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Thursday, June 30, 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.
Thursday, June 30, 2011
The bond and mortgage markets opened better this morning after the strong selling the last two sessions taking rates up 20 basis points. The Greek debt issue is off the radar for the moment after its parliament voted to cut spending and qualify for assistance from the IMF and EU keeping Greece from defaulting, at least for now. Safety trades in US treasuries being closed and the very weak treasury auctions this week along with the end of QE 2 today---all combined to drive rates higher in a rapid move. Mix in that the ECB will likely increase its base interest rates next week and the tone has changed. Both the 10 yr note and FNMA 4.0 coupon hit and held their respective 200 day averages but broke all other shorter term averages, the momentum oscillators are now in bearish levels. As we continue to point, the bond and mortgage markets are going to remain volatile over the next week or so as investors work through the end of QE 2, Europe's continuing debt issues and the weakening economic outlook. We are not looking for interest rates to increase in a major way but it is unlikely rates will return to the best levels seen three or four days ago.
Germany’s biggest banks and insurers and the government agreed on a draft proposal to roll over Greek debt holdings before a meeting with Finance Minister Wolfgang Schaeuble today, people familiar with the plan said.(Bloomberg)
Weekly jobless claims at 8:30 were down just 1K to 428K, estimates were for a decline of 8K. Continuing claims declined 12K to 3.72 mil. Weekly claims have now been above 400K for 12 consecutive weeks, no improvement but equally no increases in claims.
At 9:30 the DJIA opened +47, the 10 yr note +7/32 at 3.10% -2 bp and mortgage prices +5/32 (.15 bp).
At 9:45 the June Chicago purchasing mgrs index, expected at 53.8 frm 56.6 in May, jumped to 61.1; new orders increased to 61.2 frm 53.5, employment did decline to 58.7 frm 60.8 and prices pd at 70.5 frm 78.6 on a decline in oil prices recently. The report much stronger than thought flipped the bond and mortgage markets from minor price gains to lower prices; mortgage prices at 9:3 up 5/32 (.15 bp) at 9:50 -5/32 (.15 bp), a .30 bp swing lower and breaking the 200 day averages on the 10 yr yield and prices on the FNMA coupon. VOLATILITY!
Will the Fed launch QE 3 at some point? That is the question being debated in minds of traders now with the economic outlook declining somewhat. Many believe the Fed is out of bullets to help the economy, historically low US interest rates haven't helped much, at least based on where the economy stands now; however what would have been the situation if the Fed hadn't executed QE 2, buying $600B of US treasuries? Bernanke has said it is now a fiscal matter, meaning Congress and the Administration have the ball now; that of course isn't a confidence builder in the minds of investors since Washington continues to play its political games while the country stumbles.
Today is the end of the month and the end of the quarter, to some extent today trading in equities and bonds may be impacted on moves large investors need to make to adjust their portfolios for the end of the 2nd quarter.
:
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, June 30, 2011
The bond and mortgage markets opened better this morning after the strong selling the last two sessions taking rates up 20 basis points. The Greek debt issue is off the radar for the moment after its parliament voted to cut spending and qualify for assistance from the IMF and EU keeping Greece from defaulting, at least for now. Safety trades in US treasuries being closed and the very weak treasury auctions this week along with the end of QE 2 today---all combined to drive rates higher in a rapid move. Mix in that the ECB will likely increase its base interest rates next week and the tone has changed. Both the 10 yr note and FNMA 4.0 coupon hit and held their respective 200 day averages but broke all other shorter term averages, the momentum oscillators are now in bearish levels. As we continue to point, the bond and mortgage markets are going to remain volatile over the next week or so as investors work through the end of QE 2, Europe's continuing debt issues and the weakening economic outlook. We are not looking for interest rates to increase in a major way but it is unlikely rates will return to the best levels seen three or four days ago.
Germany’s biggest banks and insurers and the government agreed on a draft proposal to roll over Greek debt holdings before a meeting with Finance Minister Wolfgang Schaeuble today, people familiar with the plan said.(Bloomberg)
Weekly jobless claims at 8:30 were down just 1K to 428K, estimates were for a decline of 8K. Continuing claims declined 12K to 3.72 mil. Weekly claims have now been above 400K for 12 consecutive weeks, no improvement but equally no increases in claims.
At 9:30 the DJIA opened +47, the 10 yr note +7/32 at 3.10% -2 bp and mortgage prices +5/32 (.15 bp).
At 9:45 the June Chicago purchasing mgrs index, expected at 53.8 frm 56.6 in May, jumped to 61.1; new orders increased to 61.2 frm 53.5, employment did decline to 58.7 frm 60.8 and prices pd at 70.5 frm 78.6 on a decline in oil prices recently. The report much stronger than thought flipped the bond and mortgage markets from minor price gains to lower prices; mortgage prices at 9:3 up 5/32 (.15 bp) at 9:50 -5/32 (.15 bp), a .30 bp swing lower and breaking the 200 day averages on the 10 yr yield and prices on the FNMA coupon. VOLATILITY!
Will the Fed launch QE 3 at some point? That is the question being debated in minds of traders now with the economic outlook declining somewhat. Many believe the Fed is out of bullets to help the economy, historically low US interest rates haven't helped much, at least based on where the economy stands now; however what would have been the situation if the Fed hadn't executed QE 2, buying $600B of US treasuries? Bernanke has said it is now a fiscal matter, meaning Congress and the Administration have the ball now; that of course isn't a confidence builder in the minds of investors since Washington continues to play its political games while the country stumbles.
Today is the end of the month and the end of the quarter, to some extent today trading in equities and bonds may be impacted on moves large investors need to make to adjust their portfolios for the end of the 2nd quarter.
Wednesday, June 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.
Wednesday, June 29, 2011
At 9:00 this morning al global markets are glued to the events in Athens with the vote on austerity is taking place; in the streets police firing huge amounts of tear gas to break up protesters. The vote has been completed and it passed. Greek citizens will pay a heavy price for its government and its country over-spending for years. As we have noted many times in this column once a positive vote on spending cuts would happen the US bond market would see selling as safety trades are taken off. The US rate markets have moved higher quickly as we noted previously they would likely do once Greece moved back from the cliff. Two days ago France got their banks to re-cast shorter term Greek debt to much longer payout terms, one necessary step along with austerity plans to keep Greece from defaulting. News out of Germany indicates it will also get their banks to follow France's necessary action.
The bond and mortgage markets have turned bearish near term, breaking most bullish technical levels in the last 48 hours. From a technical perspective, as we have mentioned a multitude of time here, both the US equity and bond markets have been at extreme overbought (bonds) and oversold (equities). It was only a matter of time before markets would turn over. It usually takes some event to trigger the swift change in over-extended markets; the Greece vote, the poor bidding on this week's Treasury auctions and comments from Jean Claude Trichet yesterday interpreted to imply the ECB will raise its base lending rates in July have combined to send interest rates higher.
Is this the end of the declining interest rate markets? It is too soon to make that call! Markets have to settle and turn back to basic economic fundamentals and calm down from the current volatility. What we can take away, when the 10 yr note trades below 3.00% it is on thin ice. Investors in US bond markets are increasingly likely to demand a higher rate of return to continue funding the US growing budget deficit as interest rates in Europe and China increase. The outlook for US economic growth also a question mark; the divide between bullish outlook and a less optimistic outlook is wide----both views not well grounded.
Monday and yesterday Treasury auctioned $70B of notes in two auctions; both failed to meet expected demand. Today Treasury will auction $29B of 7 yr notes after rates have increased 20 basis points since the close last Friday, with higher rates will the 7 yr see better demand? If not expect more selling.
Already this morning markets have been very volatile; in the bond and mortgage markets prices have had a wide range. The 10 yr note yield spiked to 3.10% at 9:00, by 9:30 back to 3.06%; mortgage prices at 9:00 -9/32 (.28 bp), at 9:30 -3/32 (.09 bp). The three stock indexes equally volatile into the 9:30 open. Expect more trade volatility through the rest of the day.
Mortgage applications decreased 2.7% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending June 24, 2011. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 2.6% from the previous week. The seasonally adjusted Purchase Index decreased 3.0% from one week earlier. The unadjusted Purchase Index decreased 3.8% compared with the previous week and was 4.5% higher than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 0.7%. The four week moving average is down 1.5% for the seasonally adjusted Purchase Index, while this average is up 1.5% for the Refinance Index. The refinance share of mortgage activity increased to 69.5% of total applications from 69.2% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.8% from 5.9% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46% from 4.57%, with points increasing to 1.19 from 0.91 (including the origination fee) for 80% loans. This is the lowest 30-year rate recorded in the survey since the middle of November 2010. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.64% from 3.70%, with points increasing to 1.11 from 1.05 (including the origination fee) for 80% loans. This is the lowest 15-year rate recorded in the survey since the beginning of November 2010.
The DJIA opened +40 at 9:30, the 10 yr note -9/32 at 3.07% +3 bp and mortgage prices -3/32 (.09 bp) frm yesterday's close. Stock indexes have rallied for the past couple of days and interest rates have increased; all about the belief that the Greek bailout would be completed, now that the vote passed it may be a buy-the-rumor-sell the fact trade today in both the stock and bond markets.
The NAR reported May pending home sales at 10:00; expected up 3.5% jumped 8.2% frm April. Yr/yr +13.4%. A better rep[ort than was thought. There was no initial reaction to the report. At 10:00 the DJIA has turned lower.
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, June 29, 2011
At 9:00 this morning al global markets are glued to the events in Athens with the vote on austerity is taking place; in the streets police firing huge amounts of tear gas to break up protesters. The vote has been completed and it passed. Greek citizens will pay a heavy price for its government and its country over-spending for years. As we have noted many times in this column once a positive vote on spending cuts would happen the US bond market would see selling as safety trades are taken off. The US rate markets have moved higher quickly as we noted previously they would likely do once Greece moved back from the cliff. Two days ago France got their banks to re-cast shorter term Greek debt to much longer payout terms, one necessary step along with austerity plans to keep Greece from defaulting. News out of Germany indicates it will also get their banks to follow France's necessary action.
The bond and mortgage markets have turned bearish near term, breaking most bullish technical levels in the last 48 hours. From a technical perspective, as we have mentioned a multitude of time here, both the US equity and bond markets have been at extreme overbought (bonds) and oversold (equities). It was only a matter of time before markets would turn over. It usually takes some event to trigger the swift change in over-extended markets; the Greece vote, the poor bidding on this week's Treasury auctions and comments from Jean Claude Trichet yesterday interpreted to imply the ECB will raise its base lending rates in July have combined to send interest rates higher.
Is this the end of the declining interest rate markets? It is too soon to make that call! Markets have to settle and turn back to basic economic fundamentals and calm down from the current volatility. What we can take away, when the 10 yr note trades below 3.00% it is on thin ice. Investors in US bond markets are increasingly likely to demand a higher rate of return to continue funding the US growing budget deficit as interest rates in Europe and China increase. The outlook for US economic growth also a question mark; the divide between bullish outlook and a less optimistic outlook is wide----both views not well grounded.
Monday and yesterday Treasury auctioned $70B of notes in two auctions; both failed to meet expected demand. Today Treasury will auction $29B of 7 yr notes after rates have increased 20 basis points since the close last Friday, with higher rates will the 7 yr see better demand? If not expect more selling.
Already this morning markets have been very volatile; in the bond and mortgage markets prices have had a wide range. The 10 yr note yield spiked to 3.10% at 9:00, by 9:30 back to 3.06%; mortgage prices at 9:00 -9/32 (.28 bp), at 9:30 -3/32 (.09 bp). The three stock indexes equally volatile into the 9:30 open. Expect more trade volatility through the rest of the day.
Mortgage applications decreased 2.7% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending June 24, 2011. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 2.6% from the previous week. The seasonally adjusted Purchase Index decreased 3.0% from one week earlier. The unadjusted Purchase Index decreased 3.8% compared with the previous week and was 4.5% higher than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 0.7%. The four week moving average is down 1.5% for the seasonally adjusted Purchase Index, while this average is up 1.5% for the Refinance Index. The refinance share of mortgage activity increased to 69.5% of total applications from 69.2% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.8% from 5.9% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46% from 4.57%, with points increasing to 1.19 from 0.91 (including the origination fee) for 80% loans. This is the lowest 30-year rate recorded in the survey since the middle of November 2010. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.64% from 3.70%, with points increasing to 1.11 from 1.05 (including the origination fee) for 80% loans. This is the lowest 15-year rate recorded in the survey since the beginning of November 2010.
The DJIA opened +40 at 9:30, the 10 yr note -9/32 at 3.07% +3 bp and mortgage prices -3/32 (.09 bp) frm yesterday's close. Stock indexes have rallied for the past couple of days and interest rates have increased; all about the belief that the Greek bailout would be completed, now that the vote passed it may be a buy-the-rumor-sell the fact trade today in both the stock and bond markets.
The NAR reported May pending home sales at 10:00; expected up 3.5% jumped 8.2% frm April. Yr/yr +13.4%. A better rep[ort than was thought. There was no initial reaction to the report. At 10:00 the DJIA has turned lower.
Tuesday, June 28, 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, June 28, 2011
Treasuries and mortgages opened weaker this morning after a little pull-back yesterday after the weak $35B 2 yr note auction. With one exception (last Friday) the bellwether 10 yr note has traded within a 10 bp range (3.00% to 2.90%) for the last 10 days. Yesterday's weak bid on the 2 yr note may imply that investors are becoming less interested in USA debt at the present low rates; this afternoon Treasury will auction $35B of 5 yr notes, a little better test of that theory.
Greece still dominates the news today; a two day strike in the country met with tear gas and rubber bullets today while the parliament is debating serious cuts in spending, much of it is on cutting social programs. The much anticipated vote on the necessary cuts to get help from the IMF and EU will take place tomorrow morning, the number of yes votes has to be more than 150 to get it done. Although there are strikes and riots markets are expecting the vote on cuts will pass. France led the way yesterday for its banks to re-cast loans to Greece, extending payouts as far out as 30 yrs on debt maturities less than 5 yrs. Germany is expected to force the same for its banks.
The Case/Shiller April 20 city home price index was down 0.1% frm March and yr/yr down 4.0%, both generally in line with expectations. Nothing new there, housing will continue to drag down the economic recovery.
The ECB raised its benchmark rate in April for the first time in almost three years, lifting it by a quarter point to 1.25 percent. Inflation in the 17-nation euro region has been in breach of the ECB’s 2 percent limit since December. According to comments frm Jean Claude Trichet this morning the ECB is likely increase rates again next week at its meeting.
The DJIA opened +30, the 10 yr at 9:30 -5/32 at 2.95% +2 bp and mortgage prices -3/32 (.09 bp).
The June consumer confidence from the Conference Board, expected at 10:00 was somehow released at 9:40. It was expected about unchanged from May at 60.7, as released down to 58.5. The present conditions index fell to 37.6 frm 39.3, the expectations index fell to 72.4 frm 76.6. No reaction to the softer data, the stock indexes continued to gain and treasuries and mortgages lost a fell clicks immediately after the early release.
Next up for the bond market, the $35B 5 yr note auction. Traders will be keen to see what kind of demand will emerge after the surprisingly weak demand for yesterday's 2 yr note auction.
Although markets are expecting Greece will pass the austerity cuts demanded by the IMF and EU, there is still a little uncertainty. We don't expect much in the markets this morning, and not much this afternoon unless the 5 yr flops. Today it is mostly waiting on Greece in the bond market. There is uncertainty on how markets will react if the vote is positive; will investors take off the safety trade, one factor keeping US rates low?
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, June 28, 2011
Treasuries and mortgages opened weaker this morning after a little pull-back yesterday after the weak $35B 2 yr note auction. With one exception (last Friday) the bellwether 10 yr note has traded within a 10 bp range (3.00% to 2.90%) for the last 10 days. Yesterday's weak bid on the 2 yr note may imply that investors are becoming less interested in USA debt at the present low rates; this afternoon Treasury will auction $35B of 5 yr notes, a little better test of that theory.
Greece still dominates the news today; a two day strike in the country met with tear gas and rubber bullets today while the parliament is debating serious cuts in spending, much of it is on cutting social programs. The much anticipated vote on the necessary cuts to get help from the IMF and EU will take place tomorrow morning, the number of yes votes has to be more than 150 to get it done. Although there are strikes and riots markets are expecting the vote on cuts will pass. France led the way yesterday for its banks to re-cast loans to Greece, extending payouts as far out as 30 yrs on debt maturities less than 5 yrs. Germany is expected to force the same for its banks.
The Case/Shiller April 20 city home price index was down 0.1% frm March and yr/yr down 4.0%, both generally in line with expectations. Nothing new there, housing will continue to drag down the economic recovery.
The ECB raised its benchmark rate in April for the first time in almost three years, lifting it by a quarter point to 1.25 percent. Inflation in the 17-nation euro region has been in breach of the ECB’s 2 percent limit since December. According to comments frm Jean Claude Trichet this morning the ECB is likely increase rates again next week at its meeting.
The DJIA opened +30, the 10 yr at 9:30 -5/32 at 2.95% +2 bp and mortgage prices -3/32 (.09 bp).
The June consumer confidence from the Conference Board, expected at 10:00 was somehow released at 9:40. It was expected about unchanged from May at 60.7, as released down to 58.5. The present conditions index fell to 37.6 frm 39.3, the expectations index fell to 72.4 frm 76.6. No reaction to the softer data, the stock indexes continued to gain and treasuries and mortgages lost a fell clicks immediately after the early release.
Next up for the bond market, the $35B 5 yr note auction. Traders will be keen to see what kind of demand will emerge after the surprisingly weak demand for yesterday's 2 yr note auction.
Although markets are expecting Greece will pass the austerity cuts demanded by the IMF and EU, there is still a little uncertainty. We don't expect much in the markets this morning, and not much this afternoon unless the 5 yr flops. Today it is mostly waiting on Greece in the bond market. There is uncertainty on how markets will react if the vote is positive; will investors take off the safety trade, one factor keeping US rates low?
Monday, June 27, 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.
Monday, June 27, 2011
Treasuries and mortgages opened flat this morning with the stock indexes also about unchanged. At 8:30 May personal income and spending; income up 0.3% and spending unchanged. The core PCE up a little, +0.3%; May personal savings rate +5.0% up frm +4.9% in April. Consumers still saving, a good thing overall but further indication that consumer spending isn't going to be the driver of any potential economic recovery. Historically personal spending accounted for 70% of GDP, now any improvement in the economy has to come from exports and in our view that is a huge hill to climb. The weak spending added a little support to the bond and mortgage markets and pushed stock indexes into the red.
This afternoon Treasury will auction $35B of 2 yr notes, the first of three auctions this week to borrow a total of $99B and the last of Treasury auctions before the end of QE 2 on Thursday. The question now is, with QE ending will interest rates remain at these low levels as the Fed exits? For the last six months the Fed has purchased the equivalent of about 60% of all Treasury borrowing in the period.
Greece begins three days of debate in its parliament to approve spending cuts of $111B to trigger the IMF and EU package approved last week and keep Greece from defaulting. Greek, Portuguese and Irish 10-year bonds declined, driving up the extra yield investors demand to hold the securities instead of benchmark German bunds. The debt crisis that is spread all over Europe's second tier countries and is one key driver keeping US interest rates low and the US stock market sliding.
This Week's Economic Calendar:
Monday;
8:30 May personal income and spending (as reported +0.3% on income , spending unchanged)
1:00 pm $35B 2 yr note auction
Tuesday;
9:00 am Case/Shiller Apr 20 city home prices (-3.9%)
10:00 am June consumer confidence index (60.7 frm 60.8)
1:00 pm $35B 5 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
10:00 am NAR May pending home sales (+0.7%)
1:00 pm $29B 7 yr note auction
Thursday;
8:30 am weekly jobless claims (-8K to 421K; con't claims 3.70 mil frm 3.697 mil)
9:45 am June Chicago purchasing mgrs index (53.8 frm 56.6)
Friday;
9:55 am U. of Michigan final June consumer sentiment index (71.8 unch)
10:00 am June ISM Nat'l manufacturing index (51.3 frm 53.5---under 50 is considered contraction)
3:00 pm June auto and truck sales
Crude oil continuing its decline this morning on increasing belief the US economy is going to slip more and in China its economy also slowing. The IEA and the Obama Administration released 60 mil barrels of oil from the strategic reserves last week (30 mil from the US reserves); the IEA saying it will release more if necessary. Meanwhile gasoline prices continue to fall. It is a moving target the amount of declines in given areas of the country; here in Indianapolis gas has fallen from $4.22/gal a few weeks ago to $3.30 yesterday. Will the decline increase consumer discretionary spending?
The DJIA opened +20 at 9:30, the 10 yr note +2/32 and mortgage prices at 9:30 unch.
Slowly interest rates continue to decline, likely more this week with no firm resolution on Greek debt plans until Thursday. Demonstrations will go on all week in Athens as politicians debate spending cuts that have citizens revolting and protesting. It is likely the government will meet the demands of the IMF and EU with spending cuts, but until the ink is dry on the legislation the uncertainty will be a continuing positive for US bond markets.
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, June 27, 2011
Treasuries and mortgages opened flat this morning with the stock indexes also about unchanged. At 8:30 May personal income and spending; income up 0.3% and spending unchanged. The core PCE up a little, +0.3%; May personal savings rate +5.0% up frm +4.9% in April. Consumers still saving, a good thing overall but further indication that consumer spending isn't going to be the driver of any potential economic recovery. Historically personal spending accounted for 70% of GDP, now any improvement in the economy has to come from exports and in our view that is a huge hill to climb. The weak spending added a little support to the bond and mortgage markets and pushed stock indexes into the red.
This afternoon Treasury will auction $35B of 2 yr notes, the first of three auctions this week to borrow a total of $99B and the last of Treasury auctions before the end of QE 2 on Thursday. The question now is, with QE ending will interest rates remain at these low levels as the Fed exits? For the last six months the Fed has purchased the equivalent of about 60% of all Treasury borrowing in the period.
Greece begins three days of debate in its parliament to approve spending cuts of $111B to trigger the IMF and EU package approved last week and keep Greece from defaulting. Greek, Portuguese and Irish 10-year bonds declined, driving up the extra yield investors demand to hold the securities instead of benchmark German bunds. The debt crisis that is spread all over Europe's second tier countries and is one key driver keeping US interest rates low and the US stock market sliding.
This Week's Economic Calendar:
Monday;
8:30 May personal income and spending (as reported +0.3% on income , spending unchanged)
1:00 pm $35B 2 yr note auction
Tuesday;
9:00 am Case/Shiller Apr 20 city home prices (-3.9%)
10:00 am June consumer confidence index (60.7 frm 60.8)
1:00 pm $35B 5 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
10:00 am NAR May pending home sales (+0.7%)
1:00 pm $29B 7 yr note auction
Thursday;
8:30 am weekly jobless claims (-8K to 421K; con't claims 3.70 mil frm 3.697 mil)
9:45 am June Chicago purchasing mgrs index (53.8 frm 56.6)
Friday;
9:55 am U. of Michigan final June consumer sentiment index (71.8 unch)
10:00 am June ISM Nat'l manufacturing index (51.3 frm 53.5---under 50 is considered contraction)
3:00 pm June auto and truck sales
Crude oil continuing its decline this morning on increasing belief the US economy is going to slip more and in China its economy also slowing. The IEA and the Obama Administration released 60 mil barrels of oil from the strategic reserves last week (30 mil from the US reserves); the IEA saying it will release more if necessary. Meanwhile gasoline prices continue to fall. It is a moving target the amount of declines in given areas of the country; here in Indianapolis gas has fallen from $4.22/gal a few weeks ago to $3.30 yesterday. Will the decline increase consumer discretionary spending?
The DJIA opened +20 at 9:30, the 10 yr note +2/32 and mortgage prices at 9:30 unch.
Slowly interest rates continue to decline, likely more this week with no firm resolution on Greek debt plans until Thursday. Demonstrations will go on all week in Athens as politicians debate spending cuts that have citizens revolting and protesting. It is likely the government will meet the demands of the IMF and EU with spending cuts, but until the ink is dry on the legislation the uncertainty will be a continuing positive for US bond markets.
Sunday, June 26, 2011
Saturday, June 25, 2011
Friday, June 24, 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.
Friday, June 24, 2011
Treasuries and mortgages a little weaker in early activity but still holding most of the gains of yesterday. The stock indexes in pre-market activity pointing to a little better open at 9:30.
At 8:30 May durable goods orders were better than thought, up 1.9% and ex transportation up 0.6%. April durables were revised better, overall from -3.6% to -2.7% and ex transportation from -1.6% to -0.4%. Q1 GDP final report improved from +1.8% in the preliminary report last month to +1.9%. It is old news and the fractional increase is relatively meaningless to traders.
Most of the talk this morning is still over the IEA and Obama Administrations decision to take oil from the strategic reserve to supposedly drive down the price of oil thus gasoline. Both oil and Gasoline had already fallen in the past two weeks, gasoline down about 20% from recent highs and crude oil down about $10.00 frm recent highs. Was it just a political move by Obama, or was it necessary? I'll leave the answer to those that are more familiar with the details in the global oil markets. 60 mil barrels accounts from anywhere between 16 hours and 8 hours of oil usage globally, we hear both stats being bantered around. Politically Republicans saying tapping the reserve at this point was unnecessary and set a bad precedent; Democrats saying it is necessary for improving economic recovery. The other view being talked about, showing OPEC they can't get away with not increasing output as it did a week ago.
As far as helping economic recovery with 60 mil more oil over the next 30 days seems a little too optimistic. The world will get 2 mil barrels a day for 30 days, then what? If the global economy were to immediately re-start growth the price of oil and gasoline will climb right back up. The only way to get oil lower and keep it low is for oil producers to open the taps and increase output dramatically and that isn't on the table now, and likely will never be there.
Yesterday afternoon reports hit that the EU and IMF had agreed on a bail-out package for Greece; the news hit at 3:00 with the DJIA down 180 points, at the end of the session an hour later the DJIA closed down 59 points. The news was welcome but at the moment there still is no lock on the plan. Greece’s next hurdle is to shepherd 78 billion euros ($111B) of austerity measures through parliament, after yesterday’s endorsement of the program by from the European Commission, the European Central Bank and the International Monetary Fund. “We have agreed that there will be a new program for Greece,” German Chancellor Angela Merkel told reporters at an EU summit in Brussels today. “This is an important decision that says once again we will do everything to stabilize the euro overall.”
In Washington, the land of Oz, the work on the budget and debt increase continues. Work of course is a relative term, in this case the work is about who gets re-elected. That is what we have in Washington, people sent there to work on their re-election campaigns. Stupid is as stupid does according to Forrest Gump, he must have spent time in the city. Republicans walked away from discussions yesterday, a show of adolescent behavior; Democrats equally childish, unwilling to accept cuts in most programs unless they get tax increases. The saga will go on and on until the final hour on August 1st, then it will not be a meaningful measure as our leadership continues to kick the can down the road as they have done for the last three years with no budget. Let the next Congress deal with it, I want to be re-elected and get my pension, health care and all the perks I can get! I couldn't care any less about what has to be done, its al;l about me!
At 9:30 the DJIA opened down 19 points after trading higher in pre-market activity. The 10 yr note moved back to unchanged after being down 8/32 at 9:00. Mortgage prices at 9:00 were down 5/32 (.15 bp), at 9:30 off 3/32 (.09 bp). The 10 yr note holding at and unable to break below 2.90% but may make it as long as the equity markets are under pressure as the economic outlook weakens.
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.
Friday, June 24, 2011
Treasuries and mortgages a little weaker in early activity but still holding most of the gains of yesterday. The stock indexes in pre-market activity pointing to a little better open at 9:30.
At 8:30 May durable goods orders were better than thought, up 1.9% and ex transportation up 0.6%. April durables were revised better, overall from -3.6% to -2.7% and ex transportation from -1.6% to -0.4%. Q1 GDP final report improved from +1.8% in the preliminary report last month to +1.9%. It is old news and the fractional increase is relatively meaningless to traders.
Most of the talk this morning is still over the IEA and Obama Administrations decision to take oil from the strategic reserve to supposedly drive down the price of oil thus gasoline. Both oil and Gasoline had already fallen in the past two weeks, gasoline down about 20% from recent highs and crude oil down about $10.00 frm recent highs. Was it just a political move by Obama, or was it necessary? I'll leave the answer to those that are more familiar with the details in the global oil markets. 60 mil barrels accounts from anywhere between 16 hours and 8 hours of oil usage globally, we hear both stats being bantered around. Politically Republicans saying tapping the reserve at this point was unnecessary and set a bad precedent; Democrats saying it is necessary for improving economic recovery. The other view being talked about, showing OPEC they can't get away with not increasing output as it did a week ago.
As far as helping economic recovery with 60 mil more oil over the next 30 days seems a little too optimistic. The world will get 2 mil barrels a day for 30 days, then what? If the global economy were to immediately re-start growth the price of oil and gasoline will climb right back up. The only way to get oil lower and keep it low is for oil producers to open the taps and increase output dramatically and that isn't on the table now, and likely will never be there.
Yesterday afternoon reports hit that the EU and IMF had agreed on a bail-out package for Greece; the news hit at 3:00 with the DJIA down 180 points, at the end of the session an hour later the DJIA closed down 59 points. The news was welcome but at the moment there still is no lock on the plan. Greece’s next hurdle is to shepherd 78 billion euros ($111B) of austerity measures through parliament, after yesterday’s endorsement of the program by from the European Commission, the European Central Bank and the International Monetary Fund. “We have agreed that there will be a new program for Greece,” German Chancellor Angela Merkel told reporters at an EU summit in Brussels today. “This is an important decision that says once again we will do everything to stabilize the euro overall.”
In Washington, the land of Oz, the work on the budget and debt increase continues. Work of course is a relative term, in this case the work is about who gets re-elected. That is what we have in Washington, people sent there to work on their re-election campaigns. Stupid is as stupid does according to Forrest Gump, he must have spent time in the city. Republicans walked away from discussions yesterday, a show of adolescent behavior; Democrats equally childish, unwilling to accept cuts in most programs unless they get tax increases. The saga will go on and on until the final hour on August 1st, then it will not be a meaningful measure as our leadership continues to kick the can down the road as they have done for the last three years with no budget. Let the next Congress deal with it, I want to be re-elected and get my pension, health care and all the perks I can get! I couldn't care any less about what has to be done, its al;l about me!
At 9:30 the DJIA opened down 19 points after trading higher in pre-market activity. The 10 yr note moved back to unchanged after being down 8/32 at 9:00. Mortgage prices at 9:00 were down 5/32 (.15 bp), at 9:30 off 3/32 (.09 bp). The 10 yr note holding at and unable to break below 2.90% but may make it as long as the equity markets are under pressure as the economic outlook weakens.
Thursday, June 23, 2011
Wednesday, June 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.
Wednesday, June 22, 2011
Treasuries and mortgages trading better this morning, the stock indexes lower. The Greek confidence vote at 5:00 yesterday was close for Prime Minister Papandreou, he got the vote at 155 to 143 with three members abstaining. It wasn't a big victory in terms of the vote count but it did lead to what had to happen to keep Greece in line for another funding by the IMF and EU in July. The next step for Greece is to actually pass all the spending cuts that have to be accomplished in order to avoid defaulting. The euro declined against most of its major counterparts amid speculation Papandreou will struggle to pass additional austerity measures, even after winning a confidence vote last night. The IMF, contributor of a third of the bailout money for Greece and the two other euro-area countries that have received bailouts, Ireland and Portugal, has warned European Union leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.”
Yesterday stocks rallied on short covering ahead of the Greek vote, this morning the key indexes are weaker and in turn are supporting the US bond and mortgage markets. The bellwether 10 yr note remains in a tight range, unable to move lower in yield but still able to hold on any selling at 3.00%. Mortgage markets recently have been less volatile and have actually performed a little better than treasuries over the last few days. Benchmark 10-year notes are snapping a run of three straight declines, the longest losing sequence since March. Treasuries extended their advance as the Bank of England said some U.K. policy makers saw justification for further asset purchases.
Markets now totally focused on the FOMC policy statement at 12:30 this afternoon and Bernanke's press conference at 2:15. The so-called consensus is for the Fed to hold still now for a couple of months after the end of QE 2 next week. Bernanke has used the word "transitory" a number of times recently to describe the increasing costs of food and energy but no one has a definition of the word and unlikely Bernanke has no clear definition. The one thing that is clear is that the Fed has no interest in increasing interest rates for the remainder of the year and likely well into 2012.
U.S. mortgage applications declined last week, following a significant rebound the week before, as interest rates inched higher from exceedingly low levels, industry figures showed Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, dropped 5.9% in the week ended June 17. Fixed 30-year mortgage rates averaged 4.57% in the week, up from 4.51% the week before. The seasonally adjusted index of refinancing applications dropped 7.2%, while the measure of loan requests for home purchases slipped 2.8%.
At 9:30 the DJIA opened -43, the 10 yr note +8/32 at 2.95% -3 bp and mortgage prices at 9:30 +6/32 (.18 bp).
The rest of the morning should be quiet ahead of the FOMC policy statement and Bernanke's press conference at 2:15. Technically the bond market still has a bullish bias but the 10 yr note has stayed within a 10 bp yield range for the past two weeks, there was a spike higher on the 14th when the stock market ran a rally but it didn't last, the following day the 10 gained back all its price decline the day before. While still bullish, to continue the bullish outlook the 10 will have to re-gain its momentum soon otherwise the market may see rates increase slightly.
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, June 22, 2011
Treasuries and mortgages trading better this morning, the stock indexes lower. The Greek confidence vote at 5:00 yesterday was close for Prime Minister Papandreou, he got the vote at 155 to 143 with three members abstaining. It wasn't a big victory in terms of the vote count but it did lead to what had to happen to keep Greece in line for another funding by the IMF and EU in July. The next step for Greece is to actually pass all the spending cuts that have to be accomplished in order to avoid defaulting. The euro declined against most of its major counterparts amid speculation Papandreou will struggle to pass additional austerity measures, even after winning a confidence vote last night. The IMF, contributor of a third of the bailout money for Greece and the two other euro-area countries that have received bailouts, Ireland and Portugal, has warned European Union leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.”
Yesterday stocks rallied on short covering ahead of the Greek vote, this morning the key indexes are weaker and in turn are supporting the US bond and mortgage markets. The bellwether 10 yr note remains in a tight range, unable to move lower in yield but still able to hold on any selling at 3.00%. Mortgage markets recently have been less volatile and have actually performed a little better than treasuries over the last few days. Benchmark 10-year notes are snapping a run of three straight declines, the longest losing sequence since March. Treasuries extended their advance as the Bank of England said some U.K. policy makers saw justification for further asset purchases.
Markets now totally focused on the FOMC policy statement at 12:30 this afternoon and Bernanke's press conference at 2:15. The so-called consensus is for the Fed to hold still now for a couple of months after the end of QE 2 next week. Bernanke has used the word "transitory" a number of times recently to describe the increasing costs of food and energy but no one has a definition of the word and unlikely Bernanke has no clear definition. The one thing that is clear is that the Fed has no interest in increasing interest rates for the remainder of the year and likely well into 2012.
U.S. mortgage applications declined last week, following a significant rebound the week before, as interest rates inched higher from exceedingly low levels, industry figures showed Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, dropped 5.9% in the week ended June 17. Fixed 30-year mortgage rates averaged 4.57% in the week, up from 4.51% the week before. The seasonally adjusted index of refinancing applications dropped 7.2%, while the measure of loan requests for home purchases slipped 2.8%.
At 9:30 the DJIA opened -43, the 10 yr note +8/32 at 2.95% -3 bp and mortgage prices at 9:30 +6/32 (.18 bp).
The rest of the morning should be quiet ahead of the FOMC policy statement and Bernanke's press conference at 2:15. Technically the bond market still has a bullish bias but the 10 yr note has stayed within a 10 bp yield range for the past two weeks, there was a spike higher on the 14th when the stock market ran a rally but it didn't last, the following day the 10 gained back all its price decline the day before. While still bullish, to continue the bullish outlook the 10 will have to re-gain its momentum soon otherwise the market may see rates increase slightly.
Tuesday, June 21, 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, June 21, 2011
Treasuries and mortgages opened a little soft this morning with the pre-market trade in equities pointing to a better open at 9:30. Stocks look better, with European shares rebounding from a three-month low, and the euro strengthened as the Greek government prepared to face a confidence vote that may determine whether it avoids a default. Oil and palladium gained in Europe. Today’s vote of confidence in Prime Minister George Papandreou is likely to determine how soon the nation can win international aid to shore up its finances. European Union leaders have insisted he gain multi-party support for austerity measures that are a condition for the aid needed to avoid default as soon as next month. The all-critical vote will occur at 5:00 pm eastern time this afternoon and one way or the other overnight markets will likely be volatile; a positive vote will likely cause selling in the US bond and mortgage markets as safety trades are lifted.
The IMF, contributor of a third of the bailout money for Greece, Ireland and Portugal, has warned European leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.” At the same time, Papandreou is struggling to convince Greeks to accept a 78 billion-euro ($112B) package of state-asset sales and budget cuts, which include a “crisis levy” on wages.
Today the Fed begins its FOMC meeting; nothing will occur today, tomorrow the meeting concludes with the release of the p[policy statement at 12:30 then at 2:15 Bernanke will hold the second press conference immediately after an FOMC meeting. There will be a lot of chatter today and tomorrow about what the Fed may do now that QE 2 will end at the end of next week. Markets are very much like a coffee clutch where everyone sits around and gossips; in the end what the Fed may or may not do is very uncertain so al the chatter we have to endure today should be ignored. NO sense in sweating something that is totally unknown by anyone----just a lot of talk.
At 9:30 the DJIA opened +44, the 10 yr note at 9:30 -4/32 at 2.97% +1 bp and mortgage prices -2/32 (.06 bp). The S&P and NASDAQ also higher on the open. Crude oil up this morning on optimism that the Greek vote will go well and bolster economic improvement in Europe.
The only economic report today; at 10:00 a few minutes ago, May existing home sales were reported. Markets were looking for a decline of 5.0% to 5.8%; sales were down 3.8%. Single family sales down 3.2%; the median sales price $166,500, down 4.6% yr/yr due to distressed sales. According to NAR there is a 9.3 months supply on the market, slightly higher than in April. The headline looked good but the details (9.3 months supply) not so good and banks still sitting on thousands of foreclosed houses. As long as our government refuses to make housing the key to US economic recovery there is little chance of any significant employment improvement. Barney the Frank should go down in infamy.
Technically still bullish in the bond and mortgage markets, however the strength is weakening some. If Greece passes a strong deficit cutting bill with a wide margin the bond and mortgage markets will likely see rates increase a little taking away the recent safety moves to US treasuries from investors around the world. Equity markets will likely improve as a reaction if the vote is strong. The widely anticipated vote will not happen when our exchanges are open but that won't affect trade in computer trades.
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, June 21, 2011
Treasuries and mortgages opened a little soft this morning with the pre-market trade in equities pointing to a better open at 9:30. Stocks look better, with European shares rebounding from a three-month low, and the euro strengthened as the Greek government prepared to face a confidence vote that may determine whether it avoids a default. Oil and palladium gained in Europe. Today’s vote of confidence in Prime Minister George Papandreou is likely to determine how soon the nation can win international aid to shore up its finances. European Union leaders have insisted he gain multi-party support for austerity measures that are a condition for the aid needed to avoid default as soon as next month. The all-critical vote will occur at 5:00 pm eastern time this afternoon and one way or the other overnight markets will likely be volatile; a positive vote will likely cause selling in the US bond and mortgage markets as safety trades are lifted.
The IMF, contributor of a third of the bailout money for Greece, Ireland and Portugal, has warned European leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.” At the same time, Papandreou is struggling to convince Greeks to accept a 78 billion-euro ($112B) package of state-asset sales and budget cuts, which include a “crisis levy” on wages.
Today the Fed begins its FOMC meeting; nothing will occur today, tomorrow the meeting concludes with the release of the p[policy statement at 12:30 then at 2:15 Bernanke will hold the second press conference immediately after an FOMC meeting. There will be a lot of chatter today and tomorrow about what the Fed may do now that QE 2 will end at the end of next week. Markets are very much like a coffee clutch where everyone sits around and gossips; in the end what the Fed may or may not do is very uncertain so al the chatter we have to endure today should be ignored. NO sense in sweating something that is totally unknown by anyone----just a lot of talk.
At 9:30 the DJIA opened +44, the 10 yr note at 9:30 -4/32 at 2.97% +1 bp and mortgage prices -2/32 (.06 bp). The S&P and NASDAQ also higher on the open. Crude oil up this morning on optimism that the Greek vote will go well and bolster economic improvement in Europe.
The only economic report today; at 10:00 a few minutes ago, May existing home sales were reported. Markets were looking for a decline of 5.0% to 5.8%; sales were down 3.8%. Single family sales down 3.2%; the median sales price $166,500, down 4.6% yr/yr due to distressed sales. According to NAR there is a 9.3 months supply on the market, slightly higher than in April. The headline looked good but the details (9.3 months supply) not so good and banks still sitting on thousands of foreclosed houses. As long as our government refuses to make housing the key to US economic recovery there is little chance of any significant employment improvement. Barney the Frank should go down in infamy.
Technically still bullish in the bond and mortgage markets, however the strength is weakening some. If Greece passes a strong deficit cutting bill with a wide margin the bond and mortgage markets will likely see rates increase a little taking away the recent safety moves to US treasuries from investors around the world. Equity markets will likely improve as a reaction if the vote is strong. The widely anticipated vote will not happen when our exchanges are open but that won't affect trade in computer trades.
Monday, June 20, 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.
Monday, June 20, 2011
There are no economic reports today; this week economic releases are scarce with May existing and new home sales, durable goods orders and weekly jobless claims about all there is. The headlines this week are the FOMC meeting that begins tomorrow then the policy statement on Wednesday at its conclusion and Bernanke's press conference Wed afternoon; and the ongoing Greece debt problems.
As the economic outlook continues to weaken crude oil is falling; crude this morning at 8:00 am down another $1.40 to $91.60 area, by 10:00 back to unchanged. OPEC refused to increase output at its recent meeting in Vienna, however the Saudis are indicating they will increase their output. With the economy slowing demand is seen as weakening along with it; gasoline prices in most areas have fallen $0.65 to $0.70 a gallon in the last two weeks. Markets will take the decline in energy prices as a stimulus for economic growth as consumers pay less at the pump and spend more on discretionary purchases, at least that is the optimistic view held by anyone making a living selling investments (stocks).
At 6:00 am this morning the 10 yr note traded +7/32, at 8:00 +14/32 at 2.89%. Nothing new from Europe over the weekend on Greece sending equity markets lower and treasury and mortgage prices higher. Not sure what markets were thinking about what might happen with Greece since the IMF, EU and the ECB have set the conditions for additional money for Greece. Greece must adopt huge spending cuts ($28B) in its Parliament to meet conditions for more money and then it won't be done until July. As long as the Greece government is unable to pass the needed spending cuts Greece will be a dominate factor in the bond market. Not only Greece; in Spain over the weekend there were huge protests across the country against austerity moves by its government are being considered. Spain is Europe's 4th largest economy and so far has not had to seek help from the ECB or EU but things are increasingly more shaky. Then there is Italy, Portugal and Ireland that becoming more a concern. In short; in Europe there are only two economies holding the whole EU together now, Germany and France.
Another forecast of weaker growth in the US; the International Monetary Fund cut its forecast for U.S. growth in 2011 for the second time in two months on June 17, bolstering the appeal of fixed-income assets.
Some new data from the Fed; deposits at U.S. banks exceeded loans, reaching a record $1.45T last month. back in 2008 loans exceeded deposits. In the 10 yrs before credit markets seized up in 2008, U.S. deposits exceeded loans by an average of about $100B, Fed data show. As deposits exceed loan demand banks will buy more treasuries thus keeping interest rate low and likely to decline more.
The stock market opening weaker this morning aiding improvement in the bond market. Crude falling again and likely will decline more to test the very critical $90.00 level. No data and the FOMC meeting mixed with the growing mess in Europe as the ECB, IMF and EU continue to fiddle as Europe comes closer to the edge. No one knows for sure what will happen if the Greek government and its people just say the hell with it. 40% of Greeks work for the government in some way or the other, how much pain will they endure? The longer the ECB delays in making its decisions the worse the financial structure becomes and the more attractive US treasuries become as a safe haven.
This Week's Economic Calendar:
Tuesday;
10:00 am May existing home sales (-5.8% to 4.75 mil units annualized)
Wednesday;
7:00 am MBA mortgage applications
10:00 am FHFA Apr housing price index (N/A; March +0.3%)
12:30 FOMC policy statement
2:15 pm Bernanke press conference
Thursday;
8:15 am weekly jobless claims (+1K to 415K' con't claims 3.68 mil frm 3.675 mil
10:00 am May new home sales (-5.6% to 305K units annualized)
Friday;
8:30 am Q1 final GDP (+1.8% unch frm prelim last month)
May durable goods orders (+1.0%, ex transportation orders +0.6%)
The bond and mortgage markets held much better levels early this morning than at 9:30, nevertheless there is little reason to worry rates will increase in any significant way. That said, near term most of the news has been discounted in present levels. The stock market has little to look forward to as more and more the outlook looks soft for the economy. Wednesday the FOMC policy statement will likely be ore of the same the Fed has been saying for months (economic growth but sluggish, higher energy prices a drag, unemployment getting better but too slow, and the housing sector still weakening)----Bernanke will likely continue to use "transitory" to define high commodity prices.
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, June 20, 2011
There are no economic reports today; this week economic releases are scarce with May existing and new home sales, durable goods orders and weekly jobless claims about all there is. The headlines this week are the FOMC meeting that begins tomorrow then the policy statement on Wednesday at its conclusion and Bernanke's press conference Wed afternoon; and the ongoing Greece debt problems.
As the economic outlook continues to weaken crude oil is falling; crude this morning at 8:00 am down another $1.40 to $91.60 area, by 10:00 back to unchanged. OPEC refused to increase output at its recent meeting in Vienna, however the Saudis are indicating they will increase their output. With the economy slowing demand is seen as weakening along with it; gasoline prices in most areas have fallen $0.65 to $0.70 a gallon in the last two weeks. Markets will take the decline in energy prices as a stimulus for economic growth as consumers pay less at the pump and spend more on discretionary purchases, at least that is the optimistic view held by anyone making a living selling investments (stocks).
At 6:00 am this morning the 10 yr note traded +7/32, at 8:00 +14/32 at 2.89%. Nothing new from Europe over the weekend on Greece sending equity markets lower and treasury and mortgage prices higher. Not sure what markets were thinking about what might happen with Greece since the IMF, EU and the ECB have set the conditions for additional money for Greece. Greece must adopt huge spending cuts ($28B) in its Parliament to meet conditions for more money and then it won't be done until July. As long as the Greece government is unable to pass the needed spending cuts Greece will be a dominate factor in the bond market. Not only Greece; in Spain over the weekend there were huge protests across the country against austerity moves by its government are being considered. Spain is Europe's 4th largest economy and so far has not had to seek help from the ECB or EU but things are increasingly more shaky. Then there is Italy, Portugal and Ireland that becoming more a concern. In short; in Europe there are only two economies holding the whole EU together now, Germany and France.
Another forecast of weaker growth in the US; the International Monetary Fund cut its forecast for U.S. growth in 2011 for the second time in two months on June 17, bolstering the appeal of fixed-income assets.
Some new data from the Fed; deposits at U.S. banks exceeded loans, reaching a record $1.45T last month. back in 2008 loans exceeded deposits. In the 10 yrs before credit markets seized up in 2008, U.S. deposits exceeded loans by an average of about $100B, Fed data show. As deposits exceed loan demand banks will buy more treasuries thus keeping interest rate low and likely to decline more.
The stock market opening weaker this morning aiding improvement in the bond market. Crude falling again and likely will decline more to test the very critical $90.00 level. No data and the FOMC meeting mixed with the growing mess in Europe as the ECB, IMF and EU continue to fiddle as Europe comes closer to the edge. No one knows for sure what will happen if the Greek government and its people just say the hell with it. 40% of Greeks work for the government in some way or the other, how much pain will they endure? The longer the ECB delays in making its decisions the worse the financial structure becomes and the more attractive US treasuries become as a safe haven.
This Week's Economic Calendar:
Tuesday;
10:00 am May existing home sales (-5.8% to 4.75 mil units annualized)
Wednesday;
7:00 am MBA mortgage applications
10:00 am FHFA Apr housing price index (N/A; March +0.3%)
12:30 FOMC policy statement
2:15 pm Bernanke press conference
Thursday;
8:15 am weekly jobless claims (+1K to 415K' con't claims 3.68 mil frm 3.675 mil
10:00 am May new home sales (-5.6% to 305K units annualized)
Friday;
8:30 am Q1 final GDP (+1.8% unch frm prelim last month)
May durable goods orders (+1.0%, ex transportation orders +0.6%)
The bond and mortgage markets held much better levels early this morning than at 9:30, nevertheless there is little reason to worry rates will increase in any significant way. That said, near term most of the news has been discounted in present levels. The stock market has little to look forward to as more and more the outlook looks soft for the economy. Wednesday the FOMC policy statement will likely be ore of the same the Fed has been saying for months (economic growth but sluggish, higher energy prices a drag, unemployment getting better but too slow, and the housing sector still weakening)----Bernanke will likely continue to use "transitory" to define high commodity prices.
Saturday, June 18, 2011
Friday’s bond market has opened in negative territory due to stock gains and mixed economic data. The stock markets are reacting favorably to words of confidence out of Greece, pushing the Dow back above 12,000. The Dow is currently up 79 points while the Nasdaq has gained 8 points. The bond market is currently down 5/32, which should keep this morning’s mortgage rates close to yesterday’s levels.
June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment was posted late this morning, showing a reading of 71.8. This was lower than forecasts and a decline from May’s final reading, making it good news for the bond market and mortgage rates. Since consumer confidence dropped this month, it is believed consumers are less likely to make large purchases in the near future, limiting economic growth.
The Conference Board reported this morning that May's Leading Economic Indicators (LEI) rose 0.8%. This was much stronger than thought, meaning that the index is predicting rapid economic growth over the next several months. That contradicts recent opinions and economic releases, but we have to consider this news not favorable for bonds and mortgage rates. Fortunately, the data is not considered to be highly important, preventing the mortgage market from reacting much to the news.
Next week brings us the release of a couple relevant reports, none of which will be posted Monday. In addition to the week’s economic data, there is a two-day FOMC meeting being held that could be the focal point of the week. Look for details on next week’s events in Sunday’s weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment was posted late this morning, showing a reading of 71.8. This was lower than forecasts and a decline from May’s final reading, making it good news for the bond market and mortgage rates. Since consumer confidence dropped this month, it is believed consumers are less likely to make large purchases in the near future, limiting economic growth.
The Conference Board reported this morning that May's Leading Economic Indicators (LEI) rose 0.8%. This was much stronger than thought, meaning that the index is predicting rapid economic growth over the next several months. That contradicts recent opinions and economic releases, but we have to consider this news not favorable for bonds and mortgage rates. Fortunately, the data is not considered to be highly important, preventing the mortgage market from reacting much to the news.
Next week brings us the release of a couple relevant reports, none of which will be posted Monday. In addition to the week’s economic data, there is a two-day FOMC meeting being held that could be the focal point of the week. Look for details on next week’s events in Sunday’s weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Friday, June 17, 2011
Friday’s bond market has opened in negative territory due to stock gains and mixed economic data. The stock markets are reacting favorably to words of confidence out of Greece, pushing the Dow back above 12,000. The Dow is currently up 79 points while the Nasdaq has gained 8 points. The bond market is currently down 5/32, which should keep this morning’s mortgage rates close to yesterday’s levels.
June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment was posted late this morning, showing a reading of 71.8. This was lower than forecasts and a decline from May’s final reading, making it good news for the bond market and mortgage rates. Since consumer confidence dropped this month, it is believed consumers are less likely to make large purchases in the near future, limiting economic growth.
The Conference Board reported this morning that May's Leading Economic Indicators (LEI) rose 0.8%. This was much stronger than thought, meaning that the index is predicting rapid economic growth over the next several months. That contradicts recent opinions and economic releases, but we have to consider this news not favorable for bonds and mortgage rates. Fortunately, the data is not considered to be highly important, preventing the mortgage market from reacting much to the news.
Next week brings us the release of a couple relevant reports, none of which will be posted Monday. In addition to the week’s economic data, there is a two-day FOMC meeting being held that could be the focal point of the week. Look for details on next week’s events in Sunday’s weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment was posted late this morning, showing a reading of 71.8. This was lower than forecasts and a decline from May’s final reading, making it good news for the bond market and mortgage rates. Since consumer confidence dropped this month, it is believed consumers are less likely to make large purchases in the near future, limiting economic growth.
The Conference Board reported this morning that May's Leading Economic Indicators (LEI) rose 0.8%. This was much stronger than thought, meaning that the index is predicting rapid economic growth over the next several months. That contradicts recent opinions and economic releases, but we have to consider this news not favorable for bonds and mortgage rates. Fortunately, the data is not considered to be highly important, preventing the mortgage market from reacting much to the news.
Next week brings us the release of a couple relevant reports, none of which will be posted Monday. In addition to the week’s economic data, there is a two-day FOMC meeting being held that could be the focal point of the week. Look for details on next week’s events in Sunday’s weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Thursday, June 16, 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.
Thursday, June 16, 2011
Early this morning the 10 yr note made a new low yield at 2.88% frm 2.97% at the end of yesterday on increasing concerns over Europe's debt problems headlined by Greece. The European Union’s failure to contain the Greek debt crisis is sending fresh shockwaves through currencies, money markets, equities and derivatives. The cost of protecting corporate bonds soared to the highest level since January, with credit-default swaps anticipating about a 78% chance that Greece won’t pay its debts. Equities declined around the world, while a measure of fear in fixed-income markets jumped the most since November. Market moves suggest heightened concern that authorities won’t be able to keep Greece’s debt troubles from spreading after Moody’s Investors Service said it may downgrade BNP Paribas SA and two other big French banks because of their investments in the southern European nation.
At 8:30 weekly jobless claims and May housing starts and permits pushed yields up as the data was better than expected; weekly claims were down 16K to 414K. forecasts were that claims would be 421K, continuing claims also fell (21K). May housing starts were about what was expected, up 3.5% with single family starts up 3.7%; April starts were revised from -10.6% to -8.8%. Building permits were thought to be down 0.5% but reported up 8.7% the highest permits since Dec 2010; multi family was the main reason for permits higher, multi-family permits jumped 23%. The two data points took the wind out of the bond market and safe haven buying that had set a new low yield on the 10 yr and had mortgage prices up 8/32 (.25 bp) frm yesterday's close.
At 8:30 the Q1 current acc't deficit was -$119.27B lower than -$130B expected. The current account measures the United States' international trade balance in goods, services, and unilateral transfers on a quarterly basis. The levels of exports, imports and the current account indicate trends in foreign trade.
By 9:15 the 10 yr note yield climbed back to 2.96% frm 2.88% prior to the 8:30 data, mortgage prices at 9:15 unchanged after being up .25 bp at 8:15. The DJIA futures traded had the index unchanged at 9:15 after being down 70 points at 8:15. Volatility remains high as we noted yesterday.
Keeping the running story going, at 9:30 the DJIA opened down 6 points, the 10 yr at 9:30 +7/32 at 2.95% -2 bp and mortgage prices very volatile this morning up 3/32 (.09 bp). Trade between 9:30 and 10:00 wasn't significant with the 10:00 Philadelphia Fed business index due. Always significant to traders, this time it is even more so after yesterday's NY Fed manufacturing report went negative indicating contraction.
At 10:00 continued volatility with the Philly Fed business index; the index went NEGATIVE indicating contraction. The index was expected at +8 it fell to -7.7 the second report in the last 24 hours that the economy is contracting. New orders in the June report were negative at -7.6 indicating orders declined, the employment component fell to 4.1 frm 22.1 in May while prices pd fell to 26.8 frm 48.3. May Philly Fed was 3.9. The initial reaction put a small bid back into bonds and mortgages but not as much as we might have thought. The DJIA at 10:06 +26, the 10 yr +9/32 at 2.94% and mortgage prices +3/32 (.09 bp).
We will continue to suggest locking for loans closing within 7 to 15 days although we remain bullish based on technicals. That said, with volatility high and rates this low the risks have increased somewhat.
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, June 16, 2011
Early this morning the 10 yr note made a new low yield at 2.88% frm 2.97% at the end of yesterday on increasing concerns over Europe's debt problems headlined by Greece. The European Union’s failure to contain the Greek debt crisis is sending fresh shockwaves through currencies, money markets, equities and derivatives. The cost of protecting corporate bonds soared to the highest level since January, with credit-default swaps anticipating about a 78% chance that Greece won’t pay its debts. Equities declined around the world, while a measure of fear in fixed-income markets jumped the most since November. Market moves suggest heightened concern that authorities won’t be able to keep Greece’s debt troubles from spreading after Moody’s Investors Service said it may downgrade BNP Paribas SA and two other big French banks because of their investments in the southern European nation.
At 8:30 weekly jobless claims and May housing starts and permits pushed yields up as the data was better than expected; weekly claims were down 16K to 414K. forecasts were that claims would be 421K, continuing claims also fell (21K). May housing starts were about what was expected, up 3.5% with single family starts up 3.7%; April starts were revised from -10.6% to -8.8%. Building permits were thought to be down 0.5% but reported up 8.7% the highest permits since Dec 2010; multi family was the main reason for permits higher, multi-family permits jumped 23%. The two data points took the wind out of the bond market and safe haven buying that had set a new low yield on the 10 yr and had mortgage prices up 8/32 (.25 bp) frm yesterday's close.
At 8:30 the Q1 current acc't deficit was -$119.27B lower than -$130B expected. The current account measures the United States' international trade balance in goods, services, and unilateral transfers on a quarterly basis. The levels of exports, imports and the current account indicate trends in foreign trade.
By 9:15 the 10 yr note yield climbed back to 2.96% frm 2.88% prior to the 8:30 data, mortgage prices at 9:15 unchanged after being up .25 bp at 8:15. The DJIA futures traded had the index unchanged at 9:15 after being down 70 points at 8:15. Volatility remains high as we noted yesterday.
Keeping the running story going, at 9:30 the DJIA opened down 6 points, the 10 yr at 9:30 +7/32 at 2.95% -2 bp and mortgage prices very volatile this morning up 3/32 (.09 bp). Trade between 9:30 and 10:00 wasn't significant with the 10:00 Philadelphia Fed business index due. Always significant to traders, this time it is even more so after yesterday's NY Fed manufacturing report went negative indicating contraction.
At 10:00 continued volatility with the Philly Fed business index; the index went NEGATIVE indicating contraction. The index was expected at +8 it fell to -7.7 the second report in the last 24 hours that the economy is contracting. New orders in the June report were negative at -7.6 indicating orders declined, the employment component fell to 4.1 frm 22.1 in May while prices pd fell to 26.8 frm 48.3. May Philly Fed was 3.9. The initial reaction put a small bid back into bonds and mortgages but not as much as we might have thought. The DJIA at 10:06 +26, the 10 yr +9/32 at 2.94% and mortgage prices +3/32 (.09 bp).
We will continue to suggest locking for loans closing within 7 to 15 days although we remain bullish based on technicals. That said, with volatility high and rates this low the risks have increased somewhat.
Wednesday, June 15, 2011
Refi Demand Finally Reacts to Falling Mortgage Rates
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey* for the week ending June 7, 2011.
The Refinance Index ticked up noticeably in the last week, from 2475 to 2883, the highest reading since November 2010. This is bittersweet as it finally showed some linear connection between falling rates and refi demand...only to have rates rise this week. Even so, the last time rates fell from 5.0 to 4.5 as they have in 2011, readings around 3000 on the refi index represented the LOW END, moving over 5000 on the index by the time rates hit the same reported level as they did last week.
Plain and Simple: The same historically low rates are producing only a little more than half the refi demand as last fall, providing a stark picture of the current lending environment.
The Purchase Index was fairly uneventful last week. Although it rose from 182.9 to 191.1, that puts it right in line with a majority of previous weeks. In fact, 2 out of every 3 weeks since March have been within 5 points of 190. Pretty darn stagnant. With the exception of the horrible levels under 170 in the summer of 2010, we're sideways at the lowest levels in the history of MBA's reporting with a clear pivot point around 210 separating past and present.
Excerpts from the Release...
The Market Composite Index, a measure of mortgage loan application volume, increased 13.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 24.5 percent compared with the previous week, which included Memorial Day. The Refinance Index increased 16.5 percent from the previous week. The seasonally adjusted Purchase Index increased 4.5 percent from one week earlier. The unadjusted Purchase Index increased 14.2 percent compared with the previous week and was 6.1 percent higher than the same week one year ago.
"Mortgage rates have declined for 8 of the past 9 weeks. Coming off of the Memorial Day holiday, refinance application volume increased significantly, as borrowers jumped to lock in the lowest mortgage rates since last November," said Michael Fratantoni, MBA's Vice President of Research and Economics. "The volume of refinance applications still remains 28 percent below levels seen at that time, as borrowers with an incentive to refinance remain constrained from doing so by lack of equity in their homes."
The four week moving average for the seasonally adjusted Market Index is up 2.4 percent. The four week moving average is up 0.3 percent for the seasonally adjusted Purchase Index, while this average is up 3.1 percent for the Refinance Index.
The refinance share of mortgage activity increased to 70.0 percent of total applications from 67.3 percent the previous week. This is the highest refinance share since January 21, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.1 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.51 percent from 4.54 percent, with points increasing to 1.05 from 0.94 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year average rate since November 19, 2010. The effective rate also decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.67 percent, while points also remained unchanged at 1.06 (including the origination fee) for 80 percent LTV loans. This is the lowest 15-year average contract rate since November 5, 2010. The effective rate increased from last week.
*The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a falling mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out lower monthly payments. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (may boost consumer spending. It also allows debtors to pay down personal liabilities faster. A trend of declining purchase applications implies home buyer demand is shrinking.
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey* for the week ending June 7, 2011.
The Refinance Index ticked up noticeably in the last week, from 2475 to 2883, the highest reading since November 2010. This is bittersweet as it finally showed some linear connection between falling rates and refi demand...only to have rates rise this week. Even so, the last time rates fell from 5.0 to 4.5 as they have in 2011, readings around 3000 on the refi index represented the LOW END, moving over 5000 on the index by the time rates hit the same reported level as they did last week.
Plain and Simple: The same historically low rates are producing only a little more than half the refi demand as last fall, providing a stark picture of the current lending environment.
The Purchase Index was fairly uneventful last week. Although it rose from 182.9 to 191.1, that puts it right in line with a majority of previous weeks. In fact, 2 out of every 3 weeks since March have been within 5 points of 190. Pretty darn stagnant. With the exception of the horrible levels under 170 in the summer of 2010, we're sideways at the lowest levels in the history of MBA's reporting with a clear pivot point around 210 separating past and present.
Excerpts from the Release...
The Market Composite Index, a measure of mortgage loan application volume, increased 13.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 24.5 percent compared with the previous week, which included Memorial Day. The Refinance Index increased 16.5 percent from the previous week. The seasonally adjusted Purchase Index increased 4.5 percent from one week earlier. The unadjusted Purchase Index increased 14.2 percent compared with the previous week and was 6.1 percent higher than the same week one year ago.
"Mortgage rates have declined for 8 of the past 9 weeks. Coming off of the Memorial Day holiday, refinance application volume increased significantly, as borrowers jumped to lock in the lowest mortgage rates since last November," said Michael Fratantoni, MBA's Vice President of Research and Economics. "The volume of refinance applications still remains 28 percent below levels seen at that time, as borrowers with an incentive to refinance remain constrained from doing so by lack of equity in their homes."
The four week moving average for the seasonally adjusted Market Index is up 2.4 percent. The four week moving average is up 0.3 percent for the seasonally adjusted Purchase Index, while this average is up 3.1 percent for the Refinance Index.
The refinance share of mortgage activity increased to 70.0 percent of total applications from 67.3 percent the previous week. This is the highest refinance share since January 21, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.1 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.51 percent from 4.54 percent, with points increasing to 1.05 from 0.94 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year average rate since November 19, 2010. The effective rate also decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.67 percent, while points also remained unchanged at 1.06 (including the origination fee) for 80 percent LTV loans. This is the lowest 15-year average contract rate since November 5, 2010. The effective rate increased from last week.
*The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a falling mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out lower monthly payments. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (may boost consumer spending. It also allows debtors to pay down personal liabilities faster. A trend of declining purchase applications implies home buyer demand is shrinking.
Tuesday, June 14, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
The stock markets in Europe stronger, here this morning in pre-market trading the DJIA up 100 points at 8:45. The 10 yr note -21/32 at 3.06% and mortgage prices -13/32 (.41 bp) at 9:00. The markets were ripe for a change technically; the bond market overbought while the stock market oversold; always difficult to call it but we have mentioned it for the last few days. The equity market rally started in China when its industrial production was stronger than most were expecting.
In Europe markets were once again encouraged that the Greece debt problem may about to be completed; it has been back and forth for months with a plan, then no plan, and back again. Nevertheless today is a back on again. Meeting in Brussels in an emergency session before their monthly gathering next week, euro-area finance ministers are seeking to narrow differences on how investors share the cost of easing Europe’s biggest debt burden. They aim to wrap up a new financing plan at a government leaders’ summit on June 23-24, a year after Greece received its first bailout package.
At 8:30 May retail sales were expected down 0.5%, as reported down just 0.2%; excluding auto sales up 0.3% with markets looking for +0.2%. A slightly better report but in an oversold market anything better than forecasts are welcome news. Also at 8:30 May producer price index increased 0.2% overall and ex food and energy also +0.2%, that the inflation readings were moderate added to the early strength. Yr/yr PPI +7.3%, ex food and energy +2.1% in line with what economists were hoping for.
At 9:30 the DJIA opened +90, the 10 yr note -21/32 at 3.06% and mortgage prices -13/32 (.41 bp).
At 10:00 April business inventories, expected up 0.9%, were up 0.8%. Final sales up 0.1% with an inventory to sales ratio at 1.26 months from 1.25 months in March. No reaction to the report, it isn't a main liner and the stock market already up triple digits with the 10 yr note yield up 8 bp.
At 2:30 this afternoon Bernanke and a number of other economists will talk about the US debt ceiling and overall budget deficit. Traders will focus on the conference for clues from Bernanke about any additional easing moves after QE 2 ends at the end of this month. After the Fed ends its $600B buying of treasuries that began last November some question what will happen with interest rates. The Fed is on record it will keep interest rates low; the economy is weak, unemployment high and housing in the ditch. Although the equity markets are rallying this morning there isn't any significant change in the outlook yet. As noted, the rally so far is simply a reflex from oversold conditions and overbought situation in the bond and mortgage markets. The financial markets are likely to consolidate recent movements but until there is reason to believe that the economy is actually gaining traction the outlook hasn't changed for stocks or bonds. There are key data points remaining this week and an FOMC meeting next week; we'll see how the data comes out before making any significant changes in our forecasts.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
The stock markets in Europe stronger, here this morning in pre-market trading the DJIA up 100 points at 8:45. The 10 yr note -21/32 at 3.06% and mortgage prices -13/32 (.41 bp) at 9:00. The markets were ripe for a change technically; the bond market overbought while the stock market oversold; always difficult to call it but we have mentioned it for the last few days. The equity market rally started in China when its industrial production was stronger than most were expecting.
In Europe markets were once again encouraged that the Greece debt problem may about to be completed; it has been back and forth for months with a plan, then no plan, and back again. Nevertheless today is a back on again. Meeting in Brussels in an emergency session before their monthly gathering next week, euro-area finance ministers are seeking to narrow differences on how investors share the cost of easing Europe’s biggest debt burden. They aim to wrap up a new financing plan at a government leaders’ summit on June 23-24, a year after Greece received its first bailout package.
At 8:30 May retail sales were expected down 0.5%, as reported down just 0.2%; excluding auto sales up 0.3% with markets looking for +0.2%. A slightly better report but in an oversold market anything better than forecasts are welcome news. Also at 8:30 May producer price index increased 0.2% overall and ex food and energy also +0.2%, that the inflation readings were moderate added to the early strength. Yr/yr PPI +7.3%, ex food and energy +2.1% in line with what economists were hoping for.
At 9:30 the DJIA opened +90, the 10 yr note -21/32 at 3.06% and mortgage prices -13/32 (.41 bp).
At 10:00 April business inventories, expected up 0.9%, were up 0.8%. Final sales up 0.1% with an inventory to sales ratio at 1.26 months from 1.25 months in March. No reaction to the report, it isn't a main liner and the stock market already up triple digits with the 10 yr note yield up 8 bp.
At 2:30 this afternoon Bernanke and a number of other economists will talk about the US debt ceiling and overall budget deficit. Traders will focus on the conference for clues from Bernanke about any additional easing moves after QE 2 ends at the end of this month. After the Fed ends its $600B buying of treasuries that began last November some question what will happen with interest rates. The Fed is on record it will keep interest rates low; the economy is weak, unemployment high and housing in the ditch. Although the equity markets are rallying this morning there isn't any significant change in the outlook yet. As noted, the rally so far is simply a reflex from oversold conditions and overbought situation in the bond and mortgage markets. The financial markets are likely to consolidate recent movements but until there is reason to believe that the economy is actually gaining traction the outlook hasn't changed for stocks or bonds. There are key data points remaining this week and an FOMC meeting next week; we'll see how the data comes out before making any significant changes in our forecasts.
Monday, June 13, 2011
Friday, June 10, 2011
Wednesday, June 8, 2011
Tuesday, June 7, 2011
Monday, June 6, 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.
Monday, June 06, 2011
Treasuries and mortgages opened weaker this morning, the stock market trade in pre-market opening also looking weak. If the stock market (DJIA) ends this week lower it will be the first time since 2002 the key index closes lower for 7 consecutive weeks. There are no economic reports today and through the week there isn't much data to look at. The week has treasury auctioning $66B of notes and bonds. OPEC will meet Wednesday with the Saudis pushing for more production, crude oil this morning trading lower on the OPEC outlook.
Bernanke is scheduled to speak tomorrow, may talk about the Fed's new economic outlook that has been lowered recently. Some talk about another QE but we don't expect the Fed will do another easing similar to QE 2 in which the Fed bought $600B of treasuries (the program will end at the end of this month). The easing move didn't come close to helping the economic recovery as recent evidence clearly shows; the Fed in our opinion is out of bullets. If there is going to be any additional help for the recovery it has to come from the fiscal side (Congress and the Administration), both of which have so far shown little understanding about what to do.
Federal Reserve Bank of Philadelphia President Charles Plosser said an exit from stimulus measures should start “long before” a recovery in the U.S. jobs market is assured. “Somewhat tighter monetary policy is possible by the end of the year,” he said today at a press conference. “We will have to begin exiting from our policies long before the unemployment rate is down to what people would like to have. That’s going to be a difficult decision.”
Every move out of Washington since the economic decline has been mis-guided and has served to drag recovery on and on. The foremost mistake; tying the hands of FNMA and Freddie, when the economy needs help in the housing sector (one of the key reasons consumers are not supporting the economy), Congress and this Administration have yanked the GSEs back. The so-called private MBS markets have tightened credit underwriting, want to increase down payments, and lower loan limits. Every thing that has come from Washington since the sub-prime crisis has been either meaningless or has added to the problems. At a time when the government needs to be there it has been shut down. Politicians didn't heed warnings that sub-prime was headed off a cliff, can we expect them to understand what has to occur now? In total they have little understanding, as long as housing markets remain as soft as they are there is no reason to believe the economy will rebound much.
At 9:30 the DJIA opened -25, the 10 yr note -12/32 at 3.04%; mtg prices -8/32 (.25 bp) frm Friday's close.
This Week's Economic Calendar:
Tuesday;
1:00 pm $32B 3 yr note auction
3:00 pm April consumer credit (+$6.0B; this is one of our key data points)
Wednesday;
7:00 am MBA mortgage applications
1:00 pm $21B 10 yr note auction
2:00 pm Fed Beige Book
Thursday;
8:30 am weekly jobless claims (+5K to 427K; cont claims 3.688 mil frm 3.711 mil)
Apr trade balance (-$48.5B)
10:00 am Apr wholesale inventories (+0.9%)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am May import and export prices (imports -0.7%, exports +0.3%)
2:00 pm May Treasury budget (-$135B)
The bond and mortgage markets under pressure early this morning with the 10 yr note working both sides of 3.00%. Treasuries are working higher n rates with Treasury auctions beginning tomorrow. The lower rates occurring with safety buying as investors lighten up on equities. Mortgage rates working lower but last week were soft compared to the 10 yr note. Mtg markets have to contend with a softer economic outlook now, treasuries likely to out-perform MBSs this 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.
Monday, June 06, 2011
Treasuries and mortgages opened weaker this morning, the stock market trade in pre-market opening also looking weak. If the stock market (DJIA) ends this week lower it will be the first time since 2002 the key index closes lower for 7 consecutive weeks. There are no economic reports today and through the week there isn't much data to look at. The week has treasury auctioning $66B of notes and bonds. OPEC will meet Wednesday with the Saudis pushing for more production, crude oil this morning trading lower on the OPEC outlook.
Bernanke is scheduled to speak tomorrow, may talk about the Fed's new economic outlook that has been lowered recently. Some talk about another QE but we don't expect the Fed will do another easing similar to QE 2 in which the Fed bought $600B of treasuries (the program will end at the end of this month). The easing move didn't come close to helping the economic recovery as recent evidence clearly shows; the Fed in our opinion is out of bullets. If there is going to be any additional help for the recovery it has to come from the fiscal side (Congress and the Administration), both of which have so far shown little understanding about what to do.
Federal Reserve Bank of Philadelphia President Charles Plosser said an exit from stimulus measures should start “long before” a recovery in the U.S. jobs market is assured. “Somewhat tighter monetary policy is possible by the end of the year,” he said today at a press conference. “We will have to begin exiting from our policies long before the unemployment rate is down to what people would like to have. That’s going to be a difficult decision.”
Every move out of Washington since the economic decline has been mis-guided and has served to drag recovery on and on. The foremost mistake; tying the hands of FNMA and Freddie, when the economy needs help in the housing sector (one of the key reasons consumers are not supporting the economy), Congress and this Administration have yanked the GSEs back. The so-called private MBS markets have tightened credit underwriting, want to increase down payments, and lower loan limits. Every thing that has come from Washington since the sub-prime crisis has been either meaningless or has added to the problems. At a time when the government needs to be there it has been shut down. Politicians didn't heed warnings that sub-prime was headed off a cliff, can we expect them to understand what has to occur now? In total they have little understanding, as long as housing markets remain as soft as they are there is no reason to believe the economy will rebound much.
At 9:30 the DJIA opened -25, the 10 yr note -12/32 at 3.04%; mtg prices -8/32 (.25 bp) frm Friday's close.
This Week's Economic Calendar:
Tuesday;
1:00 pm $32B 3 yr note auction
3:00 pm April consumer credit (+$6.0B; this is one of our key data points)
Wednesday;
7:00 am MBA mortgage applications
1:00 pm $21B 10 yr note auction
2:00 pm Fed Beige Book
Thursday;
8:30 am weekly jobless claims (+5K to 427K; cont claims 3.688 mil frm 3.711 mil)
Apr trade balance (-$48.5B)
10:00 am Apr wholesale inventories (+0.9%)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am May import and export prices (imports -0.7%, exports +0.3%)
2:00 pm May Treasury budget (-$135B)
The bond and mortgage markets under pressure early this morning with the 10 yr note working both sides of 3.00%. Treasuries are working higher n rates with Treasury auctions beginning tomorrow. The lower rates occurring with safety buying as investors lighten up on equities. Mortgage rates working lower but last week were soft compared to the 10 yr note. Mtg markets have to contend with a softer economic outlook now, treasuries likely to out-perform MBSs this week.
Mortgage Market
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, June 06, 2011
This Week; the stock market will continue to struggle after the very weak employment report last Friday and all recent data that is confirming a slowdown in growth. The bond and mortgage markets will benefit as long as the outlook for the economy is expected to slip back. The 10 yr note is working on the psychological 3.00% level, to push yields lower it will take continuing declines in the equity markets. Another weekly lower lose in the stock market will make it six weeks in a row, not seen since back in 2002.
This week there is much in the way of economic data; Treasury will auction a total of $66b of notes and bonds beginning Tuesday through Thursday ($32B 3 yr, $21B 10 yr and $13B of 30 yr). The auctions will likely go well as most have in the last few months; however, there is always some concern that should keep interest rates frm improving much until the demand for the 10 yr note on Wednesday is measured. OPEC will meet on Wednesday with the Saudis wanting to push production higher, crude will likely trade lower in the meantime. While we continue to look for somewhat lower interest rates, this week may not provide much improvement. Technically the rate markets are overbought and likely will consolidate here for awhile. Early Monday rate markets were a little weaker with stock indexes also pointing to a lower open.
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, June 06, 2011
This Week; the stock market will continue to struggle after the very weak employment report last Friday and all recent data that is confirming a slowdown in growth. The bond and mortgage markets will benefit as long as the outlook for the economy is expected to slip back. The 10 yr note is working on the psychological 3.00% level, to push yields lower it will take continuing declines in the equity markets. Another weekly lower lose in the stock market will make it six weeks in a row, not seen since back in 2002.
This week there is much in the way of economic data; Treasury will auction a total of $66b of notes and bonds beginning Tuesday through Thursday ($32B 3 yr, $21B 10 yr and $13B of 30 yr). The auctions will likely go well as most have in the last few months; however, there is always some concern that should keep interest rates frm improving much until the demand for the 10 yr note on Wednesday is measured. OPEC will meet on Wednesday with the Saudis wanting to push production higher, crude will likely trade lower in the meantime. While we continue to look for somewhat lower interest rates, this week may not provide much improvement. Technically the rate markets are overbought and likely will consolidate here for awhile. Early Monday rate markets were a little weaker with stock indexes also pointing to a lower open.
Thursday, June 2, 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.
Thursday, June 02, 2011
Not necessarily surprising that interest rate markets are seeing a little push back this morning after the strong rallies yesterday in treasuries and mortgages. That rates are slightly higher this morning have little to do with the larger picture, the US economy is slipping back and likely will weaken through the rest of the year. If not weaken, the best we can see is stagnant economic growth. At 8:30 weekly jobless claims were down 6K to 428K, another less than expected report; claims were expected at 413K. Continuing claims at 3.71 mil frm 3.712 mil. Claims remain high, unemployment isn't declining.
At 8:30 revisions of Q1 productivity and unit labor costs; productivity at +1.8% frm +1.6% and unit labor costs +0.7% frm +1.0%. Old data that shouldn't have much impact on markets.
Today will be about tomorrow's May employment report, until yesterday's very weak ADP private jobs numbers (+38K with forecasts of +177K) the estimates for tomorrow's non-farm private jobs were in the range of 200K. After the ADP report consensus estimates were quickly revised to +120K levels. Always a crap shoot when anticipating jobs, this time is even more tedious. Traders and investors will adjust positions through the day to where they have comfort into employment; comfort is an oxymoron when it comes to the monthly employment however.
There shouldn't be much arguments now that the US economy is softening; all data over the past month has confirmed it and makes it more difficult to defend those optimistic forecasts that generally come from firms that benefit from better outlooks. There will be increasing debate now whether the Fed will do another QE move; the problem is the QE 2 $600B bond buying that ends at the end of this month didn't do anything to help the economy. While the bond-purchase program did push investors into higher-yielding assets such as stocks, the “transmission mechanism” to drive more money into the economy didn’t work. Another easing move from the Fed won't help either. There isn't much the Fed can do that it hasn't already tried and failed. It is all about the consumer and spending, consumers are not about to increase discretionary spending with high energy prices, declining home prices and uncertain employment outlooks. Amazing how the establishment doesn't understand it.
At 9:30 the DJIA opened +5, the 10 yr -14/32 2.99% +4 bp and mortgage prices -10/32 (.31 bp). Within a few minutes after the open the DJIA went negative, at 9:40 -11.
At 10:00 April factory orders, expected down 1.0%, were down 1.2%; April durable goods orders unchanged at -3.6%. No initial reaction.
Look for the day to be relatively quiet with interest rates slightly weaker and equity market indexes hanging around unchanged. Tomorrow's 8:30 May employment report should keep traders from being aggressive in either direction. Yesterday's strong rally in the bond and mortgage markets pushed the 10 yr RSI into overbought levels and betting heavily on the data tomorrow is a fool's errand.
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, June 02, 2011
Not necessarily surprising that interest rate markets are seeing a little push back this morning after the strong rallies yesterday in treasuries and mortgages. That rates are slightly higher this morning have little to do with the larger picture, the US economy is slipping back and likely will weaken through the rest of the year. If not weaken, the best we can see is stagnant economic growth. At 8:30 weekly jobless claims were down 6K to 428K, another less than expected report; claims were expected at 413K. Continuing claims at 3.71 mil frm 3.712 mil. Claims remain high, unemployment isn't declining.
At 8:30 revisions of Q1 productivity and unit labor costs; productivity at +1.8% frm +1.6% and unit labor costs +0.7% frm +1.0%. Old data that shouldn't have much impact on markets.
Today will be about tomorrow's May employment report, until yesterday's very weak ADP private jobs numbers (+38K with forecasts of +177K) the estimates for tomorrow's non-farm private jobs were in the range of 200K. After the ADP report consensus estimates were quickly revised to +120K levels. Always a crap shoot when anticipating jobs, this time is even more tedious. Traders and investors will adjust positions through the day to where they have comfort into employment; comfort is an oxymoron when it comes to the monthly employment however.
There shouldn't be much arguments now that the US economy is softening; all data over the past month has confirmed it and makes it more difficult to defend those optimistic forecasts that generally come from firms that benefit from better outlooks. There will be increasing debate now whether the Fed will do another QE move; the problem is the QE 2 $600B bond buying that ends at the end of this month didn't do anything to help the economy. While the bond-purchase program did push investors into higher-yielding assets such as stocks, the “transmission mechanism” to drive more money into the economy didn’t work. Another easing move from the Fed won't help either. There isn't much the Fed can do that it hasn't already tried and failed. It is all about the consumer and spending, consumers are not about to increase discretionary spending with high energy prices, declining home prices and uncertain employment outlooks. Amazing how the establishment doesn't understand it.
At 9:30 the DJIA opened +5, the 10 yr -14/32 2.99% +4 bp and mortgage prices -10/32 (.31 bp). Within a few minutes after the open the DJIA went negative, at 9:40 -11.
At 10:00 April factory orders, expected down 1.0%, were down 1.2%; April durable goods orders unchanged at -3.6%. No initial reaction.
Look for the day to be relatively quiet with interest rates slightly weaker and equity market indexes hanging around unchanged. Tomorrow's 8:30 May employment report should keep traders from being aggressive in either direction. Yesterday's strong rally in the bond and mortgage markets pushed the 10 yr RSI into overbought levels and betting heavily on the data tomorrow is a fool's errand.
Wednesday, June 1, 2011
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