Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A trio of data points at 8:30 this morning. Weekly jobless claims were up more than expected but not much more, estimates were for 350K as reported claims were up to 368K up 38K on the week. Recent claims data has been somewhat confusing due to technical factors and how the calendar effected claims with the way the holidays fell at the end of last year. The increase followed a combined 45,000 drop in the prior two weeks. The number of people who continue to collect jobless benefits climbed by 22,000 to 3.2 million in the week. Dec personal income was expected to be up 0.7%, as reported income increased 2.6%, Nov income was revised to +1.0% frm +0.6% originally reported. Personal spending for the month was expected up 0.3%, up 0.2% as reported. Spending is a little disappointment since it is a Dec number that suggests consumers didn’t spend as much over the holidays as retailers were expecting at the beginning of Dec. Q4 employment cost index increased 0.5%, right on forecasts; the data generally doesn’t elicit much reaction. Prior to the three 8:30 reports the stock indexes were slightly weaker while the 10 yr note yield was down 2 bp and 30 yr MBSs were +15 bp frm yesterday’s close; after the data there was no initial changes in any market, stock indexes or bonds. With the Jan employment report out tomorrow investors and traders are more concerned about that than the data this morning. The only data that was substantially different than forecasts was personal income increasing quite a bit more than what was thought. At 9:30 the DJIA opened down 16 points, NASDAQ -1, and S&P -2. The 10 yr note unchanged at 1.99% while 30 yr MBS prices up 17 bp frm yesterday’s close. The final data point today, at 9:45 the Chicago purchasing managers’ index was expected at 50.5 frm 51.6 originally reported last month. The index jumped to 55.6 frm De revised to 50.0. A huge unexpected increase when compared to the recent confidence and sentient indexes. The reaction sent stock indexes higher and put some pressure on the mortgage and bond markets. The unexpected jump may cause some to revise their estimates for the employment report to a stronger level. Tomorrow the Jan employment report is out at 8:30. The rest of the day today shouldn’t see much movement ahead of the data. Present estimates are for the unemployment rate at 7.7% down 0.1% frm Dec; private payrolls up 185K, the average hourly earnings +0.1%. While employment trumps most monthly data, there is more to consider tomorrow. The U. of Michigan consumer sentiment index thought to be 71.5 frm 71.3. The Jan national ISM manufacturing index is expected at 50.7 unchanged frm Dec, however with the regional Chicago index better than estimates traders may be re-thinking the index to be higher than what was thought prior to the Chicago report this morning. Dec construction spending tomorrow is forecast up 0.8%. Jan auto and truck sales are seen at 15.3 million down frm 15.4 million in Dec.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to the first data point this morning; at 8:00 am the 10 yr note yield was at 2.02%. At 8:15 ADP reported private jobs increased 192K, 20K more than the consensus estimates; ADP revised its Dec jobs from +215K to 185K. According to the release service sector jobs accounted for 177K of the increase. The better report for Jan is muted with the revision lower for Dec. There wasn’t any noticeable reaction to the data. At 8:30 the first look at Q4 GDP, the advance report, was expected to show the economy grew at 1.0% in the quarter; as reported GDP declined 0.1%. The surprising decline was largely due to reduced defense spending, the largest decline in that sector in 40 years. Another drag is attributed to the declining inventories as buying by consumers increased. Bolstered by a drop in fuel prices and the biggest gain in incomes in four years, consumer spending accelerated, the biggest part of the economy. The headline looks bad but isn’t quite as worrisome as it looks. Consumers spending more is actually a plus for the economy. The report is the first of three, this one, the advance report, doesn’t have all the actual data for the third month in the quarter, next month the data is likely to be revised higher----at least that is how the markets see it this morning. Yr/yr GDP for 2012 was +2.2%, up frm +1.8% in 2011. By 9:00 the 10 yr note already had seen volatility; after the early data the 10 yr dropped from its high at 2.02% to 1.97% after digesting the data traders pushed the yield back to 2.02%. Stock indexes at 9:00 implied a flat opening at 9:30, the indexes fell on the initial reaction to the GDP data but like the rate markets returned to levels prior to the reports. At 9:30 the DJIA opened -15, NASDAQ +2, S&P -2. 10 yr at 2.02% +2 bp; 30 yr MBSs -6 bp At 1:00 Treasury will auction $29B of 7 yr notes; the 5 and 2 yr auctions have been OK but not anything special. The FOMC meeting concludes at 2:15 with the release of the policy statement. We expect the statement will re-affirm the Fed is not about to end its easing, buying $85B of MBSs and treasuries each month. Since last Sept when the Fed announced it would buy $45B a month of MBSs interest rates have increased, maybe that is good news in that it implies the economic outlook is improving regardless of the GDP report this morning. Bernanke wants to increase employment, so far not much progress but as (if) the economy continues to improve, at least in housing, there is potential of lower unemployment. Earlier this morning (7:00 am) the mortgage applications decreased 8.1% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending January 25, 2013. The results include an adjustment to account for the Martin Luther King holiday. The Refinance Index decreased 10% from the previous week. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The refinance share of mortgage activity decreased to 79% of total applications from 82% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4% of total applications. The HARP share of refinance applications increased to 26% from 25% the prior week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.67%, the highest level since September 2012, from 3.62%, with points decreasing to 0.42 from 0.43 (including the origination fee) for 80% loans. The contract interest rate for 30-year fixed mortgages has increased for six of the last seven weeks. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 3.95% from 3.85%, with points increasing to 0.39 from 0.34 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.48% from 3.40%, with points decreasing to 0.33 from 0.53 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 2.95% from 2.87%, with points decreasing to 0.38 from 0.39 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.60% from 2.61%, with points increasing to 0.33 from 0.32 (including the origination fee) for 80% LTV loans. Over the last 5 sessions the 10 yr yield has increased 20 bp in yield (MBSs up 10 bp) frm the low on 1/24 to this morning. While the move higher is what we expected a few weeks back, the magnitude and speed of the increases in rates wasn’t what we expected. The bond and mortgage markets are continuing their run higher in rates but are momentarily over-sold as s the stock market momentarily overbought. Both markets should be seeing some retracements but so far it isn’t occurring. A correction in both markets is still likely but when is becoming a difficult call. The bond market is a bear with very long claws, and we don’t fight the tape. That said; there will be retracements soon, however we are now uncertain from what levels we will see it.

Mortgage Rates

Mortage Rates: Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The bond and mortgagee markets started slightly weaker this morning after the strong selling yesterday morning. Yesterday morning prices tumbled and interest rates increased on very strong Dec durable goods orders; the 10 yr climbed to 2.00% with 30 yr MBS prices off 44 bp in the morning. The afternoon saw a rebound, the 10 yield ended at 1.96% as 2.00% held; 30 yr MBSs at the end of the day ended about unchanged recovering all the morning losses. We noted last Friday that we expected increased volatility this week with all that markets would face, looks like we are seeing it. This morning at 9:00 the 10 yr at 1.97% +1 bp with MBSs -6 bp frm yesterday’s closes. Early traded in the stock index futures at 9:00 were pointing to a slightly weaker open. At 9:00 the Nov Case/Shiller 20 city home price index showed yr/yr price gain of 5.5% frm Nov 2011, right on what was widely thought. The increase is the biggest since August 2006. Prices frm Oct increased 0.6% in Nov. The price index is an average of prices over a 3 month period; in this case Sept and Oct data along with Nov data made up the yr/yr increase. Nineteen of the 20 cities in the index showed a year-over- year gain, led by a 22.8% jump in Phoenix and a 12.7% increase in San Francisco. Last week’s combined sales of new and previously owned properties last year rose 9.9%, the biggest annual gain since 1998. Just about every housing statistic released over the last few months have shown the housing market on a strong path of recovery. At 9:30 the DJIA opened +6, NASDAQ -8, S&P -1; 10 yr note unchanged at 1.97% and the MBS market unchanged from yesterday’s close. At 10:00 January consumer confidence frm the Conference Board was thought to be unchanged frm Dec at 65.1. Similar to the U. of Michigan sentiment index, the confidence index declined to 58.6 as reported. O initial reaction to the data. This afternoon Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr note auction was OK, nothing outstanding. Today’s 5 yr should also see reasonable demand but not a blowout demand with the outlook for interest rates increasingly more bearish. Tomorrow Treasury will sell $29B of 7 yr notes. The FOMC meeting begins this morning, concluding tomorrow afternoon with the policy statement. Always very important to markets, this policy statement is even more so after the minutes frm the Dec meeting indicated there is an increasing discussion within the group about how the Fed will eventually withdraw from the $85B of treasuries and MBSs that it is presently buying each month. When the minutes were released earlier this month the bond and mortgage markets saw rate increases as the fear of the Fed ending those purchases pushed prices down. This meeting, the policy statement tomorrow should provide more clarity about what the Fed is thinking now. Unlikely Bernanke will end the purchases anytime soon but markets don’t wait to see the whites of eyes. That there were discussions last meeting has removed some of the remaining bullishness for fixed income investments, especially low yielding treasuries and mortgages.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com At 8:45 this morning the 10 yr note it 2.00%, up another 5 bp frm Friday; at 8:45 the 30 yr FNMA 3.0 coupon was -37 bp frm Friday’s close. The treasury and mortgage markets have been bearish for all of January, the move to higher rates had been volatile. After the 10 yr yield climbed to 1.97% on the Dec employment report on 1/3 the 10 and MBSs declined (rates) but did not change our bearish forecasts. The yield on the 10 yr fell to 1.82% and MBSs did improve, that in turn lessened the bearish talk, but not here. At the close last Thursday the 10 yr yield was 1.85%, it blew up 10 basis points on Friday on more positive news from the EU regarding the debt crisis; in an already negative market it doesn’t take much to increase selling. This morning at 9:00 the 10 yr up another 5 bp. More stronger economic data than was expected at 8:30; Dec durable goods orders much stronger than thought. The consensus estimates were an increase of 1.6%; as reported orders increased 4.60%, ex transportation orders the forecast was for unchanged, orders increased 1.3%. The reaction moved stock index futures higher and took the 10 yr to the psychological 2.00% level. This week’s economic calendar is heavy with key reports. Treasury will auction $99B of notes this week beginning this afternoon with $35B of 2 yr notes. The FOMC meeting begins tomorrow with the very significant policy statement on Wednesday afternoon. Rounding out the week is Friday’s Jan employment report with non-farm jobs early estimate at 180K and private jobs +193K. Last week the House passed a bill suspending the debt ceiling until May 19th; Senate leaders said the Senate would pass the bill this week and the President said he would sign it immediately. In the bill there is a provision that both the House and Senate have to come up with a budget by April 15th or whichever branch doesn’t have a completed budget the members’ pay will be withheld and put into an escrow account until a budget is passed or the end of the 113th Congress whichever occurs first. The DJIA opened at 9:30 up just 12 points, the NASDAQ +2 and the S&P unch. The 10 yr at 1.99% with 30 yr MBS prices down 40 bp frm Friday’s close. At 10:00 the NAR said pending home sales were . Pending sales are contracts signed but not yet closed. Sales contracted 4.3% against estimates of unch to +1.0%. NAR said the decline is due to declining supply as big banks refuse to but their foreclosures on the markets. Nice strategy , if in fact it is one; kind of doubt though that banks are that sophisticated, willing to hold on betting on higher prices. Give the Fed the credit keeping the FF rate at zero. While we remain bearish for the interest rate markets overall; the recent spike is likely a little too much in too little time. The 2.00% level is likely to hold as a near term support. The Fed is still in the markets purchasing $85B of treasuries and MBSs, that should support rates to some extent. The Wednesday policy statement and Friday’s Jan employment report should dictate whether the 10 yr will breach 2.00%. The FOMC policy statement must convince markets the Fed is not about to change its QE policy with supportive comments that the economy isn’t as strong as markets presently believe. The stock market rise has dealt a serious blow to the near term interest rate markets; it is however in very overbought territory at the current levels, a retracement isn’t far off and when it occurs the rate markets will see some improvement but not likely to change the bearish longer term outlook. Mortgage rates and treasury rates are now at the highest levels since last April.

Mortgage Rates

Mortgage Rates This Week Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com This Week; has a lot of data, the FOMC meeting, Treasury auctioning $99B of notes, and the January employment data. Also on the table, the Senate is expected to vote on the suspension of the debt ceiling that passed the House last week. Last Friday the bond and mortgage markets fell under strong selling pressure on increasing better outlooks in the EU, lessening the need of any safety concerns that drove interest rates down last summer. The stock market now at five year highs is also forcing investors to leave the fixed income markets, especially treasuries and to a lesser degree MBSs. Friday the 10 yr note yield jumped to 1.95% and is very likely to increase more; traders will test 2.00%, maybe today. The FOMC policy statement on Wednesday afternoon takes on even more significance after the minutes frm the Dec meeting indicated there are increasing discussions within the Fed about an exit strategy from the easing moves the Fed has been doing for three years. While we don’t believe the Fed is anywhere near comfortable with the unemployment level or the strength of the economy, just the hint of any discussions about an exit is additional evidence that US and global interest rates have ended the declines as we have suggested for the last two months. Not to say the markets can’t improve on weaker equity markets, weaker economic data, or supportive comments from Bernanke; however any rallies now are not likely to push rates substantially lower. The interest rate markets remain quite bearish as the week begins on Monday with Dec durable goods orders.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com In what we have been describing as a bear market in bond and mortgage markets, today there is strong selling taking the 10 yr note yield to 1.92% at one point about 8:45 this morning and MBS prices down as much as 40 basis points from yesterday’s 25 bp sell-off. As of 9:00 this morning 20 yr 3.0 FNMA’s were down 55 bp frm the close on Wednesday. The early trade in the stock market had the DJIA up 24 points at 9:00. The 10 yr note has decidedly broken from its recent trading range, and technically broke out of a coiling pattern that had developed over the past two weeks; making lower highs on selling and higher lows on buying (yield). This morning the break-out is likely to add additional pressure for bonds and mortgages. More better news from the EU today is adding to the exodus from US treasuries. The ECB said banks in the region will repay more of its emergency 3 yr loans than most were not expecting. Another indication that the EU debt crisis is declining. One of key reasons for investors to stay with US treasuries over the past three years has been fears of debt defaults by some of the countries in the EU that would have derailed the EU. Over the course of the past few months progress made on default fears has lessened investor fears. Some 278 financial institutions will return 137.2B euros ($184.4B) on Jan. 30, the first opportunity for early repayment of the initial three-year loan. The dismal scientists had estimated paybacks would total 84B euros; a huge miss that is generating a lot of bond selling this morning. Those same economists that missed estimates by a wide margin continue to caution not to make much of it; hard to admit such a huge miss. The ECB is taking some of the punch bowl away from its pledge to buy bonds from EU countries, although the bank continues to stand by its pledge. German investor confidence has also been improving, and again another miss by economists that were forecasting less optimism in Europe’s largest economy. Mario Draghi the President of the ECB saying, “we foresee a gradual recovery in the second part of the year,”…. “Governments ought to be given credit for what they did,” he said at the World Economic Forum in Davos,…. “For the first time in many years, the process of restarting European integration got momentum.” At 9:30 the DJIA opened +28, NASDAQ +9, S&P +4. The 10 yr 1.92% +7 bp; 30 yr MBSs -37 bp. At 10:00 Dec new home sales were thought to be up 2.8%; as reported sales fell 7.3% to 369K units (annualized) but November sales were revised higher, from 377K units to 398K units. The November revision higher took sales to their highest level in two years. For all of 2012 sales were up 19.9% the best increase since 1983. The median sales price continues to increase; $248,900.00 up 13.5% on the year. The current supply is just 4.9 months, about the same as supply for Dec existing home sales. No direct reaction to the report, but the bond and mortgage markets were already seeing strong selling. Next Tuesday and Wednesday the FOMC will meet; after the minutes from the Dec meeting suggested more discussion within the FOMC about an exit strategy frm the QEs, and now more encouraging signs from the EU, the meeting has even more importance. Likely the Fed will keep buying $85B a month of MBSs and treasuries that will support US interest rates. The unanswered question now is how high with the 10 yr note increase before the Fed’s QE actually will influence markets? As we have noted over the last month, technically the bond and mortgage markets were throwing off many bearish signals; regardless of the what has been driving the bond market, it has been bearish since 12/31/12. Don’t fight the tape; price action always trumps talk and opinions, recently there has been more selling than buying as evidenced by the patterns each day from investors and traders.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Generally quiet early this morning, prior to 8:30 the 10 yr note yield was down 1 bp to 1.82% and 30 yr MBSs +3 bp frm yesterday’s close. At 8:30 weekly jobless claims were better than expected, estimates were for an increase of 25K to 365K after the 37K decline last week; as reported claims dropped 5K to 330K. The four week average down 8,250 and continuing claims at 3.157 mil frm 3.228 mil. The weekly clams were the lowest since Jan 2008. ON the surface the numbers look good but claims may reflect challenges adjusting the data during the holiday period and at the start of quarters. This year’s changes are following patterns seen in prior years, a Labor Department spokesman said. In 2008, claims dropped for consecutive weeks in early January and then rebounded at the end of the month. The number of applications was estimated for California, Virginia and Hawaii because of the holiday-shortened week. Employment gains still anemic; in Dec Labor said 155K jobs were added, in line with the 2012 average of 153K monthly jobs created. Nothing in the data this morning increases the view that the Fed may be talking about exiting its easing move that buys $85B of treasuries and MBSs each month. The bond market reaction to the claims pushed the 10 yr yield a little higher but MBSs at 9:00 were still holding minor gains, up 3 bp frm yesterday’s close. The reaction in the stock market was not much, the DJIA at 9:00 +19 while the NASDAQ futures trading was down 38 points on weaker Apple earnings that were released late yesterday. At 9:30 the DJIA opened +20, NASDAQ -28, S&P -4. The 10 yr 1.84% +1 bp; 30 yr MBSs -15 bp. At 10:00 the last data today; Dec leading economic indicators were expected up 0.5%, as reported up 0.5%. The World Economic Forum is underway in Davos, Switzerland. Most big economists and financial leaders gather every year in Davos. Bob Shiller of the Case/Shiller home price index fame was less optimistic about the US housing market than most recent data on the sector have shown….. “The housing market has been declining for something like six years now, it could go on, that’s my worry.”…. “The short-term indicators are up now, it definitely looks better, but we saw that in 2009.” …. “It’s a good housing market in the sense that mortgage rates are very low and prices have come down to normal levels, so yes, it’s a good time to buy if nothing bad happens.” ….. “But it’s also a very bad housing market in that most of the mortgages are being supported by the government, and we have the Fed and this buying program. It’s a very abnormal market. There’s a lot of uncertainty going forward.”…. “We’ve been five years in a slow economy, and it could go quite a bit longer”….. “We’ve seen gross domestic product growth at sub-normal levels.” …..“I think we’re pretty far from irrational exuberance, maybe 50 years away.”…. Talk about raining on the parade! He is well respected but likely, hopefully, way off target on his outlook. Yesterday the IMF was out revising US and Global growth lower than what the organization was saying last Oct the last time it released its forecast. Recent data out of China and Europe are not showing a decline in the data reported over the past few days. In Europe ECB President Draghi suggested the worst is over on the debt crisis in the EU, Germany investor confidence rose to its highest in 2.5 years, China’s manufacturing grew at the fastest pace in two years and euro-area services and factory output shrank less than economists forecast in surveys for January, responses from purchasing managers in both industries rose to 48.2 from 47.2 in December, London-based Markit Economics said today. Economists forecast a reading of 47.5. China’s factory index at 51.9 was up frm 51.5 in Dec. The bond and mortgage markets continue to work in very narrow ranges with interday swings back and forth with not much change in rates over the last couple of weeks. The technicals still hold bearish biases, although there has been little movement. Holding bonds together; unsure outlook on the coming debates in Washington over coming spending cuts and the debt ceiling. Yesterday the House sent a bill to the Senate suspending the debt ceiling until May 19th, Senate leaders say the Senate will pass it and the President is saying he will sign it. Next Congress must deal with the sequester on automatic spending cuts due to kick in on March 1st. Also supporting the bond market; the Fed is still buying MBSs and treasuries. Next Tuesday and Wednesday the FOMC will meet, hopefully clearing the air on an exit strategy than emerged from the minutes of the Dec meeting two weeks ago.