Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The bond and stock markets are closed today for Good Friday. Although markets are closed today, Feb personal income and spending were reported; income was up 1.1% while spending increased 0.7%. Estimates were for income to be +0.9% and spending +0.6%; January income was down 3.6% and spending up just 0.2%. Better income and spending, if markets were open, would likely support stock indexes and add slight pressure in the bond and mortgage markets. At 9:55 this morning the final monthly U. of Michigan consumer sentiment index was reported much stronger than expected. The index at 78.6 was expected at 72.5, the previous reading was 71.8. The increase in sentiment contradicts the Mar consumer confidence index released on Tuesday this week; that index saw a big decline, from 68.0 to 59.7 on estimates it would be at 66.9. Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes. The two reports this morning, if markets were open, would likely have improved the stock market and likely have the bond and mortgage markets trading weaker. The bond market, although closed, remains technically overbought based on all momentum oscillators. The likelihood of some retracement is high. Next week is employment week with March data to be reported on Friday.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The 10 yr and MBSs started a little weaker this morning; early trading in the stock indexes pointing to a slightly better open at 9:30. Neither market however was much different from yesterday’s closes. In Cyprus today, after being closed for two weeks, the banks opened for the first time. Yesterday most everyone was expecting the possibility of huge unruly crowds; lots of The bond and mortgage markets started the day a little weaker with security was planned as the world waited to see how citizens would react. Nothing happened, the opening of banks was very orderly with not many rushing to withdraw the maximum 300 euros per day. According to reports and video coverage the lines at banks were small, no more than 20 to 30 people lining up. “We expected much more people,” said a manager of a Bank of Cyprus branch. “Fortunately there are only some people who needed cash for the day, but customers reacted fantastically. We expected some people to be more aggravated.” The controls on withdrawals will continue for the next seven days. The German 10 yr bund yield rose one basis point to 1.28% after declining to 1.25%, the lowest level since Aug. 3. The yield has dropped 10 basis points this week. Spain’s 10-year yield rose one basis point to 5.09%. The rate has risen 23 basis points this week. Italian bonds (10 yr) at 4.78% was down from 4.86% earlier today, the bond up 26 bp this week. German unemployment unexpectedly rose in March; the unemployed increased 13K in the month against forecasts of a decline of 2000. Europe’s stock market today were all better on relief there were no incidents in Cyprus when their banks opened. 8:30 data; weekly jobless claims were expected to be up 4K, as reported claims were up 16K to 357K and last week’s claims were revised up frm 336K to 341K. The 4 week average increased to 343K, up 2,250; continuing claims did decline to the lowest level since July 2008. The final Q4 GDP report was expected at +0.6%, growth was +0.4% after the preliminary data last month was a growth of 0.1%. By 9:00 this morning the US stock indexes were losing all of the early improvement; the 10 yr note rate fell back to unchanged at 1.85% and 30 yr MBSs after opening down 8 bp were also back to unchanged. At 9:30 the DJIA opened +14, NASDAQ +2, S&P unch; 10 yr note +1 bp at 1.86%, 30 yr MBS price -6 bp frm yesterday’s close. 9:45 this morning brought the March Chicago purchasing mgrs. index; expected at 56.1 frm 56.8, the index fell to 52.4. Another measurement that suggests the economy may be slowing; the new orders component fell to 50 frm 60 on February. Consumer confidence slipped on Tuesday, the employment picture still too high. Would be employers and people overall are beginning to realize that Obama Care, originally touted as a cost cutting measure, will in fact cost businesses and individuals more---about $2K a year on average according recent data from American Actuaries’. Now that the reality is setting in, it is another drag on hiring full time workers. Later today, at 1:00 Treasury will auction $29B of 7 yr notes. Yesterday the 5 yr auction went OK, about in line with demand for previous 5 yr auctions. The recent decline in interest rates has been a safe haven event caused of course over the debt crisis in Cyprus. It is too early to call it over, but presently the 10 yr note , based on momentum oscillators and a key moving average, is registering overbought readings. When the 14 day relative strength indicator falls to present levels we expect some consolidation at best, at worst an increase in rates. The 10 is testing its 100 day average at 1.84%, it hasn’t traded below it since the beginning of the year. The US stock market will be closed tomorrow for Good Friday although the bond and mortgage markets will trade.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Once again yesterday as the stock market rallied, the S&P 500 failed to achieve a new high, falling short by 2 points. Early this morning US stock indexes were weaker implying a weak open at 9:30. In Europe all the major markets are weaker. Italy has political issues---again, the Italian 10 yr note at its highest rate in months on political turmoil; in Germany their 10 yr bund at 1.29% is the lowest in months. Safe haven moves sending US interest rates lower this morning; the 10 yr note walked right through its 1.90% technical resistance and at 9:00 this morning at 1.86% -5 bp frm yesterday’s close. 30 yr MBS price at 9:00 +28 bp frm yesterday’s close. Cyprus banks’ insolvency is bringing back focus on the EU banks, particularly in Italy and Spain. Cyprus is expected to open banks tomorrow with controls on withdrawals; in the end regardless of how long it takes most deposits will be gone frm the remaining “good” bank. Who will want to keep their money in Cyprus banks? Some estimates are now saying that as much as 40% of large depositors funds may be lost in the bank deal worked out over the week-end. The EU experiment has once again clearly demonstrated that without parity in the economies that make up the Union, the Union is unlikely to stabilize; it will always be that way. An on-going series of eruptions will continue the hold the region down in terms of economic growth. The have countries are not likely to continue support for the have not’s as they have over the last three years. Here in the US, the stock market rallied strongly yesterday (DJIA +111) but the broad market as measured by the S&P 500 index failed again to make a new high. Yesterday the market overlooked the dramatic decline in Mar consumer confidence, today maybe not so much. The index of confidence from the Conference Board fell to 59.7, the weakest since last Dec. Consumer confidence is critical for the outlook on consumer spending; the fall in confidence along with the increasing concerns over the EU is pressuring stock markets this morning. The run back to safety in treasuries and German bunds is increasing. That the S&P failed on five occasions over the last three weeks to break into new highs is now beginning to worry investors. Even the most bullish traders and investors have been calling for a correction in the market, today may be the beginning. At 9:30 the DJIA opened -62, NASDAQ -23, S&P -9; the 10 yr note at 1.86% -5 bp and under the 1.90% resistance level. 30 yr MBS price at 9:30 +28 bp frm yesterday’s close. The only data today, at 10:00 Feb pending home sales from NAR; the estimates prior to the release were for sales to be down 0.7%. NAR said sales pending sales fell 0.4%; yr/yr +8.4%. Pending sales are contracts signed but not yet closed. The NAR said the decline was primarily due to the lack of inventory that keeps sales down. Earlier this morning the weekly MBA mortgage applications were better after two weeks of decline; better interest rates improved the composite index 7.7% the refinance index +8.0% and the purchase index +7.0%. At 1:00 Treasury will sell $35B of 5 yr notes; yesterday’s 2 yr auction was somewhat disappointing. A bevy of Fed officials will be speaking today; 11:30 Charles Evens, Chicago Fed Pres.; 11:30 Eric Rosengren, Boston Fed Pres.; 12:15 Sandra Pianalto, Cleveland Fed Pres.; 1:00 pm Narayana Kocherlakota, Minneapolis Fed Pres. The bond and mortgage markets have new life; technically we had resistance at 1.90% and Apr 30 yr Fannies resistance was at 103.03. Both markets have broken those levels. It is back to safety with the increasing troubles re-surfacing in the EU. The next resistance level for the 10 yr is at its 100 day average at 1.84% (at 10:00 the 10 is at 1.85%). After six months with no serious issues in the EU, the region is now back as a crucial driver for equity and bond markets—here and in Europe. Continue to float this morning; so far today the stock market is adding to the momentary support for lower US interest rates.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Interest rate markets continue to trade in a tight range, this morning the 10 yr note started down 4/32 at 1.93% +1 bp and 30 yr MBS price at 8:30 -3 bps. US stock indexes early today were pointing to a better opening at 9:30, the same as yesterday; but yesterday after opening better the DJIA dropped 117 points before ending -64. The EU is still impacting markets; although the troika and Cyprus leaders cobbled a plan to keep the country from falling out of the European Union, the plan is not likely to go down well with investors both in Cyprus and other weak EU countries. Yesterday the Dutch finance minister said the plan worked out was a blue print for future banking crises in the EU; his remark sent the DJIA down 117 points. Last night he back-pedaled and in essences retracted his remark. It a common occurrence in the EU for officials to say something then get their mouth’s smacked by other officials, or after seeing the reaction, recant. At 8:30 Feb durable goods orders were better than expected, up 5.7% and Jan revised from -4.9% to -3.8%. Consensus estimates were for orders to have increased 3.9%. Orders for aircraft increased 95.3%, Boeing saying it received orders for 179 planes in Feb. Auto sales also boosted orders, up 3.8% the most since last July. Ex-transportation orders durables declined 0.5%, Jan though was revised from +2.3% to +2.9%. The increase in orders will likely increase the GDP estimates for this quarter. There was no noticeable reaction to the report. The Case/Shiller 20 city housing index for Jan, out at 9:00, was expected at +8.2% yr/yr; as reported the 20 city price increase was right on at +8.1%. In Dec the yr/yr increase was +6.8%. On a month to month basis prices increased 1.0% after increasing 0.9% in Dec. Case/Shiller data is dated, two months in arrears, but does get a little attention. Not one of our favorite series though. No reaction to report. At 9:30 the DJIA opened +67, NASDAQ +14, S&P +7. 10 yr at 9:30 1.94% +2 bp; 30 yr MBS -6 bp, FHA -12 bps. Two major reports at 10:00. Feb new home sales were expected down 3.5% to 426K units (ann.), sales as reported were 411K (ann.), down 4.6%. Jan sales were +13.1%. The median price increased to $246,800.00, up 2.9% yr/yr. Based on current sales there is a 4.4 mo supply. Although a little weaker, overall new home sales holding up well. Builders saying finding employees is beginning to be a problem and land prices are increasing. March consumer confidence was thought to be at 67 frm 69 in Feb; the index dropped to 59.7, not what we wanted to see, however there was no initial reaction to the drop in confidence. The report and the U. of Michigan consumer sentiment index is subject to emotional variances. At 1:00 this afternoon Treasury will begin the monthly auctions of notes totaling $99B. Today $35B of 2 yr note, likely to see good demand. Wednesday $35B of 5 yr notes and Thursday $29B of 7 yr notes. It is Spring time; at least that is what the calendar says but with 7” of snow on the ground it surely doesn’t feel like it. In the oil world though prices are increasing as they generally do this time of the year. Crude increased $0.83 yesterday, this morning up another dollar. Fill up now or pay the price later. Technically speaking; the MBS markets continue to struggle at present levels, the 30 yr FNMA coupon for April has yet to break above its 2 and 40 day averages. The 10 yr note is slightly better but it too is struggling at its 20 and 40 day averages. The relative strength index on the 10 is presently in positive territory but is slowing and not as bullish as at the beginning of the month. We hold with our overall forecasts; interest rates are not likely to decline much frm present levels and not likely to increase much either. As long as the Fed and other central banks remain accommodative rate should be contained in the present wide range, from 1.90% to 2.05% on the 10 yr. 30 yr MBSs have to move up to 103.03 and hold to change the soft current outlook.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Cyprus secured a bailout from its creditors; ending a week of financial panic that threatened to see the island nation become the first government to leave the euro zone. In the late hours of Monday morning Cyprus agreed to the outlines of an aid package, paving the way for 10 billion euros ($13B) of emergency loans to stave off the threat of default. The accord imposes losses that two European Union officials said would be no more than 40% on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second-biggest, which will be wound down. Europe’s stock market rallied on Monday and early Monday bolstered US stocks for a better open at 9:30. The Cyprus solution is the first time since the credit and debt crisis began in Greece in 2009 that bank depositors and stock holders are being forced to take losses; all shareholders and bond holders in the Cyprus Popular bank that will be closed. The deal will undoubtedly bring into focus the safety of deposits and bonds issued by other banks in the larger countries in the EU that are still facing debt issues (Italy, Spain, Portugal). At 9:00 this morning on the Cyprus deal the US stock indexes were pointing to a strong open; early today it appears that today may be the day when the S&P 500 index moves to an all-time high at 1565. The 10 yr at 9:00 -7/32 at 1.96% +3 bp and 30 yr MBSs -9 bp frm Friday’s close. At 9:30 the DJIA opened weaker than it was trading in the pre-market futures, +26, NASDAQ +11, S&P +5; all of the indexes were over twice as higher than at the actual open. MBS prices at 8:30 -21 bp, at 9:30 -2 bps. Already today a lot of volatility. There are no economic reports today but Fed chief Bernanke will be in discussions with IMF and BOE officials on lessons learned from the crisis. Hardly a topic that has much meat given the renewed increase in the EU over their banks and the Cyprus crisis. More bank issues now turning to Spain. Spain's government will impose heavy losses on investors at nationalized banks and hire external advisers to help it manage the banks' assets. A number of key reports this week and Treasury borrowing $99B of notes at its normal monthly auction. No reports today; tomorrow Feb durable goods orders, and new home sales; weekly claims on Thursday and the final Q4 GDP data. Two indicators of consumer confidence this week; the Conference Board’s consumer confidence index and the final Mar U. of Michigan consumer sentiment index. The Cyprus deal this morning has removed some of the safe haven concerns that drove the 10 yr note yield down briefly to 1.90% last Tuesday; this morning the 10 at 1.95% has pushed the note back over its 20 and 40 day averages. In the MBS market the 30 yr Apr FNMA coupon never did break above its 20 and 40 day averages (price). The outlook remains bearish, but not severe. The fixed income market is still tied to how the stock markets trade. As long as the equity markets continue to improve the bond market isn’t likely to decline in rates. On the other side; as long as the Fed is still holding its QE purchases there is little likelihood rates will increase much. Technically, the 10 has resistance at 1.90%, support at 2.00%; 30 yr FNMA MBS has resistance at 103.03 price and support at 102.00 (current price . Although a deal was reached to keep Cyprus from existing the EU, the reaction in the US and German bond markets hasn’t been much.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A little better start in the mortgage and bond market this morning even with the stock indexes opening better. It remains all about the Cyprus banks and whether Cyprus can come up with 5.8B euros in order to get bank rescue money from the ECB. Yesterday the gauntlet was laid down to Cyprus by the ECB and EU officials; raise the money by Monday or the rescue is off. Tough talk as there has been in the past, but in recent past crisis’s in Spain, Italy and Portugal the deadlines were achieved in various forms to avoid any systematic EU meltdown. Will it be different this time? Markets are taking the Cypriot banking crisis in stride so far, no massive runs in Europe’s stock markets, the US stock market holding well and while there has been a certain amount of safety moves into US and German bond markets, the amount hasn’t been extreme. Why so much angst over a country with very small population and not a major economic contributor to the EU? Unless Cyprus stays in the EU there is speculation that even if one country is allowed to exit the Union, it would set a precedent for other members to walk away. Keeping the 17 member EU intact is seen as critical to the future cohesiveness of the entire Union. Allowing one country to leave, even a tiny one like Cyprus, is seen by many to represent a crack in the entire EU. No one really knows for sure what the consequences would be if it is forced out but as in all past episodes over the last three years in the region, the worst case scenario dominates thinking. Based on the latest info, according to the troika, Monday is the deadline for Cyprus to raise 5.8B euros. What happens if the country doesn’t is the unknown keeping markets on edge. At 9:30 the DJIA opened +25, NASDAQ +13, S&P +5; 10 yr note at 1.92% unch and 30 yr MBS price +9 bp frm yesterday’s close. There are no economic releases today and little expected news other than what may slip out from Europe. It should be a quiet session ahead of Monday’s supposed deadline for Cyprus and possible additional news over the weekend. In Germany Angela Merkel told a closed-door meeting of legislators in Berlin today that she’s annoyed the Cypriot government hasn’t been in touch with the so-called troika of international creditors for days. She vented a little more anger than she has in the past, saying Cyprus is testing the EU’s resolve and it isn’t acceptable. The main reason US interest rates have declined somewhat over the last few days is about safety. The move of money into safe havens though, has not been dramatic compared to panic moves into US bonds as in the past upheavals over the last couple of years. The US stock market, although not rallying, is holding well. The take away is that for all the talk and fears being vented over Cyprus, so far it is mostly talk with not much investor reaction. If the crisis is avoided markets will return to more direct fundamentals; the economy and normal issues that are always present. The US economy is strengthening, the bond and mortgage markets outside of the recent Cyprus situation, hold slightly bearish biases. We still hold that interest rates will not increase much over 2.00% and that rate markets will not decline much----unless the EU is seen as unraveling, and isn’t likely.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Bonds started slightly better today, mortgages also better after yesterday’s declines in prices. In the EU-Cyprus banking crisis nothing has been achieved so far, the country has extended its bank holiday until next Monday, keeping banks closed. The country was unable to negotiate any deal with Russia so far. The ECB taking a strong stand, saying it will cut Cypriot banks off from emergency funds after March 25 (Monday) unless the island agrees on a bailout with the European Union and International Monetary Fund. “The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance, ELA, until Monday, 25 March 2013,” the Frankfurt- based ECB said “Thereafter, ELA could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks.” Cypriot banks have relied on ELA funding from their own central bank since they were cut off from regular ECB refinancing operations in June following the downgrading of the country’s credit rating by all three major rating firms to junk status. The recent sharp decline in US and German long term rates was what now appears more of a knee-jerk reaction to the banking crisis in Cyprus. Investors initially fearing that if the country actually took money frm bank depositors that was being forced on the country, it would lead to the same demands on bank deposits in Italy, Spain and Portugal. After a few days and no additional buying of US or German notes and bonds, and after further thinking, it now appears that the Cyprus banking crisis is not likely to spread. It is now seen as a non-event in terms of the EU or any contagion fears. Even if Cyprus leaves the EU, based on how markets are reacting, the fear factor that drove rates lower is not likely to continue----at least that is the view at the moment. The next issue now will focus on what happens on Monday and how markets react to whatever occurs. This morning weekly jobless claims were thought to be up 7K to 340K; as reported claims were up 2K to 336K and last week’s claims were revised from 332K to 334K. The four-week moving average of claims, a less-volatile measure, dropped to a five-year low of 339,750 from 347,250. Recent employment stats have been much better than most forecasts; in Feb job creation increased 336K and 119K new jobs in January, and the unemployment rate fell to 7.7% in Feb, lower than 7.8% expected. Based on recent data, the employment sector is gaining momentum; the Fed however isn’t likely to bite just yet. Bernanke will want more confirmation before seriously thinking of reducing the $85B monthly purchases of treasuries and MBSs. At 9:00 the January FHFA housing price index was expected at +0.7%, as reported the index increased 0.6%; yr/yr prices were up 6.5% frm Dec yr/yr of 5.6%. US stock markets opened weaker this morning, improving the bond market but not much in the mortgage world. The DJIA opened -64, NASDAQ -25, S&P -8. At 9:30 the 10 yr note at 1.93% -3 bp and 30 yr MBS price not much changed, up just 4 bps. The stock market has lost a little luster recently with the S&P unable to make a new high. Very nervous here and in Europe; at about 9:30 a Russian “official” out on the wires saying the Cyprus baking crisis is a long way frm being resolved. The immediate reaction sent US treasury rates and German bund market lower (rates). Volatility in markets continues. More data at 10:00. Feb existing home sales expected up 2.8% at 5.01 mil units (annualized); as reported sales were up 0.8% to 4.98 mil units; single family sales down 0.2%. There was an increase in the inventory level for the first time since Apr 2012 at 4.7 month’s supply, the median sales price $173,600. Feb leading economic indicators were expected +0.4%, as reported up 0.5% and Jan was revised from +0.2% to +0.5%. The March Philadelphia Fed business index, expected at -1.5 frm -12.5 in Feb, the index increased to +2.0. There was no reaction to the three reports, even though on balance they were better than estimates, the bond and stock market didn’t budge on the releases. The improvement in the bond market today is mostly due to the soft stock market rather than safe haven buying over the EU/Cyprus banking crisis. Stocks weaker following Europe’s markets and concern that the broad S&P 500 could not make a new high after moving to with five points two times in the past few sessions.