Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgages opened better this morning, the 10 yr at 1.65% yesterday’s low and -2 bp frm the close. At 9:00 30 yr MBSs +12 bps frm yesterday’s unchanged prices. 8:30 Q1 employment cost index was +0.3%, expectations called for an increase of 0.5%; no reaction to the data as expected. Today the FOMC meeting gets underway but we won’t know anything until tomorrow when the policy statement is released. At 9:00 the Feb Case/Shiller 20 city home price index increased 9.3% yr/yr, slightly better than 9.0% expected; as with the Q1 employment cost index, there was no market reaction to the data. That the index didn’t increase as much suggests there is little reason to be concerned that wages will increase inflation. Inflation, as noted here over the last couple of issues, is dead; the fear now is deflation. At 9:30 the DJIA opened -6,NASDAQ +1, S&P -1; 10 yr note 1.65% -2 bp and 30 yr MBS price +12 bps. Next up this morning, at 9:45 the April Chicago purchasing mgrs. index, expected unchanged at 52.4. The index fell to 49.0, yet one more data point that didn’t meet forecasts. The trend of economic reports that have failed to match optimistic forecasts is continuing. The reaction added a little pressure to the stock indexes but no appreciable movement in interest rates. Economic strength declining, but so far has had little impact on the sky-rocketing stock market as investors ignore the economy in favor of betting on the Fed and continuing easing that so far has accomplished little; a trillion dollars a year added to the Fed’s balance sheet that now sits at $11 trillion. The final data today; at 10:00 the April consumer confidence index frm the Conference Board, expected at 62.0 frm 59.7 in March. The index, contrary to most data these days, increased to 68.1 frm a revised 61.9. The stock market didn’t react positively, the DJIA continued to decline this morning. Gains in the stock market, an increase in property values and cheaper prices at the gas pump are helping stabilize household wealth. One take-away frm the stronger confidence is that consumers may increase spending; like those in Missouri, show me. The share of consumers expecting more jobs to become available in the next six months rose to 14.2% in April from 13 percent in February. The number of respondents who said jobs are currently plentiful advanced to 9.8% in April from 9.5%. The President will hold a news conference later this morning at 10:30, something about jobs. This week some of the focus is on the euro zone as its economy continues to contract. Business confidence fell in April and inflation rates declined. Global inflation is falling as weak economies struggle to keep prices frm continuing their downward pressures. Confidence fell to -0.93 frm -0.75 in March, the lowest since last November. Consumer confidence did increase slightly but the overall confidence index including businesses and consumers fell to 88.6 frm 90.1 in March, a four month low. The numbers are immaterial, what is material is Europe continues to drag and with it the ECB is widely expected to lower interest rates when it meets on Thursday frm 0.75% to 0.50%. The unemployment rate in the zone, 12.1% in March frm 12.0% in Feb. Everything continues to point to lower interest rates; all technical indicators remain bullish. Rates have been declining, albeit slowly recently. Investors still in love with equities and until there is any significant pullback the slide lower in rates is likely to be slow.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Q1 advance GDP was widely expected to be +3.1% growth for the quarter; as reported GDP up just 2.5% after Q4 2012 was up 0.4%. It is the advance report and subject to change next month when we see the preliminary data; nevertheless growth according to the report isn’t as strong as thought. The reaction wasn’t much compared to trade prior to the data; the 10 yr note prior to 8:30 down 1 bp at 1.70%, at 9:00 1.68%. Stock indexes were weaker before GDP but there was not much additional selling when the weaker data hit. The drop in defense spending outweighed the biggest increase in consumer spending in two years. Household consumption, which accounts for about 70% of the economy, climbed at a 3.2% rate following a 1.8% in Q4 2012. Based on the recent data the overall the economy has slowed growth, manufacturing and service data were softer than expected in March and businesses still not increasing borrowing, March durable goods orders released earlier this week were a lot weaker than forecasts. Higher payroll taxes, higher health care costs for businesses and individuals, and the sequester cuts designed by politicians to inflict the most pain on consumers are all dragging the economy down. On the other side; the increase in equity prices has emboldened consumer spending as well as continued low interest rates and rising home prices. Will the stock market ever have a major decline as many believe? First off; I have no idea, but these days it does seem like nothing will interfere with the climbing prices of the key indexes. Simply stated, where else can investors go to earn any kind of return? The Fed and other central banks are keeping interest rates low with easing moves and lowering base lending rates to almost no cost. Now we find in a major report from Central Banking Publications of 60 central bankers said 23% of banks now own stocks in their portfolios. The central banks, supposedly charged with protecting the $11 trillion foreign exchange markets, are buying stocks in record numbers. Central banks’ policies are pushing the envelope, without almost free money the US and global economies, still on very soft footings, would be headed back to recession----Europe already back into another recession. I don’t recall ever in my career that central banks invested heavily in stock markets; the consequences of any misstep now are increasing, yet so far so good. At 9:30 the DJIA opened -7, NASDAQ -5, S&P -2. 10 yr note at 9:30 1.68% -3 bp; 30 yr MBS price +17 bp frm yesterday’s close and +21 bp frm 9:30 yesterday. 9:55; the U. of Michigan consumer sentiment index was expected at 73.0 frm 72.3 at mid-month. The April final read was 76.4, a nice increase, but compared to the final March sentiment index it is lower than 78.6. The reaction pushed stock indexes higher; these days it takes very little to juice stocks while it takes a village to set off selling. That so far today the stock market has not caved on the weaker Q1 GDP data released this morning is evidence of central banks’ influence on markets. As long as the Fed and other central banks keep adding more stimulus it appears, at least at a glance, that nothing about the state of the economy will have any lasting impact on the bull run in stocks. There is simply nowhere for investors to go----in a sense kind of like a no lose investment with the Fed back-stopping any decline in stock indexes. Interest rates holding well, that market also being propped up by the Fed. Technically, every one of our indicators still hold bullish outlooks for interest rates; that should continue, but substantially lower rates is conditioned on whether the US and global equity markets hold together.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Weekly jobless claims at 8:30 were better than forecasts; down 16K to 339K. Claims last week were the lowest since early March, so-called consensus estimates were at 350K. The 4 week average on claims was down 4500 to 357,500. As we said yesterday claims now are free from seasonal machinations. A Labor Department spokesman said there was nothing unusual that affected today’s figures, he said big swings in claims are common this month because of layoffs related to school vacations and holidays such as Easter that don’t always occur during the same week each year. He also said the period of swings in unadjusted data should be coming to an end. The number of people continuing to collect continuing jobless benefits fell by 93,000 to 3 million in the week ended April 13, the lowest since May 2008. 27 states and territories reported a decrease in claims, while 26 reported an increase. Next week, the Labor Department will release April’s report on the U.S. employment situation. Surveys forecast the labor market regained some ground, with payrolls expanding by 155,000 after an 88,000 a month earlier. In the six months ended in March, employment averaged 188,000. Prior to the weekly claims the US stock indexes were a little better, then improved a little more. Europe’s stock markets were better then fell off on data. The 10 yr note prior to the claims data was at 1.71% +1 bp, the rate increased to 1.72% by 9:00 am; 30 yr MBSs at 9:00 -12 bp frm yesterday’s close. At 9:30 the DJIA opened -5, NASDAQ +12, S&P +3; 10 yr note at 1.72% +2 bp and 30 yr MBS price -6 bps. The story continues to be the same in the global financial markets; central banks printing money at light speed to hold economies together. The Fed buying $85B a month outright and using the pay downs on the big MBS portfolio it holds to buy more; Japan now trying to reflate its economy and end its deflationary trend with money printing (easing like the Fed), next week the ECB is likely to lower its base lending rate. It is an experiment that is in virgin territory, massive moves to force investments into equity markets in attempts to increase economic growth and increase employment. So far, at least here in the US, employment hasn’t seen much improvement over the last three years of Fed QEs. Employment better but at what eventual cost when the Fed and other central banks have to stop and reverse the flows. Not only printing money to drive interest rates down; central banks are increasingly buying stocks. That is rather unnerving in the longer run but is in the present time frame holding markets from major declines. A recent survey by Central Banking Publications of 60 central bankers said 23% of banks now own stocks in their portfolios. The central banks, supposedly charged with protecting the $11 trillion foreign exchange markets, are buying stocks in record numbers. These banks are normally risk-adverse but are slowly and without much concern, increasingly taking on risk that someday will be widely seen as a major financial mistake. Central bankers taking on more risk is a disaster waiting to happen; in the meantime it looks good for the bond and stock markets. At 1:00 this afternoon Treasury conclude this week’s auctions with $29B of 7 yr notes. Three times since early April the 10 yr note yield fell below 1.70% in daily trading, each time the note failed to close below it. Ignoring the intraday movements, the 10 has been stuck in a six basis point yield range since early April. No pressure to run rates higher, equally no momentum or buying when the note trades at 1.70%. 30 yr MBSs track the note, they too have been generally unchanged for three weeks. The technicals still hold positive biases after the huge rate decline that began mid-March driving the rate down from 2.05% to 1.70% in two weeks on the 10 and down 20 bp on 30 yr interest rates. We want to continue to float, but also strongly suggest keeping alert; if the 10 closes over 1.75%----just three bps away from present levels, we will quickly lock. Floating has gained about three weeks on MBS pricing, so floating even with the market flat, has improved pricing.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Early this morning prior to 8:30 the 10 yr note traded weaker at 1.72% +1 bp and 30 yr MBSs were down 6 bp frm yesterday’s close; stock indexes slightly better. March durable goods orders were reported at 8:30, the weakest since last August. Orders were expected to decline 2.5%, as reported orders were down 5.7%; ex the volatile transportation orders markets were looking for an increase of 0.5%, as reported orders fell 1.4%; Feb orders ex transportation were down 1.7%. Overall February orders were originally reported +5.7% but were revised lower to +4.3%. Orders for automobiles increased 0.2% after a 4.7% jump in February. Cars and light trucks sold at a 15.2 million annual rate in March after 15.3 million the prior month. The reaction to the weak durable goods orders tempered the initial improvement in US stock index futures and provided support in the bond and mortgage markets. At 9:30 the DJIA opened -20, NASDAQ -9, S&P -2; 10 yr note at 1.71% unch and 30 yr MBS prices +6 bp frm yesterday’s close. In Europe the Ifo institute in Munich said today its index of Germany’s business climate, based on a survey of 7,000 executives, dropped to 104.4 from 106.7 in March. A composite index of euro-area services and factory output based on a survey of purchasing managers in both industries by London-based Markit Economics held at 46.5 for April, indicating a contraction, a report yesterday showed. Similar German PMI data also showed a contraction. There is increasing speculation that when the ECB meets on May 2nd the bank will lower interest rates as the EU economies struggle with Germany’s insistence on strong austerity in the southern Europe countries thatr are teetering on depression with continual increases in unemployment. There is a slowly increasing consensus in the EU that Germany, the only strong economy in the EU, is being too restrictive with its demands, driving the EU economies down. Now Germany’s economy is beginning to feel the pinch as its output slips. The weekly mortgage applications data frm the MBA out this morning; the overall composite index up 0.2%, the purchase index +0.3% and the re-finance index +0.3%. The previous week the composite index was +4.8%, purchase index +4.0% and the re-finance index +5.0%. The purchase index in the latest week is climbing slowly in what is a positive indication for the spring housing season. The index is at its highest level since the stimulus efforts of May 2010. Helping both indexes (purchases and re-finances) was a dip in mortgage, down 2 basis points for conforming loan balances ($417,500 or less) to an average 3.65% (MBA quotes interest rates with points added for origination and other fees). At 1:00 Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr auction continued the trend of so-so auctions. Over the last couple of months the demand for US treasuries at the auctions of treasuries has been a little less than earlier this year but there hasn’t been any significant reaction to lesser demand. Treasury auctions $165B a month frm 2s to 30s. Everything is status quo in the bond and mortgage markets. Technicals still look positive but there has been almost no change in rates for the past two weeks. Yesterday the twitter event that sent bonds lower and stocks down lasted about 10 minutes, the 10 fell to 1.64% frm 1.70% then back to 1.71% in a matter of minutes. We completely ignore the drop in the 10 yr note rate; the 10 cannot so far close below 1.69%. Mortgage prices yesterday were not impacted on the 20 minute volatility caused by the hacking of APs Twitter account.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com After two weeks of trying and failing, today the 10 yr note yield at 8:30 was trading well below 1.70% at 1.66%; all we need now is for the note to close below 1.70% to start another leg lower in interest rates. Getting a close below 1.69% appears to be failing as the day proceeds. Rate markets started strong this morning on belief that the ECB will cut its interest rates when it meets next. Europe’s economy is still slowing increasing optimism that the ECB is about to cut rates to try and stem the tide of continuing decline of the EU economy. Services and manufacturing shrank in the euro area for a 15th month in April, a report showed today. Not only Europe is slowing, so too is China; similar to US ISM reports the preliminary reading of 50.5 for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compared with a final 51.6 for March. China still growing however, leaders in the country are deliberately slowing growth to fend off inflationary pressures. Feb FHFA housing price index was on target, up 0.7% as expected; yr/yr +7.1%. While there has been improvement for a number of months, the U.S. index is 13.6% below its April 2007 peak and is roughly the same as the October 2004 index level. Still, the improving prices will help add supply to the housing market. Shortages of supply for housing markets continue to place upward pressure on prices. Prices jumped 15.3% from a year earlier in the Pacific area, which includes California, Washington and Hawaii. In the Mountain region, including Arizona, Colorado and Nevada, the gain was 14%. The Middle Atlantic area -- New York, New Jersey and Pennsylvania -- had the smallest increase, at 1.9%. The South Atlantic region had the biggest gain from January. Prices climbed 17% in the area, which includes Florida, Maryland and Virginia. At 9:30 the DJIA opened up 97 points, NASDAQ +23, S&P +9; 10 yr note 1.68% -1 bp. 30 yr MBS price at 9:30 +9 bps. The strong open in the stock market took some away frm the earlier improvements seen at 8:30. At 10:00 March new home sales were expected up 2.0% at 419K annualized units. As reported sales were at 417K units up 1.5% frm February. Feb sales were revised to -7.6% frm -4.5%. The median sales price increased to $417K frm $411K in Feb; based on current sales pace there is a 4.4 month supply, unchanged from Feb. Overall the sales were better than expected, especially compared to March existing home sales released yesterday that were down 0.6%. Treasury will auction $35B of 2 yr notes at 1:00 pm; recent auctions have been tepid at best. Today the bond market started at 1.66% for the 10 yr note, by 10:00 however the yield is back to 1.70%. It didn’t hold and now back to key resistance levels at 1.70%?1.69%. All our technical models are still holding bullish reads but for two weeks the 10 hasn’t been able to close below chart resistance. Today the rate markets lost their improvements as the stock market climbed again, the DJIA over 100 points higher.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Interest rates early this morning started weaker but quickly climbed to unchanged by 8:30; the US stock indexes at 8:30 were pointing to a better open at 9:30. Stocks currently exhibiting an increase in volatility, swinging in wide ranges but with no real sustained trend as many still looking for a major correction. The bond and mortgage markets barely changing from day to day over the last couple of weeks. The 10 yr note in a 6 bp range from 1.75% to 1.69%. European stocks rose, rebounding from the biggest weekly drop in five months, as Italy elected a president and the Group of 20 refrained from opposing the Bank of Japan’s stimulus policies. Asian shares and U.S. index futures also advanced. BOJ Governor Haruhiko Kuroda emerged from the G-20 meeting saying he was encouraged to press ahead with the campaign to defeat deflation. The central bank meets this week after pledging April 4 to double the monetary base in two years. At 9:30 the DJIA opened +15 after trading +50 earlier, NASDAQ +9, S&P +2. 10 yr note at 1.69% -1 bp after trading at 1.73% earlier; 30 yr MBSs +6 bp after being down 6 bp at 9:00 am. At 10:00 this morning the first of three housing data points this week; March existing home sales were thought to be up 1.0% frm Feb at 5.03 mil units (annualized). As reported sales decline 0.6% to 4.90 mil units, a big miss with units unable to break above 5.0 mil. Feb sales were revised lower, the median sales price at $184,300 up 11.8% yr/yr. Inventories up 1.6% but down 17% yr/yr. Based on sales there is a 4.7 month supply. Homes were not coming on the market in March, just 30K new listings according to NAR. After starting stronger earlier this morning the index had been sliding since then, at 9:30 the index opened +15; after the existing home sales ell the DJIA traded -44 in yet another session that shows volatility. (see below for 10:05 levels. Beginning tomorrow Treasury will auction $99B of 2s, 5s and 7 yr notes this week. Not counting weekly bill auctions, Treasury is borrowing $165B a month from 2s through 30s funding the deficit. Earlier this morning the Chicago Fed National Activity Index was worse than expected, the index fell to -0.23 frm +0.44 in Feb; the 3 month average -0.1 frm +0.09. A negative reading indicates that national economic activity is below its historical trend. The biggest change in March is in production indicators which still contributed to growth, at plus 0.01, but well down from February's plus 0.47. Helping to pull the index into negative ground during March is employment, at minus 0.06 vs. February's plus 0.31. Sales/orders/inventories fell to minus 0.02 from plus 0.13. Consumption & housing pulled down the index down the most, at minus 0.14 for a second straight month. The Chicago Fed National Activity Index is a monthly index designed to better gauge overall economic activity and inflationary pressure. For two weeks the bond and mortgage markets have been relatively unchanged, after the nice and quick decline in rates frm mid-March over the last two weeks there is no evidence rates will move much. Over that time frame the stock market measured by the three key indexes has declined, but no real push lower for rates. Equally investors are willing to hold some treasuries as a hedge against the potential of a sustained fall in stocks. We believe the Fed will continue its QE for most of the rest of the year, however Fed officials are talking about how to handle it when it is time for exiting. That they are openly talking has opened a lot of debate, but in the end most still believe the Fed isn’t close to winding down the QE. As long as the Fed continues to buy $85B a month in treasuries and MBSs and re-invest the pay downs from its large MBS holdings, interest rates are not likely to increase much on any selling. The key is 1.75% for the 10, if it closes above it we would expect a move up a little more. Interest rates around the world are trending lower----slowly.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Yesterday there was little change in the bond and mortgage markets; the stock indexes were weaker but volume was thin. Yesterday the April Philly Fed business index and March leading economic indicators were two more data points that were weaker than expected. The Philly Fed index of business activity revealed there is no improvement in the business sector in the NE. Leading economic indicators were expected to be +0.2%, the LEI fell 0.1%. The soft data continues to be the prevalent case for most data recently. Nevertheless the stock market so far has held well and the bond market has held its recent rallies. Even on days when the stock market experiences selling the 10 yr note has not demonstrated much improvement. There are no scheduled economic releases today. US financial markets little changed this morning ahead of the 9:30 open in the stock market. Prior to the open the 10 yr note slightly weaker in price but essentially unchanged while 30 yr MBS prices also about unchanged. At 9:30 the DJIA opened -45, NASDAQ +8, S&P +4; 10 yr note a 1.71% +2 bp, 30 yr MBS price unchanged. Not much news today from Europe; the key stock markets in the region are better. Most of the coverage this morning has been about the Boston bombers; one dead, the other being hunted. Citizens told to stay inside, about a million people have been told to stay put, in homes of offices. So far the horrific bombing hasn’t filtered into the stock or bond markets. The bellwether 10 yr note is still unable to break below 1.69% on a closing basis, equally the note hasn’t shown much negativity as the yield on the note remains within a six basis point range (1.75% to 1.69%) over the last nine trading days. Conventional wisdom is that when (if) the stock market began to experience selling that the US interest rates would fall, so far neither has occurred. The stock market has been more volatile with huge swings in both directions but not much decline so far. The fear of inflation, more imagined than real, may be keeping the 10 yr falling more; however inflation is a dead soldier these days. US annual inflation is below the Fed’s 2.0% target (+1.5%) and has a few Fed officials now talking about more easing to boost the rate back to 2.0%. China’s economic slowdown also suggests no inflation, Europe’s inflation rate is declining. This morning Canada reported its inflation rate slowed to the bottom of the central bank’s target range last month as gasoline prices dropped. The consumer price index rose 1% in March from a year ago following a 1.2% gain the prior month, Statistics Canada said. The core rate, which excludes eight volatile products, was unchanged at 1.4%. The Bank of Canada said April 17 inflation will remain below policy makers’ 2% target until the second quarter of 2015 as slower growth creates more slack. Fears of inflation have eroded, eliminating one impediment for lower long term rates. No inflation, weakening economic data, a mixed picture on Q1 earnings reports, and an increasing number of economists saying Q2 growth may slow. The job markets very soft (ignore the decline in the unemployment rate). China’s economy the weakest in 13 years, Europe about to re-enter recession. All of this has yet to seriously impact US stock indexes and the bond and mortgage markets. Technically though stocks, bonds and MBSs still hold bullish biases; the 10 has room to increase to 1.75% and still hold positive, 30 yr Fannie Mae 3.0 coupon price has stalled the last five sessions but is still above its 100 and 200 day averages. Technicals look OK, but are increasingly more vulnerable.