Mortgage Rate Update
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Saturday, December 31, 2011
Friday, December 30, 2011
Mortgage Rates
The final day of the year; nothing of substance to think about. No news of consequence out of Europe, the various markets in Europe are slightly better today. At 9:00 this morning the US stock indexes traded fractionally lower, the 10 yr note +3/32 and mortgages at 9:00 +5/32 (.15 bp).
No economic data today; trading will be thin, by 1:00 most will have left the area. Markets open all day.
Europe remains the key for US interest rates, not news that safety trades have pushed US yields to all-time lows. In Jan, after a few weeks of quiet from the EU, ECB, and the IMF, expect renewed comments and "plans" on how to deal with the increasing debt mess and banking concerns in Europe's banks. At the end of the year the dangling question that has hung over global markets for two years hasn't changed. Can officials of various bodies actually solve the debt crisis in a manner that doesn't lead to default? And where is the money going to come from to relieve the region's banks? At the end of day so far, there isn't enough money or near term solution to the developing crisis. Will Europe drag global economies down as it re-enters recession?
At 9:30 the DJIA opened -14, 10 yr +3/32 at 1.89% -1 bp and mortgage prices after being +.15 bp at 9:00 fell back to +.09 bp on 30 yr MBSs.
The rest of the day should be quiet with little changes in stock indexes and interest rates. The outlook for interest rates remains positive but uneasy at these low levels. We are still concerned that the lows may have already been achieved when the 10 yr hit 1.70% last Sept. Lower rates from these levels depend on the moves made in Europe to corral what appears to be coming defaults; bailouts from the ECB, IMF and EU along with Germany and France are needed, so far that hasn't happened----only talk.
The final day of the year; nothing of substance to think about. No news of consequence out of Europe, the various markets in Europe are slightly better today. At 9:00 this morning the US stock indexes traded fractionally lower, the 10 yr note +3/32 and mortgages at 9:00 +5/32 (.15 bp).
No economic data today; trading will be thin, by 1:00 most will have left the area. Markets open all day.
Europe remains the key for US interest rates, not news that safety trades have pushed US yields to all-time lows. In Jan, after a few weeks of quiet from the EU, ECB, and the IMF, expect renewed comments and "plans" on how to deal with the increasing debt mess and banking concerns in Europe's banks. At the end of the year the dangling question that has hung over global markets for two years hasn't changed. Can officials of various bodies actually solve the debt crisis in a manner that doesn't lead to default? And where is the money going to come from to relieve the region's banks? At the end of day so far, there isn't enough money or near term solution to the developing crisis. Will Europe drag global economies down as it re-enters recession?
At 9:30 the DJIA opened -14, 10 yr +3/32 at 1.89% -1 bp and mortgage prices after being +.15 bp at 9:00 fell back to +.09 bp on 30 yr MBSs.
The rest of the day should be quiet with little changes in stock indexes and interest rates. The outlook for interest rates remains positive but uneasy at these low levels. We are still concerned that the lows may have already been achieved when the 10 yr hit 1.70% last Sept. Lower rates from these levels depend on the moves made in Europe to corral what appears to be coming defaults; bailouts from the ECB, IMF and EU along with Germany and France are needed, so far that hasn't happened----only talk.
Thursday, December 29, 2011
Mortgage Rate Update
Early this morning the 10 yr and mortgages opened a little weaker; Italy's auctions didn't do as well today as the shorter term auctions did yesterday. Italian 10-year bonds fell, pushing yields toward the highest this month, after the nation raised less than its maximum target at an auction of debt due between 2014 and 2022. Portuguese and Spanish securities also declined and the euro weakened to a 15-month low against the dollar after Italy agreed to pay a yield of 6.98% on securities maturing in 2022, close to the 7% level that prompted euro-area peers to seek bailouts. The Italian 10 after the auction is trading over 7.00% at 7.07%.
Italy did sell its debt offerings, a good thing, but the rate was higher than thought and in after market trade the rate is now above 7.00% that markets have set as a benchmark for its 10 yr debt offerings. The reaction has been muted so far this morning, except in the currency market where the euro currency continued to decline to the weakest level since Sept. 2010 against the dollar, and the weakest against the yen in 10 yrs.
At 8:30 weekly jobless claims were expected to be up 4K, as reported claims increased 15K to 381K. Continuing claims also increased, to 3.601 mil frm 3.567 mil the week before. The 4 wk average, a smoother look at claims, at 375K down from 380,750. Claims still declining even with the increase; there was no noticeable reaction to the report in either stocks or interest rates.
At 9:30 the DJIA opened +30, the 10 yr note unchanged and mortgage prices -2/32 (.06 bp).
The last key economic report of this year at 9:45; the Dec Chicago purchasing managers index. In Nov the index hit a recent high at 62.6, the index was expected to have declined in Dec to 60.1. As reported the index hit at 62.5 frm a revised 62.6 in Nov; new orders index at 68 frm 702, prices pd at 65.7 frm 60.2 and employment at 58.6 frm 56.9 (any index over 50 is considered expansion). There was little to no reaction to the data.
At 10:00 the NAR reported Nov pending home sales (contracts signed but no yet closed), expected up 0.6%,
The rest of the day bonds and mortgages will track equities; the stock market is holding a gain of about 65 points at 10:00. Trade should be contained through the rest of the session. Technically, the US 10 yr escaped from breaking down yesterday with the rally that returned the 10 below 2.00%. If equity markets were to fall the 10 and mortgages will improve, but not much.
Early this morning the 10 yr and mortgages opened a little weaker; Italy's auctions didn't do as well today as the shorter term auctions did yesterday. Italian 10-year bonds fell, pushing yields toward the highest this month, after the nation raised less than its maximum target at an auction of debt due between 2014 and 2022. Portuguese and Spanish securities also declined and the euro weakened to a 15-month low against the dollar after Italy agreed to pay a yield of 6.98% on securities maturing in 2022, close to the 7% level that prompted euro-area peers to seek bailouts. The Italian 10 after the auction is trading over 7.00% at 7.07%.
Italy did sell its debt offerings, a good thing, but the rate was higher than thought and in after market trade the rate is now above 7.00% that markets have set as a benchmark for its 10 yr debt offerings. The reaction has been muted so far this morning, except in the currency market where the euro currency continued to decline to the weakest level since Sept. 2010 against the dollar, and the weakest against the yen in 10 yrs.
At 8:30 weekly jobless claims were expected to be up 4K, as reported claims increased 15K to 381K. Continuing claims also increased, to 3.601 mil frm 3.567 mil the week before. The 4 wk average, a smoother look at claims, at 375K down from 380,750. Claims still declining even with the increase; there was no noticeable reaction to the report in either stocks or interest rates.
At 9:30 the DJIA opened +30, the 10 yr note unchanged and mortgage prices -2/32 (.06 bp).
The last key economic report of this year at 9:45; the Dec Chicago purchasing managers index. In Nov the index hit a recent high at 62.6, the index was expected to have declined in Dec to 60.1. As reported the index hit at 62.5 frm a revised 62.6 in Nov; new orders index at 68 frm 702, prices pd at 65.7 frm 60.2 and employment at 58.6 frm 56.9 (any index over 50 is considered expansion). There was little to no reaction to the data.
At 10:00 the NAR reported Nov pending home sales (contracts signed but no yet closed), expected up 0.6%,
The rest of the day bonds and mortgages will track equities; the stock market is holding a gain of about 65 points at 10:00. Trade should be contained through the rest of the session. Technically, the US 10 yr escaped from breaking down yesterday with the rally that returned the 10 below 2.00%. If equity markets were to fall the 10 and mortgages will improve, but not much.
Wednesday, December 28, 2011
Mortgage Rates
Started a little better this morning in the bond and mortgage markets, still with very thin volume. The 10 yr note and MBSs are toying with key technical levels now, if the rally is to continue the 10 must get back below 2.00% and hold there---something that it hasn't been able to achieve for any length of time. Italy sold more debt in a successful auction today increasing European stocks and supporting the US equity markets in pre-opening trade.
Italy's borrowing costs are declining, lessening concerns of default. The country sold 9 billion euros ($11.8B) of six- month Treasury bills at half the yield it agreed to pay at an auction of the securities last month. The Rome-based Treasury sold the 179-day bills at a rate of 3.251%, down from 6.504% on Nov. 25. Demand was 1.7 times the amount on offer, compared with 1.47 times last month. It also sold 1.733 billion euros of 2013 notes today to yield 4.853%, compared with a yield of 7.814% at the last auction on Nov. 25. The bid-to-cover ratio was 2.24, compared with 1.59 last month. Tomorrow Italy will auction four different securities, including a 10-year bond; if the 10 yr rate is under 7.00% it will be considered a good auction.
The reaction to the strong Italian auctions lessens the demand for US treasuries, at least at the moment; however by 9:00 this morning after some minor selling in treasuries on the auction news, the 10 yr is back to its best levels prior to the auction results. At 9:30 the DJIA opened +7, 10 yr +5/32 at 1.98% -2 bp and mortgage prices +5/32 (.15 bp).
Retail sales in the week prior to Christmas were up 4.5% last week from a year earlier, according to data reported this morning. Sales for the week ending Dec. 24 increased 0.9% from the previous week, according to a chain-store sales index released today by New York-based International Council of Shopping Centers. Yesterday Dec consumer confidence index jumped much more than thought, expectations were at 58 frm 55.2 in Nov, as released the index was 64.5 the highest since last April. Weekly jobless claims have been declining for the last month; the Nov unemployment rate fell to 8.6% frm 9.0% expected. Nov housing starts, permits, sales of existing and new home sales were better than forecast. The Dec Philly Fed index as well as the Empire State manufacturing indexes were also better than estimates. Forecasts for growth in 2012 are at +2.4% GDP, 2011 at 2.00%.
Treasuries and mortgages are increasingly facing stronger headwinds; with the recent data and at least for the moment some relaxation of Europe fears it is looking more likely that the decline in US rates may be ending. Technicals are being tested although still holding, the likelihood of further declines in rates is becoming questionable. Likely US rates would be under some pressure this morning if it were not for the long weekend ahead.
The good news so far today; the bond and mortgage markets are trading better, ignoring the Italian auctions and the recent better economic data. There isn't any data today and volume will continue to be light. Although rate markets are doing OK so far; there isn't anything out there that is adding support this morning except what so appears to be a soft equity market. The 10 yr is testing its key averages recently, but each time so far the note manages to hold its positive bias; we don't fight the tape even though interest rates are likely to increase in the next month or two.
Started a little better this morning in the bond and mortgage markets, still with very thin volume. The 10 yr note and MBSs are toying with key technical levels now, if the rally is to continue the 10 must get back below 2.00% and hold there---something that it hasn't been able to achieve for any length of time. Italy sold more debt in a successful auction today increasing European stocks and supporting the US equity markets in pre-opening trade.
Italy's borrowing costs are declining, lessening concerns of default. The country sold 9 billion euros ($11.8B) of six- month Treasury bills at half the yield it agreed to pay at an auction of the securities last month. The Rome-based Treasury sold the 179-day bills at a rate of 3.251%, down from 6.504% on Nov. 25. Demand was 1.7 times the amount on offer, compared with 1.47 times last month. It also sold 1.733 billion euros of 2013 notes today to yield 4.853%, compared with a yield of 7.814% at the last auction on Nov. 25. The bid-to-cover ratio was 2.24, compared with 1.59 last month. Tomorrow Italy will auction four different securities, including a 10-year bond; if the 10 yr rate is under 7.00% it will be considered a good auction.
The reaction to the strong Italian auctions lessens the demand for US treasuries, at least at the moment; however by 9:00 this morning after some minor selling in treasuries on the auction news, the 10 yr is back to its best levels prior to the auction results. At 9:30 the DJIA opened +7, 10 yr +5/32 at 1.98% -2 bp and mortgage prices +5/32 (.15 bp).
Retail sales in the week prior to Christmas were up 4.5% last week from a year earlier, according to data reported this morning. Sales for the week ending Dec. 24 increased 0.9% from the previous week, according to a chain-store sales index released today by New York-based International Council of Shopping Centers. Yesterday Dec consumer confidence index jumped much more than thought, expectations were at 58 frm 55.2 in Nov, as released the index was 64.5 the highest since last April. Weekly jobless claims have been declining for the last month; the Nov unemployment rate fell to 8.6% frm 9.0% expected. Nov housing starts, permits, sales of existing and new home sales were better than forecast. The Dec Philly Fed index as well as the Empire State manufacturing indexes were also better than estimates. Forecasts for growth in 2012 are at +2.4% GDP, 2011 at 2.00%.
Treasuries and mortgages are increasingly facing stronger headwinds; with the recent data and at least for the moment some relaxation of Europe fears it is looking more likely that the decline in US rates may be ending. Technicals are being tested although still holding, the likelihood of further declines in rates is becoming questionable. Likely US rates would be under some pressure this morning if it were not for the long weekend ahead.
The good news so far today; the bond and mortgage markets are trading better, ignoring the Italian auctions and the recent better economic data. There isn't any data today and volume will continue to be light. Although rate markets are doing OK so far; there isn't anything out there that is adding support this morning except what so appears to be a soft equity market. The 10 yr is testing its key averages recently, but each time so far the note manages to hold its positive bias; we don't fight the tape even though interest rates are likely to increase in the next month or two.
Tuesday, December 27, 2011
Mortgage Rates
Last Friday treasuries took a fairly large hit as traders backed away from heavy long positions into the long weekend; mortgage prices were soft all day but also on thin trading and following the bond market. This morning treasuries opened a little better with mortgage prices generally unchanged from Friday's close. This week is still on holiday with many not working. The week doesn't have much data and it is unlikely there will be much out of Europe to jostle markets until after the first of the year.
The bellwether 10 yr note continues to resist trading much under 2.00%, the averages are moving lower daily frm the 20 day to the 100 day; unless the bond market continues to improve quickly the technical picture will change to one of a more bearish outlook. In our opinion unless there is an actual default in Europe the US rate markets are going to turn slightly bearish with yields increasing somewhat. Not looking for a big increase in rates but the prolonged rally looks as if it has stalled. The U.S. government received record demand for its bonds in 2011, pushing longer-maturity Treasuries to their best performance since 1995; a very weak economy, no inflation and a huge fear factor contributed to the decline in rates.
This is the time of year when we hear a multitude of economic forecasts from economists. From what we have read over the last few days, the consensus for 2012 is better based on various surveys. Economists surveyed by Bloomberg and Reuters are expecting GDP growth in 2012 at +2.4% frm 2011 that is under 2.00%. Of course most forecasts have the caveat that Europe could drag the world back into recession and a global credit crisis if banks in the region fail or sovereign debt defaults occur. 2012 like 2011 will be held captive by Europe's continuing inability to accomplish much so far.
The S&P/Case-Shiller index of property values in 20 cities dropped 3.4% from October 2010 after decreasing 3.5% in the year ended September, the New York-based group said today. The median forecast of 27 economists in a Bloomberg News survey projected a 3.2% decrease. This report gets little if any attention from bond traders; no real news in it.
At 10:00 Dec consumer confidence index expected at 58 frm 56 in Nov. As reported the confidence index jumped to its highest level since last April to 64.5 frm a revised Nov at 55.2; the present situation index increased to 46.7 frm 38.3 and the expectations index up to 76.4 frm 66.4. A much better outlook from last month and better than what was expected; there was however no reaction to the data in either the stock or bond market----so far.
This Week's Economic Calendar:
Tuesday;
9:00 am Oct Case/Shiller housing index (as reported -3.4%)
10:00 am Dec consumer confidence index (as reported 64.5 frm 55.2)
Thursday;
8:30 weekly jobless claims (+4K to 368K)
9:45 am Chicago purchasing mgrs index (60.1 frm 62.6(
10:00 am Nov pending home sales (+0.6%)
At 9:30 the DJIA opened -20; 10 yr note +2/32 at 2.01% and mortgage prices at 9:30 generally unchanged.
Not looking for much this week; another short week and year end doldrums should keep things relatively quiet until next week. The technical picture is weakening in the bond market, unless the 10 yr improves and holds under 2.00% (which up until now has not occurred) rates from a technical outlook will likely begin to increase next week.
Last Friday treasuries took a fairly large hit as traders backed away from heavy long positions into the long weekend; mortgage prices were soft all day but also on thin trading and following the bond market. This morning treasuries opened a little better with mortgage prices generally unchanged from Friday's close. This week is still on holiday with many not working. The week doesn't have much data and it is unlikely there will be much out of Europe to jostle markets until after the first of the year.
The bellwether 10 yr note continues to resist trading much under 2.00%, the averages are moving lower daily frm the 20 day to the 100 day; unless the bond market continues to improve quickly the technical picture will change to one of a more bearish outlook. In our opinion unless there is an actual default in Europe the US rate markets are going to turn slightly bearish with yields increasing somewhat. Not looking for a big increase in rates but the prolonged rally looks as if it has stalled. The U.S. government received record demand for its bonds in 2011, pushing longer-maturity Treasuries to their best performance since 1995; a very weak economy, no inflation and a huge fear factor contributed to the decline in rates.
This is the time of year when we hear a multitude of economic forecasts from economists. From what we have read over the last few days, the consensus for 2012 is better based on various surveys. Economists surveyed by Bloomberg and Reuters are expecting GDP growth in 2012 at +2.4% frm 2011 that is under 2.00%. Of course most forecasts have the caveat that Europe could drag the world back into recession and a global credit crisis if banks in the region fail or sovereign debt defaults occur. 2012 like 2011 will be held captive by Europe's continuing inability to accomplish much so far.
The S&P/Case-Shiller index of property values in 20 cities dropped 3.4% from October 2010 after decreasing 3.5% in the year ended September, the New York-based group said today. The median forecast of 27 economists in a Bloomberg News survey projected a 3.2% decrease. This report gets little if any attention from bond traders; no real news in it.
At 10:00 Dec consumer confidence index expected at 58 frm 56 in Nov. As reported the confidence index jumped to its highest level since last April to 64.5 frm a revised Nov at 55.2; the present situation index increased to 46.7 frm 38.3 and the expectations index up to 76.4 frm 66.4. A much better outlook from last month and better than what was expected; there was however no reaction to the data in either the stock or bond market----so far.
This Week's Economic Calendar:
Tuesday;
9:00 am Oct Case/Shiller housing index (as reported -3.4%)
10:00 am Dec consumer confidence index (as reported 64.5 frm 55.2)
Thursday;
8:30 weekly jobless claims (+4K to 368K)
9:45 am Chicago purchasing mgrs index (60.1 frm 62.6(
10:00 am Nov pending home sales (+0.6%)
At 9:30 the DJIA opened -20; 10 yr note +2/32 at 2.01% and mortgage prices at 9:30 generally unchanged.
Not looking for much this week; another short week and year end doldrums should keep things relatively quiet until next week. The technical picture is weakening in the bond market, unless the 10 yr improves and holds under 2.00% (which up until now has not occurred) rates from a technical outlook will likely begin to increase next week.
Sunday, December 25, 2011
Friday, December 23, 2011
Mortgage Rates
Treasuries and mortgages opened weaker this morning in very light trading, most traders are off today. The markets will close early this afternoon; all but the stock market that will go with normal hours.
At 8:30 Nov durable goods orders were up 3.8% (forecasts +2.0%); ex transportation orders up 0.3% as expected; demand for aircraft outweighed declines in spending on computers and equipment. Demand for business equipment excluding military hardware and aircraft dropped 1.2% in November, the biggest decline since January. Nov personal income and spending, both up 0.1%; slightly weaker than expected. The stock market opened +41 on increasing belief at the moment that the US economy is recovering and improving. Whether that is the case, at the present that is what is believed. Weaker income and spending isn't very encouraging.
The House finally passed the payroll tax extension last night. The House plans to clear the bill later today for President Barack Obama’s signature. It would extend a two-percentage-point payroll tax cut, continue expanded unemployment benefits and head off a reduction in Medicare payments to doctors through February. Lawmakers plan to negotiate on a longer-term plan in the new year.
The view that the US economy is gaining momentum is questionable; based on recent reports it looks decent but there are an equal number of recent economic reports that refute the view of improvement. This morning's data were not bell ringers; income and spending lower than expected, durable goods orders without the volatile aircraft industry wasn't that good. Nevertheless, at the moment markets are holding an optimistic outlook, although the view can change quickly.
Nov new home sales at 10:00, expected up 1.9%, were up 1.6% to 315K annualized units. Nov sales the highest since last April, based on sales pace there is a 6 month supply, the lowest since March 2006, the median sales price at $214,000.00. The rate markets ticked a little weaker on the data.
Treasuries and mortgages opened weaker this morning in very light trading, most traders are off today. The markets will close early this afternoon; all but the stock market that will go with normal hours.
At 8:30 Nov durable goods orders were up 3.8% (forecasts +2.0%); ex transportation orders up 0.3% as expected; demand for aircraft outweighed declines in spending on computers and equipment. Demand for business equipment excluding military hardware and aircraft dropped 1.2% in November, the biggest decline since January. Nov personal income and spending, both up 0.1%; slightly weaker than expected. The stock market opened +41 on increasing belief at the moment that the US economy is recovering and improving. Whether that is the case, at the present that is what is believed. Weaker income and spending isn't very encouraging.
The House finally passed the payroll tax extension last night. The House plans to clear the bill later today for President Barack Obama’s signature. It would extend a two-percentage-point payroll tax cut, continue expanded unemployment benefits and head off a reduction in Medicare payments to doctors through February. Lawmakers plan to negotiate on a longer-term plan in the new year.
The view that the US economy is gaining momentum is questionable; based on recent reports it looks decent but there are an equal number of recent economic reports that refute the view of improvement. This morning's data were not bell ringers; income and spending lower than expected, durable goods orders without the volatile aircraft industry wasn't that good. Nevertheless, at the moment markets are holding an optimistic outlook, although the view can change quickly.
Nov new home sales at 10:00, expected up 1.9%, were up 1.6% to 315K annualized units. Nov sales the highest since last April, based on sales pace there is a 6 month supply, the lowest since March 2006, the median sales price at $214,000.00. The rate markets ticked a little weaker on the data.
Thursday, December 22, 2011
Mortgage Rates
Weekly jobless claims were expected to have increased by 14K based on surveys of economists and analysts; claims as reported fell 4K to 364K, the lowest weekly filings since April 2008. Continuing claims fell 79K to 3.55 mil; continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 136,300 to 3.51 million in the week ended Dec. 3. Three weeks now where claims have declined is evidence firings are declining and in turn should foreshadow an increase in employment and possible consumer spending.
Also at 8:30 the final read on Q3 GDP, expected unchanged from the prelim at +2.0%, growth was revised lower to +1.8%. Stock indexes were strong prior to 8:30; claims added some support but the GDP weighed on the other side. Nevertheless the indexes managed to hold gains but less than before the data.
At 9:30 the DJIA opened quietly at +20, the 10 yr note +9/32 at 1.94% -2 bp and mortgage prices +4/32 (.09 bp).
More data at 9:55; the U. of Michigan consumer sentiment index, expected at 68.0 frm 67.7, the index jumped to 69.9; current conditions index at 79.6 frm 77.9 and the 12 month outlook index at 70.0 frm 64.0. Much stronger consumer sentiment added a few points to the DJIA but not much. The reaction in the bond market also subdued.
The final data today at 10:00, Nov leading economic indicators expected up 0.3% increased +0.5%.
Europe still gets most of the attention, always something to talk about given the cliff the region is teetering on. Not much today of market-driving info. The remainder of the day will be on thinner volume with the equity market taking the lead. So far this morning the stock market is struggling with the weaker GDP report for the 3rd quarter and the better weekly claims. The bond market focusing on the soft GDP but will lose gains if equity markets take hold later today; conversely if indexes succumb bonds will do better. That said, we do not expect much today with Christmas holyday's beginning tomorrow.
Interesting reactions today in the stock and bond markets; the data reported for the most part was better than thought, except toe Q3 GDP. After all the data the two markets are essentially unchanged from levels prior to the 8:30 reports. Still a bullish bias for the rate markets but if the holidays were not a factor the bond market would likely be soft. With the mess in Europe investors are not likely to lighten up on safety moves.
Weekly jobless claims were expected to have increased by 14K based on surveys of economists and analysts; claims as reported fell 4K to 364K, the lowest weekly filings since April 2008. Continuing claims fell 79K to 3.55 mil; continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 136,300 to 3.51 million in the week ended Dec. 3. Three weeks now where claims have declined is evidence firings are declining and in turn should foreshadow an increase in employment and possible consumer spending.
Also at 8:30 the final read on Q3 GDP, expected unchanged from the prelim at +2.0%, growth was revised lower to +1.8%. Stock indexes were strong prior to 8:30; claims added some support but the GDP weighed on the other side. Nevertheless the indexes managed to hold gains but less than before the data.
At 9:30 the DJIA opened quietly at +20, the 10 yr note +9/32 at 1.94% -2 bp and mortgage prices +4/32 (.09 bp).
More data at 9:55; the U. of Michigan consumer sentiment index, expected at 68.0 frm 67.7, the index jumped to 69.9; current conditions index at 79.6 frm 77.9 and the 12 month outlook index at 70.0 frm 64.0. Much stronger consumer sentiment added a few points to the DJIA but not much. The reaction in the bond market also subdued.
The final data today at 10:00, Nov leading economic indicators expected up 0.3% increased +0.5%.
Europe still gets most of the attention, always something to talk about given the cliff the region is teetering on. Not much today of market-driving info. The remainder of the day will be on thinner volume with the equity market taking the lead. So far this morning the stock market is struggling with the weaker GDP report for the 3rd quarter and the better weekly claims. The bond market focusing on the soft GDP but will lose gains if equity markets take hold later today; conversely if indexes succumb bonds will do better. That said, we do not expect much today with Christmas holyday's beginning tomorrow.
Interesting reactions today in the stock and bond markets; the data reported for the most part was better than thought, except toe Q3 GDP. After all the data the two markets are essentially unchanged from levels prior to the 8:30 reports. Still a bullish bias for the rate markets but if the holidays were not a factor the bond market would likely be soft. With the mess in Europe investors are not likely to lighten up on safety moves.
Wednesday, December 21, 2011
Mortgage Rates
Early this morning the stock indexes were better after the strong rally yesterday, the bond and mortgage markets under pressure; by 9:00 the indexes reversed and were lower taking the rate markets back to unchanged. Trade continues to thin out with holidays coming on quickly, increasing the potential of volatility. Europe still holds the key; yesterday's rally in equities and selling in the bond market was driven to a large extent by Spain's sale of 3 mo bills at a rate about 4.0% lower than last month.
The ECB awarded 489 billion euros ($645B) in 3 yr loans today, the most ever in a single operation and more than economists’ median estimate of 293 billion euros. The ECB said 523 banks asked for the funds, which will be lent at the average of its benchmark interest rate -- currently 1.0% over the period of the loans. The ECB is trying to ensure that banks have access to cheap cash for the medium term so that they can keep lending to companies and households. In addition to the longer-term loans, the ECB has widened the pool of collateral banks can use to secure the funds.
The DJIA opened slightly better at 9:30, +10; the 10 yr +2/32 at 1.92% unch and mortgage prices +1/32 (.03 bp).
The weekly MBA mortgage applications were down last week. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.6% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 1.6% from the previous week. The seasonally adjusted Purchase Index decreased 4.9% from one week earlier. The refinance share of mortgage activity reached a high this year of 80.7% of total applications from 79.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to a low this year of 5.1% from 5.6% of total applications from the previous week.
At 10:00, a few minutes ago, Nov existing home sales were expected up 2.2%, increased 4.0% to 4.4 mil. The median sales price at $164,200 a decline of 3.5% yr/yr; based on sales there is a 7 month supply. The NAR revised sales between 2007 and 2010 down another 14% based on double listings; the revised sales show sales were even lower than what had been reported.
At 1:00 Treasury will auction $29B of 7 yr notes to complete this week's borrowing. The 2 yr and 5 yr didn't meet recent strong demand but both were modestly OK.
There is nothing new here; the bond market trade moving on how the equity market indexes trade; so far this morning stock indexes are weaker supporting the bond and mortgage markets. The MBS market isn't doing much recently, slight gains when the Treasury markets rally and not much decline in prices when treasuries trade lower in price as they did yesterday. We continue to believe the bond and mortgage markets will trade in narrow ranges through the remainder of the year.
Early this morning the stock indexes were better after the strong rally yesterday, the bond and mortgage markets under pressure; by 9:00 the indexes reversed and were lower taking the rate markets back to unchanged. Trade continues to thin out with holidays coming on quickly, increasing the potential of volatility. Europe still holds the key; yesterday's rally in equities and selling in the bond market was driven to a large extent by Spain's sale of 3 mo bills at a rate about 4.0% lower than last month.
The ECB awarded 489 billion euros ($645B) in 3 yr loans today, the most ever in a single operation and more than economists’ median estimate of 293 billion euros. The ECB said 523 banks asked for the funds, which will be lent at the average of its benchmark interest rate -- currently 1.0% over the period of the loans. The ECB is trying to ensure that banks have access to cheap cash for the medium term so that they can keep lending to companies and households. In addition to the longer-term loans, the ECB has widened the pool of collateral banks can use to secure the funds.
The DJIA opened slightly better at 9:30, +10; the 10 yr +2/32 at 1.92% unch and mortgage prices +1/32 (.03 bp).
The weekly MBA mortgage applications were down last week. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.6% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 1.6% from the previous week. The seasonally adjusted Purchase Index decreased 4.9% from one week earlier. The refinance share of mortgage activity reached a high this year of 80.7% of total applications from 79.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to a low this year of 5.1% from 5.6% of total applications from the previous week.
At 10:00, a few minutes ago, Nov existing home sales were expected up 2.2%, increased 4.0% to 4.4 mil. The median sales price at $164,200 a decline of 3.5% yr/yr; based on sales there is a 7 month supply. The NAR revised sales between 2007 and 2010 down another 14% based on double listings; the revised sales show sales were even lower than what had been reported.
At 1:00 Treasury will auction $29B of 7 yr notes to complete this week's borrowing. The 2 yr and 5 yr didn't meet recent strong demand but both were modestly OK.
There is nothing new here; the bond market trade moving on how the equity market indexes trade; so far this morning stock indexes are weaker supporting the bond and mortgage markets. The MBS market isn't doing much recently, slight gains when the Treasury markets rally and not much decline in prices when treasuries trade lower in price as they did yesterday. We continue to believe the bond and mortgage markets will trade in narrow ranges through the remainder of the year.
Tuesday, December 20, 2011
Mortgage Rates
After a big drop in US long term treasuries over the last few days, this morning the 10 yr is backing away with US stock indexes aiming for a better open at 9:30. At 9:00 the 10 yr -16/32 at 1.86% +5 bp and MBSs -7/32 (.22 bp) frm yesterday's closes. Europe's stock markets traded better this morning; the US indexes were better prior to 8:30 then got an additional boost when Nov housing starts and permits were reported. Both starts and permits were expected to be weaker (-0.8% or starts and -2.8% on permits) as reported starts increased 9.3% and permits up 5.7%. Starts the highest in a year, multifamily starts at a three year high. New construction of single-family houses rose 2.3% from the prior month to a 447,000 annual rate, the most since June. Work on multifamily homes surged 25% to an annual rate of 238,000, the highest level since September 2008.
Europe's equity markets better on data from Germany and the UK were better than expectations. German business confidence climbed in December, suggesting Europe’s largest economy is weathering the euro area’s debt crisis. The gauge of business confidence, based on a survey of 7,000 executives, rose to 107.2 from 106.6 in November, the Munich-based Ifo institute said today. Consumer confidence in the UK rose in November from a record low as consumer expectations for the economy improved in the run-up to Christmas. Momentary reports that are not likely to be sustainable but today they are pushing equity markets higher in the region.
Fitch lowered France’s credit outlook and put other euro-area nations on review Dec. 16, saying an overall crisis solution may be “technically and politically beyond reach.” Italy’s benchmark 10-year bond yield returned yesterday above 7%, the level that led Greece, Portugal and Ireland to seek bailouts, before falling below the threshold.
At 1:00 this afternoon Treasury will auction $35B of 5 yr notes; yesterday's 2 yr auction wasn't as well bid as we and many expected. Over the last couple of months Treasury auctions had been strong, yesterday's 2 wasn't that weak, but in comparison to recent borrowings it was a little disappointing. The 5 today should see better bidding, if not look for yields to edge a little higher with $29B of 7 yr notes tomorrow.
Stock indexes exploded on the open, up 160 on the DJIA then continued higher; after 10 minutes the DJIA +218. Interest rates up this morning on the equity market; the 10 yr at 1.87% +6 bp. Mortgage prices at 9:30 were -5/32 (.15 bp).
Long term rates are at levels that may be hard to continue lower; the 10 closed at 1.81% yesterday, 11 bps frm the all-time low at 1.70% hit in late Sept. If Europe wasn't in the headlines everyday with its inability to remove fears that the EU will break apart, that Spain, Italy and the regions banks won't implode in defaults and insolvency; US interest rates would likely be 50 to 60 basis points higher. In the US the economy is improving, about every data point over the last month has been better than thought. The only reason US rates are at these low levels is because money from around the world is moving to the safest place---the US treasury market.
After a big drop in US long term treasuries over the last few days, this morning the 10 yr is backing away with US stock indexes aiming for a better open at 9:30. At 9:00 the 10 yr -16/32 at 1.86% +5 bp and MBSs -7/32 (.22 bp) frm yesterday's closes. Europe's stock markets traded better this morning; the US indexes were better prior to 8:30 then got an additional boost when Nov housing starts and permits were reported. Both starts and permits were expected to be weaker (-0.8% or starts and -2.8% on permits) as reported starts increased 9.3% and permits up 5.7%. Starts the highest in a year, multifamily starts at a three year high. New construction of single-family houses rose 2.3% from the prior month to a 447,000 annual rate, the most since June. Work on multifamily homes surged 25% to an annual rate of 238,000, the highest level since September 2008.
Europe's equity markets better on data from Germany and the UK were better than expectations. German business confidence climbed in December, suggesting Europe’s largest economy is weathering the euro area’s debt crisis. The gauge of business confidence, based on a survey of 7,000 executives, rose to 107.2 from 106.6 in November, the Munich-based Ifo institute said today. Consumer confidence in the UK rose in November from a record low as consumer expectations for the economy improved in the run-up to Christmas. Momentary reports that are not likely to be sustainable but today they are pushing equity markets higher in the region.
Fitch lowered France’s credit outlook and put other euro-area nations on review Dec. 16, saying an overall crisis solution may be “technically and politically beyond reach.” Italy’s benchmark 10-year bond yield returned yesterday above 7%, the level that led Greece, Portugal and Ireland to seek bailouts, before falling below the threshold.
At 1:00 this afternoon Treasury will auction $35B of 5 yr notes; yesterday's 2 yr auction wasn't as well bid as we and many expected. Over the last couple of months Treasury auctions had been strong, yesterday's 2 wasn't that weak, but in comparison to recent borrowings it was a little disappointing. The 5 today should see better bidding, if not look for yields to edge a little higher with $29B of 7 yr notes tomorrow.
Stock indexes exploded on the open, up 160 on the DJIA then continued higher; after 10 minutes the DJIA +218. Interest rates up this morning on the equity market; the 10 yr at 1.87% +6 bp. Mortgage prices at 9:30 were -5/32 (.15 bp).
Long term rates are at levels that may be hard to continue lower; the 10 closed at 1.81% yesterday, 11 bps frm the all-time low at 1.70% hit in late Sept. If Europe wasn't in the headlines everyday with its inability to remove fears that the EU will break apart, that Spain, Italy and the regions banks won't implode in defaults and insolvency; US interest rates would likely be 50 to 60 basis points higher. In the US the economy is improving, about every data point over the last month has been better than thought. The only reason US rates are at these low levels is because money from around the world is moving to the safest place---the US treasury market.
Monday, December 19, 2011
Mortgage Rates
Quiet but weak start today in the bond and mortgage markets. Europe's stock markets better except for the UK, its index down slightly. This week is likely to be thin trading with the holidays and an early close in the bond market on Friday. Although there are a number of key economic reports (mostly Nov housing), Treasury will auction $99B of notes, and Europe has a deadline (self-imposed) today for drawing additional aid to the debt crisis and to form new budget rules; trade should be quietly unchanged by the end of the week. That said, if there is any significant changes in the bond and stock markets it will be triggered by events in Europe. Euro-area officials aim to meet their deadline for today to arrange the IMF loans. The package entails about 150 billion euros pledged by euro-area central banks and another 50 billion euros to be contributed by non-euro EU states.
At 9:30 the DJIA opened +27, the 10 yr note traded -3/32 and mortgage prices were down 3/32 (.09 bp).
The only scheduled data today, Dec NAHB housing mkt index, expected at 20, increased to 21 frm 19 in Nov. Single family index at 22 frm 20; next six months index increased to 26 frm 25. (50 is the pivot for the indexes, above expansion, below contraction).
At 1:00 Treasury will auction $35B of 2 yr notes, likely it will be strongly bid as have been most Treasury auctions recently. The death of Kim Jung II in N. Korea should add more to the demand for US debt.
This Week's Economic Calendar:
Monday;
10:00 am Dec NAHB housing market index (as reported
1:00 pm $35B 2 yr note auction
Tuesday;
8:30 am Nov housing starts and permits (starts -0.8%, permits -2.8%)
1:00 pm $35B 5 yr note auction
Wednesday;
7:00 am MBA mortgage applications
10:00 am Nov existing home sales (+2.2%)
1:00 pm $29B 7 yr note auction
Thursday;
8:30 weekly jobless claims (+14K to 380K)
Q3 final GDP (+2.0%, unch frm prelim report last month)
9:55 am U. of Michigan consumer sentiment index (68.0 frm 67.7)
10:00 am Nov leading economic indicators (+0.3%)
FHFA Oct price index ( +0.3%)
Friday;
8:30 am Nov durable goods orders (+2.0%; ex transportation orders +0.3%)
Nov personal income and spending (income +0.2%, spending +0.3%)
10:00 am Nov new home sales (+1.9%)
Last week the 10 yr note yield declined 25 basis points, mortgage rates down 10 bp. Technically the bond market has improved while the MBS market, still holding nicely is being propped up by treasuries. Europe still the key driver for the lower US rates on movements into the US dollar through safety into treasuries. The low yield on the 10 occurred in Sept at 1.70% when Europe's debt problems infected Italy and Spain. Whether yields will get back to the historic lows depends on what happens in Europe; that is hard to handicap, there has been nothing but talk and plans but so far no progress to head of defaults or anything that takes the region back frm the cliff edge.
Quiet but weak start today in the bond and mortgage markets. Europe's stock markets better except for the UK, its index down slightly. This week is likely to be thin trading with the holidays and an early close in the bond market on Friday. Although there are a number of key economic reports (mostly Nov housing), Treasury will auction $99B of notes, and Europe has a deadline (self-imposed) today for drawing additional aid to the debt crisis and to form new budget rules; trade should be quietly unchanged by the end of the week. That said, if there is any significant changes in the bond and stock markets it will be triggered by events in Europe. Euro-area officials aim to meet their deadline for today to arrange the IMF loans. The package entails about 150 billion euros pledged by euro-area central banks and another 50 billion euros to be contributed by non-euro EU states.
At 9:30 the DJIA opened +27, the 10 yr note traded -3/32 and mortgage prices were down 3/32 (.09 bp).
The only scheduled data today, Dec NAHB housing mkt index, expected at 20, increased to 21 frm 19 in Nov. Single family index at 22 frm 20; next six months index increased to 26 frm 25. (50 is the pivot for the indexes, above expansion, below contraction).
At 1:00 Treasury will auction $35B of 2 yr notes, likely it will be strongly bid as have been most Treasury auctions recently. The death of Kim Jung II in N. Korea should add more to the demand for US debt.
This Week's Economic Calendar:
Monday;
10:00 am Dec NAHB housing market index (as reported
1:00 pm $35B 2 yr note auction
Tuesday;
8:30 am Nov housing starts and permits (starts -0.8%, permits -2.8%)
1:00 pm $35B 5 yr note auction
Wednesday;
7:00 am MBA mortgage applications
10:00 am Nov existing home sales (+2.2%)
1:00 pm $29B 7 yr note auction
Thursday;
8:30 weekly jobless claims (+14K to 380K)
Q3 final GDP (+2.0%, unch frm prelim report last month)
9:55 am U. of Michigan consumer sentiment index (68.0 frm 67.7)
10:00 am Nov leading economic indicators (+0.3%)
FHFA Oct price index ( +0.3%)
Friday;
8:30 am Nov durable goods orders (+2.0%; ex transportation orders +0.3%)
Nov personal income and spending (income +0.2%, spending +0.3%)
10:00 am Nov new home sales (+1.9%)
Last week the 10 yr note yield declined 25 basis points, mortgage rates down 10 bp. Technically the bond market has improved while the MBS market, still holding nicely is being propped up by treasuries. Europe still the key driver for the lower US rates on movements into the US dollar through safety into treasuries. The low yield on the 10 occurred in Sept at 1.70% when Europe's debt problems infected Italy and Spain. Whether yields will get back to the historic lows depends on what happens in Europe; that is hard to handicap, there has been nothing but talk and plans but so far no progress to head of defaults or anything that takes the region back frm the cliff edge.
Sunday, December 18, 2011
Mortgage Rates This Week
This Week; the 10 yr note ended last week at 1.85%, the lowest in the recent decline. This week has a load of housing data; Nov starts and permits, Nov existing and new home sales, and a couple of housing price4 reports. The final look at Q3 GDP, Nov durable goods orders, Nov personal income and spending and of course weekly jobless claims. Claims declined 19K last week to 366K, this week the early take is for an increase of 14K. Most of the data this week is important, even the sales of homes although there is no reason to expect much improvement.
Also this week Treasury will auction $99B of 2 yr, 5 yr and 7 yr notes beginning Monday through Wednesday. Add in the holidays coming on and Europe’s continual fumbling, the markets may present volatility with many traders and investors closing down for the year. Last week the 10 yr note yield fell 25 basis points on continuing safe haven moves against Europe’s mess; mortgages are following but way behind, the move to lower interest rates is mostly confined to the Treasury markets.
This Week; the 10 yr note ended last week at 1.85%, the lowest in the recent decline. This week has a load of housing data; Nov starts and permits, Nov existing and new home sales, and a couple of housing price4 reports. The final look at Q3 GDP, Nov durable goods orders, Nov personal income and spending and of course weekly jobless claims. Claims declined 19K last week to 366K, this week the early take is for an increase of 14K. Most of the data this week is important, even the sales of homes although there is no reason to expect much improvement.
Also this week Treasury will auction $99B of 2 yr, 5 yr and 7 yr notes beginning Monday through Wednesday. Add in the holidays coming on and Europe’s continual fumbling, the markets may present volatility with many traders and investors closing down for the year. Last week the 10 yr note yield fell 25 basis points on continuing safe haven moves against Europe’s mess; mortgages are following but way behind, the move to lower interest rates is mostly confined to the Treasury markets.
Friday, December 16, 2011
Mortgage Rate Update
Yesterday the bond and mortgage markets were unchanged in very narrow ranges all day; today the markets starting the same way with little change from yesterday's closes. At 8:30 Nov CPI, the only data today, the overall and the core were expected +0.1%; as reported the overall was unchanged and the core (ex food and energy) up 0.2%. There was no reaction to the higher core in the bond market.
The stock indexes in pre-opening trade were better, at 9:00 the DJIA up 63 points. At 9:30 the DJIA opened +55, the 10 yr note up 7/32 at 1.89% mortgage prices +1/32.
In Europe the various bourses are mixed with the FTSE up in the UK, Germany and French markets about unchanged. US equities are optimistic the European Union will meet a Dec. 19 deadline for funding a crisis-fighting package. U.S. stocks snapped a three-day decline yesterday after reports on jobless claims and manufacturing boosted confidence in the US economic improvement. According to leaders in Europe, the European Union should meet an informal Dec. 19 deadline for arranging loans to the International Monetary Fund as part of a crisis-fighting package. EU leaders decided at a Dec. 9 summit to channel an additional 200 billion euros ($261B) in loans to the IMF to help fight the euro region’s debt crisis.
Europe remains key to keeping US interest rates low; if Europe wasn't facing this crisis US interest rates given the recent improvements in most economic readings, the 10 yr and mortgages would likely be 25 to 30 basis points higher in rates. ECB President Mario Draghi announced the plan to offer lenders unlimited funds for three years after the central bank’s policy meeting on Dec. 8. The result has Spanish and Italian notes better today, leading gains in euro-area debt, on speculation banks bought the securities to use as collateral when the European Central Bank starts offering three-year loans next week.
The bellwether 10 yr yield at 1.88% is 2 bp frm its recent low yield this morning. Mortgages just sitting with no change yesterday and so far this morning. In past moves when the 10 yr traded below 2.00% it lasted just three days before it moved back over 2.00%. This time down may last longer as investors begin to wind down for the year; with Europe a constant ticking bomb investors and traders are not likely to back off treasuries much. Technically the bond market is still holding a bullish bias, mortgage markets slightly so but still in decent shape technically. With the weekend here today is likely to be quiet with narrow ranges.
Yesterday the bond and mortgage markets were unchanged in very narrow ranges all day; today the markets starting the same way with little change from yesterday's closes. At 8:30 Nov CPI, the only data today, the overall and the core were expected +0.1%; as reported the overall was unchanged and the core (ex food and energy) up 0.2%. There was no reaction to the higher core in the bond market.
The stock indexes in pre-opening trade were better, at 9:00 the DJIA up 63 points. At 9:30 the DJIA opened +55, the 10 yr note up 7/32 at 1.89% mortgage prices +1/32.
In Europe the various bourses are mixed with the FTSE up in the UK, Germany and French markets about unchanged. US equities are optimistic the European Union will meet a Dec. 19 deadline for funding a crisis-fighting package. U.S. stocks snapped a three-day decline yesterday after reports on jobless claims and manufacturing boosted confidence in the US economic improvement. According to leaders in Europe, the European Union should meet an informal Dec. 19 deadline for arranging loans to the International Monetary Fund as part of a crisis-fighting package. EU leaders decided at a Dec. 9 summit to channel an additional 200 billion euros ($261B) in loans to the IMF to help fight the euro region’s debt crisis.
Europe remains key to keeping US interest rates low; if Europe wasn't facing this crisis US interest rates given the recent improvements in most economic readings, the 10 yr and mortgages would likely be 25 to 30 basis points higher in rates. ECB President Mario Draghi announced the plan to offer lenders unlimited funds for three years after the central bank’s policy meeting on Dec. 8. The result has Spanish and Italian notes better today, leading gains in euro-area debt, on speculation banks bought the securities to use as collateral when the European Central Bank starts offering three-year loans next week.
The bellwether 10 yr yield at 1.88% is 2 bp frm its recent low yield this morning. Mortgages just sitting with no change yesterday and so far this morning. In past moves when the 10 yr traded below 2.00% it lasted just three days before it moved back over 2.00%. This time down may last longer as investors begin to wind down for the year; with Europe a constant ticking bomb investors and traders are not likely to back off treasuries much. Technically the bond market is still holding a bullish bias, mortgage markets slightly so but still in decent shape technically. With the weekend here today is likely to be quiet with narrow ranges.
Thursday, December 15, 2011
Wednesday, December 14, 2011
Mortgage Rates
Treasuries and mortgages were unchanged in early activity this morning with US stock indexes weaker. At 9:30 the 10 yr traded +4/32 at 1.95% and mortgage prices +3/32 (.09 bp). The debt crisis in Europe is not getting better, its actually worsening after the EU summit fumbled again with nothing but way out plans. Moody’s said on Monday that last week’s euro crisis summit didn’t provide new measures which would lead to a resolution of Europe’s debt problems, and it would review European Union sovereign ratings in the first quarter of 2012. S&P said before the meeting that it may cut the credit rankings of euro members. Italy sold 5 yr notes at the highest rate in 14 years, more evidence the debt mess is nowhere close to any resolution. In the UK additional evidence Europe is moving back into recession; the unemployment rate increased to 8.3% frm 7.9% in the latest quarter. Unemployment among 16-24-year-olds climbed 54,000 to 1.03 million, or 22%, the highest since comparable records began in 1992.
Yesterday's FOMC meeting disappointed investors with the Fed not willing to add more easing. Stocks in Europe weaker and in the US opening soft at 9:30. In the FOMC statement the Fed said that there is an “apparent slowing in global growth” and that “strains in global financial markets continue to pose significant downside risks to the economic outlook.” While admitting the obvious, the Fed also said the US recovery is moving slowly but in a positive direction.
Nov export prices were up 0.1% while import prices increased 0.7%; no reaction in the markets to the report. At 1:00 Treasury will finish this week's auctions with $13B of 30 yr bonds, it will likely be very well bid as was yesterday's strong 10 yr auction. The 10 yr trading now below 2.00%; can it be sustained. Since the beginning of Nov every move below 2.00% has been short-lived; after the blown EU summit last week there is a renewed run for safety into US treasuries. While history is important, this time may be different in that Europe has clearly demonstrated that there is no immediate way to deal with the possibility of defaults in Italy and Spain. While unlikely defaults will actually occur, investors are not going to accept that as a given.
The weekly MBA mortgage applications weaker on purchases but better on re-finances. The volume of purchase applications swung lower in the December 9 week, down 8.2% vs an 8.3% rise in the prior week. Swings in weekly data can be severe but the overall trend for purchase applications has been positive. The volume of applications for refinancing has also been positive, up 9.3% on top of the prior week's 15.3% gain. Low mortgage rates are behind the demand with the 30-year averaging 4.12%, down six basis points for the lowest rate of the year.
At 1:00 Treasury auction $13B of 30 yr bonds, look for another strong auction with good demand.
So far this morning not much movement in the bond and mortgage markets; the stock market opened weaker but also has seen little movement. Technically the bond market remains bullish, that the 10 yr is under 2.00% is nice but can it hold? In past moves below 2.00% buying dried up and the note moved quickly back above it. It depends on US equity markets and the turmoil in Europe. After last week's disappointment over the EU summit meeting that produced nothing there is another round of safe haven buying; based on history the 10 won't hold below 2.00% for long. Take advantage of the current rates.
Treasuries and mortgages were unchanged in early activity this morning with US stock indexes weaker. At 9:30 the 10 yr traded +4/32 at 1.95% and mortgage prices +3/32 (.09 bp). The debt crisis in Europe is not getting better, its actually worsening after the EU summit fumbled again with nothing but way out plans. Moody’s said on Monday that last week’s euro crisis summit didn’t provide new measures which would lead to a resolution of Europe’s debt problems, and it would review European Union sovereign ratings in the first quarter of 2012. S&P said before the meeting that it may cut the credit rankings of euro members. Italy sold 5 yr notes at the highest rate in 14 years, more evidence the debt mess is nowhere close to any resolution. In the UK additional evidence Europe is moving back into recession; the unemployment rate increased to 8.3% frm 7.9% in the latest quarter. Unemployment among 16-24-year-olds climbed 54,000 to 1.03 million, or 22%, the highest since comparable records began in 1992.
Yesterday's FOMC meeting disappointed investors with the Fed not willing to add more easing. Stocks in Europe weaker and in the US opening soft at 9:30. In the FOMC statement the Fed said that there is an “apparent slowing in global growth” and that “strains in global financial markets continue to pose significant downside risks to the economic outlook.” While admitting the obvious, the Fed also said the US recovery is moving slowly but in a positive direction.
Nov export prices were up 0.1% while import prices increased 0.7%; no reaction in the markets to the report. At 1:00 Treasury will finish this week's auctions with $13B of 30 yr bonds, it will likely be very well bid as was yesterday's strong 10 yr auction. The 10 yr trading now below 2.00%; can it be sustained. Since the beginning of Nov every move below 2.00% has been short-lived; after the blown EU summit last week there is a renewed run for safety into US treasuries. While history is important, this time may be different in that Europe has clearly demonstrated that there is no immediate way to deal with the possibility of defaults in Italy and Spain. While unlikely defaults will actually occur, investors are not going to accept that as a given.
The weekly MBA mortgage applications weaker on purchases but better on re-finances. The volume of purchase applications swung lower in the December 9 week, down 8.2% vs an 8.3% rise in the prior week. Swings in weekly data can be severe but the overall trend for purchase applications has been positive. The volume of applications for refinancing has also been positive, up 9.3% on top of the prior week's 15.3% gain. Low mortgage rates are behind the demand with the 30-year averaging 4.12%, down six basis points for the lowest rate of the year.
At 1:00 Treasury auction $13B of 30 yr bonds, look for another strong auction with good demand.
So far this morning not much movement in the bond and mortgage markets; the stock market opened weaker but also has seen little movement. Technically the bond market remains bullish, that the 10 yr is under 2.00% is nice but can it hold? In past moves below 2.00% buying dried up and the note moved quickly back above it. It depends on US equity markets and the turmoil in Europe. After last week's disappointment over the EU summit meeting that produced nothing there is another round of safe haven buying; based on history the 10 won't hold below 2.00% for long. Take advantage of the current rates.
Tuesday, December 13, 2011
Mortgage Rates
Treasuries and mortgages opened a little soft early this morning with Europe's stock markets better and trade in US futures pointing to a better open at 9:30. At 8:30 Nov retail sales were not as strong as expected; sales were up 0.2% both for the overall and excluding auto sales, expectations were for both sales to be up 0.6% overall and +0.5% ex auto sales. The weaker sales didn't impact either the stock or bond markets, both held where they were prior to 8:30.
In Europe Spain sold more securities than expected and a report showed that investor confidence in Germany improved. Nothing has changed from yesterday. Europe's banks are beginning to sell assets that generate profits to increase capital that is demanded from decisions by European regulators to make banks increase core capital to 9% by June instead of 2019. Euro banks' can't successfully sell stock or get anyone to buy their debt holdings with values so low banks would have to book losses. Selling businesses that generate profits will further slow recovery in the region but with the inability to provide debt relief through the EU, ECB or IMF selling off assets is the only course left. Banks across Europe have pledged to cut more than 950 billion euros of assets over the next two years, about two-thirds of that will come from sales of profitable units and performing loans.
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The FOMC is meeting today in a one day meeting; the policy statement will be released at 2:15. Most Fed watchers are expecting a slightly better outlook on the economy from the group. There is little belief the Fed will launch a QE 3 as had been hoped a month ago. Two weeks ago the view among dealers was that the Fed would likely increase its purchases of MBSs to assist in keeping mortgage rates low; there hasn't been anymore talk about it since then. With the economy looking better based on recent data the Fed isn't likely to see the necessity in more easing of any type.
Trade this morning is likely to be quiet ahead of the auction and the FOMC statement at 2:15 this afternoon. The Fed is very unlikely to issue a statement that will surprise; the Fed is doing everything it can to not roil markets anymore than what Europe is already doing to global markets.
Regardless of the constant run of news reports out of Europe, and the lack of any significant near term progress (the summit last week focused on fiscal union among members that will take months if not years to resolve) and didn't address how the debt messes would be dealt with; the US rate markets have not continued to improve. The 10 yr note has a brick wall at 2.00% and another at 2.12%; for over a month and against all the negativity out of Europe's fumbling the long end of the yield curve has been essentially unchanged. The fears of debt defaults in Europe have lessened a little while the US economy has shown improvement albeit small; Europe will continue to keep US rates low but pulling the other direction is what appears to be a better economy. Neither issue is a lock, the end result is current stagnation in the interest rate sector.
Treasuries and mortgages opened a little soft early this morning with Europe's stock markets better and trade in US futures pointing to a better open at 9:30. At 8:30 Nov retail sales were not as strong as expected; sales were up 0.2% both for the overall and excluding auto sales, expectations were for both sales to be up 0.6% overall and +0.5% ex auto sales. The weaker sales didn't impact either the stock or bond markets, both held where they were prior to 8:30.
In Europe Spain sold more securities than expected and a report showed that investor confidence in Germany improved. Nothing has changed from yesterday. Europe's banks are beginning to sell assets that generate profits to increase capital that is demanded from decisions by European regulators to make banks increase core capital to 9% by June instead of 2019. Euro banks' can't successfully sell stock or get anyone to buy their debt holdings with values so low banks would have to book losses. Selling businesses that generate profits will further slow recovery in the region but with the inability to provide debt relief through the EU, ECB or IMF selling off assets is the only course left. Banks across Europe have pledged to cut more than 950 billion euros of assets over the next two years, about two-thirds of that will come from sales of profitable units and performing loans.
.
The FOMC is meeting today in a one day meeting; the policy statement will be released at 2:15. Most Fed watchers are expecting a slightly better outlook on the economy from the group. There is little belief the Fed will launch a QE 3 as had been hoped a month ago. Two weeks ago the view among dealers was that the Fed would likely increase its purchases of MBSs to assist in keeping mortgage rates low; there hasn't been anymore talk about it since then. With the economy looking better based on recent data the Fed isn't likely to see the necessity in more easing of any type.
Trade this morning is likely to be quiet ahead of the auction and the FOMC statement at 2:15 this afternoon. The Fed is very unlikely to issue a statement that will surprise; the Fed is doing everything it can to not roil markets anymore than what Europe is already doing to global markets.
Regardless of the constant run of news reports out of Europe, and the lack of any significant near term progress (the summit last week focused on fiscal union among members that will take months if not years to resolve) and didn't address how the debt messes would be dealt with; the US rate markets have not continued to improve. The 10 yr note has a brick wall at 2.00% and another at 2.12%; for over a month and against all the negativity out of Europe's fumbling the long end of the yield curve has been essentially unchanged. The fears of debt defaults in Europe have lessened a little while the US economy has shown improvement albeit small; Europe will continue to keep US rates low but pulling the other direction is what appears to be a better economy. Neither issue is a lock, the end result is current stagnation in the interest rate sector.
Monday, December 12, 2011
Mortgage Rates
Treasuries and mortgages opened a little better this morning after last week that ended with no changes in rates or prices. The EU summit last week was another miss, nothing of consequence out of the continual run of meetings that lead to nowhere; Europe's debts are so huge that there is no solution without a break up of the 13 year experiment that went along OK as long as there wasn't a problem. Moody’s Investors Service said today it will review the ratings of all European Union nations after last week’s summit failed to produce “decisive policy measures,” while Standard & Poor’s announced Dec. 5 it may cut 15 euro members, including AAA rated Germany and France. AAA bonds in Europe are a thing of the past. Disappointed with the outcome of the Brussels talks, the yields on 10-year bonds sold by Italy, that must repay about 53 billion euros in the first quarter of next year, climbed above 6.50% after falling on Dec. 9. France’s note yield was at 3.29%, from 3.13% a week ago.
By 9:00 this morning the 10 yr note yield sat at 2.01% down frm 2.06% Friday; mortgage prices better at 9:00, +6/32 (.18 bp) after declining 13/32 (.41 bp) Friday. The stock indexes at 9:00 weaker. Nothing specific so far this morning, just the usual backing and filling with no real changes. At 9:30 the DJIA opened -72, 10 yr +14/32 at 2.01% -5 bp and mortgage prices +5/32 (.15 bp).
The only scheduled data today comes at 2:00 when Treasury reports the Nov budget deficit at $139.5B, better than -$150.4B in Oct. This week however has data, Treasury auctions and the FOMC meeting. Maybe markets will concentrate on US affairs rather than Europe.
This Week's Economic Calendar:
Monday;
2:00 pm Nov Treasury budget (-$139.5B)
Tuesday;
8:30 am Nov retail sales (+0.6%, ex auto sales +0.5%)
10:00 am Oct business inventories (+0.9%)
1:00 pm $32B 3 yr note auction
2:15 FOMC policy statement
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Nov import ad export prices (N/A)
1:00 pm $21B 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+9K to 390K)
Nov PPI (+0.1%, ex food and energy +0.1%)
Dec NY Empire State manufacturing index (3.0 frm 0.61)
Q3 current account deficit (-$110B)
9:15 am Nov industrial production (+0.2%)
Nov capacity utilization (77.8% unch frm Oct)
10:00 am Philadelphia Fed business index (4.5 frm 3.6)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am Nov CPI (+0.1%, ex food and energy +0.1%)
The 10 yr note back to 2.00% this morning, at the lower end of its month-long range; of course to have the 10 yr better the stock market must be weaker---and it is this morning. There is no actual movement in the rate markets and it is likely to stay that way with no accomplishment from the EU summit meeting last week. The EU's path now is on fiscal controls of all the EU members; cutting expenses and increasing revenues (taxes). Getting 27 members of the EU and 17 members using the euro currency to agree on budgets isn't likely to achieve much success however; it is difficult to imagine getting all of the sovereigns to agree other than on principle. Europe sliding into another recession while Germany and France call the shots.
Treasuries and mortgages opened a little better this morning after last week that ended with no changes in rates or prices. The EU summit last week was another miss, nothing of consequence out of the continual run of meetings that lead to nowhere; Europe's debts are so huge that there is no solution without a break up of the 13 year experiment that went along OK as long as there wasn't a problem. Moody’s Investors Service said today it will review the ratings of all European Union nations after last week’s summit failed to produce “decisive policy measures,” while Standard & Poor’s announced Dec. 5 it may cut 15 euro members, including AAA rated Germany and France. AAA bonds in Europe are a thing of the past. Disappointed with the outcome of the Brussels talks, the yields on 10-year bonds sold by Italy, that must repay about 53 billion euros in the first quarter of next year, climbed above 6.50% after falling on Dec. 9. France’s note yield was at 3.29%, from 3.13% a week ago.
By 9:00 this morning the 10 yr note yield sat at 2.01% down frm 2.06% Friday; mortgage prices better at 9:00, +6/32 (.18 bp) after declining 13/32 (.41 bp) Friday. The stock indexes at 9:00 weaker. Nothing specific so far this morning, just the usual backing and filling with no real changes. At 9:30 the DJIA opened -72, 10 yr +14/32 at 2.01% -5 bp and mortgage prices +5/32 (.15 bp).
The only scheduled data today comes at 2:00 when Treasury reports the Nov budget deficit at $139.5B, better than -$150.4B in Oct. This week however has data, Treasury auctions and the FOMC meeting. Maybe markets will concentrate on US affairs rather than Europe.
This Week's Economic Calendar:
Monday;
2:00 pm Nov Treasury budget (-$139.5B)
Tuesday;
8:30 am Nov retail sales (+0.6%, ex auto sales +0.5%)
10:00 am Oct business inventories (+0.9%)
1:00 pm $32B 3 yr note auction
2:15 FOMC policy statement
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Nov import ad export prices (N/A)
1:00 pm $21B 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+9K to 390K)
Nov PPI (+0.1%, ex food and energy +0.1%)
Dec NY Empire State manufacturing index (3.0 frm 0.61)
Q3 current account deficit (-$110B)
9:15 am Nov industrial production (+0.2%)
Nov capacity utilization (77.8% unch frm Oct)
10:00 am Philadelphia Fed business index (4.5 frm 3.6)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am Nov CPI (+0.1%, ex food and energy +0.1%)
The 10 yr note back to 2.00% this morning, at the lower end of its month-long range; of course to have the 10 yr better the stock market must be weaker---and it is this morning. There is no actual movement in the rate markets and it is likely to stay that way with no accomplishment from the EU summit meeting last week. The EU's path now is on fiscal controls of all the EU members; cutting expenses and increasing revenues (taxes). Getting 27 members of the EU and 17 members using the euro currency to agree on budgets isn't likely to achieve much success however; it is difficult to imagine getting all of the sovereigns to agree other than on principle. Europe sliding into another recession while Germany and France call the shots.
Sunday, December 11, 2011
Friday, December 9, 2011
Thursday, December 8, 2011
Mortgage Rates
US interest rates remain in their tight trading ranges; the 10 yr note trades within a 4 basis point yield while mortgage prices are essentially unchanged now for over a month. Up and down with no real change ahead of the EU summit tomorrow. The summit isn't likely to satisfy; likely some kind of frame work that will fall apart or drag along for another six months; too many opinions among sovereign countries that differ from what Germany wants---Germany holds the key to any program that may keep regional banks from financial stress and add relief to the debt ladened countries. Some positive news however, Italian and Spanish bond rates have peeked recently and have declined somewhat. More on anticipation that something will actually be accomplished than relief that the debt crisis is over. If the summit tomorrow doesn't end with progress those rates will likely increase again.
The ECB lowered its rate by .25% to 1.00%; it was widely expected. No noticeable reaction in the markets; the second month in a row it lowered rates. The ECB is looking into lowering collateral criteria to get banks lending again rather than the central bank buying government bonds. The ECB's priority appears to be to save banks rather than saving the debt ridden countries although banks and sovereign debt cannot be separated.
At 8:30 weekly jobless claims were better than forecasts, claims fell 23K to 381K the lowest in nine months; continuing claims fell more that estimates to 3.583 mi frm 3.757 mil last week, the lowest continuing claims since Sept 2008. The initial reaction pressured the rate markets and pushed stock indexes higher, however it didn't last more that a few minutes. At 8:30 the 10 yr note yield jumped to 2.10%, by 8:50 back to 2.05% +1 bp frm yesterday's close; stock indexes reversed and were weaker at 9:00. MBS prices have been volatile; FNMA 3.5 coupon at one juncture up as much as 14/32 (.44 bp), Freddie's and GNMAs prices slightly weaker. Not sure why, but MBSs are trading in wide swings.
At 10:00 Oct wholesale inventories, not much of a mover, increased 1.6% on forecasts of +0.3%; sales were up 0.9% with a 1.16 month of inventory based on sales. making more but selling not matching growth in inventories.
Treasury is about to officially announce next week's auction details; $32B of 3 yr notes, $21b of 10 yr notes and $13B of 30 yr bonds, the same as the last few months is likely.
With tomorrow's EU summit meeting markets will likely end the session with little changes. Technically the bond and mortgage markets still hold slightly bullish biases; mostly throwing off neutral readings. The key 10 yr note is comfortable between 2.00% and 2.12%, lower interest rates will be hard to achieve with the US economy continuing to improve albeit at a slow pace. Most of the economic reports in the past month have exceeded estimates, however unemployment remains high and the housing sector still mired in declining prices will restrain growth to a snail's pace.
US interest rates remain in their tight trading ranges; the 10 yr note trades within a 4 basis point yield while mortgage prices are essentially unchanged now for over a month. Up and down with no real change ahead of the EU summit tomorrow. The summit isn't likely to satisfy; likely some kind of frame work that will fall apart or drag along for another six months; too many opinions among sovereign countries that differ from what Germany wants---Germany holds the key to any program that may keep regional banks from financial stress and add relief to the debt ladened countries. Some positive news however, Italian and Spanish bond rates have peeked recently and have declined somewhat. More on anticipation that something will actually be accomplished than relief that the debt crisis is over. If the summit tomorrow doesn't end with progress those rates will likely increase again.
The ECB lowered its rate by .25% to 1.00%; it was widely expected. No noticeable reaction in the markets; the second month in a row it lowered rates. The ECB is looking into lowering collateral criteria to get banks lending again rather than the central bank buying government bonds. The ECB's priority appears to be to save banks rather than saving the debt ridden countries although banks and sovereign debt cannot be separated.
At 8:30 weekly jobless claims were better than forecasts, claims fell 23K to 381K the lowest in nine months; continuing claims fell more that estimates to 3.583 mi frm 3.757 mil last week, the lowest continuing claims since Sept 2008. The initial reaction pressured the rate markets and pushed stock indexes higher, however it didn't last more that a few minutes. At 8:30 the 10 yr note yield jumped to 2.10%, by 8:50 back to 2.05% +1 bp frm yesterday's close; stock indexes reversed and were weaker at 9:00. MBS prices have been volatile; FNMA 3.5 coupon at one juncture up as much as 14/32 (.44 bp), Freddie's and GNMAs prices slightly weaker. Not sure why, but MBSs are trading in wide swings.
At 10:00 Oct wholesale inventories, not much of a mover, increased 1.6% on forecasts of +0.3%; sales were up 0.9% with a 1.16 month of inventory based on sales. making more but selling not matching growth in inventories.
Treasury is about to officially announce next week's auction details; $32B of 3 yr notes, $21b of 10 yr notes and $13B of 30 yr bonds, the same as the last few months is likely.
With tomorrow's EU summit meeting markets will likely end the session with little changes. Technically the bond and mortgage markets still hold slightly bullish biases; mostly throwing off neutral readings. The key 10 yr note is comfortable between 2.00% and 2.12%, lower interest rates will be hard to achieve with the US economy continuing to improve albeit at a slow pace. Most of the economic reports in the past month have exceeded estimates, however unemployment remains high and the housing sector still mired in declining prices will restrain growth to a snail's pace.
Wednesday, December 7, 2011
Mortgage Rates
In early trade this morning the rate markets opened a little better while the stock indexes were generally unchanged. All global markets awaiting the EU summit meeting that begins late Thursday and into Friday. News out of Europe this morning is one of caution, Germany saying not to expect any significant decisions that would end the debt mess. While that isn't unexpected, unless there is something positive markets can hang their hats on disappointment will likely take stocks lower and add additional support in the bond and mortgage markets.
Yesterday Tim Geithner was in the mix in Frankfurt; he backed a German-French push for closer European cooperation, urging policy makers to work with central banks to erect a “stronger firewall” to end the crisis. He welcomed “progress toward a fiscal compact for the euro zone.” The ECB will likely cut base lending rates tomorrow, the only question is by how much, normally central banks move in 25 bps. The central bank is trying to encourage lending by banks in Europe; one thought being knocked around is the bank could lower collateral standards allowing banks to borrow more and for a longer period rather than purchasing more bonds. Getting banks to lend more accomplishes what? Nothing that deals with the sovereign debt problems. The ECB has indicated it will act to prevent a credit shortage as this falls within its monetary policy remit. At the end of the day and after the EU summit on Friday there won't be anything that will please markets; after two years of constant anticipation, one meeting after another, they all ended with nothing of substance and more disappointment---we bet it will be the same this go-round.
US treasuries are better this morning but in terms of direction the 10 yr note and MBSs are not moving; trading in well defined narrow ranges. The 10, 2.12% to 1.90% and MBSs in a 50 basis point price range for the last month. The equity markets also not trending, wide swings up and down on the indexes but at the end of the day, no direction. For all the talk from traders and stock market touters there is about as much confidence behind the opinions that can be put in a thimble. Europe is a political disaster; the idea for the EU back in the 90s has turned sour. The first crisis since 1999 clearly demonstrates a combination of sovereign countries doesn't work as well as most thought when the EU was formed.
Mortgage application volumes in the December 2 week bounced right back following the lull of the Thanksgiving week, up a weekly 8.3% for purchase applications and up 15.3% for refinancing applications. Purchase applications have been trending higher which is a positive signal for home sales. Low rates are lifting demand for mortgages with the average 30-year FHA loan down two basis points to 3.98%. Conforming 30-year loans ($417,500 or less) averaged 4.18%, down three basis points, with jumbo loans (over $417,500) also down three basis points to 4.52%.
In early trade this morning the rate markets opened a little better while the stock indexes were generally unchanged. All global markets awaiting the EU summit meeting that begins late Thursday and into Friday. News out of Europe this morning is one of caution, Germany saying not to expect any significant decisions that would end the debt mess. While that isn't unexpected, unless there is something positive markets can hang their hats on disappointment will likely take stocks lower and add additional support in the bond and mortgage markets.
Yesterday Tim Geithner was in the mix in Frankfurt; he backed a German-French push for closer European cooperation, urging policy makers to work with central banks to erect a “stronger firewall” to end the crisis. He welcomed “progress toward a fiscal compact for the euro zone.” The ECB will likely cut base lending rates tomorrow, the only question is by how much, normally central banks move in 25 bps. The central bank is trying to encourage lending by banks in Europe; one thought being knocked around is the bank could lower collateral standards allowing banks to borrow more and for a longer period rather than purchasing more bonds. Getting banks to lend more accomplishes what? Nothing that deals with the sovereign debt problems. The ECB has indicated it will act to prevent a credit shortage as this falls within its monetary policy remit. At the end of the day and after the EU summit on Friday there won't be anything that will please markets; after two years of constant anticipation, one meeting after another, they all ended with nothing of substance and more disappointment---we bet it will be the same this go-round.
US treasuries are better this morning but in terms of direction the 10 yr note and MBSs are not moving; trading in well defined narrow ranges. The 10, 2.12% to 1.90% and MBSs in a 50 basis point price range for the last month. The equity markets also not trending, wide swings up and down on the indexes but at the end of the day, no direction. For all the talk from traders and stock market touters there is about as much confidence behind the opinions that can be put in a thimble. Europe is a political disaster; the idea for the EU back in the 90s has turned sour. The first crisis since 1999 clearly demonstrates a combination of sovereign countries doesn't work as well as most thought when the EU was formed.
Mortgage application volumes in the December 2 week bounced right back following the lull of the Thanksgiving week, up a weekly 8.3% for purchase applications and up 15.3% for refinancing applications. Purchase applications have been trending higher which is a positive signal for home sales. Low rates are lifting demand for mortgages with the average 30-year FHA loan down two basis points to 3.98%. Conforming 30-year loans ($417,500 or less) averaged 4.18%, down three basis points, with jumbo loans (over $417,500) also down three basis points to 4.52%.
Tuesday, December 6, 2011
Monday, December 5, 2011
Mortgage Rate Update
This week will continue to be on what happens in Europe with the debt issues. It is not going to fall off the front page for out markets for many months; on Friday the leaders in Europe are scheduled to meeting on Friday. Markets are hoping there will be some kind of plan that emerges to deal with the debts of Spain and Italy but after two years of trying it is a leap of faith to expect anything substantive coming from the meeting. Not much in the way of key economic readings this week; Monday the Nov ISM services sector index and weekly jobless claims on Friday are the only serious data points.
This morning Europe and US stock markets trading better; the US bond and mortgage markets weaker. At 9:00 the 10 yr -20/32 at 2.10% and mortgage prices -9/32 (.28 bp). News out of Europe continues to be indecisive with the summit meeting on Friday of Europe's leaders. Germany's Merkel is due to meet with French President Nicolas Sarkozy in Paris today to prepare for a Dec. 9 European summit. According to news early this morning the German government won’t stand in the way of Bundesbank help to fight the debt crisis by means of loans channeled through the International Monetary Fund. Starting the week there is increased optimism in markets that Europe will actually work out something positive to fend of defaults in Spain and Italy. Tim Geithner is in Europe cajoling leaders to come up with a plan quickly, hard to handicap his influence. If there is actually something of substance from the EU this week or over next weekend US interest rates will increase, no more safety moves into treasuries and the view that a plan in Europe will improve its and the US economic outlook.
Two economic reports at 10:00; Nov ISM services sector index expected at 53.4 frm 52.9 was weaker at 52.0; new orders component at 53.0 frm 52.4, employment at 48.9 frm 53.3 and prices pd at 62.5 frm 57.1. A little improvement in the bond market on the weaker data but not much; the stock market didn't react much to the report. The employment component fell under 50 indicating contraction. Also at 10:00 Oct factory orders, expected down 0.4% hit right on at -0.4%, Oct durable goods orders originally reported down 0.7% were revised to 0.05%.
Technically and fundamentally the US interest rate markets remain in narrow trading ranges; the 10 yr note still unable to hold under 2.00% but does find support anytime the yield climbs to 2.12% as it did last week. Mortgage rates and prices trading a even narrower ranges; the price on the 3.5 FNMA coupon has held in a 50 basis point price range now for almost a month. The week will continue to work off how equity markets, stock indexes higher---bond and mortgage prices lower. We remain skeptical that US interest rates will decline much frm these levels, the larger outlook is that rates will begin to slowly increase from present levels.
This week will continue to be on what happens in Europe with the debt issues. It is not going to fall off the front page for out markets for many months; on Friday the leaders in Europe are scheduled to meeting on Friday. Markets are hoping there will be some kind of plan that emerges to deal with the debts of Spain and Italy but after two years of trying it is a leap of faith to expect anything substantive coming from the meeting. Not much in the way of key economic readings this week; Monday the Nov ISM services sector index and weekly jobless claims on Friday are the only serious data points.
This morning Europe and US stock markets trading better; the US bond and mortgage markets weaker. At 9:00 the 10 yr -20/32 at 2.10% and mortgage prices -9/32 (.28 bp). News out of Europe continues to be indecisive with the summit meeting on Friday of Europe's leaders. Germany's Merkel is due to meet with French President Nicolas Sarkozy in Paris today to prepare for a Dec. 9 European summit. According to news early this morning the German government won’t stand in the way of Bundesbank help to fight the debt crisis by means of loans channeled through the International Monetary Fund. Starting the week there is increased optimism in markets that Europe will actually work out something positive to fend of defaults in Spain and Italy. Tim Geithner is in Europe cajoling leaders to come up with a plan quickly, hard to handicap his influence. If there is actually something of substance from the EU this week or over next weekend US interest rates will increase, no more safety moves into treasuries and the view that a plan in Europe will improve its and the US economic outlook.
Two economic reports at 10:00; Nov ISM services sector index expected at 53.4 frm 52.9 was weaker at 52.0; new orders component at 53.0 frm 52.4, employment at 48.9 frm 53.3 and prices pd at 62.5 frm 57.1. A little improvement in the bond market on the weaker data but not much; the stock market didn't react much to the report. The employment component fell under 50 indicating contraction. Also at 10:00 Oct factory orders, expected down 0.4% hit right on at -0.4%, Oct durable goods orders originally reported down 0.7% were revised to 0.05%.
Technically and fundamentally the US interest rate markets remain in narrow trading ranges; the 10 yr note still unable to hold under 2.00% but does find support anytime the yield climbs to 2.12% as it did last week. Mortgage rates and prices trading a even narrower ranges; the price on the 3.5 FNMA coupon has held in a 50 basis point price range now for almost a month. The week will continue to work off how equity markets, stock indexes higher---bond and mortgage prices lower. We remain skeptical that US interest rates will decline much frm these levels, the larger outlook is that rates will begin to slowly increase from present levels.
Sunday, December 4, 2011
Saturday, December 3, 2011
Friday, December 2, 2011
Mortgage Rates
Today's news will feature the unemployment rte dropped to 8.6% frm 9.0%; non-farm jobs increased 120K while private non-farm jobs increased 140K, average hourly earnings +0.1%. The unemployment rate is the lowest since March 2009, but there is a hitch to the headline; the labor participation rate declined to 64.0% frm 64.2% implying that more potential workers have dropped out from looking for a job. The decrease in the jobless rate reflected a 278,000 gain in employment at the same time 315,000 Americans left the labor force. Revisions to Sept and Oct added 72K more jobs than originally reported. The U-6 underemployment rate declined from 16.2% to 15.6%, it includes part- time workers who’d prefer a full-time position and people who want work but have given up looking.
That non-farm jobs increased 120K reflects many jobs are temporary hirings for the holidays, the reaction in the bond and mortgage markets wasn't much change from yesterday's closes although slightly lower as traders discount the decline in the unemployment rate and job growth was fractionally lower than general estimates. The stock indexes were trading better prior to 8:30 on the back of continued improvement in Europe's equity markets; there was little change in the indexes following the report.
In Europe there is some increased optimism that the debt crisis may be helped by the ECB funneling funds to the IMF then the IMF leverages the funds and provides funds to Italy and Spain taking them back from the abyss. Next Friday Europe's leaders will meet in a summit in Brussels, the meeting must end with something more than what the world has had to swallow for two years----a lot of talk but little action. Given the improvement in Europe's equity markets this week and the best week for Italy's and Spain's 2 yr note yields this week, optimism is increasing.
So far today the employment report has had little impact on the US financial markets. The bellwether 10 yr note has near term support at 2.12% that has been tested a few times and held, at 10:00 it traded at 2.11% after ending yesterday at 2.10% after moving to 2.14% intraday yesterday. Mortgages have been held captive in a 50 basis point price range for three weeks now while the 10 yr volatility swings its yield from 2.12% to 1.86% on every sentence out of the mouths of Europe's leaders.
We haven't changed our outlook that the US interest rate markets are unlikely to decline much from the present levels and have more potential to rise that decline. While Europe's mess will take years to resolve the markets now are believing that a plan will surface soon that will remove much of concern that Europe's banks would fail. Over the last couple of weeks the safety moves into US treasuries has ebbed substantially. We can argue that the US economy won't improve much based on the housing market and the high level of unemployment, however trading in the equity markets implies investors are increasingly more optimistic about the future. Either way one sees it the reality is that no one is sure, that has lead to huge wings in the indexes and has contributed to keeping interest rates from falling further.
Today's news will feature the unemployment rte dropped to 8.6% frm 9.0%; non-farm jobs increased 120K while private non-farm jobs increased 140K, average hourly earnings +0.1%. The unemployment rate is the lowest since March 2009, but there is a hitch to the headline; the labor participation rate declined to 64.0% frm 64.2% implying that more potential workers have dropped out from looking for a job. The decrease in the jobless rate reflected a 278,000 gain in employment at the same time 315,000 Americans left the labor force. Revisions to Sept and Oct added 72K more jobs than originally reported. The U-6 underemployment rate declined from 16.2% to 15.6%, it includes part- time workers who’d prefer a full-time position and people who want work but have given up looking.
That non-farm jobs increased 120K reflects many jobs are temporary hirings for the holidays, the reaction in the bond and mortgage markets wasn't much change from yesterday's closes although slightly lower as traders discount the decline in the unemployment rate and job growth was fractionally lower than general estimates. The stock indexes were trading better prior to 8:30 on the back of continued improvement in Europe's equity markets; there was little change in the indexes following the report.
In Europe there is some increased optimism that the debt crisis may be helped by the ECB funneling funds to the IMF then the IMF leverages the funds and provides funds to Italy and Spain taking them back from the abyss. Next Friday Europe's leaders will meet in a summit in Brussels, the meeting must end with something more than what the world has had to swallow for two years----a lot of talk but little action. Given the improvement in Europe's equity markets this week and the best week for Italy's and Spain's 2 yr note yields this week, optimism is increasing.
So far today the employment report has had little impact on the US financial markets. The bellwether 10 yr note has near term support at 2.12% that has been tested a few times and held, at 10:00 it traded at 2.11% after ending yesterday at 2.10% after moving to 2.14% intraday yesterday. Mortgages have been held captive in a 50 basis point price range for three weeks now while the 10 yr volatility swings its yield from 2.12% to 1.86% on every sentence out of the mouths of Europe's leaders.
We haven't changed our outlook that the US interest rate markets are unlikely to decline much from the present levels and have more potential to rise that decline. While Europe's mess will take years to resolve the markets now are believing that a plan will surface soon that will remove much of concern that Europe's banks would fail. Over the last couple of weeks the safety moves into US treasuries has ebbed substantially. We can argue that the US economy won't improve much based on the housing market and the high level of unemployment, however trading in the equity markets implies investors are increasingly more optimistic about the future. Either way one sees it the reality is that no one is sure, that has lead to huge wings in the indexes and has contributed to keeping interest rates from falling further.
Thursday, December 1, 2011
Mortgage Rates
Treasuries and mortgages opened weaker this morning, at 8:30 weekly jobless claims that were expected to be down 2K jumped 6K to 402K and last week's claims were revised higher to 396K frm 393K. Back above what traders consider pivotal 400K. Prior to the claims report the 10 yr note traded at 2.13% up 5 bp frm yesterday's close and breaking its key short tem moving averages. Mortgages still holding well against the rise in treasury rates but still a little weaker at 9:00, down 6/32 (.18 bp) frm yesterday's close.
Markets still thinking about what was behind the unexpected coordinated central bank's move yesterday to increase liquidity in the currency markets. Some talk that a bank in Europe was on the edge of failing but who really knows these days. Whether there is any truth in it doesn't matter; banks in Europe are drowning in debt from Greece, Italy, Spain and a few other countries and are on the edge of failure.
Spain and France borrowing costs declined today after the lowered currency swap rate announcement yesterday. Is Europe getting closer to some kind of resolution of the debt mess that will save its banks? Hard to be sure, the debts are so huge that in the end it will take many years to resolve it. Next week leaders of the EU will meet (Dec 9), if they don't have a workable solution or plan that is credible markets are going to blow up, stocks will likely drop globally and safety to US treasuries will increase once more. That said, although we have no insight other than it has to end soon, markets seem to be expecting something positive next week. US treasury rates are increasing, the safety trade into US treasuries ran out of gas a few weeks ago, and the action by the central banks yesterday suggest Europe has to do something now; anymore delays will bring the house of cards down hard. Europe is at the end of the road of arguments and differences of opinion; after two years either Europe's banks will begin to fail or there will be some kind of plan to take it back from the edge----there is no time left for fiddling, time is up!
A lot of talk these days that the US economy is improving, most of it comes from those that have a vested interest in touting any bullish view. The economy is stagnant at best; like the three bears not too hot but not too cool either. Every data point recently is taken as the final word, and every negative data point these days is largely discounted. The reality is, with Europe teetering on a serious crisis there is actually no real strong consensus either way. The proof is obvious; huge swings in stock indexes but in the wider perspective no directional change. We are all in a state of mass uncertainty and until Europe can find any solution to their debt crisis nothing will change. Wrap a big red Christmas ribbon around it; with the housing market in depression and unemployment not likely to decline much, the outlook for the US is not good, not bad either.
Attempting to read the tea laves of the fundamentals these days is impossible with the issues that bear on the markets. Looking purely at the technicals though is somewhat clearer; the 10 yr treasury yield is increasing and breaking support levels, mortgage prices locked in a 50 basis point price range for the last three weeks. Technicals ignore all the talk and measure what is actually happening with each market; how much buying and selling---what money is doing, not what CNBC or Bloomberg guests have to say. Based on what money is doing today, money is leaving treasury markets and in turn have capped the decline in mortgage rates. As noted though, uncertainty over Europe keeps volatility and uncertainty at very high levels.
Treasuries and mortgages opened weaker this morning, at 8:30 weekly jobless claims that were expected to be down 2K jumped 6K to 402K and last week's claims were revised higher to 396K frm 393K. Back above what traders consider pivotal 400K. Prior to the claims report the 10 yr note traded at 2.13% up 5 bp frm yesterday's close and breaking its key short tem moving averages. Mortgages still holding well against the rise in treasury rates but still a little weaker at 9:00, down 6/32 (.18 bp) frm yesterday's close.
Markets still thinking about what was behind the unexpected coordinated central bank's move yesterday to increase liquidity in the currency markets. Some talk that a bank in Europe was on the edge of failing but who really knows these days. Whether there is any truth in it doesn't matter; banks in Europe are drowning in debt from Greece, Italy, Spain and a few other countries and are on the edge of failure.
Spain and France borrowing costs declined today after the lowered currency swap rate announcement yesterday. Is Europe getting closer to some kind of resolution of the debt mess that will save its banks? Hard to be sure, the debts are so huge that in the end it will take many years to resolve it. Next week leaders of the EU will meet (Dec 9), if they don't have a workable solution or plan that is credible markets are going to blow up, stocks will likely drop globally and safety to US treasuries will increase once more. That said, although we have no insight other than it has to end soon, markets seem to be expecting something positive next week. US treasury rates are increasing, the safety trade into US treasuries ran out of gas a few weeks ago, and the action by the central banks yesterday suggest Europe has to do something now; anymore delays will bring the house of cards down hard. Europe is at the end of the road of arguments and differences of opinion; after two years either Europe's banks will begin to fail or there will be some kind of plan to take it back from the edge----there is no time left for fiddling, time is up!
A lot of talk these days that the US economy is improving, most of it comes from those that have a vested interest in touting any bullish view. The economy is stagnant at best; like the three bears not too hot but not too cool either. Every data point recently is taken as the final word, and every negative data point these days is largely discounted. The reality is, with Europe teetering on a serious crisis there is actually no real strong consensus either way. The proof is obvious; huge swings in stock indexes but in the wider perspective no directional change. We are all in a state of mass uncertainty and until Europe can find any solution to their debt crisis nothing will change. Wrap a big red Christmas ribbon around it; with the housing market in depression and unemployment not likely to decline much, the outlook for the US is not good, not bad either.
Attempting to read the tea laves of the fundamentals these days is impossible with the issues that bear on the markets. Looking purely at the technicals though is somewhat clearer; the 10 yr treasury yield is increasing and breaking support levels, mortgage prices locked in a 50 basis point price range for the last three weeks. Technicals ignore all the talk and measure what is actually happening with each market; how much buying and selling---what money is doing, not what CNBC or Bloomberg guests have to say. Based on what money is doing today, money is leaving treasury markets and in turn have capped the decline in mortgage rates. As noted though, uncertainty over Europe keeps volatility and uncertainty at very high levels.
Wednesday, November 30, 2011
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 30, 2011
Treasuries and mortgages being hit early this morning on news that the US and five other central banks injected liquidity into markets in move to lower currency swap rates. The move is aimed at easing strains in markets and boosting the central banks’ capacity to support the global financial system. The interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points, or half a percentage point, from 100 basis points, and the program was extended to Feb. 1, 2013, the Fed said in a statement in Washington. European stocks extended their gains, the euro advanced against the dollar; treasuries and MBSs fell after the announcement. With the program, the Fed lends dollars to the ECB and other central banks in exchange for currencies including euros. The central banks lend dollars to commercial banks in their jurisdictions through an auction process.
The next hit to the bond market came at 8:15 on the ADP employment report; ADP was widely expected to report non-farm private jobs at +125K to +130K. ADP said private jobs increased 206K. Analysts are now re-working their estimates for job growth when the BLS employment report is released on Friday morning. Prior to the report estimates were for an increase of 150K private jobs from the BLS. Last month, ADP’s initial figures showed a 110,000 gain for October, while the Labor Department’s data two days later showed an increase of 104,000 in private payrolls.
Prior to the actual open of stocks the DJIA at 9:00 was +275. The 10 yr note at 9:00 -28/32 at 2.08% above its 20 and 40 day moving averages. Mortgage prices at 9:00 -6/32 (.18 bp) frm yesterday's close. As the case has been, the volatility in the rate markets is confined mainly to treasuries. Treasuries have been highly volatile over the past three months as European leaders tried to convince investors that nations in the region will be able to pay their debts. The U.S. 10-year yield rose to 2.42% on Oct. 28, after reaching a record low 1.67% on Sept. 23.
By 9:30 the 10 yr note which hit 2.10% early on was back to 2.06 and mortgage prices moved back to unchanged after being down 10/32 (.31 bp) at 8:30. The DJIA opened +243, the 10 yr at 2.06% and mortgage prices -4/32 (.12 bp).
At 9:45 the Nov Chicago purchasing mangers' index, expected at 59.0 frm 58.4, jumped to 62.6; the components, employment at 56.9 frm 62.3, new orders 70.2 frm 61.3 and prices pd 60.2 frm 66.0. The headline much better than thought and added to the ADP jobs report pushed the DJIA to +388 at 9:50.
At 10:00 Sept pending home sales, contracts signed but not yet closed, was thought to be +0.1%. NAR reported pending sales jumped 10.4%; yr.yr pending sales +9.6%. More positive news.
Later this afternoon (2:00 pm) the Fed will release its Beige Book, the Fed's detailed economic report from all 12 Fed districts. Normally not much in it that markets are not already aware of but at times the details do attract interest. In this case it probably won't will all attention on the employment report on Friday and the continual unfolding drama out of Europe.
Some positive movement in the world of central banks, better job growth than thought and the regional Chicago PM index all combine to send equity indexes roaring higher and pushing treasury interest rates higher. We have mentioned numerous times over the last couple of months that US long term rates would find it a huge hill to climb to trade for any extended time under 2.00%. The 10 yr, driver for mortgages, has tried a number of times since Sept to hold under 2.00% but has not been able to hold. We believe US long term rates are about as low as they may fall based on the present fundamentals. That said, Europe is a time bomb, if defaults actually occur it would change our outlook; until then at the 2.00% area is about the best we expect.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 30, 2011
Treasuries and mortgages being hit early this morning on news that the US and five other central banks injected liquidity into markets in move to lower currency swap rates. The move is aimed at easing strains in markets and boosting the central banks’ capacity to support the global financial system. The interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points, or half a percentage point, from 100 basis points, and the program was extended to Feb. 1, 2013, the Fed said in a statement in Washington. European stocks extended their gains, the euro advanced against the dollar; treasuries and MBSs fell after the announcement. With the program, the Fed lends dollars to the ECB and other central banks in exchange for currencies including euros. The central banks lend dollars to commercial banks in their jurisdictions through an auction process.
The next hit to the bond market came at 8:15 on the ADP employment report; ADP was widely expected to report non-farm private jobs at +125K to +130K. ADP said private jobs increased 206K. Analysts are now re-working their estimates for job growth when the BLS employment report is released on Friday morning. Prior to the report estimates were for an increase of 150K private jobs from the BLS. Last month, ADP’s initial figures showed a 110,000 gain for October, while the Labor Department’s data two days later showed an increase of 104,000 in private payrolls.
Prior to the actual open of stocks the DJIA at 9:00 was +275. The 10 yr note at 9:00 -28/32 at 2.08% above its 20 and 40 day moving averages. Mortgage prices at 9:00 -6/32 (.18 bp) frm yesterday's close. As the case has been, the volatility in the rate markets is confined mainly to treasuries. Treasuries have been highly volatile over the past three months as European leaders tried to convince investors that nations in the region will be able to pay their debts. The U.S. 10-year yield rose to 2.42% on Oct. 28, after reaching a record low 1.67% on Sept. 23.
By 9:30 the 10 yr note which hit 2.10% early on was back to 2.06 and mortgage prices moved back to unchanged after being down 10/32 (.31 bp) at 8:30. The DJIA opened +243, the 10 yr at 2.06% and mortgage prices -4/32 (.12 bp).
At 9:45 the Nov Chicago purchasing mangers' index, expected at 59.0 frm 58.4, jumped to 62.6; the components, employment at 56.9 frm 62.3, new orders 70.2 frm 61.3 and prices pd 60.2 frm 66.0. The headline much better than thought and added to the ADP jobs report pushed the DJIA to +388 at 9:50.
At 10:00 Sept pending home sales, contracts signed but not yet closed, was thought to be +0.1%. NAR reported pending sales jumped 10.4%; yr.yr pending sales +9.6%. More positive news.
Later this afternoon (2:00 pm) the Fed will release its Beige Book, the Fed's detailed economic report from all 12 Fed districts. Normally not much in it that markets are not already aware of but at times the details do attract interest. In this case it probably won't will all attention on the employment report on Friday and the continual unfolding drama out of Europe.
Some positive movement in the world of central banks, better job growth than thought and the regional Chicago PM index all combine to send equity indexes roaring higher and pushing treasury interest rates higher. We have mentioned numerous times over the last couple of months that US long term rates would find it a huge hill to climb to trade for any extended time under 2.00%. The 10 yr, driver for mortgages, has tried a number of times since Sept to hold under 2.00% but has not been able to hold. We believe US long term rates are about as low as they may fall based on the present fundamentals. That said, Europe is a time bomb, if defaults actually occur it would change our outlook; until then at the 2.00% area is about the best we expect.
Tuesday, November 29, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 29, 2011
Treasuries and mortgages turned nicely better yesterday afternoon after opening weaker in the morning; most lenders re-priced as MBS prices at the end of the day were 50 bp better than at 9:30. The 10 yr climbed to 2.08% early then fell to 1.95% and closed at 1.97% unchanged while the stock market rallied to push the DJIA +291 and the NASDAQ +86. Treasury 10-year note yields traded at less than 2% for a sixth day as Italy once again paid above 7% in its debt auctions and the European Central Bank failed to fully offset the extra liquidity created by its bond purchase program. Retail sales over the weekend were much stronger than what markets were expecting. The bond market was supported by comments from a few Fed officials that the Fed should think about increasing purchases of MBSs to keep rates low and hopefully support the housing sector that so far has not shown any progress.
This morning Sept Case/Shiller home price index was a little better than expected, down 0.6% for the 20 city and -0.4% for the 10 city price, forecasts were for a decline of 3.0% on the 20 city. Yr/yr the 20 city prices were down 3.6% while the 10 city down 3.3%. As usual it got very little attention from traders, nothing new; prices continue to fall.
At 9:30 the DJIA opened unchanged, the 10 yr note traded -9/32 at 2.00% +3 bp and mortgage prices -4/32 (.12 bp).
At 10:00 the Conference Board reported Nov consumer confidence index 56.0 frm 40.9 last month against forecasts of 44.0, the expectations index jumped to 67.8 frm 50.0. Strong increase in consumers' attitudes and the highest index since July. The reaction so far has been subdued, not much initial reaction to the better confidence readings.
Also at 10:00 the Sept FHFA home price index, expected unchanged, increased 0.9%; yr/yr -2.2%.
Today finance ministers will meet in Europe (again) in an effort to solve the impossible, the debt crisis contagion that is spreading through Europe like the Bubonic Plague. The 17-member monetary union meet in Brussels today to debate using their bailout fund, the Financial Stability Facility, to insure sovereign debt with guarantees. Europe's stock markets are weaker this morning before the meeting to discuss insuring a portion of bonds issued by debt-stricken countries. Investors and financial markets are continuing to lose confidence in Europe's ability to stop the debt crisis contagion from spreading though the region and eventually to the US as Europe is sure to re-enter recession. The ECB failed to fully offset the extra liquidity created by its bond purchases for the first time in seven months, a sign of mounting tensions among euro-area banks. The ECB tries to drain bank liquidity in the same amounts it buys bonds from Italy and Spain; the offering today for 7 day term deposits didn't match up as euro banks did not bid enough to cover the bond buys. The ECB worrying about inflation wants to offset purchases with short term deposits from banks.
This is employment week, traders and investors pay a lot of attention to Europe these days but US employment is also critical. Tomorrow ADP will release their estimate for private jobs in Nov, the forecast is an increase of 125K jobs. Friday the official BLS data is expected to show an increase of 118K non-farm jobs and +133K non-farm private jobs with the unemployment rate unchanged at 9.0%.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 29, 2011
Treasuries and mortgages turned nicely better yesterday afternoon after opening weaker in the morning; most lenders re-priced as MBS prices at the end of the day were 50 bp better than at 9:30. The 10 yr climbed to 2.08% early then fell to 1.95% and closed at 1.97% unchanged while the stock market rallied to push the DJIA +291 and the NASDAQ +86. Treasury 10-year note yields traded at less than 2% for a sixth day as Italy once again paid above 7% in its debt auctions and the European Central Bank failed to fully offset the extra liquidity created by its bond purchase program. Retail sales over the weekend were much stronger than what markets were expecting. The bond market was supported by comments from a few Fed officials that the Fed should think about increasing purchases of MBSs to keep rates low and hopefully support the housing sector that so far has not shown any progress.
This morning Sept Case/Shiller home price index was a little better than expected, down 0.6% for the 20 city and -0.4% for the 10 city price, forecasts were for a decline of 3.0% on the 20 city. Yr/yr the 20 city prices were down 3.6% while the 10 city down 3.3%. As usual it got very little attention from traders, nothing new; prices continue to fall.
At 9:30 the DJIA opened unchanged, the 10 yr note traded -9/32 at 2.00% +3 bp and mortgage prices -4/32 (.12 bp).
At 10:00 the Conference Board reported Nov consumer confidence index 56.0 frm 40.9 last month against forecasts of 44.0, the expectations index jumped to 67.8 frm 50.0. Strong increase in consumers' attitudes and the highest index since July. The reaction so far has been subdued, not much initial reaction to the better confidence readings.
Also at 10:00 the Sept FHFA home price index, expected unchanged, increased 0.9%; yr/yr -2.2%.
Today finance ministers will meet in Europe (again) in an effort to solve the impossible, the debt crisis contagion that is spreading through Europe like the Bubonic Plague. The 17-member monetary union meet in Brussels today to debate using their bailout fund, the Financial Stability Facility, to insure sovereign debt with guarantees. Europe's stock markets are weaker this morning before the meeting to discuss insuring a portion of bonds issued by debt-stricken countries. Investors and financial markets are continuing to lose confidence in Europe's ability to stop the debt crisis contagion from spreading though the region and eventually to the US as Europe is sure to re-enter recession. The ECB failed to fully offset the extra liquidity created by its bond purchases for the first time in seven months, a sign of mounting tensions among euro-area banks. The ECB tries to drain bank liquidity in the same amounts it buys bonds from Italy and Spain; the offering today for 7 day term deposits didn't match up as euro banks did not bid enough to cover the bond buys. The ECB worrying about inflation wants to offset purchases with short term deposits from banks.
This is employment week, traders and investors pay a lot of attention to Europe these days but US employment is also critical. Tomorrow ADP will release their estimate for private jobs in Nov, the forecast is an increase of 125K jobs. Friday the official BLS data is expected to show an increase of 118K non-farm jobs and +133K non-farm private jobs with the unemployment rate unchanged at 9.0%.
Monday, November 28, 2011
Sunday, November 27, 2011
Friday, November 25, 2011
Thursday, November 24, 2011
Wednesday, November 23, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 23, 2011
Three economic reports this morning at 8:30; weekly jobless claims were up 2K to 393K, last week's claims were revised to 391K frm 388K, continuing claims were up 68K to 3.691 mil. Overall claims were about as expected. Oct personal income was expected up 0.3%, it increased +0.4% the highest since March; personal spending was expected up 0.3%, as reported spending up 0.1%, the personal savings rate at 3.5% was up frm 3.3% in Sept. Oct durable goods orders expected -1.0% was -0.7%, excluding volatile transportation orders up 0.7% with forecasts of unchanged. Prior to the three reports the 10 yr traded unchanged at 1.93% where there is resistance, at 9:00 the 10 -5/32 to 1.94% and mortgage prices -7/32 (.22 bp).
The 8:30 data was mostly in line with forecasts but treasuries and mortgages being hit this morning as the contagion in Europe may be infecting Germany now. Germany tried to sell bunds but the auction failed miserably. It failed to reach its maximum sales target of 6 billion euros ($8B) at an auction of securities due in January 2022. Total bids amounted to 3.889 billion euros, falling short by 35%, according to data from the Bundesbank. The securities were sold at a yield of 1.98%. Germany the rock of the EU unable to sell its debt is worrisome and another shock to markets. The ECB was said to have bought more Italian bonds today, but no direct confirmation frm the ECB. In Greece, Greece's central bank warned the country has one last chance to reshape its economy and stay in the euro region, the country’s central bank said, adding to European Union pressure on Greek political leaders to move decisively on economic revamping.
In Europe and China the purchasing mgrs indexes are declining as Europe heads for another recession and dragging the world down with it. Europe needs so much money to head off the potential of sovereign defaults that it is becoming clear that in the end of it all there will be defaults of a lot of debt that will drag Europe's banking system into crisis. Rating agencies are poised to lower credit ratings for France, with the failure of German bund sales today France is likely to see a downgrade within a week or so.
At 9:30 the stock market opened weaker; the DJIA started down -95 and continued to decline, NASDAQ -20; the 10- yr note yield at 1.96% +3 bp. Mortgage prices at 9:30 -9/32 (.28 bp).
At 9:55 the U. of Michigan consumer sentiment index, expected at 64.6 frm 64.2, was 64.1; at the end of Oct the index was 60.4, the 12 month out expectation index unchanged at 52.
Finally today, at 1:00 Treasury will auction the third auction this week with $29B of 7 yr notes. The 2 and 5 yr auctions on Monday and Tuesday saw strong demand, likely the 7 will also be well bid.
The key 10 yr note hit a chart resistance level at 1.93% the low yield on 11/9, frm there the 10 jumped to 2.12% before returning to 1.93%. While rtes are higher this morning and prices lower, with equity markets falling and Europe spinning rapidly rates in the US should not increase much. That said, the technical failure so far at 1.93% is something to keep in mind. The safety moves to treasuries recently has slowed; Europe news has been continuously bad yet the 10 yr note yield has generally steady suggesting investors are better positioned now. Volatility will continue as uncertainty dominates all thinking these days.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 23, 2011
Three economic reports this morning at 8:30; weekly jobless claims were up 2K to 393K, last week's claims were revised to 391K frm 388K, continuing claims were up 68K to 3.691 mil. Overall claims were about as expected. Oct personal income was expected up 0.3%, it increased +0.4% the highest since March; personal spending was expected up 0.3%, as reported spending up 0.1%, the personal savings rate at 3.5% was up frm 3.3% in Sept. Oct durable goods orders expected -1.0% was -0.7%, excluding volatile transportation orders up 0.7% with forecasts of unchanged. Prior to the three reports the 10 yr traded unchanged at 1.93% where there is resistance, at 9:00 the 10 -5/32 to 1.94% and mortgage prices -7/32 (.22 bp).
The 8:30 data was mostly in line with forecasts but treasuries and mortgages being hit this morning as the contagion in Europe may be infecting Germany now. Germany tried to sell bunds but the auction failed miserably. It failed to reach its maximum sales target of 6 billion euros ($8B) at an auction of securities due in January 2022. Total bids amounted to 3.889 billion euros, falling short by 35%, according to data from the Bundesbank. The securities were sold at a yield of 1.98%. Germany the rock of the EU unable to sell its debt is worrisome and another shock to markets. The ECB was said to have bought more Italian bonds today, but no direct confirmation frm the ECB. In Greece, Greece's central bank warned the country has one last chance to reshape its economy and stay in the euro region, the country’s central bank said, adding to European Union pressure on Greek political leaders to move decisively on economic revamping.
In Europe and China the purchasing mgrs indexes are declining as Europe heads for another recession and dragging the world down with it. Europe needs so much money to head off the potential of sovereign defaults that it is becoming clear that in the end of it all there will be defaults of a lot of debt that will drag Europe's banking system into crisis. Rating agencies are poised to lower credit ratings for France, with the failure of German bund sales today France is likely to see a downgrade within a week or so.
At 9:30 the stock market opened weaker; the DJIA started down -95 and continued to decline, NASDAQ -20; the 10- yr note yield at 1.96% +3 bp. Mortgage prices at 9:30 -9/32 (.28 bp).
At 9:55 the U. of Michigan consumer sentiment index, expected at 64.6 frm 64.2, was 64.1; at the end of Oct the index was 60.4, the 12 month out expectation index unchanged at 52.
Finally today, at 1:00 Treasury will auction the third auction this week with $29B of 7 yr notes. The 2 and 5 yr auctions on Monday and Tuesday saw strong demand, likely the 7 will also be well bid.
The key 10 yr note hit a chart resistance level at 1.93% the low yield on 11/9, frm there the 10 jumped to 2.12% before returning to 1.93%. While rtes are higher this morning and prices lower, with equity markets falling and Europe spinning rapidly rates in the US should not increase much. That said, the technical failure so far at 1.93% is something to keep in mind. The safety moves to treasuries recently has slowed; Europe news has been continuously bad yet the 10 yr note yield has generally steady suggesting investors are better positioned now. Volatility will continue as uncertainty dominates all thinking these days.
Tuesday, November 22, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 22, 2011
Prior to 8:30 the bond and mortgage markets were slightly weaker in price with stock indexes better. At 8:30 more not so good news, the Q3 preliminary GDP data was weaker than expected and weaker than last month's advance report. Q3 GDP was revised from +2.5% to +2.0% with forecasts of +2.3% to +2.5%; consumer spending +2.3% frm +2.4%, business investment +14.8% frm +16.3%, all sales +3.6% unchanged from the advance report. The reaction turned the 10 yr note from -5/32 to +6/32 at 8:40, mortgage prices frm -3/32 to =2/32 and the stock indexes slightly lower.
The revision lower to Q3 GDP sets up a redo of the estimates for Q4 which had been talked at 3.0%; that is unlikely now. The weaker economy won't sit well with equity markets, the key indexes opening weaker this morning after the DJIA closed down 248 points yesterday.
In Europe it is still the same, no positive news. Germany is the key and so far it will not step up and take command, can't blame it though as every EU country in the final analysis will look inward first. Germany rejected calls from allies and investors to do more to counter market turmoil as Spain’s financing costs surged and pressure mounted on Greek political leaders to submit written commitments to austerity measures. Bond yields in France, Spain and Italy climbed as the absence of progress toward enacting a month-old comprehensive crisis-fighting package; Spain's leaders saying the country cannot afford 7.0% interest rates. Greece’s New Democracy party, was told by the president of the European Commission to quit playing “political games” and drop his refusal to pledge written support for Greek budget cuts as a condition for the next installment of international aid.
One more failure by elected officials to do the country's business. Nothing from the Super Committee. The committee had no chance to begin with as members of both parties were pleased to just let it go by. It is all about elections for Congress and the Administration; failing to cut spending by $1.2T simply lets spending cuts and taxes die for the next year. The cuts were to begin 2013 not next year; by 2013 there may be an entirely different political make up in Congress so any real attempt to deal with spending cuts didn't matter much with the Super Dud Committee.
At 9:30 the DJIA opened down 50, the 10 yr at 1.96% unch and mortgage prices +1/32 (.03 bp).
At 1:00 Treasury will borrow $35B of 5 yr notes in its auction; yesterday's 2 yr note found solid bidding. At 2:00 the Fed will release the minutes of the 11/2 FOMC meeting.
Thanksgiving week is short with most investors ending the week tomorrow (Wed), although the US markets will trade in shortened sessions. Volume this week in trading activity is thin and possibly affecting the wide swings in equities, the bond market is holding under 2.00% on the 10 yr but isn't showing much strength given the soft equity markets and the troubles in Europe. Safe haven buying of US treasuries is waning recently as more investors simply take to the sidelines; not buying equities, gold or interest rates. Gold today is opening better but has fallen over $100.00 on the past week.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 22, 2011
Prior to 8:30 the bond and mortgage markets were slightly weaker in price with stock indexes better. At 8:30 more not so good news, the Q3 preliminary GDP data was weaker than expected and weaker than last month's advance report. Q3 GDP was revised from +2.5% to +2.0% with forecasts of +2.3% to +2.5%; consumer spending +2.3% frm +2.4%, business investment +14.8% frm +16.3%, all sales +3.6% unchanged from the advance report. The reaction turned the 10 yr note from -5/32 to +6/32 at 8:40, mortgage prices frm -3/32 to =2/32 and the stock indexes slightly lower.
The revision lower to Q3 GDP sets up a redo of the estimates for Q4 which had been talked at 3.0%; that is unlikely now. The weaker economy won't sit well with equity markets, the key indexes opening weaker this morning after the DJIA closed down 248 points yesterday.
In Europe it is still the same, no positive news. Germany is the key and so far it will not step up and take command, can't blame it though as every EU country in the final analysis will look inward first. Germany rejected calls from allies and investors to do more to counter market turmoil as Spain’s financing costs surged and pressure mounted on Greek political leaders to submit written commitments to austerity measures. Bond yields in France, Spain and Italy climbed as the absence of progress toward enacting a month-old comprehensive crisis-fighting package; Spain's leaders saying the country cannot afford 7.0% interest rates. Greece’s New Democracy party, was told by the president of the European Commission to quit playing “political games” and drop his refusal to pledge written support for Greek budget cuts as a condition for the next installment of international aid.
One more failure by elected officials to do the country's business. Nothing from the Super Committee. The committee had no chance to begin with as members of both parties were pleased to just let it go by. It is all about elections for Congress and the Administration; failing to cut spending by $1.2T simply lets spending cuts and taxes die for the next year. The cuts were to begin 2013 not next year; by 2013 there may be an entirely different political make up in Congress so any real attempt to deal with spending cuts didn't matter much with the Super Dud Committee.
At 9:30 the DJIA opened down 50, the 10 yr at 1.96% unch and mortgage prices +1/32 (.03 bp).
At 1:00 Treasury will borrow $35B of 5 yr notes in its auction; yesterday's 2 yr note found solid bidding. At 2:00 the Fed will release the minutes of the 11/2 FOMC meeting.
Thanksgiving week is short with most investors ending the week tomorrow (Wed), although the US markets will trade in shortened sessions. Volume this week in trading activity is thin and possibly affecting the wide swings in equities, the bond market is holding under 2.00% on the 10 yr but isn't showing much strength given the soft equity markets and the troubles in Europe. Safe haven buying of US treasuries is waning recently as more investors simply take to the sidelines; not buying equities, gold or interest rates. Gold today is opening better but has fallen over $100.00 on the past week.
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 22, 2011
Prior to 8:30 the bond and mortgage markets were slightly weaker in price with stock indexes better. At 8:30 more not so good news, the Q3 preliminary GDP data was weaker than expected and weaker than last month's advance report. Q3 GDP was revised from +2.5% to +2.0% with forecasts of +2.3% to +2.5%; consumer spending +2.3% frm +2.4%, business investment +14.8% frm +16.3%, all sales +3.6% unchanged from the advance report. The reaction turned the 10 yr note from -5/32 to +6/32 at 8:40, mortgage prices frm -3/32 to =2/32 and the stock indexes slightly lower.
The revision lower to Q3 GDP sets up a redo of the estimates for Q4 which had been talked at 3.0%; that is unlikely now. The weaker economy won't sit well with equity markets, the key indexes opening weaker this morning after the DJIA closed down 248 points yesterday.
In Europe it is still the same, no positive news. Germany is the key and so far it will not step up and take command, can't blame it though as every EU country in the final analysis will look inward first. Germany rejected calls from allies and investors to do more to counter market turmoil as Spain’s financing costs surged and pressure mounted on Greek political leaders to submit written commitments to austerity measures. Bond yields in France, Spain and Italy climbed as the absence of progress toward enacting a month-old comprehensive crisis-fighting package; Spain's leaders saying the country cannot afford 7.0% interest rates. Greece’s New Democracy party, was told by the president of the European Commission to quit playing “political games” and drop his refusal to pledge written support for Greek budget cuts as a condition for the next installment of international aid.
One more failure by elected officials to do the country's business. Nothing from the Super Committee. The committee had no chance to begin with as members of both parties were pleased to just let it go by. It is all about elections for Congress and the Administration; failing to cut spending by $1.2T simply lets spending cuts and taxes die for the next year. The cuts were to begin 2013 not next year; by 2013 there may be an entirely different political make up in Congress so any real attempt to deal with spending cuts didn't matter much with the Super Dud Committee.
At 9:30 the DJIA opened down 50, the 10 yr at 1.96% unch and mortgage prices +1/32 (.03 bp).
At 1:00 Treasury will borrow $35B of 5 yr notes in its auction; yesterday's 2 yr note found solid bidding. At 2:00 the Fed will release the minutes of the 11/2 FOMC meeting.
Thanksgiving week is short with most investors ending the week tomorrow (Wed), although the US markets will trade in shortened sessions. Volume this week in trading activity is thin and possibly affecting the wide swings in equities, the bond market is holding under 2.00% on the 10 yr but isn't showing much strength given the soft equity markets and the troubles in Europe. Safe haven buying of US treasuries is waning recently as more investors simply take to the sidelines; not buying equities, gold or interest rates. Gold today is opening better but has fallen over $100.00 on the past week.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 22, 2011
Prior to 8:30 the bond and mortgage markets were slightly weaker in price with stock indexes better. At 8:30 more not so good news, the Q3 preliminary GDP data was weaker than expected and weaker than last month's advance report. Q3 GDP was revised from +2.5% to +2.0% with forecasts of +2.3% to +2.5%; consumer spending +2.3% frm +2.4%, business investment +14.8% frm +16.3%, all sales +3.6% unchanged from the advance report. The reaction turned the 10 yr note from -5/32 to +6/32 at 8:40, mortgage prices frm -3/32 to =2/32 and the stock indexes slightly lower.
The revision lower to Q3 GDP sets up a redo of the estimates for Q4 which had been talked at 3.0%; that is unlikely now. The weaker economy won't sit well with equity markets, the key indexes opening weaker this morning after the DJIA closed down 248 points yesterday.
In Europe it is still the same, no positive news. Germany is the key and so far it will not step up and take command, can't blame it though as every EU country in the final analysis will look inward first. Germany rejected calls from allies and investors to do more to counter market turmoil as Spain’s financing costs surged and pressure mounted on Greek political leaders to submit written commitments to austerity measures. Bond yields in France, Spain and Italy climbed as the absence of progress toward enacting a month-old comprehensive crisis-fighting package; Spain's leaders saying the country cannot afford 7.0% interest rates. Greece’s New Democracy party, was told by the president of the European Commission to quit playing “political games” and drop his refusal to pledge written support for Greek budget cuts as a condition for the next installment of international aid.
One more failure by elected officials to do the country's business. Nothing from the Super Committee. The committee had no chance to begin with as members of both parties were pleased to just let it go by. It is all about elections for Congress and the Administration; failing to cut spending by $1.2T simply lets spending cuts and taxes die for the next year. The cuts were to begin 2013 not next year; by 2013 there may be an entirely different political make up in Congress so any real attempt to deal with spending cuts didn't matter much with the Super Dud Committee.
At 9:30 the DJIA opened down 50, the 10 yr at 1.96% unch and mortgage prices +1/32 (.03 bp).
At 1:00 Treasury will borrow $35B of 5 yr notes in its auction; yesterday's 2 yr note found solid bidding. At 2:00 the Fed will release the minutes of the 11/2 FOMC meeting.
Thanksgiving week is short with most investors ending the week tomorrow (Wed), although the US markets will trade in shortened sessions. Volume this week in trading activity is thin and possibly affecting the wide swings in equities, the bond market is holding under 2.00% on the 10 yr but isn't showing much strength given the soft equity markets and the troubles in Europe. Safe haven buying of US treasuries is waning recently as more investors simply take to the sidelines; not buying equities, gold or interest rates. Gold today is opening better but has fallen over $100.00 on the past week.
Monday, November 21, 2011
Mortgage Rate Update
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Monday, November 21, 2011
Treasury rates a little lower this with the stock market opening weaker. That the Super Committee has failed to reach any compromise is driving markets this morning. The bond and mortgage markets should hold through the week but unlikely to decline in rates much. It will be a short week with Thanksgiving on Thursday and a skeleton crew on Friday with most taking the day off. The rest of the world doesn't do Thanksgiving so outside the US its business as usual. The only data today is Oct existing home sales; Tuesday has the second look at Q3 GDP, Wednesday is loaded with data including weekly jobless claims normally released on Thursdays.
The Super Committee has already admitted defeat with its deadline on Wednesday. No compromises on taxes and spending cuts so automatic spending cuts will occur totaling $1.2T including cuts in some of the social programs. That these is the automatic cuts supposed to occur it is unlikely that in the end there will be no cuts as Congress and the Administration won't step and do it. 2012 is all about the election a year from now, given the impasse between Republicans and Democrats the year won't likely see anything of real substance in relation to budgets and spending with both parties unwilling to take their responsibilities seriously----what politicians take seriously is being re-elected.
Treasury will auction $99B of notes beginning Monday with $35B of 2 yr notes, Tuesday $35B of 5 yr notes and Wednesday $29B of 7 yr notes. Europe still holds US markets by the throat with 5 of the EU countries facing debt crisis and three countries currently changing governments in attempts to deal with huge austerity plans that will increase taxes and cut large chunks out of spending.
The 10 yr note trades around 2.00% and seems to find resistance when its yield moves below 2.00%; mortgages continue to lag treasuries as the move lower in rates is primarily into treasuries as insurance against continuing uncertainty in Europe.
The DJIA opened -125, the 10 yr at 9:30 +13/32 at 1.96% -5 bp while mortgage prices at 9:30 +4/32 (.12 bp).
At 10:00 Oct existing home sales expected down 1.2% were up 1.4% to 4.97 mil annualized; the median sales price $162.500 -4.2% yr/yr, 28% of sales were distressed sales, down from 30% in Sept. There is an 8 month supply based on current sales down 2.2% frm Sept. There was no immediate reaction to the better report.
This Week's Economic Calendar:
Monday;
10:00 am Oct existing home sales (as reported
1:00 pm $35B 2 yr note auction
Tuesday;
8:30 am Q3 GDP advance report (+2.5% unch frm last month's prelim report)
1:00 pm $35B 5 yr note auction
2:00 pm FOMC minutes frm 11/2 meeting
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am weekly jobless claims (+3K to 391K)
Oct personal income & spending (income +0.3%, spending +0.3%)
Oct durable goods orders (-0.9%, ex transportation orders 0.0%)
9:55 U. of Michigan consumer sentiment index (64.2 frm 64.2)
1:00 pm $29B 7 yr note auction
Thursday;
All Markets Closed
Friday;
Early closes for all markets
The Bundesbank commenting today that growth in Germany, Europe’s largest economy, may slow to a near standstill next year as the region’s debt crisis saps demand for exports. Europe is on the path of another recession as it cannot come up with a way to deal with the massive debts accumulated by Southern Europe countries.
The bond market continues to move with equity markets, that isn't likely to change anytime soon. As stocks fall on failure of the Super Committee, the weakening outlook for the global economies and now increasing fears S&P and the other rating agencies may once again lower US economic outlook and cut our debt rating again. Even if the agencies lower US debt ratings it isn't likely to impact our rate markets directly as the US will still be the place for worldwide investors to seek safety in the present chaotic world.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Monday, November 21, 2011
Treasury rates a little lower this with the stock market opening weaker. That the Super Committee has failed to reach any compromise is driving markets this morning. The bond and mortgage markets should hold through the week but unlikely to decline in rates much. It will be a short week with Thanksgiving on Thursday and a skeleton crew on Friday with most taking the day off. The rest of the world doesn't do Thanksgiving so outside the US its business as usual. The only data today is Oct existing home sales; Tuesday has the second look at Q3 GDP, Wednesday is loaded with data including weekly jobless claims normally released on Thursdays.
The Super Committee has already admitted defeat with its deadline on Wednesday. No compromises on taxes and spending cuts so automatic spending cuts will occur totaling $1.2T including cuts in some of the social programs. That these is the automatic cuts supposed to occur it is unlikely that in the end there will be no cuts as Congress and the Administration won't step and do it. 2012 is all about the election a year from now, given the impasse between Republicans and Democrats the year won't likely see anything of real substance in relation to budgets and spending with both parties unwilling to take their responsibilities seriously----what politicians take seriously is being re-elected.
Treasury will auction $99B of notes beginning Monday with $35B of 2 yr notes, Tuesday $35B of 5 yr notes and Wednesday $29B of 7 yr notes. Europe still holds US markets by the throat with 5 of the EU countries facing debt crisis and three countries currently changing governments in attempts to deal with huge austerity plans that will increase taxes and cut large chunks out of spending.
The 10 yr note trades around 2.00% and seems to find resistance when its yield moves below 2.00%; mortgages continue to lag treasuries as the move lower in rates is primarily into treasuries as insurance against continuing uncertainty in Europe.
The DJIA opened -125, the 10 yr at 9:30 +13/32 at 1.96% -5 bp while mortgage prices at 9:30 +4/32 (.12 bp).
At 10:00 Oct existing home sales expected down 1.2% were up 1.4% to 4.97 mil annualized; the median sales price $162.500 -4.2% yr/yr, 28% of sales were distressed sales, down from 30% in Sept. There is an 8 month supply based on current sales down 2.2% frm Sept. There was no immediate reaction to the better report.
This Week's Economic Calendar:
Monday;
10:00 am Oct existing home sales (as reported
1:00 pm $35B 2 yr note auction
Tuesday;
8:30 am Q3 GDP advance report (+2.5% unch frm last month's prelim report)
1:00 pm $35B 5 yr note auction
2:00 pm FOMC minutes frm 11/2 meeting
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am weekly jobless claims (+3K to 391K)
Oct personal income & spending (income +0.3%, spending +0.3%)
Oct durable goods orders (-0.9%, ex transportation orders 0.0%)
9:55 U. of Michigan consumer sentiment index (64.2 frm 64.2)
1:00 pm $29B 7 yr note auction
Thursday;
All Markets Closed
Friday;
Early closes for all markets
The Bundesbank commenting today that growth in Germany, Europe’s largest economy, may slow to a near standstill next year as the region’s debt crisis saps demand for exports. Europe is on the path of another recession as it cannot come up with a way to deal with the massive debts accumulated by Southern Europe countries.
The bond market continues to move with equity markets, that isn't likely to change anytime soon. As stocks fall on failure of the Super Committee, the weakening outlook for the global economies and now increasing fears S&P and the other rating agencies may once again lower US economic outlook and cut our debt rating again. Even if the agencies lower US debt ratings it isn't likely to impact our rate markets directly as the US will still be the place for worldwide investors to seek safety in the present chaotic world.
Sunday, November 20, 2011
Friday, November 18, 2011
Mortgage Rates
Interest rates started a little higher this morning but are holding well after the 10 yr closed at 1.97% yesterday. Early this morning the 10 yr traded at 2.03% at 7:30, but by 9:00 it fell back to 1.99%. Mortgage prices a little lower in line with the 10 yr price decline; stock indexes were pointing to a better open at 9:30 (at 9:30 the DJIA opened +40). There was no economic data today until 10:00 when Oct leading economic indicators, expected up 0.6%, increased 0.9%; Sept revised to +0.1% frm 0.2%. The LEI suggests the economy is holding and improving a little. There was no noticeable reaction to the better report. At 10:05 the 10- yr at 2.00% +3 bp and mortgage prices -.12 bp. Although LEI is better the outlook for employment still is dismal.
In Europe the ECB was in again buying Italian and Spanish bonds keeping their rates under what is considered a key rate at 7.00%. A rate over 7.00% for Italian bonds is being considered as the level that has to hold if Italy and Spain have any chance of avoiding defaults because the austerity cuts at higher rates would be impossible to achieve. European officials may start talks with the International Monetary Fund on a mechanism for the ECB to lend to the IMF for sovereign bailouts in the region, Dow Jones Newswires reported. Agreement on the proposal between ECB and IMF may result in an announcement at a European Union summit on Dec. 9, Dow Jones said, citing two unidentified people with direct knowledge of the matter. Sounds nice but we won't hold our breath that a workable plan will emerge; it hasn't happened in the last 2 yrs.
The ECB is continuing to buy Italian and Spanish debt, how that is being justified is unsure since the EU treaty precludes the central bank from buying individual country bonds. Nevertheless it is doing it and it seems the only actual activity in the region. With the EU teetering on the edge of potential breakup all the rules are subject to change. Germany continues to resist the intervention by the ECB, and Germany is at increasing odds with France over how to deal with the debt crisis. The longer the crisis drags on the more EU countries will turn inward toward their own interests above those of the EU as a group. Germany is already thinking outside the box of the EU.
A little better to start today in the equity markets but no assurance the key indexes can improve. A stronger equity market today would work against the rate markets; not something new though, that has been the trade fro months----higher indexes equals lower prices in rate markets.
Yesterday the 10 yr closed under 2.00% and increased the bullish technical outlook. The 10 remains slightly below 2.00% this morning, the longer it holds the better the outlook fro mortgage rates. The relative strength in the bond market is increasing and more of our studies are turning more positive. That said, even with Europe and safe haven moves, if US equity markets rally it will take a toll on rates.
Interest rates started a little higher this morning but are holding well after the 10 yr closed at 1.97% yesterday. Early this morning the 10 yr traded at 2.03% at 7:30, but by 9:00 it fell back to 1.99%. Mortgage prices a little lower in line with the 10 yr price decline; stock indexes were pointing to a better open at 9:30 (at 9:30 the DJIA opened +40). There was no economic data today until 10:00 when Oct leading economic indicators, expected up 0.6%, increased 0.9%; Sept revised to +0.1% frm 0.2%. The LEI suggests the economy is holding and improving a little. There was no noticeable reaction to the better report. At 10:05 the 10- yr at 2.00% +3 bp and mortgage prices -.12 bp. Although LEI is better the outlook for employment still is dismal.
In Europe the ECB was in again buying Italian and Spanish bonds keeping their rates under what is considered a key rate at 7.00%. A rate over 7.00% for Italian bonds is being considered as the level that has to hold if Italy and Spain have any chance of avoiding defaults because the austerity cuts at higher rates would be impossible to achieve. European officials may start talks with the International Monetary Fund on a mechanism for the ECB to lend to the IMF for sovereign bailouts in the region, Dow Jones Newswires reported. Agreement on the proposal between ECB and IMF may result in an announcement at a European Union summit on Dec. 9, Dow Jones said, citing two unidentified people with direct knowledge of the matter. Sounds nice but we won't hold our breath that a workable plan will emerge; it hasn't happened in the last 2 yrs.
The ECB is continuing to buy Italian and Spanish debt, how that is being justified is unsure since the EU treaty precludes the central bank from buying individual country bonds. Nevertheless it is doing it and it seems the only actual activity in the region. With the EU teetering on the edge of potential breakup all the rules are subject to change. Germany continues to resist the intervention by the ECB, and Germany is at increasing odds with France over how to deal with the debt crisis. The longer the crisis drags on the more EU countries will turn inward toward their own interests above those of the EU as a group. Germany is already thinking outside the box of the EU.
A little better to start today in the equity markets but no assurance the key indexes can improve. A stronger equity market today would work against the rate markets; not something new though, that has been the trade fro months----higher indexes equals lower prices in rate markets.
Yesterday the 10 yr closed under 2.00% and increased the bullish technical outlook. The 10 remains slightly below 2.00% this morning, the longer it holds the better the outlook fro mortgage rates. The relative strength in the bond market is increasing and more of our studies are turning more positive. That said, even with Europe and safe haven moves, if US equity markets rally it will take a toll on rates.
Thursday, November 17, 2011
Mortgage Rate Update
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, November 17, 2011
Before the 8:30 data this morning the 10 yr note traded at 1.97%, after the 8:30 economic reports the 10 yr back to 2.03% at 9:00 am. Weekly jobless claims were down 5K to 388K last week, estimates were for an increase of 5K to 10K. Weekly claims last week were revised to 393K frm 390K originally reported. The claims lowest since April 2nd 2011. Continuing claims fell to 3.608 mil frm 3.665 mil. Oct housing starts and permits also at 8:30; starts were expected to be down 8.0% as reported -0.3% at 628K. Sept starts revised lower to +7.7% frm +15.0%. Single family starts up 3.9% while multi-family starts -8.3%. Permits up 10.9% to 653K the best since March 2010. The two reports turned stock indexes frm weaker to better, at 9:00 the DJIA +40 after being off 50.
In Europe more talk but nothing of substance in terms of progress. Now France and Germany squabbling; Germany's Angela Merkel rejected French calls to deploy the European Central Bank as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. ECB itself has also resisted calls to provide more support. Mario Draghi, the Italian who took over as president of the central bank this month, said Nov. 3 that backstopping government borrowing lies outside the ECB’s responsibility. The spread between French and German 10-year yields widened to as much as 204 basis points today as France sold 6.98 billion euros ($9.38 billion) of notes. Spanish bonds sank, driving 10- year yields to the highest since the euro was introduced in 1999, as borrowing costs climbed to the most in at least seven years at an auction of securities. The ECB said to be buying more Italian debt today after buying yesterday; the Italian 10 yr traded above 7.00% early this morning triggering some safe haven buying in US treasuries, now at 6.95% and the US 10 yr back over 2.00%.
At 9:30 the DJIA opened -13, 10 yr 2.02% +2 bp and mortgage prices -3/32 (.09 bp) frm yesterday's close.
At 10:00 a few minutes ago the key Nov Philadelphia Fed business index, expected at 9.0 frm 8.7 in Oct, earlier this week the index was expected at 6.8. As released the index was weaker at 3.6, prices pd component 22.8 frm 20.0, new orders 1.3 frm 7.8, employment component 12.0 frm 1.4. Employment better but new orders and the overall index weaker than expected. There isn't much initial reaction to the report. An index above zero is considered expansion, below zero, contraction.
The 10 yr and mortgage markets continue to trade in very tight ranges, two weeks with little change. Early today the 10 traded at 1.97%, at 10:00 back to 2.00%. Two factors for US rates; Europe and the US equity markets. Stock indexes turned up at 10:05 this morning and immediately the mtg market slipped a little. We still have somewhat positive technicals but overall the recent activity is neural with little changes.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, November 17, 2011
Before the 8:30 data this morning the 10 yr note traded at 1.97%, after the 8:30 economic reports the 10 yr back to 2.03% at 9:00 am. Weekly jobless claims were down 5K to 388K last week, estimates were for an increase of 5K to 10K. Weekly claims last week were revised to 393K frm 390K originally reported. The claims lowest since April 2nd 2011. Continuing claims fell to 3.608 mil frm 3.665 mil. Oct housing starts and permits also at 8:30; starts were expected to be down 8.0% as reported -0.3% at 628K. Sept starts revised lower to +7.7% frm +15.0%. Single family starts up 3.9% while multi-family starts -8.3%. Permits up 10.9% to 653K the best since March 2010. The two reports turned stock indexes frm weaker to better, at 9:00 the DJIA +40 after being off 50.
In Europe more talk but nothing of substance in terms of progress. Now France and Germany squabbling; Germany's Angela Merkel rejected French calls to deploy the European Central Bank as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. ECB itself has also resisted calls to provide more support. Mario Draghi, the Italian who took over as president of the central bank this month, said Nov. 3 that backstopping government borrowing lies outside the ECB’s responsibility. The spread between French and German 10-year yields widened to as much as 204 basis points today as France sold 6.98 billion euros ($9.38 billion) of notes. Spanish bonds sank, driving 10- year yields to the highest since the euro was introduced in 1999, as borrowing costs climbed to the most in at least seven years at an auction of securities. The ECB said to be buying more Italian debt today after buying yesterday; the Italian 10 yr traded above 7.00% early this morning triggering some safe haven buying in US treasuries, now at 6.95% and the US 10 yr back over 2.00%.
At 9:30 the DJIA opened -13, 10 yr 2.02% +2 bp and mortgage prices -3/32 (.09 bp) frm yesterday's close.
At 10:00 a few minutes ago the key Nov Philadelphia Fed business index, expected at 9.0 frm 8.7 in Oct, earlier this week the index was expected at 6.8. As released the index was weaker at 3.6, prices pd component 22.8 frm 20.0, new orders 1.3 frm 7.8, employment component 12.0 frm 1.4. Employment better but new orders and the overall index weaker than expected. There isn't much initial reaction to the report. An index above zero is considered expansion, below zero, contraction.
The 10 yr and mortgage markets continue to trade in very tight ranges, two weeks with little change. Early today the 10 traded at 1.97%, at 10:00 back to 2.00%. Two factors for US rates; Europe and the US equity markets. Stock indexes turned up at 10:05 this morning and immediately the mtg market slipped a little. We still have somewhat positive technicals but overall the recent activity is neural with little changes.
Wednesday, November 16, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 16, 2011
Prior to 8:30 this morning the 10 yr note quiet but down 4/32 to 2.05%, mortgages down 4/32 (.12 bp). At 8:30 Oct CPI was -0.1% against forecasts of unch; the core (ex food and energy) +0.1% in line with estimates. Yr/yr overall CPI +3.5%, ex food and energy +2/1%. The slightly better inflation report turned the 10 to +6/32 to 2.03% -1 bp on the day, and mortgage prices up 1/32 (.03 bp). Early trade in stock indexes were weaker, the DJIA down 88 points. U.S. index futures and the euro fell after the Bank of England said failure to resolve Europe’s debt crisis may have “significant adverse effects” on the economy.
Europe continues to dictate to markets; about any sneeze from anyone in the region has some kind of reaction in global markets. Italian Prime Minister-designate Mario Monti will announce his new government today. Two days of consultations with parties, unions and employers left him “convinced” that Italy can overcome the crisis, he said yesterday. Italian bonds gained for the first day in three, with the 10-year yield falling 15 basis points to 6.92%. Italy’s deficit, at 4.6 percent of gross domestic product last year, is about the same as Germany’s, lower than that of France and less than half the U.K.’s, at 10.3 percent. Still, its debt load is bigger than that of Spain, Greece, Ireland and Portugal combined. German Chancellor Angela Merkel said Germany is prepared to cede some national sovereignty to the European Union to achieve closer economic and political ties.
Treasuries are on hold the last couple of weeks with little change in interest rates; the 10 yr note between 2.10% and 2.00% while mortgage prices equally flat. News out of Europe at the moment is generally constructive, at least no more shocks in the last few days. Still have a safe haven trade in US treasuries however, there is really no end in sight for Europe's debt problems. French banks troubled, Germans resisting additional support although Merkel sounded somewhat conciliatory but we have heard plenty of that over the last year.
Oct industrial production at 9:15 was better than estimates, up 0.7% with estimates at +0.4%, however Sept production was revised to -0.1% frm +0.2%. Oct factory usage increased to 77.8% frm 77.3% in Sept also better than expected. There was little reaction to the better data in stock and bond markets. Europe still trading with weaker markets, US is like the faithful dog that never leaves the master's side and these days Europe is the master and the US the faithful pup.
Crude oil this morning breached $100.00/barrel; at 9:15 $100.91 +$1.54 (see below for 9:50 level). Gold prices falling, down to $1760.00 -$22.00.
At 9:30 the DJIA opened very weak, down 130; the 10 yr at 2.02% -2 bp and mortgage prices +5/32 (.15 bp) on 30s.
At 10:00, a few minutes ago the Nov NAHB housing market index, expected at 18 increased to 21 the highest in a very long time; Oct index revised from 18 to 17.
As long as the 10 yr fails to break 2.00% the opportunity for lower mortgage rates is absent. MBS markets have been flat for over two weeks as has the 10 yr. Investors still hold somewhat of a bullish bias as a safe haven against the ever changing situation in Europe but for the last week or so there have been no additional shoes to drop. No shocks but no actual progress that is aimed at the banks in Europe that are in as bad if not worse shape than US bans found themselves in 2008 when Lehman failed and the sub prime bubble exploded. US banks were extremely leveraged just as Europe's banks are now.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 16, 2011
Prior to 8:30 this morning the 10 yr note quiet but down 4/32 to 2.05%, mortgages down 4/32 (.12 bp). At 8:30 Oct CPI was -0.1% against forecasts of unch; the core (ex food and energy) +0.1% in line with estimates. Yr/yr overall CPI +3.5%, ex food and energy +2/1%. The slightly better inflation report turned the 10 to +6/32 to 2.03% -1 bp on the day, and mortgage prices up 1/32 (.03 bp). Early trade in stock indexes were weaker, the DJIA down 88 points. U.S. index futures and the euro fell after the Bank of England said failure to resolve Europe’s debt crisis may have “significant adverse effects” on the economy.
Europe continues to dictate to markets; about any sneeze from anyone in the region has some kind of reaction in global markets. Italian Prime Minister-designate Mario Monti will announce his new government today. Two days of consultations with parties, unions and employers left him “convinced” that Italy can overcome the crisis, he said yesterday. Italian bonds gained for the first day in three, with the 10-year yield falling 15 basis points to 6.92%. Italy’s deficit, at 4.6 percent of gross domestic product last year, is about the same as Germany’s, lower than that of France and less than half the U.K.’s, at 10.3 percent. Still, its debt load is bigger than that of Spain, Greece, Ireland and Portugal combined. German Chancellor Angela Merkel said Germany is prepared to cede some national sovereignty to the European Union to achieve closer economic and political ties.
Treasuries are on hold the last couple of weeks with little change in interest rates; the 10 yr note between 2.10% and 2.00% while mortgage prices equally flat. News out of Europe at the moment is generally constructive, at least no more shocks in the last few days. Still have a safe haven trade in US treasuries however, there is really no end in sight for Europe's debt problems. French banks troubled, Germans resisting additional support although Merkel sounded somewhat conciliatory but we have heard plenty of that over the last year.
Oct industrial production at 9:15 was better than estimates, up 0.7% with estimates at +0.4%, however Sept production was revised to -0.1% frm +0.2%. Oct factory usage increased to 77.8% frm 77.3% in Sept also better than expected. There was little reaction to the better data in stock and bond markets. Europe still trading with weaker markets, US is like the faithful dog that never leaves the master's side and these days Europe is the master and the US the faithful pup.
Crude oil this morning breached $100.00/barrel; at 9:15 $100.91 +$1.54 (see below for 9:50 level). Gold prices falling, down to $1760.00 -$22.00.
At 9:30 the DJIA opened very weak, down 130; the 10 yr at 2.02% -2 bp and mortgage prices +5/32 (.15 bp) on 30s.
At 10:00, a few minutes ago the Nov NAHB housing market index, expected at 18 increased to 21 the highest in a very long time; Oct index revised from 18 to 17.
As long as the 10 yr fails to break 2.00% the opportunity for lower mortgage rates is absent. MBS markets have been flat for over two weeks as has the 10 yr. Investors still hold somewhat of a bullish bias as a safe haven against the ever changing situation in Europe but for the last week or so there have been no additional shoes to drop. No shocks but no actual progress that is aimed at the banks in Europe that are in as bad if not worse shape than US bans found themselves in 2008 when Lehman failed and the sub prime bubble exploded. US banks were extremely leveraged just as Europe's banks are now.
Tuesday, November 15, 2011
It is time to do an FHA streamline! Here is why. They are going to increase the monthly Mortgage Insurance.
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http://ping.fm/a59W5
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 15, 2011
Three economic reports at 8:30 this morning; Oct retail sales better than estimates, +0.5% overall and +0.6% ex auto sales, estimates were +0.4% and +0.2% respectively. Nov Empire State manufacturing index expected -0.8 frm -8.48 in Oct was +0.61; new orders component -2.07 frm +0.16, employment at -3.66 frm +3.77 and prices pd at 18.29 frm 22.47; any index lower than zero is considered contraction. The headline was better but the components didn't look so good with employment and new orders weaker. Oct PPI expected -0.2% overall and ex food and energy +0.1%; as reported the overall was -0.3% and the core unch. Yr/yr overall PPI +5.9% while the core yr/yr +2.8%. At the wholesale level inflation is rather tame.
Prior to the 8:30 data the 10 yr note once again traded down to 2.00%, once again it hasn't held as 2.00% is a brick wall for long term rates. Although the 1 has moved under 2.00% it hasn't been able to sustain it. Mortgage prices prior to 8:30 up 7/32 (.22 bp), at 9:00 +5/32 (.15 bp).
In Europe the economy continued to muddle along. The EU’s gross domestic product increased 0.2% from the previous three months, when it rose at the same pace, according to EU data. The euro weakened as the cost of insuring French bonds climbed to a record and Spanish yields rose at an auction. Mario Monti, Italy’s premier-in-waiting, faced political resistance on forming a Cabinet during talks in Rome yesterday. Monti wants a technocratic government without politicians, politicians in Italy refusing to go along. French and Italian interest rates increased today. Germany and Britain exchanging words over Britain's refusal to go along with a tax on financial transactions. 25% of Britain's lawmakers are calling for a referendum vote to exit the EU. Germany has been at the forefront of calls for a European transaction tax, a levy Britain is only willing to countenance if the U.S. and Asian nations join in to prevent financial services from deserting London’s financial center. The European Commission has proposed a plan that it says would raise 57 billion euros ($77B) a year.
The DJIA opened -12 points at 9:30, the 10 yr note +4/32 to 2.03% -1 bp and mortgage prices at 9:30 +3/32 (.09 bp).
At 10:00 Sept business inventories expected +0.1% were reported unchanged.
Chicago Fed Pres Evens out this morning advocating more easing from the Fed to lower the persistent high unemployment rate. Evens was the lone dissenter at the last FOMC meeting (11/2) when the FOMC decided to not announce anymore easing. Another Fed easing however won't reduce unemployment; all the easing so far hasn't done anything to lower unemployment.
We continue our concern that interest rates are running out of steam at the present levels. The 10 yr note hasn't been able to move below 2.00% and hold it; recent turmoil in Europe that isn't lessening but becoming worse hasn't generated the kind of safe haven moves into treasuries the last few weeks. Mortgage rates also finding resistance at present prices and yields. Although buying has slowed there isn't much to suggest interest rates should increase either; the 10 yr is comfortable between 2.10% and 2.00% while mortgage rates are stable at present rates. The equity market in the US and the chaos in Europe are the issues; this morning so far a good example, the 10 yr was holding positive with a gain that had the yield at 2.00% when the stock indexes were weaker. At 9:45 the key indexes went positive and took mortgages and the 10 yr back to unchanged.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, November 15, 2011
Three economic reports at 8:30 this morning; Oct retail sales better than estimates, +0.5% overall and +0.6% ex auto sales, estimates were +0.4% and +0.2% respectively. Nov Empire State manufacturing index expected -0.8 frm -8.48 in Oct was +0.61; new orders component -2.07 frm +0.16, employment at -3.66 frm +3.77 and prices pd at 18.29 frm 22.47; any index lower than zero is considered contraction. The headline was better but the components didn't look so good with employment and new orders weaker. Oct PPI expected -0.2% overall and ex food and energy +0.1%; as reported the overall was -0.3% and the core unch. Yr/yr overall PPI +5.9% while the core yr/yr +2.8%. At the wholesale level inflation is rather tame.
Prior to the 8:30 data the 10 yr note once again traded down to 2.00%, once again it hasn't held as 2.00% is a brick wall for long term rates. Although the 1 has moved under 2.00% it hasn't been able to sustain it. Mortgage prices prior to 8:30 up 7/32 (.22 bp), at 9:00 +5/32 (.15 bp).
In Europe the economy continued to muddle along. The EU’s gross domestic product increased 0.2% from the previous three months, when it rose at the same pace, according to EU data. The euro weakened as the cost of insuring French bonds climbed to a record and Spanish yields rose at an auction. Mario Monti, Italy’s premier-in-waiting, faced political resistance on forming a Cabinet during talks in Rome yesterday. Monti wants a technocratic government without politicians, politicians in Italy refusing to go along. French and Italian interest rates increased today. Germany and Britain exchanging words over Britain's refusal to go along with a tax on financial transactions. 25% of Britain's lawmakers are calling for a referendum vote to exit the EU. Germany has been at the forefront of calls for a European transaction tax, a levy Britain is only willing to countenance if the U.S. and Asian nations join in to prevent financial services from deserting London’s financial center. The European Commission has proposed a plan that it says would raise 57 billion euros ($77B) a year.
The DJIA opened -12 points at 9:30, the 10 yr note +4/32 to 2.03% -1 bp and mortgage prices at 9:30 +3/32 (.09 bp).
At 10:00 Sept business inventories expected +0.1% were reported unchanged.
Chicago Fed Pres Evens out this morning advocating more easing from the Fed to lower the persistent high unemployment rate. Evens was the lone dissenter at the last FOMC meeting (11/2) when the FOMC decided to not announce anymore easing. Another Fed easing however won't reduce unemployment; all the easing so far hasn't done anything to lower unemployment.
We continue our concern that interest rates are running out of steam at the present levels. The 10 yr note hasn't been able to move below 2.00% and hold it; recent turmoil in Europe that isn't lessening but becoming worse hasn't generated the kind of safe haven moves into treasuries the last few weeks. Mortgage rates also finding resistance at present prices and yields. Although buying has slowed there isn't much to suggest interest rates should increase either; the 10 yr is comfortable between 2.10% and 2.00% while mortgage rates are stable at present rates. The equity market in the US and the chaos in Europe are the issues; this morning so far a good example, the 10 yr was holding positive with a gain that had the yield at 2.00% when the stock indexes were weaker. At 9:45 the key indexes went positive and took mortgages and the 10 yr back to unchanged.
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