Mortgage Rates
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Sunday, July 31, 2011
Friday, July 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.
Friday, July 29, 2011
Treasuries and mortgages were better early this morning on the failure of the House to pass its "plan" yesterday as was expected based on comments frm Speaker Boehner through the day. Safety moves into treasuries as Congress and the Administration move closer to a possible default is driving longer dated treasuries lower and with them mortgage rates. There is a lot of talk as you know, that the US will suffer a decline in its credit rating by the rating agencies. Based on reports this morning 75% of investors in treasuries said they would not change their investments or jettison treasuries if in fact the downgrade actually happens.
At 8:30 more improvement in treasuries and mortgages with the advance GDP report for Q2 showing the economy grew just 1.3% against general estimates of +1.9%. Q1 GDP was revised lower, from +1.9% on the final read last month to +0.4%, a huge revision lower. Forecasts of 85 economists in the survey ranged from 0.9% to 2.9%. At $13.27 trillion in the second quarter, GDP has yet to surpass the pre-recession peak. The GDP estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available. Consumer spending from April through June showed the smallest gain since the second quarter of 2009, when the economy was in recession. The slump reflected a 4.4% decline in purchases of durable goods like automobiles. Q2 employment cost index increased 0.7%; yr/yr up 2.2%.
Markets spent a lot of gray matter yesterday on the idea the Boehner plan would pass the House late yesterday; it didn't happen as conservative Tea Party members refused to go along even with Boehner flexing his leadership muscle. Even if the House would have passed its plan the Senate had made it clear it would be dead on arrival if it had reached the chamber. The next step isn't' clear; that said there are countless opinions about what will happen and what the impact will be under various scenarios.
President Obama is scheduled to talk about the impasse on the debt ceiling at 10:20 this morning.
More data at 9:45 when the July Chicago purchasing mgrs index hit; forecasts were for an unchanged index at 61.1, as reported 58.8; employment at 51.5 frm 58.7, new orders at 59.4 frm 61.2 and prices pd at 71.7 frm 70.5. Another weak report however the stock market didn't seem to react much to it, as the key indexes were already down hard from yesterday's closes. Treasuries and mortgage markets did add to their gains on the release, the 10 yr note yield dipped to 2.86% down 2 bp below its level prior to the report; mtgs jumped 4/32 (.12 bp in price)
At 9:55 the U. of Michigan consumer sentiment index, expected at 64.0 frm 63.8; was 63.7. The 12 month out expectations index at 55 frm 52. No reaction to it.
The bellwether 10 yr note this morning fell to 2.87% close to the 2.85% seen a month ago. With Washington in current gridlock on the debt ceiling investors are piling into safety positions, in US treasuries. That Congress and this Administration are at an impasse at the moment is surprising to me; I really believed they would act responsibly, always overestimate the will of politicians even though I set the bar exceptionally low.
At 9:30 the DJIA opened -130, the 10 yr note +20/32 at 2.88% -8 bp and mortgage prices +10/32 (.31 bp).
The bond and mortgage markets are testing last month's low yields this morning. Given the mess in Washington the potential for even lower rates has increased; however, we have to respect the technicals and the momentary double bottom in yields if rates don't push lower. The next few days are critical.
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, July 29, 2011
Treasuries and mortgages were better early this morning on the failure of the House to pass its "plan" yesterday as was expected based on comments frm Speaker Boehner through the day. Safety moves into treasuries as Congress and the Administration move closer to a possible default is driving longer dated treasuries lower and with them mortgage rates. There is a lot of talk as you know, that the US will suffer a decline in its credit rating by the rating agencies. Based on reports this morning 75% of investors in treasuries said they would not change their investments or jettison treasuries if in fact the downgrade actually happens.
At 8:30 more improvement in treasuries and mortgages with the advance GDP report for Q2 showing the economy grew just 1.3% against general estimates of +1.9%. Q1 GDP was revised lower, from +1.9% on the final read last month to +0.4%, a huge revision lower. Forecasts of 85 economists in the survey ranged from 0.9% to 2.9%. At $13.27 trillion in the second quarter, GDP has yet to surpass the pre-recession peak. The GDP estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available. Consumer spending from April through June showed the smallest gain since the second quarter of 2009, when the economy was in recession. The slump reflected a 4.4% decline in purchases of durable goods like automobiles. Q2 employment cost index increased 0.7%; yr/yr up 2.2%.
Markets spent a lot of gray matter yesterday on the idea the Boehner plan would pass the House late yesterday; it didn't happen as conservative Tea Party members refused to go along even with Boehner flexing his leadership muscle. Even if the House would have passed its plan the Senate had made it clear it would be dead on arrival if it had reached the chamber. The next step isn't' clear; that said there are countless opinions about what will happen and what the impact will be under various scenarios.
President Obama is scheduled to talk about the impasse on the debt ceiling at 10:20 this morning.
More data at 9:45 when the July Chicago purchasing mgrs index hit; forecasts were for an unchanged index at 61.1, as reported 58.8; employment at 51.5 frm 58.7, new orders at 59.4 frm 61.2 and prices pd at 71.7 frm 70.5. Another weak report however the stock market didn't seem to react much to it, as the key indexes were already down hard from yesterday's closes. Treasuries and mortgage markets did add to their gains on the release, the 10 yr note yield dipped to 2.86% down 2 bp below its level prior to the report; mtgs jumped 4/32 (.12 bp in price)
At 9:55 the U. of Michigan consumer sentiment index, expected at 64.0 frm 63.8; was 63.7. The 12 month out expectations index at 55 frm 52. No reaction to it.
The bellwether 10 yr note this morning fell to 2.87% close to the 2.85% seen a month ago. With Washington in current gridlock on the debt ceiling investors are piling into safety positions, in US treasuries. That Congress and this Administration are at an impasse at the moment is surprising to me; I really believed they would act responsibly, always overestimate the will of politicians even though I set the bar exceptionally low.
At 9:30 the DJIA opened -130, the 10 yr note +20/32 at 2.88% -8 bp and mortgage prices +10/32 (.31 bp).
The bond and mortgage markets are testing last month's low yields this morning. Given the mess in Washington the potential for even lower rates has increased; however, we have to respect the technicals and the momentary double bottom in yields if rates don't push lower. The next few days are critical.
Thursday, July 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.
Thursday, July 28, 2011
Treasuries and mortgages prior to 8:30 were up nicely, not unusual as in the last seven days every other day the bond and mortgage markets have some gains, and every other day prices fall with no real change in the level of rates. At 8:30 weekly jobless claims took some wind out of the rate markets; after 16 weeks of claims above 400K, claims this morning declined 24K to 398K. The stock indexes reversed from lower levels to up a little. Continuing claims fell 17K to 3.703 mil; last week's claims were revised up 4K to 422K from 418K. The lower claims didn't turn rate markets completely, just a slight move lower but still held better levels than yesterday's closes; within 30 minutes the bond and mortgage markets recovered all of the minor price declines.
CEOs of all major banks sent a letter to Obama, Republicans and Democrats urging they get their act together and deal with the debt problems. One more huge voice but likely won't budge anyone. According to news reports Republicans in the House will vote today on the Boehner plan to increase the debt limit; a two step plan that calls for a temporary increase then another round in early 2012. Many of the Tea Party freshmen members of the House have been resisting accepting Boehner's plan; yesterday he told them to "get their ass in line", tough talk. If the House actually passes the Boehner plan it will go to the senate where Sen.. Reid will make amendments to it, likely removing the temporary increase to increasing the ceiling through all of 2012. Then the bill will go back to the House. If Senate Republicans balk over changes to the Boehner plan it will leave Democrats and the President with the choice of accepting the plan or let the US default. All that said, it is still a fast moving target and likely will have more moves before there is a deal avoiding default.
The bond market continues to believe there will be no default, interest rate markets are holding generally unchanged for the last two weeks with yields swinging up and down every other day with no actual significant changes. One view traders hold is that even if the rating agencies were to lower US credit ratings as they have warned if the Boehner plan is passed, it won't have any impact on US interest rates. A lower credit rating will not take away the fact that the US is still the strongest and safest place in the world. That view is key to why the bond and mortgage markets are not seeing any increase in interest rates. Banks searching for hints of credit-market distress ahead of next week’s deadline to raise the debt ceiling are finding few signs of panic so far.
At 9:30 the DJIA opened +6, the S&P +1, and NASDAQ +2; the 10 yr note +9/32 at 2.95% -3 bp and mortgage prices up 10/32 (.31 bp).
At 10:00 NAR June pending home sales, expected down 2.0%, were up 2.4% after increasing 8.4% in May. Yr/yr pending sales up 19.8%. No reaction to the data, sales still very volatile but showing some small signs of improvement.
At 1:00 Treasury will auction $29B of 7 yr notes to complete this week's borrowing. Yesterday's 5 yr wasn't met with strong demand, not a bad auction just not as solid as recent 5 yr debt issues.
Treasuries still holding most of their bullish technical readings; the 10 yr trading under its key 20 and 40 day averages on the yield charts. The RSI is hovering at 50, a neutral reading. The MBS markets are a little more volatile than treasuries but will follow the 10 yr; note the MBS chart, prices are slightly declining; unable to its 20 day average. Got to go with the technicals but still wonder whether interest rates can decline much from the present levels. These are unusual times with Europe still teetering on defaults in a number of countries; we haven't heard much recently as all attention is aimed at the US debt ceiling issue; difficult to handicap what will happen next once the debt ceiling is increased.
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, July 28, 2011
Treasuries and mortgages prior to 8:30 were up nicely, not unusual as in the last seven days every other day the bond and mortgage markets have some gains, and every other day prices fall with no real change in the level of rates. At 8:30 weekly jobless claims took some wind out of the rate markets; after 16 weeks of claims above 400K, claims this morning declined 24K to 398K. The stock indexes reversed from lower levels to up a little. Continuing claims fell 17K to 3.703 mil; last week's claims were revised up 4K to 422K from 418K. The lower claims didn't turn rate markets completely, just a slight move lower but still held better levels than yesterday's closes; within 30 minutes the bond and mortgage markets recovered all of the minor price declines.
CEOs of all major banks sent a letter to Obama, Republicans and Democrats urging they get their act together and deal with the debt problems. One more huge voice but likely won't budge anyone. According to news reports Republicans in the House will vote today on the Boehner plan to increase the debt limit; a two step plan that calls for a temporary increase then another round in early 2012. Many of the Tea Party freshmen members of the House have been resisting accepting Boehner's plan; yesterday he told them to "get their ass in line", tough talk. If the House actually passes the Boehner plan it will go to the senate where Sen.. Reid will make amendments to it, likely removing the temporary increase to increasing the ceiling through all of 2012. Then the bill will go back to the House. If Senate Republicans balk over changes to the Boehner plan it will leave Democrats and the President with the choice of accepting the plan or let the US default. All that said, it is still a fast moving target and likely will have more moves before there is a deal avoiding default.
The bond market continues to believe there will be no default, interest rate markets are holding generally unchanged for the last two weeks with yields swinging up and down every other day with no actual significant changes. One view traders hold is that even if the rating agencies were to lower US credit ratings as they have warned if the Boehner plan is passed, it won't have any impact on US interest rates. A lower credit rating will not take away the fact that the US is still the strongest and safest place in the world. That view is key to why the bond and mortgage markets are not seeing any increase in interest rates. Banks searching for hints of credit-market distress ahead of next week’s deadline to raise the debt ceiling are finding few signs of panic so far.
At 9:30 the DJIA opened +6, the S&P +1, and NASDAQ +2; the 10 yr note +9/32 at 2.95% -3 bp and mortgage prices up 10/32 (.31 bp).
At 10:00 NAR June pending home sales, expected down 2.0%, were up 2.4% after increasing 8.4% in May. Yr/yr pending sales up 19.8%. No reaction to the data, sales still very volatile but showing some small signs of improvement.
At 1:00 Treasury will auction $29B of 7 yr notes to complete this week's borrowing. Yesterday's 5 yr wasn't met with strong demand, not a bad auction just not as solid as recent 5 yr debt issues.
Treasuries still holding most of their bullish technical readings; the 10 yr trading under its key 20 and 40 day averages on the yield charts. The RSI is hovering at 50, a neutral reading. The MBS markets are a little more volatile than treasuries but will follow the 10 yr; note the MBS chart, prices are slightly declining; unable to its 20 day average. Got to go with the technicals but still wonder whether interest rates can decline much from the present levels. These are unusual times with Europe still teetering on defaults in a number of countries; we haven't heard much recently as all attention is aimed at the US debt ceiling issue; difficult to handicap what will happen next once the debt ceiling is increased.
Wednesday, July 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.
Wednesday, July 27, 2011
The debt ceiling debate continues again today, and will likely continue right up to Aug 2nd. The gap between Democrats and Republicans is as wide as the Grand Canyon, or at least that is what it seems. Yesterday House leader John Boehner said he had a two step plan that could get passed by both houses; this morning that is out. Even if it passed Obama said he would veto it. The Boehner plan had been designed to raise the debt ceiling $900 billion while cutting $1.2 trillion in spending over a decade, then tie a subsequent, $1.6 trillion borrowing increase early next year to enactment of a package slicing $1.8 trillion from the long-term debt. Yet the Congressional Budget Office reported that the measure would only cut $850 billion in spending, violating Boehner’s oft-stated promise that any debt-limit boost be smaller than the cuts accompanying it. The CBO didn’t count the $1.8 trillion in debt savings, saying it couldn’t predict whether the joint congressional committee the measure establishes would be able to produce them.
The President wants a debt ceiling increase large enough to cover all of 2012 while Republicans want an increase that is less and go at it again in the next few months. Obama has said he doesn't want to deal with it in 2012 while he campaigns for his re-election; having to deal with it would keep him from focusing on his career.
The current odds that rating agencies will down grade US credit rating is 60% against 40% they won't. Will it matter? A down grade is kind of a slap in the face but as Rick Santelli pointed out this morning on CNBC, if the US debt is down graded debt ratings in France, Germany and other AAA countries would have to be down graded also; the US is still the strongest and safest country in the world so in relative terms if we go down so too should other countries slide.
It is another day of wrangling in Washington while the bond and mortgage markets sit very still with no real change in rates for the past week and still holding a slight bullish technical bias. Every other day the 10 yr and mortgages see some price improvements, the intervening days see prices decline; yesterday the 10 improved in price and mortgages gained, this morning prices a little weaker.
June durable goods orders were out at 8:30 but with all focus on the debt ceiling increase it and other data are taking a back seat for the moment. Durables fell 2.1% in June, ex the volatile transportation orders up 0.1%, no reaction to the report. Although it is not the headline, orders were very weak and won't be completely dismissed by investors.
At 9:30 the DJIA opened -46, the 10 yr note -7/32 at 2.98% +2 bp and mortgages being hit -8/32 (.25 bp). By 10:00 the 10 yr note has improved to unchanged on the session.
The weekly MBA mortgage applications last week declined from the strong week prior. The index of home loan demand dipped 5.0% in the week ended July 22 after spiking the week before. Meanwhile, MBA's index of refinancing applications was off 5.5% following a 23.1% surge the week before; and requests for purchase loans slipped 3.8%. The declines came as fixed 30-year mortgage rates climbed to 4.57% from 4.54%.
At 1:00 this afternoon Treasury will auction $35B of 5 yr notes, the second of three auctions this week. Yesterday's 2 yr auction was OK, not stellar but under the current circumstances it went well.
At 2:00 the Fed will release its economic data for the 12 Fed districts, known as the Beige Book. It will get attention but not as much as it does in normal situations; the only thing moving markets now is the political drama in Washington.
Treasuries, mortgages and the stock market are all softer this morning as the debt ceiling debate is yielding no progress. Markets are getting increasingly more nervous with the inability of our elected officials to get something worked out. Taking the punch bowl away from politicians (spending) is anathema to them. Technically the bond and mortgage markets are still holding thin bullish readings, but the longer this is dragged on the weaker markets will become. This is not a market that warrants taking on much risk on either side of the outcome, whether bullish or bearish in ones outlook.
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, July 27, 2011
The debt ceiling debate continues again today, and will likely continue right up to Aug 2nd. The gap between Democrats and Republicans is as wide as the Grand Canyon, or at least that is what it seems. Yesterday House leader John Boehner said he had a two step plan that could get passed by both houses; this morning that is out. Even if it passed Obama said he would veto it. The Boehner plan had been designed to raise the debt ceiling $900 billion while cutting $1.2 trillion in spending over a decade, then tie a subsequent, $1.6 trillion borrowing increase early next year to enactment of a package slicing $1.8 trillion from the long-term debt. Yet the Congressional Budget Office reported that the measure would only cut $850 billion in spending, violating Boehner’s oft-stated promise that any debt-limit boost be smaller than the cuts accompanying it. The CBO didn’t count the $1.8 trillion in debt savings, saying it couldn’t predict whether the joint congressional committee the measure establishes would be able to produce them.
The President wants a debt ceiling increase large enough to cover all of 2012 while Republicans want an increase that is less and go at it again in the next few months. Obama has said he doesn't want to deal with it in 2012 while he campaigns for his re-election; having to deal with it would keep him from focusing on his career.
The current odds that rating agencies will down grade US credit rating is 60% against 40% they won't. Will it matter? A down grade is kind of a slap in the face but as Rick Santelli pointed out this morning on CNBC, if the US debt is down graded debt ratings in France, Germany and other AAA countries would have to be down graded also; the US is still the strongest and safest country in the world so in relative terms if we go down so too should other countries slide.
It is another day of wrangling in Washington while the bond and mortgage markets sit very still with no real change in rates for the past week and still holding a slight bullish technical bias. Every other day the 10 yr and mortgages see some price improvements, the intervening days see prices decline; yesterday the 10 improved in price and mortgages gained, this morning prices a little weaker.
June durable goods orders were out at 8:30 but with all focus on the debt ceiling increase it and other data are taking a back seat for the moment. Durables fell 2.1% in June, ex the volatile transportation orders up 0.1%, no reaction to the report. Although it is not the headline, orders were very weak and won't be completely dismissed by investors.
At 9:30 the DJIA opened -46, the 10 yr note -7/32 at 2.98% +2 bp and mortgages being hit -8/32 (.25 bp). By 10:00 the 10 yr note has improved to unchanged on the session.
The weekly MBA mortgage applications last week declined from the strong week prior. The index of home loan demand dipped 5.0% in the week ended July 22 after spiking the week before. Meanwhile, MBA's index of refinancing applications was off 5.5% following a 23.1% surge the week before; and requests for purchase loans slipped 3.8%. The declines came as fixed 30-year mortgage rates climbed to 4.57% from 4.54%.
At 1:00 this afternoon Treasury will auction $35B of 5 yr notes, the second of three auctions this week. Yesterday's 2 yr auction was OK, not stellar but under the current circumstances it went well.
At 2:00 the Fed will release its economic data for the 12 Fed districts, known as the Beige Book. It will get attention but not as much as it does in normal situations; the only thing moving markets now is the political drama in Washington.
Treasuries, mortgages and the stock market are all softer this morning as the debt ceiling debate is yielding no progress. Markets are getting increasingly more nervous with the inability of our elected officials to get something worked out. Taking the punch bowl away from politicians (spending) is anathema to them. Technically the bond and mortgage markets are still holding thin bullish readings, but the longer this is dragged on the weaker markets will become. This is not a market that warrants taking on much risk on either side of the outcome, whether bullish or bearish in ones outlook.
Tuesday, July 26, 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, July 26, 2011
Interest rate markets started unchanged this morning after some weakness yesterday that mirrored the slight improvement last Friday. Markets still don't have any idea how the debt ceiling increase will be resolved, thus sitting quietly waiting. By 9:30 mortgage prices were better by 3/32 (.09 bp) frm yesterday's close. The DJIA opened -40, the 10 yr note +3/32 at 2.99% -1 bp.
At 9:00 the May Case/Shiller home price index was up 1.0% for 20 cities and -4.5% yr/yr, both as expected. No reaction to the report; in our view it is a lagging report and isn't a key data point on housing, just one more study but covers just 20 large markets. Home prices in 20 U.S. cities dropped in the year ended May by the most in 18 months, adding to evidence the housing market is struggling.
At 10:00 July consumer confidence index hit at 59.5 frm a revised 57.6 (revised from 58.5); the expectations index 75.4 frm 71.6 in June.
June new home sales down 1.0% against estimates of +0.4% to 312K units annualized. May sales revised to -0.6% frm -2.1%; based on sales there is a 6.3 month supply. The median sales price $235,200 up 7.2% yr/yr. There was no immediate reaction to the two data points. The DJIA still falling and the bond and mortgage markets improving from earlier levels.
The Pres. went on prime time TV last night pleading his plan and chiding Republicans; immediately after he spoke John Boehner fired back. That is about all we get these days; barbs flying and fear mongering from both sides; meanwhile there is still no deal. “We can’t allow the American people to become collateral damage to Washington’s political warfare,” Obama said. Moments later, Boehner responded that the president “wants a blank check” to continue government spending that is “sapping the drive of our people.” Posturing isn't helping and won't make a bit of difference as both sides now are locked in their own ideas. Markets are not falling apart as the Pres has implied; markets increasingly believe if August 2nd comes and goes the government will find a way to pay its bills. As for down grading US credit rating; that also hasn't generated any significant moves in the bond or equity markets. There is now an increasing floating balloon to lessen the idea of a default; that the US really doesn't need a debt ceiling at all; Moody's is saying it as is Warren Buffet. As this saga goes on---and on----markets and investors are increasingly bored with it; no increase in interest rates, no real decline in the equity markets based on debt fears.
At 1:00 Treasury will auction $35B of 2 yr notes, if the auction goes well it will be further evidence global investors are not fretting over the impasse in Washington and ignoring the Armageddon talk coming from the White House. If demand is weak, then we have something to worry about.
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, July 26, 2011
Interest rate markets started unchanged this morning after some weakness yesterday that mirrored the slight improvement last Friday. Markets still don't have any idea how the debt ceiling increase will be resolved, thus sitting quietly waiting. By 9:30 mortgage prices were better by 3/32 (.09 bp) frm yesterday's close. The DJIA opened -40, the 10 yr note +3/32 at 2.99% -1 bp.
At 9:00 the May Case/Shiller home price index was up 1.0% for 20 cities and -4.5% yr/yr, both as expected. No reaction to the report; in our view it is a lagging report and isn't a key data point on housing, just one more study but covers just 20 large markets. Home prices in 20 U.S. cities dropped in the year ended May by the most in 18 months, adding to evidence the housing market is struggling.
At 10:00 July consumer confidence index hit at 59.5 frm a revised 57.6 (revised from 58.5); the expectations index 75.4 frm 71.6 in June.
June new home sales down 1.0% against estimates of +0.4% to 312K units annualized. May sales revised to -0.6% frm -2.1%; based on sales there is a 6.3 month supply. The median sales price $235,200 up 7.2% yr/yr. There was no immediate reaction to the two data points. The DJIA still falling and the bond and mortgage markets improving from earlier levels.
The Pres. went on prime time TV last night pleading his plan and chiding Republicans; immediately after he spoke John Boehner fired back. That is about all we get these days; barbs flying and fear mongering from both sides; meanwhile there is still no deal. “We can’t allow the American people to become collateral damage to Washington’s political warfare,” Obama said. Moments later, Boehner responded that the president “wants a blank check” to continue government spending that is “sapping the drive of our people.” Posturing isn't helping and won't make a bit of difference as both sides now are locked in their own ideas. Markets are not falling apart as the Pres has implied; markets increasingly believe if August 2nd comes and goes the government will find a way to pay its bills. As for down grading US credit rating; that also hasn't generated any significant moves in the bond or equity markets. There is now an increasing floating balloon to lessen the idea of a default; that the US really doesn't need a debt ceiling at all; Moody's is saying it as is Warren Buffet. As this saga goes on---and on----markets and investors are increasingly bored with it; no increase in interest rates, no real decline in the equity markets based on debt fears.
At 1:00 Treasury will auction $35B of 2 yr notes, if the auction goes well it will be further evidence global investors are not fretting over the impasse in Washington and ignoring the Armageddon talk coming from the White House. If demand is weak, then we have something to worry about.
Monday, July 25, 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, July 25, 2011
Treasuries and mortgages opened weak this morning; over the week-end no real progress with the debt ceiling increase as political gamesmanship continues. Democrats and the Pres want debt ceiling increase large enough to avoid having to deal with it next year ahead of the elections, while Republicans are trying to get a plan that increases the ceiling but only enough to get through several months then back to the debate.
The impasse has boosted the chance Standard & Poor’s will lower the U.S. credit rating from AAA within three months to 50%, according to PIMCO, the largest bond managers in the world. Mohammad El Erian said in an e-mail last week. “In most likelihood, a last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable,” ...... “stock markets around the globe will look to price in a greater uncertainty premium on account of political squabbles in the world’s largest economy and the increasing risk that it may lose its sacred AAA rating.” Over the weekend there was a lot of concern that equity markets would fall hard frm Asia to Europe and in the US; the DJIA is opening weaker this morning but not nearly as bad as some were expecting.
The way the debating in Washington is proceeding it isn't going to sit well with markets. The US interest rate markets are likely to begin factoring in a risk premium based on concerns that rating agencies may lower the US credit rating based on the reluctance of politicians to step up and make major decisions on increasing revenues and cutting spending. As it looks now what actually occurs will not satisfy rating agencies; at least that is the present fluid thinking. A rapidly moving target now with the deadline coming on rapidly making it questionable whether Congress can put it all together in time to avoid default.
No economic releases today; this week Treasury will auction $99B of notes. The Fed isn't buying treasuries anymore but the auctions two weeks ago didn't appear to be pressured as a result.
This Week's Economic Calendar;
Tuesday;
9:00 am Case/Shiller May 20 city price index (-4.4%)
10:00 am July consumer confidence index (56.0 frm 58.5)
June new home sales (+0.4% to 320K annualized)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am Weekly MBA mortgage applications
8:30 am June durable orders (+0.4%; ex transportation orders +0.5%)
1:00 pm $35B 5 yr note auction
2:00 pm Fed Beige Book
Thursday;
8:30 am weekly jobless clams (-3K to 415K; cont claims 3.688 mil frm 3.698 mil)
10:00 am June pending home sales (-3.0%; +8.2% in May)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am Q2 advance GDP report (+1.6% frm +1.9% in Q1)
Q2 employment cost index (+0.5%)
9:45 am July Chicago purchasing mangers index (58.0 frm 61.1)
9:55 am U. of Michigan consumer sentiment index (63.8 unch)
Gold this morning making another record high as concern over the US credit rating possibly being lowered by the rating agencies.
Asian stock markets fell today, Europe's markets also lower; at 9:30 the DJIA opened -96; the 10 yr note -13/32 3.01% and mortgage prices -9/32 (.28 bp).
Equity markets didn't open as badly as many were expecting with no debt ceiling deal in place but the indexes are slipping a little from the 9:30 open, as they do fall the bond market is finding support. Although interest rates are higher this morning and prices lower on mortgages, if the stock market continues to slide as the day rolls on the bond market will likely improve. Conversely, any improvement in equity markets will push yields higher and prices lower. Technically the bond and mortgage markets are still not throwing off bearish reads but any more selling and the short term outlook will turn bearish. On the outlook for lower rates, we do not expect rates will fall much on any rallies. The 10 yr note has put in a double bottom on the yield chart, not a good sign. If the 10 yr note yield closes above 3.05% the next target would be 3.25% then 3.40%; mortgage rates will follow.
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, July 25, 2011
Treasuries and mortgages opened weak this morning; over the week-end no real progress with the debt ceiling increase as political gamesmanship continues. Democrats and the Pres want debt ceiling increase large enough to avoid having to deal with it next year ahead of the elections, while Republicans are trying to get a plan that increases the ceiling but only enough to get through several months then back to the debate.
The impasse has boosted the chance Standard & Poor’s will lower the U.S. credit rating from AAA within three months to 50%, according to PIMCO, the largest bond managers in the world. Mohammad El Erian said in an e-mail last week. “In most likelihood, a last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable,” ...... “stock markets around the globe will look to price in a greater uncertainty premium on account of political squabbles in the world’s largest economy and the increasing risk that it may lose its sacred AAA rating.” Over the weekend there was a lot of concern that equity markets would fall hard frm Asia to Europe and in the US; the DJIA is opening weaker this morning but not nearly as bad as some were expecting.
The way the debating in Washington is proceeding it isn't going to sit well with markets. The US interest rate markets are likely to begin factoring in a risk premium based on concerns that rating agencies may lower the US credit rating based on the reluctance of politicians to step up and make major decisions on increasing revenues and cutting spending. As it looks now what actually occurs will not satisfy rating agencies; at least that is the present fluid thinking. A rapidly moving target now with the deadline coming on rapidly making it questionable whether Congress can put it all together in time to avoid default.
No economic releases today; this week Treasury will auction $99B of notes. The Fed isn't buying treasuries anymore but the auctions two weeks ago didn't appear to be pressured as a result.
This Week's Economic Calendar;
Tuesday;
9:00 am Case/Shiller May 20 city price index (-4.4%)
10:00 am July consumer confidence index (56.0 frm 58.5)
June new home sales (+0.4% to 320K annualized)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am Weekly MBA mortgage applications
8:30 am June durable orders (+0.4%; ex transportation orders +0.5%)
1:00 pm $35B 5 yr note auction
2:00 pm Fed Beige Book
Thursday;
8:30 am weekly jobless clams (-3K to 415K; cont claims 3.688 mil frm 3.698 mil)
10:00 am June pending home sales (-3.0%; +8.2% in May)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am Q2 advance GDP report (+1.6% frm +1.9% in Q1)
Q2 employment cost index (+0.5%)
9:45 am July Chicago purchasing mangers index (58.0 frm 61.1)
9:55 am U. of Michigan consumer sentiment index (63.8 unch)
Gold this morning making another record high as concern over the US credit rating possibly being lowered by the rating agencies.
Asian stock markets fell today, Europe's markets also lower; at 9:30 the DJIA opened -96; the 10 yr note -13/32 3.01% and mortgage prices -9/32 (.28 bp).
Equity markets didn't open as badly as many were expecting with no debt ceiling deal in place but the indexes are slipping a little from the 9:30 open, as they do fall the bond market is finding support. Although interest rates are higher this morning and prices lower on mortgages, if the stock market continues to slide as the day rolls on the bond market will likely improve. Conversely, any improvement in equity markets will push yields higher and prices lower. Technically the bond and mortgage markets are still not throwing off bearish reads but any more selling and the short term outlook will turn bearish. On the outlook for lower rates, we do not expect rates will fall much on any rallies. The 10 yr note has put in a double bottom on the yield chart, not a good sign. If the 10 yr note yield closes above 3.05% the next target would be 3.25% then 3.40%; mortgage rates will follow.
Sunday, July 24, 2011
Friday, July 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.
Friday, July 22, 2011
Treasuries and mortgages took a hit yesterday on increased belief a plan will emerge in Europe to bring those debt ladened countries in the EU back from the brink and some optimism that the Washington crowd might actually get a deal on increasing the debt ceiling and cut some spending. This morning though the mortgage market in early trading has re-cooped all of its price declines from yesterday. Yesterday the 10 yr note yield jumped 10 basis points after toying with the low rate back in June. As we have noted many times, when the 10 yr note rate falls below 3.00% it enters a level that will be difficult to maintain.
There are no economic reports today; yesterday the Philly Fed index, while back above zero, did not meet forecasts. The economy is still struggling. Stocks rallying on all the better Q2 earnings and belief growth will increase. At 9:30 the DJIA opened -33, the 10 yr note +10/32 at 2.98% -4 bp and mortgage prices +9/21 (.28 bp).
The turmoil in Europe continued today; all attempts to structure a plan seem to meet dead ends. One day it appears good, the next back to square one. As the uncertainty continues it plays into our markets with increased volatility. German Chancellor Angela Merkel said government chiefs had learned from “systemic effects” in the single-currency area and widened the scope of their bailout fund to allow it to buy the bonds of debt-laden nations, support banks and offer credit lines. The agreement included new aid for Greece that embraced bondholders, prompting Fitch Ratings to say it will put a default rating on Greek debt. The risk is that the package will follow the pattern of previous agreements and eventually disappoint markets.
Here in the US still no deal to increase the debt ceiling; today Timothy F. Geithner was scheduled to meet this morning with Bernanke to discuss the implications of a failure of Congress to raise the debt limit in a timely manner, according to an administration official. William C. Dudley, president of the Federal Reserve Bank of New York, was also scheduled to take part in the meeting. Geithner has repeatedly said he expects Congress will raise the $14.3 trillion debt ceiling and that Republican leaders have taken default “off the table.” He has not discussed publicly any contingency plans in the event that the Aug. 2 deadline is not met.
Crude oil playing again close to $100.00/barrel. Gold +$16.00.
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, July 22, 2011
Treasuries and mortgages took a hit yesterday on increased belief a plan will emerge in Europe to bring those debt ladened countries in the EU back from the brink and some optimism that the Washington crowd might actually get a deal on increasing the debt ceiling and cut some spending. This morning though the mortgage market in early trading has re-cooped all of its price declines from yesterday. Yesterday the 10 yr note yield jumped 10 basis points after toying with the low rate back in June. As we have noted many times, when the 10 yr note rate falls below 3.00% it enters a level that will be difficult to maintain.
There are no economic reports today; yesterday the Philly Fed index, while back above zero, did not meet forecasts. The economy is still struggling. Stocks rallying on all the better Q2 earnings and belief growth will increase. At 9:30 the DJIA opened -33, the 10 yr note +10/32 at 2.98% -4 bp and mortgage prices +9/21 (.28 bp).
The turmoil in Europe continued today; all attempts to structure a plan seem to meet dead ends. One day it appears good, the next back to square one. As the uncertainty continues it plays into our markets with increased volatility. German Chancellor Angela Merkel said government chiefs had learned from “systemic effects” in the single-currency area and widened the scope of their bailout fund to allow it to buy the bonds of debt-laden nations, support banks and offer credit lines. The agreement included new aid for Greece that embraced bondholders, prompting Fitch Ratings to say it will put a default rating on Greek debt. The risk is that the package will follow the pattern of previous agreements and eventually disappoint markets.
Here in the US still no deal to increase the debt ceiling; today Timothy F. Geithner was scheduled to meet this morning with Bernanke to discuss the implications of a failure of Congress to raise the debt limit in a timely manner, according to an administration official. William C. Dudley, president of the Federal Reserve Bank of New York, was also scheduled to take part in the meeting. Geithner has repeatedly said he expects Congress will raise the $14.3 trillion debt ceiling and that Republican leaders have taken default “off the table.” He has not discussed publicly any contingency plans in the event that the Aug. 2 deadline is not met.
Crude oil playing again close to $100.00/barrel. Gold +$16.00.
Thursday, July 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.
Thursday, July 21, 2011
Mortgage prices were under pressure in early trading. Equity futures were stronger prior to the opening as the problems in Europe seem to have moved to a more promising solution. At the opening of the stock markets the DJIA was higher but not as high as the futures were indicating earlier in the morning. Mortgage prices were down by 6/32, unchanged from earlier in the morning. The 10-year note yield is pushing the 3.0% mark, 2.99% at the stock market opening.
The unfolding talks in Europe over Greek debt have brought us a pending compromise whereby the ECB will allow Greece to temporarily slip into default as part of a broader agreement. The proposal involves a buyback of discounted Greek bonds to help Greece deal with the crippling effects of the current terms of their rescue. This agreement that is supported by Germany and France and the Dutch, is touted as the most promising way to get private investors involved in the second rescue package. The implications for a rescue package for Portugal, Ireland, and then Italy and Spain are perhaps looking better as the compromise over Greek debt comes to a head.
Economic news in Europe was weaker as the French and German equivalent to our PMI was reported close to contraction. In addition, China’s factory sector reported a contraction for the first time in a year. These are more signs that the global economy is slowing and that it will filter over to our economy as we have seen of late.
At 8:30am weekly jobless claims were reported up 10K to 418K for the week ending 7/16. Continuing claims fell to 3.698M from 3.748M for the week ending 7/09. The 4-week moving average fell by 2,750 to 421,250 claims. There was no market reaction to the rise in claims.
At 10:00am June leading indicators came in at +0.3% versus +0.8% in May meeting expectations. Equities rose and mortgage prices fell about 1/32.
The Federal Housing Finance Agency reported at 10:00am that home prices for May were +0.4% versus +0.8% in April.
Lastly at 10:00am The Philadelphia Fed Index for July came in at 3.2 on expectations of about a 2.5 read from June’s negative read of -7.7. Equity markets rose on the news and mortgage prices gave up about 1/32.
The big media event of the day centers around testimony on the Hill regarding the Dodd-Frank Bill 1-year after taking effect and the deal or compromise that Congress is proposing over the debt-ceiling deficit-reduction debate.
Gold and oil prices are higher in early trade as is the euro. The euro gained strength as a compromise over Greece looks like it may be reached. The yen is essentially unchanged versus the dollar.
The only item left on the calendar for the week is the 1:00pm 10-year TIPS auction. The rest of the day will be dominated by European news and bonds and mortgages following equities.
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, July 21, 2011
Mortgage prices were under pressure in early trading. Equity futures were stronger prior to the opening as the problems in Europe seem to have moved to a more promising solution. At the opening of the stock markets the DJIA was higher but not as high as the futures were indicating earlier in the morning. Mortgage prices were down by 6/32, unchanged from earlier in the morning. The 10-year note yield is pushing the 3.0% mark, 2.99% at the stock market opening.
The unfolding talks in Europe over Greek debt have brought us a pending compromise whereby the ECB will allow Greece to temporarily slip into default as part of a broader agreement. The proposal involves a buyback of discounted Greek bonds to help Greece deal with the crippling effects of the current terms of their rescue. This agreement that is supported by Germany and France and the Dutch, is touted as the most promising way to get private investors involved in the second rescue package. The implications for a rescue package for Portugal, Ireland, and then Italy and Spain are perhaps looking better as the compromise over Greek debt comes to a head.
Economic news in Europe was weaker as the French and German equivalent to our PMI was reported close to contraction. In addition, China’s factory sector reported a contraction for the first time in a year. These are more signs that the global economy is slowing and that it will filter over to our economy as we have seen of late.
At 8:30am weekly jobless claims were reported up 10K to 418K for the week ending 7/16. Continuing claims fell to 3.698M from 3.748M for the week ending 7/09. The 4-week moving average fell by 2,750 to 421,250 claims. There was no market reaction to the rise in claims.
At 10:00am June leading indicators came in at +0.3% versus +0.8% in May meeting expectations. Equities rose and mortgage prices fell about 1/32.
The Federal Housing Finance Agency reported at 10:00am that home prices for May were +0.4% versus +0.8% in April.
Lastly at 10:00am The Philadelphia Fed Index for July came in at 3.2 on expectations of about a 2.5 read from June’s negative read of -7.7. Equity markets rose on the news and mortgage prices gave up about 1/32.
The big media event of the day centers around testimony on the Hill regarding the Dodd-Frank Bill 1-year after taking effect and the deal or compromise that Congress is proposing over the debt-ceiling deficit-reduction debate.
Gold and oil prices are higher in early trade as is the euro. The euro gained strength as a compromise over Greece looks like it may be reached. The yen is essentially unchanged versus the dollar.
The only item left on the calendar for the week is the 1:00pm 10-year TIPS auction. The rest of the day will be dominated by European news and bonds and mortgages following equities.
Wednesday, July 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.
Wednesday, July 20, 2011
In early trading this morning (7:00 am) the 10 yr note off 10/32 at 2.92% and mortgages opened -6/32 (.18 bp); by 9:00 however the markets had firmed. The 10 yr at 9:00 -7/32, mortgage prices -3/32 (.09 bp). Early trade in the stock index futures were stronger pointing to a better open at 9:30. At 9:30 however the DJIA actually opened weaker.
A huge increase in mortgage applications last week according to the Mortgage Bankers Assoc; overall applications were up 15.5% frm the previous week led by the lowest mortgage rates of the year. Purchase apps were actually down 0.1% but re-finance apps were up 23.1% for the week; the strongest showing since last March. The share of re-finances increased to 70.1% frm 65.6% the prior week. The MBA stated the obvious; turmoil in Europe over potential defaults on sovereign debt driving US rates lower, driving re-finances; that is the good news for originators, the bad news---no purchase increases.
Yesterday afternoon's appearance of the Pres. saying he in essence is in favor of the proposal offered by the Gang of Six Senators to end the impasse over increasing the debt ceiling drove equity markets higher and eased concerns that there is going to be a deal. As we have noted, a debt default on US debt was not going to happen; if for no other reason, no politician wants that on their plate. The deal isn't what conservatives want nor is it what liberals would like but neither was going to get what the wanted and everyone knew it. That said, there is still no deal yet; Congress as to pass it then Obama has to accept it.
Want to earn 40% on a 2 yr note? Buy Greek 2 years. The sovereign debt problems in Europe are still a key reason US treasury rates are maintaining low yields as investors seek safety. Tomorrow the leaders of Europe will meet in Brussels to continue to try and come up with a plan to pull the EU back from the cliff. Together with a second Greek aid package, the goal is to prove to markets that Europe has the will and the tools to prevent the 21-month sovereign debt crisis from engulfing Spain and Italy. “Nobody should be under any illusion; the situation is very serious,” European Commission President Jose Barroso told reporters in Brussels today. “It requires a response. Otherwise, the negative consequences will be felt in all corners of Europe and beyond.”
Until there is some practical and workable plan in Europe to keep sovereign defaults from occurring, US interest rates will find support as global investors move into the safest place to park money. That said, the belief that the US will dodge its own default and all the strong Q2 earnings being reported have increased the risk appetite of investors. So far though as stocks rally the US bond market isn't being hurt and rates remain low. The DJIA opened a little weaker this morning after increasing 200 points yesterday, trying to handicap what is going on in Washington; the DJIA -5 points on the open.
At 10:00 June existing home sales, expected to be up 2.5% to 4.93 mil annualized units, as reported sales down 0.8%. 30% of sales were on distressed properties; the median sales price $184.300, based on ales there is a 9.5 months supply. The NAR reported there was a 16% cancellation rate in June; possibly due to the rapid decline in rates, but it does leave a question as to why if it wasn't due to falling rates. There was no market reaction to the report.
Yesterday the 10 yr note yield fell to 2.87% at one point, closing at 2.88%; the low a month ago was 2.85% before a huge selling binge drove the 10 yr up 40 basis points in five days and mortgage rates up 30 basis points. The rate market is currently re-testing that low, it begs the question now whether the situation in Europe is so bad that long term US rates can move much lower. All technical reads remain positive but at these low yields we continue to be very cautious; stay with the trend but be ready to move if the 10 yr note climbs back above 2.95% on a closing basis. Even if these are the lows and yields do not fall more, there is little likelihood now that rates will increase much as long as Europe's mess remains unresolved.
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, July 20, 2011
In early trading this morning (7:00 am) the 10 yr note off 10/32 at 2.92% and mortgages opened -6/32 (.18 bp); by 9:00 however the markets had firmed. The 10 yr at 9:00 -7/32, mortgage prices -3/32 (.09 bp). Early trade in the stock index futures were stronger pointing to a better open at 9:30. At 9:30 however the DJIA actually opened weaker.
A huge increase in mortgage applications last week according to the Mortgage Bankers Assoc; overall applications were up 15.5% frm the previous week led by the lowest mortgage rates of the year. Purchase apps were actually down 0.1% but re-finance apps were up 23.1% for the week; the strongest showing since last March. The share of re-finances increased to 70.1% frm 65.6% the prior week. The MBA stated the obvious; turmoil in Europe over potential defaults on sovereign debt driving US rates lower, driving re-finances; that is the good news for originators, the bad news---no purchase increases.
Yesterday afternoon's appearance of the Pres. saying he in essence is in favor of the proposal offered by the Gang of Six Senators to end the impasse over increasing the debt ceiling drove equity markets higher and eased concerns that there is going to be a deal. As we have noted, a debt default on US debt was not going to happen; if for no other reason, no politician wants that on their plate. The deal isn't what conservatives want nor is it what liberals would like but neither was going to get what the wanted and everyone knew it. That said, there is still no deal yet; Congress as to pass it then Obama has to accept it.
Want to earn 40% on a 2 yr note? Buy Greek 2 years. The sovereign debt problems in Europe are still a key reason US treasury rates are maintaining low yields as investors seek safety. Tomorrow the leaders of Europe will meet in Brussels to continue to try and come up with a plan to pull the EU back from the cliff. Together with a second Greek aid package, the goal is to prove to markets that Europe has the will and the tools to prevent the 21-month sovereign debt crisis from engulfing Spain and Italy. “Nobody should be under any illusion; the situation is very serious,” European Commission President Jose Barroso told reporters in Brussels today. “It requires a response. Otherwise, the negative consequences will be felt in all corners of Europe and beyond.”
Until there is some practical and workable plan in Europe to keep sovereign defaults from occurring, US interest rates will find support as global investors move into the safest place to park money. That said, the belief that the US will dodge its own default and all the strong Q2 earnings being reported have increased the risk appetite of investors. So far though as stocks rally the US bond market isn't being hurt and rates remain low. The DJIA opened a little weaker this morning after increasing 200 points yesterday, trying to handicap what is going on in Washington; the DJIA -5 points on the open.
At 10:00 June existing home sales, expected to be up 2.5% to 4.93 mil annualized units, as reported sales down 0.8%. 30% of sales were on distressed properties; the median sales price $184.300, based on ales there is a 9.5 months supply. The NAR reported there was a 16% cancellation rate in June; possibly due to the rapid decline in rates, but it does leave a question as to why if it wasn't due to falling rates. There was no market reaction to the report.
Yesterday the 10 yr note yield fell to 2.87% at one point, closing at 2.88%; the low a month ago was 2.85% before a huge selling binge drove the 10 yr up 40 basis points in five days and mortgage rates up 30 basis points. The rate market is currently re-testing that low, it begs the question now whether the situation in Europe is so bad that long term US rates can move much lower. All technical reads remain positive but at these low yields we continue to be very cautious; stay with the trend but be ready to move if the 10 yr note climbs back above 2.95% on a closing basis. Even if these are the lows and yields do not fall more, there is little likelihood now that rates will increase much as long as Europe's mess remains unresolved.
Tuesday, July 19, 2011
Mortgage Rate Update
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, July 19, 2011
Treasuries and mortgages started soft this morning after some selling yesterday. Two drivers, and only two these days; the debt and spending cut talks that seem like they are going nowhere and the on-going and continuing escalation of Europe's debt issues. Italy, a country much larger than Greece is now on the front burner with concerns it will need a bail-out. IN Greece the EU and IMF still can't get it together and Greece's Parliament isn't making much headway; if Greece can't be dealt with concerns that Italy will be a much more difficult problem. Bank stocks fell yesterday in Europe and fed to the US as debt default concerns increase. European Union leaders are preparing for a summit on July 21 to hammer out a solution to the Greek debt crisis, as concern deepened that it would spread to Italian and Spanish bonds. This morning Germany's Merkel dampened any potential optimism with comments that she isn't expecting much frm the meeting.
We continue to believe that at the 11th hour there will be a deal on the debt ceiling, however whatever comes out of it it won't be significant in terms of cutting spending or increasing taxes on the wealthy. To achieve any significant cuts in government spending and potential tax increases is not going to come to a head until after the 2012 elections Politicians will do what they do until then; talk a lot but accomplish little. If the US is going to actually tackle our fiscal mess it will take voters to force the issues. Will voters understand the problem and will they vote to begin to correct them?
At 8:30 this morning June housing starts and permits; starts expected up 1.75% but jumped 14.6% to 629K units (annualized). Single family starts in June were up 9.4%, the highest since Nov. June building permits were expected to be unchanged from May, as reported they increased 2.5%. No initial market reaction to the report but at 9:30 when equi8ty trading started the key indexes are doing better than expected; as noted above it is all about the debt ceiling and Europe's escalating sovereign debt problems. Although the June starts were much stronger there is little reason to expect an immediate change in the housing sector that remains in depression.
At 9:30 the DJIA opened +90, 10 yr -7/32 at 2.94% +2 bp; mortgage prices -5/32 (.15 bp). Trade volume yesterday was thin, the same is likely today. Technically the FNMA MBS has broken below its 20 and 40 day averages while the 10 yr note yield is still holding its averages. There is little reason now to become too bullish, as previously noted the level of US interest rates are at record lows, to decline further is likely to be difficult.
Bank of America Corp. posted the biggest quarterly loss in the lender’s history. The second-quarter loss of $8.83B, or 90 cents a share, compared with profit of $3.12B, or 27 cents, a year earlier. The mortgage unit’s loss widened to $14.5B from $1.5B a year earlier, on the previously announced settlement costs and additions to provisions; can we say Countrywide?
The bond and mortgage markets are likely to continue trading in about a 10 basis point yield range through the rest of the week and into next week. Safety trades into US treasuries will continue as long as Europe is in play and the US Congress and the Administration continue to debate the debt ceiling; as noted we do not believe the US will default, most of the chatter is just that; not to make light of the problem but no politician will let that happen. While the issues are far apart they will come to some half-assed deal that will avoid default but won't come close to facing reality that the US government is out of control in terms of spending----politicians' lifeblood.
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, July 19, 2011
Treasuries and mortgages started soft this morning after some selling yesterday. Two drivers, and only two these days; the debt and spending cut talks that seem like they are going nowhere and the on-going and continuing escalation of Europe's debt issues. Italy, a country much larger than Greece is now on the front burner with concerns it will need a bail-out. IN Greece the EU and IMF still can't get it together and Greece's Parliament isn't making much headway; if Greece can't be dealt with concerns that Italy will be a much more difficult problem. Bank stocks fell yesterday in Europe and fed to the US as debt default concerns increase. European Union leaders are preparing for a summit on July 21 to hammer out a solution to the Greek debt crisis, as concern deepened that it would spread to Italian and Spanish bonds. This morning Germany's Merkel dampened any potential optimism with comments that she isn't expecting much frm the meeting.
We continue to believe that at the 11th hour there will be a deal on the debt ceiling, however whatever comes out of it it won't be significant in terms of cutting spending or increasing taxes on the wealthy. To achieve any significant cuts in government spending and potential tax increases is not going to come to a head until after the 2012 elections Politicians will do what they do until then; talk a lot but accomplish little. If the US is going to actually tackle our fiscal mess it will take voters to force the issues. Will voters understand the problem and will they vote to begin to correct them?
At 8:30 this morning June housing starts and permits; starts expected up 1.75% but jumped 14.6% to 629K units (annualized). Single family starts in June were up 9.4%, the highest since Nov. June building permits were expected to be unchanged from May, as reported they increased 2.5%. No initial market reaction to the report but at 9:30 when equi8ty trading started the key indexes are doing better than expected; as noted above it is all about the debt ceiling and Europe's escalating sovereign debt problems. Although the June starts were much stronger there is little reason to expect an immediate change in the housing sector that remains in depression.
At 9:30 the DJIA opened +90, 10 yr -7/32 at 2.94% +2 bp; mortgage prices -5/32 (.15 bp). Trade volume yesterday was thin, the same is likely today. Technically the FNMA MBS has broken below its 20 and 40 day averages while the 10 yr note yield is still holding its averages. There is little reason now to become too bullish, as previously noted the level of US interest rates are at record lows, to decline further is likely to be difficult.
Bank of America Corp. posted the biggest quarterly loss in the lender’s history. The second-quarter loss of $8.83B, or 90 cents a share, compared with profit of $3.12B, or 27 cents, a year earlier. The mortgage unit’s loss widened to $14.5B from $1.5B a year earlier, on the previously announced settlement costs and additions to provisions; can we say Countrywide?
The bond and mortgage markets are likely to continue trading in about a 10 basis point yield range through the rest of the week and into next week. Safety trades into US treasuries will continue as long as Europe is in play and the US Congress and the Administration continue to debate the debt ceiling; as noted we do not believe the US will default, most of the chatter is just that; not to make light of the problem but no politician will let that happen. While the issues are far apart they will come to some half-assed deal that will avoid default but won't come close to facing reality that the US government is out of control in terms of spending----politicians' lifeblood.
Monday, July 18, 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, July 18, 2011
Treasuries started better this morning on continuing debt problems in Europe; today its Italy and Greece but also Portugal, Spain and Ireland also rattling global markets. Sovereign debt in those countries is serious and unlikely to be resolved anytime soon. Increasing concerns that in the end there will be actual defaults in Europe; here in the US the debt mess and budget impasse continues. The US isn't near the problems in Europe but the country is headed that way unless Americans get serious about deficit reductions, a very hard pill to swallow in these soft economic times. In the meantime Congress and the Administration will continue to kick the can down the road until citizens demand them to cut spending-----a decision many will have trouble with. By 9:00 the 10 yr note had lost all its early gains and mortgage prices went negative (-3/32, 0.09 bp) frm Friday' close.
President Barack Obama is pressing congressional leaders for a multitrillion-dollar agreement in deficit-cutting talks as negotiators near an Aug. 2 deadline for raising the debt limit. A default would cause more panic than the collapse of Lehman Brothers Holdings Inc. in 2008, former Treasury Secretary Larry Summers told CNN in an interview broadcast yesterday. Treasuries rose and the euro fell amid concern European leaders will fail to stop the region’s spreading debt woes at a summit this week.
Mortgage rates being pulled lower as treasuries get safety driven buying; the stock market opening lower this morning also helping. Crude oil lower today as stocks decline; Brent crude declined for a third day in London as investors bet that Europe’s worsening debt crisis may slow the economy and crimp fuel demand. Gold back over $1600.00 also driven by safety moves with investors becoming less comfortable with any currencies.
At 9:30 the DJIA opened down 65, the 10 yr note +2/32 and mortgage prices +1/32 (.03 bp).
This Week's Economic Calendar:
Today;
10:00 July NAHB housing index (as reported 15 frm 13; still very negative)
Tuesday;
8:30 am June housing starts and permits (starts +1.75%, permits unchanged)
Wednesday;
10:00 am June existing home sales (+2.5% at 4.93 mil units annualized)
Thursday;
8:30 am weekly jobless claims (+6K at 411K)
10:00 am July Philly Fed business index (0.0 frm -7/1 in June)
June leading economic indicators (+0.3%)
FHFA May housing price index (N/A)
Economists in a Bloomberg News survey projected long-term U.S. financial assets would show net buying of $40B in May; as reported net purchases were $23.6B. The Treasury’s reporting on long-term securities is a gauge of confidence in U.S. economic policy, and today’s report suggests the U.S. continues to offer safety from the economic crisis in Europe even with the White House and Congress at odds over raising the Treasury’s borrowing authority; although the increase was much less than was thought suggesting all is not that rosy.
US interest rates still have a bullish bias based on Europe's problems and the on-going debates in Washington over the debt ceiling and budget cuts; however, we remain somewhat defensive with interest rates as low as we have them now. We don't want to fight the tape but at the same time we have to be cautious and not get too optimistic. Go with it, but be prepared to take advantage of the low rates when markets turn. It is highly unlikely the US will lose its AAA credit rating by rating agencies, and the US will not default on our debt; nevertheless markets are dancing on a hot skillet as the deadline approaches. It is a day-to-day trade these days; unfolding and very fluid events can have a swift and big move in markets; interest rates are at all time lows now, it will take a lot of surprising bad news to drive rates 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.
Monday, July 18, 2011
Treasuries started better this morning on continuing debt problems in Europe; today its Italy and Greece but also Portugal, Spain and Ireland also rattling global markets. Sovereign debt in those countries is serious and unlikely to be resolved anytime soon. Increasing concerns that in the end there will be actual defaults in Europe; here in the US the debt mess and budget impasse continues. The US isn't near the problems in Europe but the country is headed that way unless Americans get serious about deficit reductions, a very hard pill to swallow in these soft economic times. In the meantime Congress and the Administration will continue to kick the can down the road until citizens demand them to cut spending-----a decision many will have trouble with. By 9:00 the 10 yr note had lost all its early gains and mortgage prices went negative (-3/32, 0.09 bp) frm Friday' close.
President Barack Obama is pressing congressional leaders for a multitrillion-dollar agreement in deficit-cutting talks as negotiators near an Aug. 2 deadline for raising the debt limit. A default would cause more panic than the collapse of Lehman Brothers Holdings Inc. in 2008, former Treasury Secretary Larry Summers told CNN in an interview broadcast yesterday. Treasuries rose and the euro fell amid concern European leaders will fail to stop the region’s spreading debt woes at a summit this week.
Mortgage rates being pulled lower as treasuries get safety driven buying; the stock market opening lower this morning also helping. Crude oil lower today as stocks decline; Brent crude declined for a third day in London as investors bet that Europe’s worsening debt crisis may slow the economy and crimp fuel demand. Gold back over $1600.00 also driven by safety moves with investors becoming less comfortable with any currencies.
At 9:30 the DJIA opened down 65, the 10 yr note +2/32 and mortgage prices +1/32 (.03 bp).
This Week's Economic Calendar:
Today;
10:00 July NAHB housing index (as reported 15 frm 13; still very negative)
Tuesday;
8:30 am June housing starts and permits (starts +1.75%, permits unchanged)
Wednesday;
10:00 am June existing home sales (+2.5% at 4.93 mil units annualized)
Thursday;
8:30 am weekly jobless claims (+6K at 411K)
10:00 am July Philly Fed business index (0.0 frm -7/1 in June)
June leading economic indicators (+0.3%)
FHFA May housing price index (N/A)
Economists in a Bloomberg News survey projected long-term U.S. financial assets would show net buying of $40B in May; as reported net purchases were $23.6B. The Treasury’s reporting on long-term securities is a gauge of confidence in U.S. economic policy, and today’s report suggests the U.S. continues to offer safety from the economic crisis in Europe even with the White House and Congress at odds over raising the Treasury’s borrowing authority; although the increase was much less than was thought suggesting all is not that rosy.
US interest rates still have a bullish bias based on Europe's problems and the on-going debates in Washington over the debt ceiling and budget cuts; however, we remain somewhat defensive with interest rates as low as we have them now. We don't want to fight the tape but at the same time we have to be cautious and not get too optimistic. Go with it, but be prepared to take advantage of the low rates when markets turn. It is highly unlikely the US will lose its AAA credit rating by rating agencies, and the US will not default on our debt; nevertheless markets are dancing on a hot skillet as the deadline approaches. It is a day-to-day trade these days; unfolding and very fluid events can have a swift and big move in markets; interest rates are at all time lows now, it will take a lot of surprising bad news to drive rates lower.
Sunday, July 17, 2011
Saturday, July 16, 2011
Friday, July 15, 2011
Thursday, July 14, 2011
Successful people often have one thing in common, the look for solutions to problems, they do not dwell on their misfortunes, nor do they hide under their desks when things get ugly. These opportunists shift their strategies and greet difficult challenges with new and innovative approaches. During times of distress, an astute businessperson is always looking at how to use deficiencies as advantages and those who master this are the ones that come out on top. This is how millionaires are made, empires are built and businesses are branded to last generations.
Surround yourself by those who want to build and grow a strong business, with a clear focus on providing quality products, ethical business practices and constantly improving customer service standards. You will grow during weak economic times and when business recovers on a broad basis, you will be propelled into the stratosphere of prosperity.
Surround yourself by those who want to build and grow a strong business, with a clear focus on providing quality products, ethical business practices and constantly improving customer service standards. You will grow during weak economic times and when business recovers on a broad basis, you will be propelled into the stratosphere of prosperity.
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, July 14, 2011
Prior to three data points at 8:30 the 10 yr note -7/32 and mortgage prices -3/32 (.09 bp). Stock indexes were better indicating a better open at 9:30.
At 8:30 weekly jobless claims were expected at 405K; as released claims did decline to 405K down 22K frm last week. Continuing claims at 3.727 mil frm 3.712 mil. June retail sales were up 0.1%, excluding auto sales unchanged for the month. June PPI -0.4%, excluding food and energy +0.3%; yr/yr PPI +7.0%, excluding food and energy yr/yr +2.4% (pushing the Fed’s target).
Moody’s is threatening to downgrade US debt; putting the US on rating review. Moody’s is saying it doesn’t matter whether or not the US pays the interest on its debt or cuts social security and other payments, in their view any missed payments if a debt deal isn’t agreed on will be considered a default by the US. Treasuries and the dollar weakened while U.S. debt insurance costs climbed to the highest level in more than a year. Moody’s did the same thing in 1995 when the US faced the same political battle. Also over night there were more debt downgrades for 5 Irish banks.
At 9:30 the DJIA opened +8, the 10 yr note -10/32 at 2.92% +4 bp.
At 10:00 May business inventories; +1.0%, final sales -0.1%. The inventory to sales ratio at 1.28 months from 1.27 months in April.
At 10:00 Ben Bernanke will go to the Senate for the 2nd day of semi-annual required testimony on monetary and economic policy. At the House yesterday he warned Congress not to do anything that would weaken the economy more. He of course chided then to get the debt ceiling increased. Bernanke told the House he is prepared to launch another easing move if the economy continues to weaken; buying more treasuries and possibly MBSs. I can’t see how driving rates even lower will increase employment or help the economy grow, interest levels are not an impediment to growth at these levels. Pres Obama said he may call for a meeting at Camp David over the weekend to hammer out a deal on the debt-spending battle.
At 1:00 Treasury will auction $13B of 30 yr bonds, re-opening the 30 yr issued in May. The 10 yr and 3 yr auctions met with decent demand.
I am still out on vacation; sorry about the brevity this morning.
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, July 14, 2011
Prior to three data points at 8:30 the 10 yr note -7/32 and mortgage prices -3/32 (.09 bp). Stock indexes were better indicating a better open at 9:30.
At 8:30 weekly jobless claims were expected at 405K; as released claims did decline to 405K down 22K frm last week. Continuing claims at 3.727 mil frm 3.712 mil. June retail sales were up 0.1%, excluding auto sales unchanged for the month. June PPI -0.4%, excluding food and energy +0.3%; yr/yr PPI +7.0%, excluding food and energy yr/yr +2.4% (pushing the Fed’s target).
Moody’s is threatening to downgrade US debt; putting the US on rating review. Moody’s is saying it doesn’t matter whether or not the US pays the interest on its debt or cuts social security and other payments, in their view any missed payments if a debt deal isn’t agreed on will be considered a default by the US. Treasuries and the dollar weakened while U.S. debt insurance costs climbed to the highest level in more than a year. Moody’s did the same thing in 1995 when the US faced the same political battle. Also over night there were more debt downgrades for 5 Irish banks.
At 9:30 the DJIA opened +8, the 10 yr note -10/32 at 2.92% +4 bp.
At 10:00 May business inventories; +1.0%, final sales -0.1%. The inventory to sales ratio at 1.28 months from 1.27 months in April.
At 10:00 Ben Bernanke will go to the Senate for the 2nd day of semi-annual required testimony on monetary and economic policy. At the House yesterday he warned Congress not to do anything that would weaken the economy more. He of course chided then to get the debt ceiling increased. Bernanke told the House he is prepared to launch another easing move if the economy continues to weaken; buying more treasuries and possibly MBSs. I can’t see how driving rates even lower will increase employment or help the economy grow, interest levels are not an impediment to growth at these levels. Pres Obama said he may call for a meeting at Camp David over the weekend to hammer out a deal on the debt-spending battle.
At 1:00 Treasury will auction $13B of 30 yr bonds, re-opening the 30 yr issued in May. The 10 yr and 3 yr auctions met with decent demand.
I am still out on vacation; sorry about the brevity this morning.
Wednesday, July 13, 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, July 13, 2011
Thanks to Ann Magelinski for covering Monday and Tuesday; I’m back today and tomorrow while remaining on vacation, then Ann will wrap it up on Friday.
Early activity this morning had the 10 yr note down 16/32 at 8:30 to 2.93% while mortgages were holding slight gains; yesterday the 10 yr ended up 13/32 while mortgages were up 4/32 (.12 bp).
June export prices excluding ag prices were unchanged from May; import prices excluding ag prices -0.1%.
The rate markets rallying now on continuing problems in Europe with debt in Greece, Ireland, Spain, Portugal and Italy. Moody’s continues to downgrade the debt in those countries to junk status while the EU, IMF, France and Germany and current debt holders try to work out plans to avoid what increasingly looks like defaults are possible.
At 9:30 the DJIA opened +64; the 10 yr note -12/32 at 2.92% +4 bp. Mortgage prices at 9:30 +5/32 (.15 bp).
Yesterday the $32B 3 yr note auction did get decent demand unlike the 2 yr auction two weeks ago; today Treasury will auction $21B of 10 yr notes that may be a little more of a problem. Thursday $13B of 30 yr bonds will be borrowed.
Chinese GDP +9.5% actual v. 9.3% expected topped expectations. The better report is improving equity markets after strong selling in the last few days.
Yesterday’s FOMC minutes; some members mentioning the possibility of another QE program to stimulate job growth and improve the recovery. What can the Fed do? Keep buying treasuries and mortgage backs, the Fed is about out of bullets. Unlikely the Fed can do much to increase hiring by just keeping rates low, rates already not a factor at these low yields. Any real economic stimulus has to come from the fiscal side, not sure the Fed can do much more.
Fed chief Bernanke will testify at the House Committee on Financial Services at 10:00 this morning. It is the first of two required appearances at Congress, the semi-annual testimony on monetary and economic policy. He will likely add his comments to members that it is critical to get a debt ceiling deal worked out before Aug 2 when Geithner says the US will run out of money. It will happen but as is the norm, Congress and the Administration will take all the time before making a deal.
Recall a month ago, Bill Gross of PIMCO said the bond fund did not hold any US Treasuries; he is back buying Treasuries saying the fund holds about 8% of Treasuries. Is he possibly buying the bottom? We wouldn’t want to fade him but it is a major turnaround from his former position that US debt was not as good of an investment as other sovereign debt in emerging markets.
Mortgage applications decreased 5.1 percent from one week earlier, according to data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending July 8, 2011. This week's results include an adjustment to account for the Fourth of July holiday. The seasonally adjusted Purchase Index decreased 2.6 percent from one week earlier. The Refinance Index decreased 6.2 percent from the previous week, and was 42.1 percent lower than a year ago. The Refinance Index has decreased the past four consecutive weeks, reaching its lowest level since April 29, 2011. The refinance share of mortgage activity decreased to 65.6 percent of total applications from 66.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.5 percent from 6.1 percent of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.55 percent from 4.69 percent, with points increasing to 0.99 from 0.90 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.68 percent from 3.79 percent, with points increasing to 1.10 from 0.88 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last 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.
Wednesday, July 13, 2011
Thanks to Ann Magelinski for covering Monday and Tuesday; I’m back today and tomorrow while remaining on vacation, then Ann will wrap it up on Friday.
Early activity this morning had the 10 yr note down 16/32 at 8:30 to 2.93% while mortgages were holding slight gains; yesterday the 10 yr ended up 13/32 while mortgages were up 4/32 (.12 bp).
June export prices excluding ag prices were unchanged from May; import prices excluding ag prices -0.1%.
The rate markets rallying now on continuing problems in Europe with debt in Greece, Ireland, Spain, Portugal and Italy. Moody’s continues to downgrade the debt in those countries to junk status while the EU, IMF, France and Germany and current debt holders try to work out plans to avoid what increasingly looks like defaults are possible.
At 9:30 the DJIA opened +64; the 10 yr note -12/32 at 2.92% +4 bp. Mortgage prices at 9:30 +5/32 (.15 bp).
Yesterday the $32B 3 yr note auction did get decent demand unlike the 2 yr auction two weeks ago; today Treasury will auction $21B of 10 yr notes that may be a little more of a problem. Thursday $13B of 30 yr bonds will be borrowed.
Chinese GDP +9.5% actual v. 9.3% expected topped expectations. The better report is improving equity markets after strong selling in the last few days.
Yesterday’s FOMC minutes; some members mentioning the possibility of another QE program to stimulate job growth and improve the recovery. What can the Fed do? Keep buying treasuries and mortgage backs, the Fed is about out of bullets. Unlikely the Fed can do much to increase hiring by just keeping rates low, rates already not a factor at these low yields. Any real economic stimulus has to come from the fiscal side, not sure the Fed can do much more.
Fed chief Bernanke will testify at the House Committee on Financial Services at 10:00 this morning. It is the first of two required appearances at Congress, the semi-annual testimony on monetary and economic policy. He will likely add his comments to members that it is critical to get a debt ceiling deal worked out before Aug 2 when Geithner says the US will run out of money. It will happen but as is the norm, Congress and the Administration will take all the time before making a deal.
Recall a month ago, Bill Gross of PIMCO said the bond fund did not hold any US Treasuries; he is back buying Treasuries saying the fund holds about 8% of Treasuries. Is he possibly buying the bottom? We wouldn’t want to fade him but it is a major turnaround from his former position that US debt was not as good of an investment as other sovereign debt in emerging markets.
Mortgage applications decreased 5.1 percent from one week earlier, according to data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending July 8, 2011. This week's results include an adjustment to account for the Fourth of July holiday. The seasonally adjusted Purchase Index decreased 2.6 percent from one week earlier. The Refinance Index decreased 6.2 percent from the previous week, and was 42.1 percent lower than a year ago. The Refinance Index has decreased the past four consecutive weeks, reaching its lowest level since April 29, 2011. The refinance share of mortgage activity decreased to 65.6 percent of total applications from 66.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.5 percent from 6.1 percent of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.55 percent from 4.69 percent, with points increasing to 0.99 from 0.90 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.68 percent from 3.79 percent, with points increasing to 1.10 from 0.88 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last week.
Tuesday, July 12, 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, July 12, 2011
In early trade, equity futures were down on debt concerns in Greece and the possibility of contagion in Spain, Italy, Portugal, and Ireland. Problems in Greece are still unresolved despite the Band-Aides that been applied. It is now becoming more accepted that there will be some sort of Greek default. Fears over Italian solvency and political stability have now infected European markets and many are questioning the EU’s ability to handle the damage. This put pressure on the euro and US equity futures indicating that stocks would open lower in the US. EU finance ministers promised yesterday that they would offer cheaper loans and make the rescue fund for Greece more palatable but investors are losing confidence that these bigger problems in Greece will be contained.
Treasury yields fell significantly overnight on European fears but recovered somewhat near the 9:30am stock market opening. The 10-year note yield traded as low as 2.80%, the lowest yield since November, and then settled back to the 2.90% level. At the 9:30am opening, the 10-year was trading at 2.91% and the DJIA was lower by only about 5 points.
At 8:30am the trade deficit for May came in bigger than expected -$50.23B versus -$43.63B in April. This is the largest trade deficit since October 2008. The main growth in the deficit is due to petroleum demand. Imports and exports are growing but imports are outpacing exports. The big issue becomes that this negatively affects GDP and makes the advance 2nd quarter GDP report in two weeks possibly revised lower.
There is little for the markets to chew on today so focus will remain on European sovereign debt issues. The debt ceiling issue is essentially accepted as a done deal in that Congress will raise the limit and avoid a downgrading but media pundits will continue to talk about it. The focus will hopefully change to the spending cuts that will be agreed to that will come along with the increase in the debt ceiling limit.
Next on the calendar for today is at 1:00pm when the US Treasury will auction $32B in 3-year notes. We are in the midst of summer trading activity when many top decision makers are on holiday. This may make the markets more volatile with greater swings intraday.
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, July 12, 2011
In early trade, equity futures were down on debt concerns in Greece and the possibility of contagion in Spain, Italy, Portugal, and Ireland. Problems in Greece are still unresolved despite the Band-Aides that been applied. It is now becoming more accepted that there will be some sort of Greek default. Fears over Italian solvency and political stability have now infected European markets and many are questioning the EU’s ability to handle the damage. This put pressure on the euro and US equity futures indicating that stocks would open lower in the US. EU finance ministers promised yesterday that they would offer cheaper loans and make the rescue fund for Greece more palatable but investors are losing confidence that these bigger problems in Greece will be contained.
Treasury yields fell significantly overnight on European fears but recovered somewhat near the 9:30am stock market opening. The 10-year note yield traded as low as 2.80%, the lowest yield since November, and then settled back to the 2.90% level. At the 9:30am opening, the 10-year was trading at 2.91% and the DJIA was lower by only about 5 points.
At 8:30am the trade deficit for May came in bigger than expected -$50.23B versus -$43.63B in April. This is the largest trade deficit since October 2008. The main growth in the deficit is due to petroleum demand. Imports and exports are growing but imports are outpacing exports. The big issue becomes that this negatively affects GDP and makes the advance 2nd quarter GDP report in two weeks possibly revised lower.
There is little for the markets to chew on today so focus will remain on European sovereign debt issues. The debt ceiling issue is essentially accepted as a done deal in that Congress will raise the limit and avoid a downgrading but media pundits will continue to talk about it. The focus will hopefully change to the spending cuts that will be agreed to that will come along with the increase in the debt ceiling limit.
Next on the calendar for today is at 1:00pm when the US Treasury will auction $32B in 3-year notes. We are in the midst of summer trading activity when many top decision makers are on holiday. This may make the markets more volatile with greater swings intraday.
Monday, July 11, 2011
Mortgage Rates
The week ahead is all about the debt crisis in Europe and the threat of a further contagion. We already know that Italy is under the microscope and that the EU must deal with restructuring its debt. However, many analysts are of the belief that Portugal and Ireland, not to mention Greece, are still larger problems than Italy.
We will also hear all week the continued debate about the US debt ceiling. We would like to put everyone that doubts that the ceiling will be raised to rest as cooler heads will prevail and no one in Congress is willing to allow US sovereign debt to be downgraded by the ratings agencies.
The rate markets will follow the equity markets and their reaction to the issues in Europe. It may take a few days of media attention to the problems in Italy before the markets settle on any new levels. The key will be for the 10-year note yield to remain around or below the 3.0% level for us to change our near-term view that rates will likely increase slightly with the 10-year note yield at about the 3.25% level.
Tuesday, Wednesday, and Thursday we will see $66B in new 3s, reopened 10s, and reopened 30s. The last auctions we not well received so expect close attention paid to these new auctions.
We will see more inflation information on Thursday with the June Producer Price Index and on Friday with the Consumer Price Index. Expectations are for a both reads to be negative. Also important will be Thursday’s report on retail Sales for June. Consensus is expecting sales to be down but to what level is what will be the focus. We know that the consumer is trying very hard to pay down their personal debt and in doing so it will effect spending. 70% of our GDP is attributed to consumer spending.
On Friday we get a look at manufacturing in the New York region with the Empire State Index fro July. Expectations are calling for a slight increase after the index turned negative in June. Also we will get a read on Industrial Production for June expected to be up slightly and Capacity Utilization for June expected to be a hair higher than in May.
We expect a significant amount of intraday volatility as the media spins the crisis in Europe and the debt ceiling debate in the US.
The week ahead is all about the debt crisis in Europe and the threat of a further contagion. We already know that Italy is under the microscope and that the EU must deal with restructuring its debt. However, many analysts are of the belief that Portugal and Ireland, not to mention Greece, are still larger problems than Italy.
We will also hear all week the continued debate about the US debt ceiling. We would like to put everyone that doubts that the ceiling will be raised to rest as cooler heads will prevail and no one in Congress is willing to allow US sovereign debt to be downgraded by the ratings agencies.
The rate markets will follow the equity markets and their reaction to the issues in Europe. It may take a few days of media attention to the problems in Italy before the markets settle on any new levels. The key will be for the 10-year note yield to remain around or below the 3.0% level for us to change our near-term view that rates will likely increase slightly with the 10-year note yield at about the 3.25% level.
Tuesday, Wednesday, and Thursday we will see $66B in new 3s, reopened 10s, and reopened 30s. The last auctions we not well received so expect close attention paid to these new auctions.
We will see more inflation information on Thursday with the June Producer Price Index and on Friday with the Consumer Price Index. Expectations are for a both reads to be negative. Also important will be Thursday’s report on retail Sales for June. Consensus is expecting sales to be down but to what level is what will be the focus. We know that the consumer is trying very hard to pay down their personal debt and in doing so it will effect spending. 70% of our GDP is attributed to consumer spending.
On Friday we get a look at manufacturing in the New York region with the Empire State Index fro July. Expectations are calling for a slight increase after the index turned negative in June. Also we will get a read on Industrial Production for June expected to be up slightly and Capacity Utilization for June expected to be a hair higher than in May.
We expect a significant amount of intraday volatility as the media spins the crisis in Europe and the debt ceiling debate in the US.
Sunday, July 10, 2011
Saturday, July 9, 2011
Friday, July 8, 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, July 08, 2011
Stunned!! The only way to describe what we saw at 8:30 when the BLS employment report was released, mouths dropped, words were hard to come by with one of the weakest monthly employment reports in over a year. Non-farm jobs, expected up 100K were up just 18K; private sector jobs expected up 125K, up just 57K. It wasn't just June data; May non-farm jobs were revised frm +54K to +29K and April jobs lower by 4K frm what what was originally released. The jobs were the weakest since Sept 2010. The unemployment rate, expected unchanged at 9.1%, increased to 9.2%, the highest since Dec 2010. Average hourly earnings -0.1%, normally up 0.2% a month. No matter how the report is spun when Pres Obama speaks at 10:35; this is a very serious blow to the view that the economy is improving and has turned markets upside down.
Prior to the release of employment the 10 yr note yield was up to 3.18% +4 bp frm yesterday's close; mortgage prices -7/32 (.22 bp) frm yesterday's close. At 9:00 the 10 yr note rate was down to 3.03% -11 bp frm yesterday's close and mortgage prices +18/32 (.56 bp). Stock indexes were better prior to 8:30, at 9:00 the DJIA -132, down 155 points from pre employment.
At 9:30 the DJIA opened -100, the 10 yr note 3.05% -9 bp and mortgage prices -16/32 (.50 bp). Crude oil -$1.60, gold up $12.50.
Until the report this morning the rate markets were decidedly bearish and equity markets were looking for the economy to rebound. Our outlook was for rates to edge a little higher with the 10 yr note likely to climb to 3.25% before the selling would abate. With this report that forecast is dashed, at least in the near term. Employment reports are always market movers as is the case today, however the data for June has really rattled markets more so than usual. Markets are going to take more than a day or two to wrestle with the deeper meaning for the economic outlook and whether we are headed into a double dip recession. While that is an extreme view, nevertheless May and June job growth (+47K in 2 months) won't be dismissed and forecasts of growth will likely be revised lower.
The bond and mortgage market outlook, bearish until 8:30, have shaken off all of the optimistic economic estimates. What was is no longer. Without job growth the economy cannot grow, stocks are going to be weak today and early next week. The 10 yr note will test 3.00% today and Monday. While the data today shocked everyone, it will take sometime to sift out the longer term meaning. Look for some to argue that May and June were just big bumps in the road to recovery and stronger growth; the bullish views on the economy won't die easily. Market volatility will likely remain at very high levels.
Although the employment situation as reported has caused many to re-consider their outlook for economic growth, what the Fed might do, what Congress might do, and where interest rates will trade now; the resolution will take time. We still believe the 10 yr note will have difficulty holding under 3.00% as we noted previously. Next week Treasury will auction a total of $66B, the first auctions since the end of QE 2, $21B of the total of 10 yr notes. Two weeks ago Treasury auctions met with weaker demand than had been the case for over a year. How the auctions go will be major test.
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, July 08, 2011
Stunned!! The only way to describe what we saw at 8:30 when the BLS employment report was released, mouths dropped, words were hard to come by with one of the weakest monthly employment reports in over a year. Non-farm jobs, expected up 100K were up just 18K; private sector jobs expected up 125K, up just 57K. It wasn't just June data; May non-farm jobs were revised frm +54K to +29K and April jobs lower by 4K frm what what was originally released. The jobs were the weakest since Sept 2010. The unemployment rate, expected unchanged at 9.1%, increased to 9.2%, the highest since Dec 2010. Average hourly earnings -0.1%, normally up 0.2% a month. No matter how the report is spun when Pres Obama speaks at 10:35; this is a very serious blow to the view that the economy is improving and has turned markets upside down.
Prior to the release of employment the 10 yr note yield was up to 3.18% +4 bp frm yesterday's close; mortgage prices -7/32 (.22 bp) frm yesterday's close. At 9:00 the 10 yr note rate was down to 3.03% -11 bp frm yesterday's close and mortgage prices +18/32 (.56 bp). Stock indexes were better prior to 8:30, at 9:00 the DJIA -132, down 155 points from pre employment.
At 9:30 the DJIA opened -100, the 10 yr note 3.05% -9 bp and mortgage prices -16/32 (.50 bp). Crude oil -$1.60, gold up $12.50.
Until the report this morning the rate markets were decidedly bearish and equity markets were looking for the economy to rebound. Our outlook was for rates to edge a little higher with the 10 yr note likely to climb to 3.25% before the selling would abate. With this report that forecast is dashed, at least in the near term. Employment reports are always market movers as is the case today, however the data for June has really rattled markets more so than usual. Markets are going to take more than a day or two to wrestle with the deeper meaning for the economic outlook and whether we are headed into a double dip recession. While that is an extreme view, nevertheless May and June job growth (+47K in 2 months) won't be dismissed and forecasts of growth will likely be revised lower.
The bond and mortgage market outlook, bearish until 8:30, have shaken off all of the optimistic economic estimates. What was is no longer. Without job growth the economy cannot grow, stocks are going to be weak today and early next week. The 10 yr note will test 3.00% today and Monday. While the data today shocked everyone, it will take sometime to sift out the longer term meaning. Look for some to argue that May and June were just big bumps in the road to recovery and stronger growth; the bullish views on the economy won't die easily. Market volatility will likely remain at very high levels.
Although the employment situation as reported has caused many to re-consider their outlook for economic growth, what the Fed might do, what Congress might do, and where interest rates will trade now; the resolution will take time. We still believe the 10 yr note will have difficulty holding under 3.00% as we noted previously. Next week Treasury will auction a total of $66B, the first auctions since the end of QE 2, $21B of the total of 10 yr notes. Two weeks ago Treasury auctions met with weaker demand than had been the case for over a year. How the auctions go will be major test.
Thursday, July 7, 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, July 07, 2011
Two early employment reports this morning; at 8:15 ADP non-farm private jobs were expected at +65K to +90K, as reported jobs increased by 157K. The reaction sent interest rates up and prices lower in treasuries and mortgages. At 8:30 weekly jobless claims were expected down 8K, as reported down 14K to 418K; last week's claims were revised slightly higher to 432K frm 428K. Continuing claims fell to 3.68 mil frm last week's revised 3.725 mil; the 4 wk average 424.75K. Weekly claims have held above the 400K level now for 13 consecutive weeks.
The ADP report, much higher than was expected, initially sent the 10 yr note rate up to 3.16% from 3.11% yesterday and mortgage prices dropped 11/32 (.34 bp). Cooler heads prevailed however, within 30 minutes while still weaker the 10 yr bounced back some and mortgage prices at 8:45 off 6/32 (.18 bp). The increase in ADP set up a stronger open in the stock market, at 9:00 the DJIA was trading +60 points.
As widely expected the ECB did increase its base rate by 0.25%, the increase didn't have much of an impact on Europe's markets however.
Nothing left on the schedule today, the rest of the day will be positioning moves for tomorrow's more important BLS June employment report. There is little reason to expect any improvement in the bond and mortgage markets through the rest of the day given the ADP jobs report this morning and tomorrow's "official" June employment data. The estimates prior to the ADP report were for non-farm private jobs to have increased 125K with unemployment at 9.1% unchanged from May. After ADP analysts and traders now looking for a stronger jobs increase. ADP estimates in the past have deviated substantially at times from the BLS data so markets are left as always, holding collective breaths and will resist any improvement in the rate markets today.
The DJIA opened +69 at 9:30, the 10 yr note -12/32 to 3.15% +4 bp and mortgage prices -7/32 (.22 bp).
The debt ceiling debates between the Democrats and the Administration and Republicans appears to be making progress. There will be no debt defaults or any government shutdown. In these times neither party can afford to fumble the ball now. Unlikely a complete agreement will be reached for another couple of weeks but in the end it will get done. Neither side will be pleased and the debate will continue on how to cut spending, increase taxes and restructure social security and Medicare. Unlikely there will anything definitive until after 2012 elections as our politicians are more about being re-elected than facing serious issues.
Technically the bond and mortgage markets are bearish now, the only hope for a significant rebound in the near term is a weaker than expected employment report tomorrow. While we are not constructive on the short term outlook for interest rates, we don't believe rates will explode much higher. The 10 yr note is likely to move to 3.25% up 10 more basis points in rate and mortgages up an additional amount.
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, July 07, 2011
Two early employment reports this morning; at 8:15 ADP non-farm private jobs were expected at +65K to +90K, as reported jobs increased by 157K. The reaction sent interest rates up and prices lower in treasuries and mortgages. At 8:30 weekly jobless claims were expected down 8K, as reported down 14K to 418K; last week's claims were revised slightly higher to 432K frm 428K. Continuing claims fell to 3.68 mil frm last week's revised 3.725 mil; the 4 wk average 424.75K. Weekly claims have held above the 400K level now for 13 consecutive weeks.
The ADP report, much higher than was expected, initially sent the 10 yr note rate up to 3.16% from 3.11% yesterday and mortgage prices dropped 11/32 (.34 bp). Cooler heads prevailed however, within 30 minutes while still weaker the 10 yr bounced back some and mortgage prices at 8:45 off 6/32 (.18 bp). The increase in ADP set up a stronger open in the stock market, at 9:00 the DJIA was trading +60 points.
As widely expected the ECB did increase its base rate by 0.25%, the increase didn't have much of an impact on Europe's markets however.
Nothing left on the schedule today, the rest of the day will be positioning moves for tomorrow's more important BLS June employment report. There is little reason to expect any improvement in the bond and mortgage markets through the rest of the day given the ADP jobs report this morning and tomorrow's "official" June employment data. The estimates prior to the ADP report were for non-farm private jobs to have increased 125K with unemployment at 9.1% unchanged from May. After ADP analysts and traders now looking for a stronger jobs increase. ADP estimates in the past have deviated substantially at times from the BLS data so markets are left as always, holding collective breaths and will resist any improvement in the rate markets today.
The DJIA opened +69 at 9:30, the 10 yr note -12/32 to 3.15% +4 bp and mortgage prices -7/32 (.22 bp).
The debt ceiling debates between the Democrats and the Administration and Republicans appears to be making progress. There will be no debt defaults or any government shutdown. In these times neither party can afford to fumble the ball now. Unlikely a complete agreement will be reached for another couple of weeks but in the end it will get done. Neither side will be pleased and the debate will continue on how to cut spending, increase taxes and restructure social security and Medicare. Unlikely there will anything definitive until after 2012 elections as our politicians are more about being re-elected than facing serious issues.
Technically the bond and mortgage markets are bearish now, the only hope for a significant rebound in the near term is a weaker than expected employment report tomorrow. While we are not constructive on the short term outlook for interest rates, we don't believe rates will explode much higher. The 10 yr note is likely to move to 3.25% up 10 more basis points in rate and mortgages up an additional amount.
Wednesday, July 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.
Wednesday, July 06, 2011
Treasuries and mortgages rallied yesterday after the panic moves last week that shot the 10 yr note up 37 basis points and mortgage rates up 26 basis points. The rally in stocks last week and the jump in interest rates came with both markets very over-extended and triggered by better economic reads on two manufacturing indexes (Chicago and ISM), the momentary debt crisis in Greece averted, the surprisingly weak demand for Treasury's $99B of auctions and the end of QE 2. Yesterday and so far this morning markets are better but the outlook remains questionable that interest rates will decline to the lows seen three weeks ago.
This morning the bond and mortgage markets continued to gain; at 9:00 the 10 yr note traded +9/32 at 3.09% and mortgage prices +5/32 (.15 bp). The US stock market following the declines in Europe in pre-market trading. Equity markets being hit some on China increasing rates again, the third tome this year to head off inflation that has increased; the rate up 25 basis points to 6.5%. Tomorrow the ECB will likely increase its base lending rate. Rates increasing globally except here in the US. In Europe Portugal, Ireland, Italy and Spain interest rates increasing after Moody's rated Portugal's debt to junk status. Europe's banks and those countries facing continued debt fears that won't likely be solved for a long time, possibly years. The ECB, IMF and the EU trying to hold it all together but fighting a huge headwind.
At 9:30 the DJIA opened slightly lower, down 10; the 10 yr note +5/32 3.10% -2 bp and mortgages at 9:30 +3/32 (.09 bp) frm yesterday's close.
Early this morning the weekly MBA mortgage applications report. Mortgage applications decreased 5.2% from one week earlier. The Refinance Index decreased 9.2% from the previous week. The Refinance Index has decreased for 3 consecutive weeks, reaching its lowest level since May 6, 2011. The seasonally adjusted Purchase Index increased 4.8% from one week earlier. The unadjusted Purchase Index was 11.7% higher than the same week one year ago. The four week moving average for the Market Index is down 0.5%. The four week moving average is up 0.8% for the seasonally adjusted Purchase Index, while this average is down 1.1% for the Refinance Index. The refinance share of mortgage activity decreased to 66.4% of total applications from 69.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8%of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69% from 4.46%, with points decreasing to 0.90 from 1.19 (including the origination fee) for 80% loans. This is the highest 30-year rate recorded in the survey since the middle of May 2011. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.79% from 3.64%, with points decreasing to 0.88 from 1.11 (including the origination fee) for 80% loans. This is the highest 15-year rate recorded in the survey since the beginning of May 2011.
A few minutes ago at 10:00 the June ISM services sector index, expected at 54, was 53.3 frm 54.6; new orders component 53.6 frm 56.8, prices 60.9 frm 69.6 and employment 54.1 frm 54.0. A little weaker but not much, close to 50 level which is pivotal; under 50 is contraction, over is expansion. There was not much initial reaction to the report.
Markets still focused more on employment due out Friday and tomorrow the ADP non-farm private jobs estimate (+60K) and Friday's BLS estimate +80K on non-farm payrolls and +110K non-farm private jobs increase. The estimates are not strong, employment still soft, could get a bullish surprise when the BLS reports on Friday morning.
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, July 06, 2011
Treasuries and mortgages rallied yesterday after the panic moves last week that shot the 10 yr note up 37 basis points and mortgage rates up 26 basis points. The rally in stocks last week and the jump in interest rates came with both markets very over-extended and triggered by better economic reads on two manufacturing indexes (Chicago and ISM), the momentary debt crisis in Greece averted, the surprisingly weak demand for Treasury's $99B of auctions and the end of QE 2. Yesterday and so far this morning markets are better but the outlook remains questionable that interest rates will decline to the lows seen three weeks ago.
This morning the bond and mortgage markets continued to gain; at 9:00 the 10 yr note traded +9/32 at 3.09% and mortgage prices +5/32 (.15 bp). The US stock market following the declines in Europe in pre-market trading. Equity markets being hit some on China increasing rates again, the third tome this year to head off inflation that has increased; the rate up 25 basis points to 6.5%. Tomorrow the ECB will likely increase its base lending rate. Rates increasing globally except here in the US. In Europe Portugal, Ireland, Italy and Spain interest rates increasing after Moody's rated Portugal's debt to junk status. Europe's banks and those countries facing continued debt fears that won't likely be solved for a long time, possibly years. The ECB, IMF and the EU trying to hold it all together but fighting a huge headwind.
At 9:30 the DJIA opened slightly lower, down 10; the 10 yr note +5/32 3.10% -2 bp and mortgages at 9:30 +3/32 (.09 bp) frm yesterday's close.
Early this morning the weekly MBA mortgage applications report. Mortgage applications decreased 5.2% from one week earlier. The Refinance Index decreased 9.2% from the previous week. The Refinance Index has decreased for 3 consecutive weeks, reaching its lowest level since May 6, 2011. The seasonally adjusted Purchase Index increased 4.8% from one week earlier. The unadjusted Purchase Index was 11.7% higher than the same week one year ago. The four week moving average for the Market Index is down 0.5%. The four week moving average is up 0.8% for the seasonally adjusted Purchase Index, while this average is down 1.1% for the Refinance Index. The refinance share of mortgage activity decreased to 66.4% of total applications from 69.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8%of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69% from 4.46%, with points decreasing to 0.90 from 1.19 (including the origination fee) for 80% loans. This is the highest 30-year rate recorded in the survey since the middle of May 2011. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.79% from 3.64%, with points decreasing to 0.88 from 1.11 (including the origination fee) for 80% loans. This is the highest 15-year rate recorded in the survey since the beginning of May 2011.
A few minutes ago at 10:00 the June ISM services sector index, expected at 54, was 53.3 frm 54.6; new orders component 53.6 frm 56.8, prices 60.9 frm 69.6 and employment 54.1 frm 54.0. A little weaker but not much, close to 50 level which is pivotal; under 50 is contraction, over is expansion. There was not much initial reaction to the report.
Markets still focused more on employment due out Friday and tomorrow the ADP non-farm private jobs estimate (+60K) and Friday's BLS estimate +80K on non-farm payrolls and +110K non-farm private jobs increase. The estimates are not strong, employment still soft, could get a bullish surprise when the BLS reports on Friday morning.
Tuesday, July 5, 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, July 05, 2011
A nice start today with treasuries and mortgages doing much better after the huge increase in interest rates last week. The 10 yr note rate jumped 37 basis points and mortgage rates up 25 percent last week. Looking for some retracement after the beatdown last week, and volatility this week will be very high. This is employment week and the expectations are not that great so if we were to see any less than thought reads on jobs some rte improvement is likely. Last week it was the stock market making big moves higher in the indexes, the best week for stocks in 2 yrs; the DJIA up 648, NASDAQ +208 and S&P +71. Like the bond market it too was likely a little ahead of itself.
This morning in early activity (9:00 am) the 10 yr note +10/32 at 3.15% -5 bp and mortgage prices +11/32 (.34 bp); the DJIA +7 but the S&P -2.
Although the potential for a bounce in the bond and mortgage markets is likely, the trend and technicals have changed to bearish or at best sitting here for awhile. That said, as noted its employment week. The early forecasts for Thursday's ADP non-farm private job growth an anemic +60K, the forecast for the BLS non-farm private job growth on Friday, also a weak +110K. These are not numbers that show much improvement. Expect estimates to change a little as the week progresses.
In Europe Thursday it is expected the ECB will increase its base rate once again. European services and manufacturing growth were revised lower, with a composite index falling to 53.3, from an earlier reading of 53.6, London-based Markit Economics said today. Spanish and Italian bonds fell, increasing the additional yield investors demand to hold the securities instead of German bunds, on concern Greece’s debt crisis may continue to harm its euro-area peers. Portuguese 10-year bonds also sank as the Financial Times reported commitments from banks to reinvest funds from maturing securities into new Greek debt may fall short of policy makers’ target. Europe's debt problems are not over, even Greece is still subject to defaulting eventually as some continue to expect it will.
Crude oil higher this morning after two days of declines; crude is well trapped between $97.00 and $92.00 a barrel.
At 9:30 the DJIA opened -14, S&P -2; 10 yr note +11/32 at 3.14% -6 bp and mortgage prices +12/32 (.37 bp).
The only data today; at 10:00 May factory orders were up 0.8% against estimates of +1.0%; April orders were revised to -0.9% frm -1.2%. May durable goods orders revised to +2.1% frm +1.9%-----no initial reaction to the data.
This Week's Economic Calendar:
Today;
10:00 am May Factory Orders as reported +0.8%
Wednesday;
7:00 am Weekly MBA mortgage apps (N/A)
10:00 am June ISM services sector index (54.0 frm 54.6)
Thursday;
8:15 am ADP non-farm private jobs (+60K)
8:30 am weekly jobless claims (-3K to 425K; con't claims 3,70 mil frm 3.702 mil)
Friday;
8:30 am BLS employment report (NFP jobs +80K, non-farm private jobs +110K; unemployment rate 9.1% unch)
10:00 am May wholesale inventories (+1.0%)
3:00 pm May consumer credit (+$3.5B, Apr +$6.5B)
Last week's strong stock market rally, the momentary deal worked out to keep Greece afloat, the end of QE 2 and the previous week's very poor demand for $99B of Treasury offerings combined to break the bond and mortgage markets. This week's employment data that will set the next move for the bond market. The US economy is feeble giving many the idea that US interest rates will move back below 3.00% after the spike last week; we do not subscribe to that view however. Although the economy isn't likely to grow quickly and inflation is not a problem, the recent auctions suggest risk levels for US debt will increase a little, keeping interest rates a little higher than 3.00% for the benchmark 10 yr note---driver for 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, July 05, 2011
A nice start today with treasuries and mortgages doing much better after the huge increase in interest rates last week. The 10 yr note rate jumped 37 basis points and mortgage rates up 25 percent last week. Looking for some retracement after the beatdown last week, and volatility this week will be very high. This is employment week and the expectations are not that great so if we were to see any less than thought reads on jobs some rte improvement is likely. Last week it was the stock market making big moves higher in the indexes, the best week for stocks in 2 yrs; the DJIA up 648, NASDAQ +208 and S&P +71. Like the bond market it too was likely a little ahead of itself.
This morning in early activity (9:00 am) the 10 yr note +10/32 at 3.15% -5 bp and mortgage prices +11/32 (.34 bp); the DJIA +7 but the S&P -2.
Although the potential for a bounce in the bond and mortgage markets is likely, the trend and technicals have changed to bearish or at best sitting here for awhile. That said, as noted its employment week. The early forecasts for Thursday's ADP non-farm private job growth an anemic +60K, the forecast for the BLS non-farm private job growth on Friday, also a weak +110K. These are not numbers that show much improvement. Expect estimates to change a little as the week progresses.
In Europe Thursday it is expected the ECB will increase its base rate once again. European services and manufacturing growth were revised lower, with a composite index falling to 53.3, from an earlier reading of 53.6, London-based Markit Economics said today. Spanish and Italian bonds fell, increasing the additional yield investors demand to hold the securities instead of German bunds, on concern Greece’s debt crisis may continue to harm its euro-area peers. Portuguese 10-year bonds also sank as the Financial Times reported commitments from banks to reinvest funds from maturing securities into new Greek debt may fall short of policy makers’ target. Europe's debt problems are not over, even Greece is still subject to defaulting eventually as some continue to expect it will.
Crude oil higher this morning after two days of declines; crude is well trapped between $97.00 and $92.00 a barrel.
At 9:30 the DJIA opened -14, S&P -2; 10 yr note +11/32 at 3.14% -6 bp and mortgage prices +12/32 (.37 bp).
The only data today; at 10:00 May factory orders were up 0.8% against estimates of +1.0%; April orders were revised to -0.9% frm -1.2%. May durable goods orders revised to +2.1% frm +1.9%-----no initial reaction to the data.
This Week's Economic Calendar:
Today;
10:00 am May Factory Orders as reported +0.8%
Wednesday;
7:00 am Weekly MBA mortgage apps (N/A)
10:00 am June ISM services sector index (54.0 frm 54.6)
Thursday;
8:15 am ADP non-farm private jobs (+60K)
8:30 am weekly jobless claims (-3K to 425K; con't claims 3,70 mil frm 3.702 mil)
Friday;
8:30 am BLS employment report (NFP jobs +80K, non-farm private jobs +110K; unemployment rate 9.1% unch)
10:00 am May wholesale inventories (+1.0%)
3:00 pm May consumer credit (+$3.5B, Apr +$6.5B)
Last week's strong stock market rally, the momentary deal worked out to keep Greece afloat, the end of QE 2 and the previous week's very poor demand for $99B of Treasury offerings combined to break the bond and mortgage markets. This week's employment data that will set the next move for the bond market. The US economy is feeble giving many the idea that US interest rates will move back below 3.00% after the spike last week; we do not subscribe to that view however. Although the economy isn't likely to grow quickly and inflation is not a problem, the recent auctions suggest risk levels for US debt will increase a little, keeping interest rates a little higher than 3.00% for the benchmark 10 yr note---driver for mortgage rates.
Friday, July 1, 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, July 01, 2011
The bond and mortgage markets opened a little better this morning ahead of key data points at 10:00 when the June ISM manufacturing report is released and the U. of Michigan consumer sentiment index is revealed. Stock indexes in early trading about unchanged. Manufacturing growth is slowing from China to Europe; China’s factory index fell to the lowest level since February 2009, while in the 17-nation euro area, a gauge slipped to an 18-month low. German manufacturing expanded at the weakest pace in 17 months, while Italy, Ireland, Spain and Greece contracted. In the U.K. and India, output growth also slowed.
ECB President Jean-Claude Trichet reiterated yesterday that policy makers are ready to raise the benchmark interest rate further from 1.25 percent to fight inflation threats even as governments struggle to contain Greece’s debt crisis. They will hold their next monetary policy meeting on July 7 in Frankfurt.
Crude oil and gold trading lower this morning; crude early was down $1.20, gold at 9:30 off $15.00.
At 9:30 the DJIA opened flat, the 10 yr note +3/32 and mortgage prices +3/32 (.09 bp) frm yesterday's close.
At 9:55 the U. of Michigan consumer sentiment index expected unchanged at 71.8 frm two weeks ago; hit at 71.5, down from 79.6 at the end of May. Current conditions 82.0 frm 79.6, expectations 64.8 frm 66.8 two weeks ago and the 12 month outlook 74.0 frm 78.0. No reaction to the data with the ISM hitting 5 minutes later at 10:00.
At 10:00 the June ISM manufacturing index, expected at 52.0 frm 53.5 in May, increased to 55.3. New orders increased to 51.6 frm 51.0, employment at 59.9 frm 58.2 and prices pd at 68.0 frm 76.5. Like yesterday's Chicago regional report, better than expected and sent stock indexes higher and the bond and mortgage markets lower in prices, higher in yields prior to the release.
May construction spending expected unchanged was down 0.6%.
As noted in the past two days, expect increased market volatility in equities, bonds, energy and precious metals in the next week or two. The rapid increase in interest rates since Tuesday appears to have caught investors off guard, markets will take some time to assess the potential impact on economies, inflation and the potential implications of an interest rate increase in Europe next week. The data this morning is adding to the swift turn in outlooks for the economy; after a series of very weak data points on May data now the data suggests the economy is showing slight signs of improvement. The stock market jumped higher on the 10:00 data, the 10 yr note yield hit 3.20% +4 bp on the initial reaction to the ISM report.
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, July 01, 2011
The bond and mortgage markets opened a little better this morning ahead of key data points at 10:00 when the June ISM manufacturing report is released and the U. of Michigan consumer sentiment index is revealed. Stock indexes in early trading about unchanged. Manufacturing growth is slowing from China to Europe; China’s factory index fell to the lowest level since February 2009, while in the 17-nation euro area, a gauge slipped to an 18-month low. German manufacturing expanded at the weakest pace in 17 months, while Italy, Ireland, Spain and Greece contracted. In the U.K. and India, output growth also slowed.
ECB President Jean-Claude Trichet reiterated yesterday that policy makers are ready to raise the benchmark interest rate further from 1.25 percent to fight inflation threats even as governments struggle to contain Greece’s debt crisis. They will hold their next monetary policy meeting on July 7 in Frankfurt.
Crude oil and gold trading lower this morning; crude early was down $1.20, gold at 9:30 off $15.00.
At 9:30 the DJIA opened flat, the 10 yr note +3/32 and mortgage prices +3/32 (.09 bp) frm yesterday's close.
At 9:55 the U. of Michigan consumer sentiment index expected unchanged at 71.8 frm two weeks ago; hit at 71.5, down from 79.6 at the end of May. Current conditions 82.0 frm 79.6, expectations 64.8 frm 66.8 two weeks ago and the 12 month outlook 74.0 frm 78.0. No reaction to the data with the ISM hitting 5 minutes later at 10:00.
At 10:00 the June ISM manufacturing index, expected at 52.0 frm 53.5 in May, increased to 55.3. New orders increased to 51.6 frm 51.0, employment at 59.9 frm 58.2 and prices pd at 68.0 frm 76.5. Like yesterday's Chicago regional report, better than expected and sent stock indexes higher and the bond and mortgage markets lower in prices, higher in yields prior to the release.
May construction spending expected unchanged was down 0.6%.
As noted in the past two days, expect increased market volatility in equities, bonds, energy and precious metals in the next week or two. The rapid increase in interest rates since Tuesday appears to have caught investors off guard, markets will take some time to assess the potential impact on economies, inflation and the potential implications of an interest rate increase in Europe next week. The data this morning is adding to the swift turn in outlooks for the economy; after a series of very weak data points on May data now the data suggests the economy is showing slight signs of improvement. The stock market jumped higher on the 10:00 data, the 10 yr note yield hit 3.20% +4 bp on the initial reaction to the ISM report.
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