five months this year 123K. Not much reaction to the weaker data. At 8:30 weekly jobless claims were expected to have declined 4K, as reported claims were up 10K to 383K after last week was revised from 370K to 373K. The 4 wk average on claims at 374,500 frm 370,750K; continuing claims at 3.242 mil down frm 3.278 mil as more unemployed lose their benefits. The continuing claims are the lowest since July 2008. Also at 8:30 Q1 preliminary GDP was expected at 1.9% and was as reported and down from +2.2% on the advance report last month; final sales in Q1 +1.7% frm +1.6% on the preliminary report.
Market reaction on the early data took the 10 yr note to 1.60% -0.1% and mortgage prices +5/32 (.15 bp) frm yesterday’s close. Stock indexes still held minor gains on the data but were well off the levels prior to the data. At 9:30 the DJIA opened +15, NASDAQ unch; the 10 yr note +5/32 at 1.60% and MBS 30 yr price +5/32 (.15 bp) frm yesterday’s close. As the day has progressed rates continue to decline (see below)
In Tokyo last night Fed’s Bullard said he doesn’t see the need for more QE frm the Fed. One man’s opinion in a Fed divided. There remains a number of Fedsters that still want another easing. We continue our opinion that the fed will not ease at the June 19-20 meeting, and after that the Fed will hold off as it generally doesn’t want to be seen as political into the Nov elections.
At 9:45 the May Chicago purchasing managers’ index, thought to be at 57.0 frm 56.2, took a big decline to 52.7. The components also weaker than thought; new orders index at 52.9 frm 57.4, the lowest read since Sept 2009, employment component at 57.0 frm 58.7; prices at 60.4 frm 68.6 on the decline of energy prices. Although markets are taking it badly in the stock market, the key indexes still are above 50 and expanding, albeit very slowly and weakening. Europe is having a serious negative impact on the US and global economies as it is clearly in deepening recession dragging the rest of the world along with it. That’s it for scheduled reports today; tomorrow of course is the mother lode with the May BLS employment report; after the data this morning many traders already adjusting to a weaker than thought report.
Spanish and Italian bonds rallied amid speculation the European Central Bank will announce measures to combat the debt crisis when it meets next week. Spanish 10-year bond yields declined from a six-month high today even as ECB President Mario Draghi told a European Union Parliament committee the central bank cannot fill the “vacuum” of the lack of fiscal prudence and governance in the euro area. Policy makers will meet on June 6. Round and round we go with conflicting news from the region.
The safe haven move to US treasuries has moved more toward 30 yr bonds than the 10 yr note as investors are looking for higher yields. The 10 yr note this morning hit a new low at 1.59% for a nanosecond; the 30 yr bond declined 6 bp at 9:30 compared to -1 bp on the 10 yr; the 10 price +4/32 while the 30 yr bond up 25/32. Mortgage markets take their direction from the 10 yr, not the 30 yr. In Germany this morning their 10 yr bund traded at 1.25% compared to 1.60% on the US 10 yr. Mortgage markets not rallying much this morning but prices have improved, at 10:00 the 10 yr note at 1.58% a new record low.
Thursday, May 31, 2012
Wednesday, May 30, 2012
Mortgage Rates
A new record low for the 10 yr note this morning, at 1.67% at 8:30; stock indexes being crushed early on. Mortgage rates also at new record lows. Of course its all about Europe as has been the case now for well over a year; an index of executive and consumer sentiment in the 17-nation euro area fell to 90.6 from a revised 92.9 in April, the European Commission in Brussels said today. That’s the lowest since October 2009 and below the 91.9 forecast by economists. A gauge of sentiment among European manufacturers fell to minus 11.3 from minus 9 in April, today’s report showed. That’s the lowest since February 2010. An indicator of services confidence dropped to minus 4.9 from minus 2.4, while a gauge of consumer sentiment rose to minus 19.3 from minus 19.9. Sentiment in the construction industry also declined this month.
Italy’s bond yields surged to a four-month high as the nation missed its maximum target for sales of five- and 10-year securities. German two- five-, 10- and 30-year government bond yields fell to record lows. Spanish bonds slumped, driving five-year yields to more than 6.0% for the first time since November. The Italian 10-year yield advanced 18 basis points, or 0.18 percentage point, to 5.95 percent early today; the rate reached 6.01% before bouncing, the highest since Jan. 31. German 10-year yields fell five basis points to 1.32% after dropping to 1.304% before a bounce, the least since tracking the data in 1989. German two-year yields slipped to 0.01%, five-year yields declined to 0.383%, while 30-year rates slid to 1.849%, all the least on record for the securities.
About 7:00 am this morning news wires reported the European Commission called for direct euro-area aid for troubled banks and touted common bond issuance as an antidote to the debt crisis now threatening to overwhelm Spain. The current EU plans call for the 500 billion-euro European Stability Mechanism, set to start up in July, to funnel bank-aid money through national governments and, ultimately, require those governments to pay it back. The commission appealed for a “banking union” that would more tightly integrate supervision and create a pool of European funds to clean up banks with cross-border exposure and segregate their underperforming assets. The “new” plan being floated calls for direct loans to troubled banks and not through governments; it is being opposed by Germany however. The German view is that lending to banks directly instead of through governments would lessen the moves to austerity in spending.
All Europe’s stock markets are getting hit hard this morning on increasing lack of confidence in the region and the inability of Italy to sell its debt. Money continues to flow to safety, into German bunds and US treasuries. US interest rates trading higher than German rates; the German 10 yr bund at 1.32% compared to US 10 yr treasury at 1.66% keeping demand high. In China today the government said it won’t inject stimulus at the pace it did in 2008 as its economic growth is expected to decline to +8.2%, also helping drive global rates lower.
Mortgage applications decreased 1.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 25, 2012. This week’s results do not include an adjustment for early closings on Friday before the Memorial Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.6 percent compared with the previous week. The Refinance Index decreased 1.5 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.6 percent from one week earlier. The unadjusted Purchase Index decreased 1.8 percent compared with the previous week and was 3.9 percent lower than the same week one year ago.
At 9:30, in line with Europe’s markets, the DJIA opened -110, NASDAQ -29. The 10 yr at 9:30 1.66% -9 bp frm yesterday and taking out resistance at 1.70%; MBS 30 yr prices +10/32 (.31 bp).
The only data today; April pending home sales, expected up 0.2%, fell 5.5%; yr/yr sales +14.4%. Pending sales are contracts signed but not closed; cancellations led to the decline as appraisals and credit problems continue to eliminate potential buyers. The stock indexes weakened more and the rate markets improved slightly on the report.
Limbo, Limbo. How low can they go? How bad will things get in Europe’s financial crisis, and how deeply will Europe drive global economies down? The US 10 yr is now technically set to test the next resistance at 1.60%. As long as German 10 yr bunds fall it will drive US rates down with it as US rates continue to trade at higher rates. That said, it is the moving target and completely depends on the deteriorating outlook in the EU’s ability to work out a solution to its debt and growing problems in the banking sectors. Germany is the key; will it step up and take the leap to save the day as it did with east Germany? So far Germany is unwilling to take on the challenge.
A new record low for the 10 yr note this morning, at 1.67% at 8:30; stock indexes being crushed early on. Mortgage rates also at new record lows. Of course its all about Europe as has been the case now for well over a year; an index of executive and consumer sentiment in the 17-nation euro area fell to 90.6 from a revised 92.9 in April, the European Commission in Brussels said today. That’s the lowest since October 2009 and below the 91.9 forecast by economists. A gauge of sentiment among European manufacturers fell to minus 11.3 from minus 9 in April, today’s report showed. That’s the lowest since February 2010. An indicator of services confidence dropped to minus 4.9 from minus 2.4, while a gauge of consumer sentiment rose to minus 19.3 from minus 19.9. Sentiment in the construction industry also declined this month.
Italy’s bond yields surged to a four-month high as the nation missed its maximum target for sales of five- and 10-year securities. German two- five-, 10- and 30-year government bond yields fell to record lows. Spanish bonds slumped, driving five-year yields to more than 6.0% for the first time since November. The Italian 10-year yield advanced 18 basis points, or 0.18 percentage point, to 5.95 percent early today; the rate reached 6.01% before bouncing, the highest since Jan. 31. German 10-year yields fell five basis points to 1.32% after dropping to 1.304% before a bounce, the least since tracking the data in 1989. German two-year yields slipped to 0.01%, five-year yields declined to 0.383%, while 30-year rates slid to 1.849%, all the least on record for the securities.
About 7:00 am this morning news wires reported the European Commission called for direct euro-area aid for troubled banks and touted common bond issuance as an antidote to the debt crisis now threatening to overwhelm Spain. The current EU plans call for the 500 billion-euro European Stability Mechanism, set to start up in July, to funnel bank-aid money through national governments and, ultimately, require those governments to pay it back. The commission appealed for a “banking union” that would more tightly integrate supervision and create a pool of European funds to clean up banks with cross-border exposure and segregate their underperforming assets. The “new” plan being floated calls for direct loans to troubled banks and not through governments; it is being opposed by Germany however. The German view is that lending to banks directly instead of through governments would lessen the moves to austerity in spending.
All Europe’s stock markets are getting hit hard this morning on increasing lack of confidence in the region and the inability of Italy to sell its debt. Money continues to flow to safety, into German bunds and US treasuries. US interest rates trading higher than German rates; the German 10 yr bund at 1.32% compared to US 10 yr treasury at 1.66% keeping demand high. In China today the government said it won’t inject stimulus at the pace it did in 2008 as its economic growth is expected to decline to +8.2%, also helping drive global rates lower.
Mortgage applications decreased 1.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 25, 2012. This week’s results do not include an adjustment for early closings on Friday before the Memorial Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.6 percent compared with the previous week. The Refinance Index decreased 1.5 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.6 percent from one week earlier. The unadjusted Purchase Index decreased 1.8 percent compared with the previous week and was 3.9 percent lower than the same week one year ago.
At 9:30, in line with Europe’s markets, the DJIA opened -110, NASDAQ -29. The 10 yr at 9:30 1.66% -9 bp frm yesterday and taking out resistance at 1.70%; MBS 30 yr prices +10/32 (.31 bp).
The only data today; April pending home sales, expected up 0.2%, fell 5.5%; yr/yr sales +14.4%. Pending sales are contracts signed but not closed; cancellations led to the decline as appraisals and credit problems continue to eliminate potential buyers. The stock indexes weakened more and the rate markets improved slightly on the report.
Limbo, Limbo. How low can they go? How bad will things get in Europe’s financial crisis, and how deeply will Europe drive global economies down? The US 10 yr is now technically set to test the next resistance at 1.60%. As long as German 10 yr bunds fall it will drive US rates down with it as US rates continue to trade at higher rates. That said, it is the moving target and completely depends on the deteriorating outlook in the EU’s ability to work out a solution to its debt and growing problems in the banking sectors. Germany is the key; will it step up and take the leap to save the day as it did with east Germany? So far Germany is unwilling to take on the challenge.
Tuesday, May 29, 2012
Mortgage Rates
This is employment week, always a big one for the markets. ADP will report its estimate for private jobs in May on Thursday then the BLS reports the “official;” report on Friday. In the meantime Europe still dominates overall, now Spain is taking the spotlight on concerns Spanish banks are teetering on the edge and need capital infusion in some manner in order to remain solvent. It only gets worse in Europe, Greece is increasingly viewed as leaving the EU with the deciding vote in about two weeks (June 17th).
How low can US interest rates fall? Based on comparisons of some other AAA sovereign yields the US 10 yr note is cheap, trading at 1.73% this morning compared to Germany’s 10 yr bund at 1.346%; the spread .385 bp at 9:30. $ yrs and counting, the US budget deficits have exceeded $1.0T with US debt downgraded by rating agencies and no longer AAA. One of the key drivers for US interest rates is there are better yields here than in Germany, Australia and other better controlled countries. The extra yield investors receive for holding Treasuries is an added benefit for investors seeking a haven from Europe’s sovereign debt turmoil. In the US there is absolutely no incentive for politicians to focus on budgets; neither Democrats or republicans, no matter what comes out of their mouths, our politicians have no interest in actually dealing with excess spending regardless of what you may here from any of them.
Home values in 20 U.S. cities fell in the 12 months ended March at the slowest pace in more than a year as lower borrowing costs and an improving job market gave sales a boost. The S&P/Case-Shiller index of property values fell 2.6% from a year earlier after a 3.5% drop in February.
At 9:30 the DJIA opened +83, NASDAQ +25; 10 yr note +3/32 at 1.73% -1 bp and mortgage prices that were slightly better early were unchanged.
At 10:00 May consumer confidence index from the Conference Board, expected at 69.4, was a lot weaker at 64.9 frm rev’d Apr at 68.7 frm 69.2. Expectations at 77.6 frm 80.4, the present situation at 45.9 frm 51.2. The rep[ort on consumers is a lot weaker than what the U. of Michigan consumer sentiment index reported last week. The reaction wasn’t much, the 10 yr note moved up 2/32 in price but the stock market ignored the report.
Probably won’t see much movement in the financial markets through the rest of the day; at least until; 3:00 for the stock market. The final hour in stock trading is generally volatile. The interest rate markets are not likely to improve a whole lot this week until employment on Friday or a significant decline on German 10 yr bunds. Technically the US 10 yr is going to need a large push to move and stay below 1.70%. Mortgage rates are likely to be unchanged through most of this four day week.
This is employment week, always a big one for the markets. ADP will report its estimate for private jobs in May on Thursday then the BLS reports the “official;” report on Friday. In the meantime Europe still dominates overall, now Spain is taking the spotlight on concerns Spanish banks are teetering on the edge and need capital infusion in some manner in order to remain solvent. It only gets worse in Europe, Greece is increasingly viewed as leaving the EU with the deciding vote in about two weeks (June 17th).
How low can US interest rates fall? Based on comparisons of some other AAA sovereign yields the US 10 yr note is cheap, trading at 1.73% this morning compared to Germany’s 10 yr bund at 1.346%; the spread .385 bp at 9:30. $ yrs and counting, the US budget deficits have exceeded $1.0T with US debt downgraded by rating agencies and no longer AAA. One of the key drivers for US interest rates is there are better yields here than in Germany, Australia and other better controlled countries. The extra yield investors receive for holding Treasuries is an added benefit for investors seeking a haven from Europe’s sovereign debt turmoil. In the US there is absolutely no incentive for politicians to focus on budgets; neither Democrats or republicans, no matter what comes out of their mouths, our politicians have no interest in actually dealing with excess spending regardless of what you may here from any of them.
Home values in 20 U.S. cities fell in the 12 months ended March at the slowest pace in more than a year as lower borrowing costs and an improving job market gave sales a boost. The S&P/Case-Shiller index of property values fell 2.6% from a year earlier after a 3.5% drop in February.
At 9:30 the DJIA opened +83, NASDAQ +25; 10 yr note +3/32 at 1.73% -1 bp and mortgage prices that were slightly better early were unchanged.
At 10:00 May consumer confidence index from the Conference Board, expected at 69.4, was a lot weaker at 64.9 frm rev’d Apr at 68.7 frm 69.2. Expectations at 77.6 frm 80.4, the present situation at 45.9 frm 51.2. The rep[ort on consumers is a lot weaker than what the U. of Michigan consumer sentiment index reported last week. The reaction wasn’t much, the 10 yr note moved up 2/32 in price but the stock market ignored the report.
Probably won’t see much movement in the financial markets through the rest of the day; at least until; 3:00 for the stock market. The final hour in stock trading is generally volatile. The interest rate markets are not likely to improve a whole lot this week until employment on Friday or a significant decline on German 10 yr bunds. Technically the US 10 yr is going to need a large push to move and stay below 1.70%. Mortgage rates are likely to be unchanged through most of this four day week.
Friday, May 25, 2012
Mortgage Rates
A little better start this morning but interest rates continue in a narrow range ahead of the 3 day holiday. With US markets closed on Monday and the rest of the world working, the bond and stock market should trade in a tight range with the bond market not likely to see a lot of selling today. The bond and mortgage markets will close at 2:00 this afternoon with most traders out by 12:00.
The US dollar continues to gain strength over the euro on Europe’s debt crisis that isn’t close to any resolution. The euro fell against the dollar and yen for the fourth day amid concern Spain’s regional governments may lose access to capital markets. Spain’s government is analyzing “with all caution” requests from regional governments to help them regain access to capital markets. The Italian prime minister told an Italian television station yesterday that the majority of EU leaders at a Brussels meeting this week backed joint euro-area bonds. He added that Italy can help persuade Germany to support Europe’s “common good” as well. Germany is opposed to euro bonds and has only one thing on its agenda, continue the severe austerity moves that are not working and could well break up the EU unless there is more emphasis on improving economies with increased spending. Euro-area bonds lower borrowing costs for the currency’s most debt-stricken members by making repayment the responsibility of all 17 countries.
At 9:30 the DJIA opened -15, NASDAQ +1; the 10 yr note +10/32 at 1.75% -3 bp and MBS 30 yr price +6/32 (.18 bp).
At 9:55 the final May U. of Michigan consumer sentiment index was expected at 77.5 down from 77.8 two weeks ago at the mid-month sentiment. The index increased to 79.3 the highest reading since Oct 2007 and from the final read at the end of April at 76.4. The current condition at 87.2 frm 87.3 at mid-month, expectations at 74.3 frm 71.7 and the 12 month outlook at 91 frm 88. The better sentiment took the stock indexes off their lows but not into the black; the rate markets didn’t show much reaction to the better sentiment as the improvement is likely due to one thing, the decline in gasoline prices. The report does present volatility.
The rest of the day will be on very light volume and with little changes, The bond and mortgage markets close at 2:00 this afternoon.
A little better start this morning but interest rates continue in a narrow range ahead of the 3 day holiday. With US markets closed on Monday and the rest of the world working, the bond and stock market should trade in a tight range with the bond market not likely to see a lot of selling today. The bond and mortgage markets will close at 2:00 this afternoon with most traders out by 12:00.
The US dollar continues to gain strength over the euro on Europe’s debt crisis that isn’t close to any resolution. The euro fell against the dollar and yen for the fourth day amid concern Spain’s regional governments may lose access to capital markets. Spain’s government is analyzing “with all caution” requests from regional governments to help them regain access to capital markets. The Italian prime minister told an Italian television station yesterday that the majority of EU leaders at a Brussels meeting this week backed joint euro-area bonds. He added that Italy can help persuade Germany to support Europe’s “common good” as well. Germany is opposed to euro bonds and has only one thing on its agenda, continue the severe austerity moves that are not working and could well break up the EU unless there is more emphasis on improving economies with increased spending. Euro-area bonds lower borrowing costs for the currency’s most debt-stricken members by making repayment the responsibility of all 17 countries.
At 9:30 the DJIA opened -15, NASDAQ +1; the 10 yr note +10/32 at 1.75% -3 bp and MBS 30 yr price +6/32 (.18 bp).
At 9:55 the final May U. of Michigan consumer sentiment index was expected at 77.5 down from 77.8 two weeks ago at the mid-month sentiment. The index increased to 79.3 the highest reading since Oct 2007 and from the final read at the end of April at 76.4. The current condition at 87.2 frm 87.3 at mid-month, expectations at 74.3 frm 71.7 and the 12 month outlook at 91 frm 88. The better sentiment took the stock indexes off their lows but not into the black; the rate markets didn’t show much reaction to the better sentiment as the improvement is likely due to one thing, the decline in gasoline prices. The report does present volatility.
The rest of the day will be on very light volume and with little changes, The bond and mortgage markets close at 2:00 this afternoon.
Wednesday, May 23, 2012
Mortgage Rates
Treasuries and mortgage markets opened better this morning on continued concerns that Greece will leave the euro although officials in the region are saying they are not preparing for a Greek exist. Nothing different in terms of various comments out of Europe, some say one thing while others deny. Nevertheless global investors are more convinced Greece will go. Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro. While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal. Even with more than two years of preparation, banks still are at risk of deposit flight and rising defaults in other indebted euro nations. European leaders are meeting today to discuss the region’s debt crisis. Deepening concern Greece will exit the euro has wiped about $4 trillion from equity markets worldwide this month.
European Union officials damped expectations for the 27-nation summit starting at 7 p.m. in Brussels, looking toward the next meeting on June 28-29 as the time to take pro-growth steps. The crisis in the 17 euro countries will come up tonight only “at the very end,” the EU President said in a pre-summit letter.
German interest rates continued to fall today on the Greek situation, the US 10 yr note is lower in yield early today on the same concerns. That said, while there is little reason to expect interest rates will increase, the US 10 yr still has strong resistance at 1.70%, the level that hasn’t been breached on a closing basis. As long as the on-going uncertainty remains the US interest rate markets will remain at these levels; to crack 1.70% on the 10 yr and send mortgage rates to another historic low Greece will have to actually default. IN the meantime officials in Europe will never acquiesce that Greece will leave the EU, always holding out hope that the contagion will not spread to other indebted countries in the region sitting on the brink.
At 9:30 the DJIA opened -55, NASDAQ -24. The 10 yr note traded at 1.74% -4 bp frm yesterday’s close; MBS 30 yr price +5/32 (.15 bp) frm yesterday’s close.
At 10:00 April new home sales were expected up 3.3%; as reported up 3.3% at 343K units annualized, the median sales price $235,700.00 +4.9% yr/yr; based on present sales there is a 5.1 month supply.
The March FHFA housing price index, expected up 0.3%, increased 1.8% and +2.7% yr/yr.
The weekly MBA mortgage applications were up last week. The Market Composite Index, a measure of mortgage loan application volume, increased 3.8% on a seasonally adjusted basis from one week earlier. The Refinance Index increased 5.6% from the previous week. This is the third consecutive weekly increase in the Refinance Index which is at its highest level since February 10, 2012. The seasonally adjusted Purchase Index decreased 3.0% from one week earlier to its lowest level since April 20, 2012. The four week moving average for the seasonally adjusted Market Index is up 3.72 percent. The four week moving average is up 0.17% for the seasonally adjusted Purchase Index, while this average is up 4.83% for the Refinance Index. The refinance share of mortgage activity increased to 76.6% of total applications from 74.9% the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.93 percent, the lowest rate in the history of the survey, from 3.96 percent, with points increasing to 0.39 from 0.37 (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) increased to 4.25 percent from 4.20 percent, with points increasing to 0.42 from 0.36 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.73 percent, the lowest rate in the history of the survey, from 3.75 percent, with points decreasing to 0.57 from 0.66 (including the origination fee) for 80% loans.
At 1:00 Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr auction saw good demand, likely that will be the same today.
Treasuries and mortgage markets opened better this morning on continued concerns that Greece will leave the euro although officials in the region are saying they are not preparing for a Greek exist. Nothing different in terms of various comments out of Europe, some say one thing while others deny. Nevertheless global investors are more convinced Greece will go. Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro. While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal. Even with more than two years of preparation, banks still are at risk of deposit flight and rising defaults in other indebted euro nations. European leaders are meeting today to discuss the region’s debt crisis. Deepening concern Greece will exit the euro has wiped about $4 trillion from equity markets worldwide this month.
European Union officials damped expectations for the 27-nation summit starting at 7 p.m. in Brussels, looking toward the next meeting on June 28-29 as the time to take pro-growth steps. The crisis in the 17 euro countries will come up tonight only “at the very end,” the EU President said in a pre-summit letter.
German interest rates continued to fall today on the Greek situation, the US 10 yr note is lower in yield early today on the same concerns. That said, while there is little reason to expect interest rates will increase, the US 10 yr still has strong resistance at 1.70%, the level that hasn’t been breached on a closing basis. As long as the on-going uncertainty remains the US interest rate markets will remain at these levels; to crack 1.70% on the 10 yr and send mortgage rates to another historic low Greece will have to actually default. IN the meantime officials in Europe will never acquiesce that Greece will leave the EU, always holding out hope that the contagion will not spread to other indebted countries in the region sitting on the brink.
At 9:30 the DJIA opened -55, NASDAQ -24. The 10 yr note traded at 1.74% -4 bp frm yesterday’s close; MBS 30 yr price +5/32 (.15 bp) frm yesterday’s close.
At 10:00 April new home sales were expected up 3.3%; as reported up 3.3% at 343K units annualized, the median sales price $235,700.00 +4.9% yr/yr; based on present sales there is a 5.1 month supply.
The March FHFA housing price index, expected up 0.3%, increased 1.8% and +2.7% yr/yr.
The weekly MBA mortgage applications were up last week. The Market Composite Index, a measure of mortgage loan application volume, increased 3.8% on a seasonally adjusted basis from one week earlier. The Refinance Index increased 5.6% from the previous week. This is the third consecutive weekly increase in the Refinance Index which is at its highest level since February 10, 2012. The seasonally adjusted Purchase Index decreased 3.0% from one week earlier to its lowest level since April 20, 2012. The four week moving average for the seasonally adjusted Market Index is up 3.72 percent. The four week moving average is up 0.17% for the seasonally adjusted Purchase Index, while this average is up 4.83% for the Refinance Index. The refinance share of mortgage activity increased to 76.6% of total applications from 74.9% the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.93 percent, the lowest rate in the history of the survey, from 3.96 percent, with points increasing to 0.39 from 0.37 (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) increased to 4.25 percent from 4.20 percent, with points increasing to 0.42 from 0.36 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.73 percent, the lowest rate in the history of the survey, from 3.75 percent, with points decreasing to 0.57 from 0.66 (including the origination fee) for 80% loans.
At 1:00 Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr auction saw good demand, likely that will be the same today.
Tuesday, May 22, 2012
Mortgage Rates
Interest rate markets opened weaker today after a little weakness yesterday. Europe continues to drag global markets around, however the slight increase in interest rates yesterday and today is more a technical issue than any significant change in underlying fundamentals. The bellwether 10 yr note, the main driver for mortgage rates, fell to 1.70% last Thursday and Friday, the level it hit last Sept before rates shot up to 2.00% in the next three days. With no fear news out of Europe and increasing talk out of China that it is going to increase spending to improve its growth, traders have no immediate reason to push interest rates lower. China plans to speed up approval of infrastructure projects and allocate construction funding faster to improve growth, the China Securities Journal reported. At the lowest levels in history, interest rates will decline more only as the global situation deteriorates. Betting on Greece leaving the 17 member euro currency has driven billions of global cash to US treasuries. Europe has demonstrated over the last 2+ years that what seems likely today can change quickly. Recall there was a bailout plan in place, investors and central bankers lauded it as the beginning of the end of the crisis in Greece.
Merkel and Hollande, leaders of Germany and France, will meet today. Both have different ideas of what is best to save Greece and the entire EU; Merkel has forced spending cuts although there hasn’t been many, and higher taxes that are driving growth down and unemployment higher. Hollande, the new President of France, was elected on his view that Europe must increase spending and back off from some of what he has called draconian demands on Greece, Ireland and Portugal.
European leaders are scheduled to meet in Brussels tomorrow. Merkel said she won’t shy away from disagreeing with French President Hollande, saying good cooperation “doesn’t exclude differing positions.” France isn’t out to create conflict and will welcome “all the tools, all the proposals” at the meeting, Hollande said. Kissy, Kissy; wonder why Europe is keeping the global markets in turmoil?
At 9:30 ahead of April existing home sales at 10:00, the DJIA opened +6, NASDAQ +5; the 10 yr note at 1.79% +5 bp and MBS 30 yr prices -6/32 (.18 bp). The gain at the opened evaporated in 10 minutes on the key indexes. The steady sell off in the stock market mirrors a pullback underway in retail sales, according to ICSC-Goldman whose same-store sales index, at minus 1.7% in the May 19 week, is down for a fourth week in a row. The year-on-year rate is down seven tenths to plus 3.8%. The report notes little positive effect from favorable weather or from lower gas prices.
Japan’s sovereign-credit rating was lowered by Fitch because of limited progress by the government in tackling the world’s biggest public debt burden. The long-term, local currency grade fell by one step to A+, the fifth highest ranking, with a negative outlook, Fitch said in a statement today. The foreign-currency rating declined two steps to A+. The Organization for Economic Cooperation and Development said today that gross public debt will be 223% of GDP next year, up from a projected 214% in 2012; wherever one turns in the world sovereign debt is increasing at alarming rates; Japan, Europe, the US and the list goes on and on.
April existing home sales were expected to have increased 3.7%, as reports sales were up 3.4% after march was revised from -2.6% to -2.8%. The median sales price at $177,400 up 10.1% yr/yr and the highest since Jan 2006. Based on the sales there is a 6.6 month supply. The lack of inventory is pushing prices up. Treasuries and mortgages lost more ground while the stock market turned up on the report.
At 1:00 this afternoon Treasury auction $35B of 2 yr notes, demand is expected to be decent. If the 2 doesn’t match the outlook of good demand it won’t bode well for tomorrow’s 5 yr note and Thursday’s 7 yr note auctions.
Interest rate markets opened weaker today after a little weakness yesterday. Europe continues to drag global markets around, however the slight increase in interest rates yesterday and today is more a technical issue than any significant change in underlying fundamentals. The bellwether 10 yr note, the main driver for mortgage rates, fell to 1.70% last Thursday and Friday, the level it hit last Sept before rates shot up to 2.00% in the next three days. With no fear news out of Europe and increasing talk out of China that it is going to increase spending to improve its growth, traders have no immediate reason to push interest rates lower. China plans to speed up approval of infrastructure projects and allocate construction funding faster to improve growth, the China Securities Journal reported. At the lowest levels in history, interest rates will decline more only as the global situation deteriorates. Betting on Greece leaving the 17 member euro currency has driven billions of global cash to US treasuries. Europe has demonstrated over the last 2+ years that what seems likely today can change quickly. Recall there was a bailout plan in place, investors and central bankers lauded it as the beginning of the end of the crisis in Greece.
Merkel and Hollande, leaders of Germany and France, will meet today. Both have different ideas of what is best to save Greece and the entire EU; Merkel has forced spending cuts although there hasn’t been many, and higher taxes that are driving growth down and unemployment higher. Hollande, the new President of France, was elected on his view that Europe must increase spending and back off from some of what he has called draconian demands on Greece, Ireland and Portugal.
European leaders are scheduled to meet in Brussels tomorrow. Merkel said she won’t shy away from disagreeing with French President Hollande, saying good cooperation “doesn’t exclude differing positions.” France isn’t out to create conflict and will welcome “all the tools, all the proposals” at the meeting, Hollande said. Kissy, Kissy; wonder why Europe is keeping the global markets in turmoil?
At 9:30 ahead of April existing home sales at 10:00, the DJIA opened +6, NASDAQ +5; the 10 yr note at 1.79% +5 bp and MBS 30 yr prices -6/32 (.18 bp). The gain at the opened evaporated in 10 minutes on the key indexes. The steady sell off in the stock market mirrors a pullback underway in retail sales, according to ICSC-Goldman whose same-store sales index, at minus 1.7% in the May 19 week, is down for a fourth week in a row. The year-on-year rate is down seven tenths to plus 3.8%. The report notes little positive effect from favorable weather or from lower gas prices.
Japan’s sovereign-credit rating was lowered by Fitch because of limited progress by the government in tackling the world’s biggest public debt burden. The long-term, local currency grade fell by one step to A+, the fifth highest ranking, with a negative outlook, Fitch said in a statement today. The foreign-currency rating declined two steps to A+. The Organization for Economic Cooperation and Development said today that gross public debt will be 223% of GDP next year, up from a projected 214% in 2012; wherever one turns in the world sovereign debt is increasing at alarming rates; Japan, Europe, the US and the list goes on and on.
April existing home sales were expected to have increased 3.7%, as reports sales were up 3.4% after march was revised from -2.6% to -2.8%. The median sales price at $177,400 up 10.1% yr/yr and the highest since Jan 2006. Based on the sales there is a 6.6 month supply. The lack of inventory is pushing prices up. Treasuries and mortgages lost more ground while the stock market turned up on the report.
At 1:00 this afternoon Treasury auction $35B of 2 yr notes, demand is expected to be decent. If the 2 doesn’t match the outlook of good demand it won’t bode well for tomorrow’s 5 yr note and Thursday’s 7 yr note auctions.
Monday, May 21, 2012
Mortgage Rates
The bond and mortgage markets started slightly weaker this morning but have managed to hold close to unchanged with stock indexes trading a little better. There are no economic reports today. This week Treasury will auction $99B of notes beginning tomorrow through Thursday; with rates now at historic lows the demand will be the measurement of how well the auctions go off. Economic reports this week have April existing and new home sales, durable goods orders and of course weekly jobless claims.
In Europe the EU summit starts Wednesday. German and French finance chiefs are scheduled to meet in Berlin before the summit meeting. Concern Greece will exit the euro erased about $4 trillion from global stock markets this month. There is a strong desire for keeping Greece in the 17 county currency, although Germany still holds court with its insistence for severe austerity. Greece will have another election in June, in essence to determine whether voters want to stay or go; while the election isn’t framed as a do or die thing, that is what it will be. Hedge funds reduced wagers on a rally in commodities to the lowest this year on mounting speculation that Greece will leave the euro, slowing global growth and curbing demand for everything from copper to soybeans. US stock indexes trading higher on comments from China it would support the economy and German and French officials prepared to meet before a summit. There is an increasing belief that Greece will leave the euro currency, that belief will keep US interest rates from increasing much. According to one report 90% of respondents now believe Greece will go. On Saturday at Camp David G-8 leaders urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the European Union’s bailout deal.
Speculation has risen that the Fed may need to add to the $12.8 trillion already spent to avert a second recession in three years after reports showed jobs are growing more slowly than forecast and Bernanke said April 25 that the Fed “remains prepared to do more as needed.” For first time since it announced Operation Twist in September, the Fed’s preferred gauge of measuring traders’ inflation expectations is poised to fall for a second straight month. Six weeks frm now the Fed’s Operation Twist is set to end, with inflation not a factor and the weakening global and US economy there is likely to be increasing speculation the Fed will either extend it or have another plan to keep interest rates from increasing.
At 9:30 the DJIA opened +25, NASDAQ +5; Facebook trade started lower than its IPO price last Friday -$3.00 frm the IPO price of $38.00. The 10 yr note -3/32; mtg prices traded about unchanged from Friday.
Interest rate markets continue their bullish bias, mostly on the inability of Europe’s leaders to come to any significant plan to keep Greece in the EU while softening and supporting moves to boost growth with spending increases. Two plus years and counting as the region chokes on debts it can’t pay and disagreement on how to create a miracle that will save the EU. If Greece leaves the fear of contagion to Ireland, Portugal and Spain will increase exponentially. The remainder of the day the bond and mortgage markets will take their lead from the US stock market; At 10:00 the key indexes are slightly better but appear to be struggling to hold gas.
The bond and mortgage markets started slightly weaker this morning but have managed to hold close to unchanged with stock indexes trading a little better. There are no economic reports today. This week Treasury will auction $99B of notes beginning tomorrow through Thursday; with rates now at historic lows the demand will be the measurement of how well the auctions go off. Economic reports this week have April existing and new home sales, durable goods orders and of course weekly jobless claims.
In Europe the EU summit starts Wednesday. German and French finance chiefs are scheduled to meet in Berlin before the summit meeting. Concern Greece will exit the euro erased about $4 trillion from global stock markets this month. There is a strong desire for keeping Greece in the 17 county currency, although Germany still holds court with its insistence for severe austerity. Greece will have another election in June, in essence to determine whether voters want to stay or go; while the election isn’t framed as a do or die thing, that is what it will be. Hedge funds reduced wagers on a rally in commodities to the lowest this year on mounting speculation that Greece will leave the euro, slowing global growth and curbing demand for everything from copper to soybeans. US stock indexes trading higher on comments from China it would support the economy and German and French officials prepared to meet before a summit. There is an increasing belief that Greece will leave the euro currency, that belief will keep US interest rates from increasing much. According to one report 90% of respondents now believe Greece will go. On Saturday at Camp David G-8 leaders urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the European Union’s bailout deal.
Speculation has risen that the Fed may need to add to the $12.8 trillion already spent to avert a second recession in three years after reports showed jobs are growing more slowly than forecast and Bernanke said April 25 that the Fed “remains prepared to do more as needed.” For first time since it announced Operation Twist in September, the Fed’s preferred gauge of measuring traders’ inflation expectations is poised to fall for a second straight month. Six weeks frm now the Fed’s Operation Twist is set to end, with inflation not a factor and the weakening global and US economy there is likely to be increasing speculation the Fed will either extend it or have another plan to keep interest rates from increasing.
At 9:30 the DJIA opened +25, NASDAQ +5; Facebook trade started lower than its IPO price last Friday -$3.00 frm the IPO price of $38.00. The 10 yr note -3/32; mtg prices traded about unchanged from Friday.
Interest rate markets continue their bullish bias, mostly on the inability of Europe’s leaders to come to any significant plan to keep Greece in the EU while softening and supporting moves to boost growth with spending increases. Two plus years and counting as the region chokes on debts it can’t pay and disagreement on how to create a miracle that will save the EU. If Greece leaves the fear of contagion to Ireland, Portugal and Spain will increase exponentially. The remainder of the day the bond and mortgage markets will take their lead from the US stock market; At 10:00 the key indexes are slightly better but appear to be struggling to hold gas.
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