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On Monday, September 5, 2011, in observance of
Labor Day!
On Friday September 2, 2011
Our office will be open regular hours.
Have a safe and happy holiday!
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Wednesday, August 31, 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.
Wednesday, August 31, 2011
At 8:15 the August ADP private jobs report showed an increase of 91K; markets were generally expecting an increase of 100K, in the world of jobs it is considered right on estimates given the revisions that will come later. The stock market trade remained with gains while the treasury and mortgage markets also held slight price gains after yesterday's strong rate market rally. Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in February, when it understated the gain in jobs by 5,000. The estimate was least accurate in June, when it overestimated the increase in employment by 100,000.
The weekly MBA applications out at 7:00; the overall index declined 9.6%. Refinancing applications fell 12.2% in the August 26 week according to MBA. The purchase index ended three weeks of heavy decline though with only a mild 0.9% gain. Rates are near 10-month lows, at 4.32% for 30-year lows for a seven basis point decline in the week. Points for 30-year loans increased to 1.30 from 0.88 (including origination fee) for 80% loans.
At 9:30 the DJIA opened up 53 points, the 10 yr note dipped back from its best levels (+9/32) to +4/32 at 2.17%. Mortgage prices at 9:15 were +8/32 (.25 bp) at 9:30 +3/32 (.09 bp).
At 9:45 the August Chicago purchasing mgrs index, expected at 54 frm 58.8, it was better at 56.5. The components; new orders index fell to 56.9 frm 59.4 in July, prices pd index fell to 68.6 frm 71.7 and employment increased a little to 52.1 frm 51.5. On the initial reaction toe 10 yr fell to -1/32 on the day with its rate at 2.18%, earlier this morning the rate was at 2.14%; mortgage prices held their prices at 9:30 (+.09 bp).
At 10:00 July factory orders; expectations were for an increase of 2.0%, as released orders increased 2.4%; June revised from -0.8% to -0.4%. Ex transportation orders up 0.9%. A better report along with a better Chicago report added to the gains in stock markets and pushed rate market prices lower.
The rate markets are continuing to move in a range, the 10 yr note still looking good but at present levels and uncertainty about what the President will announce in his speech next week the bond and mortgage markets will likely continue to trade in a narrow range. The Fed is also in play; yesterday's FOMC minutes revealed a Fed divided on what to do, if anything. Bernanke says the Fed has many tools in its box to use if necessary. What does that mean? The division at the FOMC on what to do is the most since back in 2002 when Greenspan was in charge. There is no consensus at the Fed and certainly no consensus in the markets. Bernanke wants to jam rates so low that it will force banks to lend and drive investors into stocks, all n an effort to induce consumers to spend more. The problem is, consumers are more wise than the Fed and markets give them credit for; savings rate is at 5.0% after negative savings prior to 2008. As long as job creation remains weak and home prices continue to decline consumers will not increase spending.
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, August 31, 2011
At 8:15 the August ADP private jobs report showed an increase of 91K; markets were generally expecting an increase of 100K, in the world of jobs it is considered right on estimates given the revisions that will come later. The stock market trade remained with gains while the treasury and mortgage markets also held slight price gains after yesterday's strong rate market rally. Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in February, when it understated the gain in jobs by 5,000. The estimate was least accurate in June, when it overestimated the increase in employment by 100,000.
The weekly MBA applications out at 7:00; the overall index declined 9.6%. Refinancing applications fell 12.2% in the August 26 week according to MBA. The purchase index ended three weeks of heavy decline though with only a mild 0.9% gain. Rates are near 10-month lows, at 4.32% for 30-year lows for a seven basis point decline in the week. Points for 30-year loans increased to 1.30 from 0.88 (including origination fee) for 80% loans.
At 9:30 the DJIA opened up 53 points, the 10 yr note dipped back from its best levels (+9/32) to +4/32 at 2.17%. Mortgage prices at 9:15 were +8/32 (.25 bp) at 9:30 +3/32 (.09 bp).
At 9:45 the August Chicago purchasing mgrs index, expected at 54 frm 58.8, it was better at 56.5. The components; new orders index fell to 56.9 frm 59.4 in July, prices pd index fell to 68.6 frm 71.7 and employment increased a little to 52.1 frm 51.5. On the initial reaction toe 10 yr fell to -1/32 on the day with its rate at 2.18%, earlier this morning the rate was at 2.14%; mortgage prices held their prices at 9:30 (+.09 bp).
At 10:00 July factory orders; expectations were for an increase of 2.0%, as released orders increased 2.4%; June revised from -0.8% to -0.4%. Ex transportation orders up 0.9%. A better report along with a better Chicago report added to the gains in stock markets and pushed rate market prices lower.
The rate markets are continuing to move in a range, the 10 yr note still looking good but at present levels and uncertainty about what the President will announce in his speech next week the bond and mortgage markets will likely continue to trade in a narrow range. The Fed is also in play; yesterday's FOMC minutes revealed a Fed divided on what to do, if anything. Bernanke says the Fed has many tools in its box to use if necessary. What does that mean? The division at the FOMC on what to do is the most since back in 2002 when Greenspan was in charge. There is no consensus at the Fed and certainly no consensus in the markets. Bernanke wants to jam rates so low that it will force banks to lend and drive investors into stocks, all n an effort to induce consumers to spend more. The problem is, consumers are more wise than the Fed and markets give them credit for; savings rate is at 5.0% after negative savings prior to 2008. As long as job creation remains weak and home prices continue to decline consumers will not increase spending.
Tuesday, August 30, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, August 30, 2011
A better open this morning in the bond and mortgage markets; the stock indexes pointing to a lower open. Two days of stock market rallies generally leads to a day of decline as investors are still unwilling to jump in heavily. On the bond and mortgage markets, the rate markets are likely to continue their sideway movement until at least Friday when the August employment report is released. The MBS market continues to be volatile with price changes as much as 7/32 a click at times; this morning 30 yr MBSs traded +11/32 (.34 bp), in one trade the price fell 7/32 (.22 bp).
Charles Evans, Chicago Fed President, on CNBC this morning suggesting the Fed should be doing much more; he mentioned the Fed should increase its inflation target to 3.0% in an effort to reflate prices, he suggests he would like to see more stimulus, he wants the Fed to set a target for low rates possibly tied to employment like until the unemployment rate falls to 7.5% as an example. He isn't one in the camp that believes there will be no double dip; another Fed voice and another opinion. At 2:00 this afternoon the Fed will release the minutes of the FOMC meeting on 8/9 wherein there was a lot of dissention within the members debating the economic outlook and led up to the famous "the Fed will leave rates at these levels until mid-2013". The minutes should be interesting, if not market moving. Evans does not believe the Fed's low rates has inflated commodity prices; on that comment gold jumped $40.00.
June Case/Shiller home price index at 9:00 am; Q2 overall +3.6%; in June up 1.1%. It covers 20 cities, a lot of data that essentially doesn't have much new news in it. The index of property values in 20 cities fell 4.5% from June 2010, after a 4.6% drop in the 12 months ended May that was the biggest since 2009.
At 9:30 the DJIA opened -50; mortgage prices that were +11/32 at 9:00 fell back to +4/32 at 9:30. The 10 yr note up 19/32 at 9:30 at 2.20% -6 bp. MBSs are looking weaker than what we expect, low volume and the Case/Shiller data this morning might be a drag. Prior to 9:30 the stock indexes were trading much weaker than at the actual open.
At 10:00 August consumer confidence; expected at 52.0 frm 59.5, fell to 44.5; the expectations index fell to 51.9 frm 74.9 and the jobs-hard-to-get index at 49.1 frm 44.8 in July. The reaction was swift; the 10 yr note jumped to +27/32 to 2.17%, mortgage prices no change on the data; the DJIA down 107. Just prior to the release the DJIA -27, the 10 yr note +23/32 and mortgage prices up 10/32 (.31 bp)
Bonds and mortgages are likely to continue sideway movement until Friday's employment data. After employment its the President and his next major speech on the 5th of Sept where he will reveal what plans he has to boost the economy, the housing markets and employment.
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, August 30, 2011
A better open this morning in the bond and mortgage markets; the stock indexes pointing to a lower open. Two days of stock market rallies generally leads to a day of decline as investors are still unwilling to jump in heavily. On the bond and mortgage markets, the rate markets are likely to continue their sideway movement until at least Friday when the August employment report is released. The MBS market continues to be volatile with price changes as much as 7/32 a click at times; this morning 30 yr MBSs traded +11/32 (.34 bp), in one trade the price fell 7/32 (.22 bp).
Charles Evans, Chicago Fed President, on CNBC this morning suggesting the Fed should be doing much more; he mentioned the Fed should increase its inflation target to 3.0% in an effort to reflate prices, he suggests he would like to see more stimulus, he wants the Fed to set a target for low rates possibly tied to employment like until the unemployment rate falls to 7.5% as an example. He isn't one in the camp that believes there will be no double dip; another Fed voice and another opinion. At 2:00 this afternoon the Fed will release the minutes of the FOMC meeting on 8/9 wherein there was a lot of dissention within the members debating the economic outlook and led up to the famous "the Fed will leave rates at these levels until mid-2013". The minutes should be interesting, if not market moving. Evans does not believe the Fed's low rates has inflated commodity prices; on that comment gold jumped $40.00.
June Case/Shiller home price index at 9:00 am; Q2 overall +3.6%; in June up 1.1%. It covers 20 cities, a lot of data that essentially doesn't have much new news in it. The index of property values in 20 cities fell 4.5% from June 2010, after a 4.6% drop in the 12 months ended May that was the biggest since 2009.
At 9:30 the DJIA opened -50; mortgage prices that were +11/32 at 9:00 fell back to +4/32 at 9:30. The 10 yr note up 19/32 at 9:30 at 2.20% -6 bp. MBSs are looking weaker than what we expect, low volume and the Case/Shiller data this morning might be a drag. Prior to 9:30 the stock indexes were trading much weaker than at the actual open.
At 10:00 August consumer confidence; expected at 52.0 frm 59.5, fell to 44.5; the expectations index fell to 51.9 frm 74.9 and the jobs-hard-to-get index at 49.1 frm 44.8 in July. The reaction was swift; the 10 yr note jumped to +27/32 to 2.17%, mortgage prices no change on the data; the DJIA down 107. Just prior to the release the DJIA -27, the 10 yr note +23/32 and mortgage prices up 10/32 (.31 bp)
Bonds and mortgages are likely to continue sideway movement until Friday's employment data. After employment its the President and his next major speech on the 5th of Sept where he will reveal what plans he has to boost the economy, the housing markets and employment.
Monday, August 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.
Monday, August 29, 2011
Not a good start to the week; treasuries and mortgage markets trading lower in price and higher yields, at 9:00 the 10 yr note -27/32 at 2.28% +9 bp, mortgage prices -9/32 (.28 bp) frm Friday's close. The global stock markets were better overnight and are propelling US stocks higher this morning. Last Friday Bernanke in his speech at Jackson Hole said he doesn't believe the US will enter another recession as the economy slowly improves. The Fed has no plans at the moment for another easing move, but he said the Fed will move if necessary. Meanwhile Bernanke turned US equity markets around on his economic outlook; the DJIA closed +134 Friday and at 9:00 this morning ahead of the open the DJIA +122.
At 8:30 this morning July personal income and spending; income up 0.3%, June income revised to +0.2% frm +0.1%. Spending in July was a little better than 0.5% expected, up 0.8% and added a little more strength to the pre-open trading in the indexes. The July savings rate +5.0%, down slightly from +5.5% in June. The US savings rate has been strong for the past year; prior to the 2008 calamities US savings were under 1.0%; consumers unlike politicians understand the need to cut spending and increase savings.
At 10:00 NAR June pending home sales were expected down 1.3%; as reported sales fell 1.3%; yr/yr +14.4%. Pending sales are contracts signed but not yet closed, likely some of the contracts will not close. No immediate reaction to the report.
This week is employment week; Friday the August employment report will likely keep markets from substantial moves. Of course treasuries and mortgages will be impacted by trade in the stock market. Given the trading over the last week it is looking less likely the 10 yr note will break below 2.00% and that the lows in rates may have been achieved. To attract buying in treasuries that will drop the 10 yr note below 2.00% the economic outlook would have to revert to a recession view; Bernanke took some of that outlook out of the equation in his speech.
This Week's Economic Calendar;
Today;
8:30 am July personal income and spending (as reported, income up 0.3%, spending +0.8%)
10:00 am June pending home sales (as reported -1.3%)
Tuesday;
9:00 am June Case/Shiller 20 city price index (-4.7%)
10:00 am Aug consumer confidence index (52.0 frm 59.5)
Wednesday;
7:00 am weekly MBA mortgage applications
8:15 am Aug ADP private jobs estimate (+100K)
9:45 am Chicago purchasing mgrs index (53.0 frm 58.8)
10:00 am July factory orders (+1.8%)
Thursday;
8:30 am weekly jobless claims (-10K to 407K)
Q2 productivity (-0.5%)
Q2 unit labor costs (+2.4%)
10:00 am Aug ISM manufacturing index (48.5 frm 50.9)
July construction spending (0.0%)
Friday;
8:30 am Aug employment data (unemployed 9.1%, non-farm jobs +73K, non-farm private jobs +110K)
The DJIA opened +143, the 10 yr at 9:30 -24/32 at 2.27% +8 bp and mortgage prices -8/32 (.25 bp).
In Greece its stock market put in the best performance in the last 23 years on news that tow of their banks will merge, the merger supposedly will increase the ability of the merged banks to avoid defaulting. The strength in Greece fed through most European stock markets; doesn't take a lot these days to bring out bargain hunters after how badly markets have been beaten down. The Greek two year note rate is 46%, after the country was bailed out twice by European Union partners as it struggled to service its debt. Still no real progress from Europe on all of the sovereign debt problems; the ECB, the EU, the IMF, Germany and France can't get banks to write down their loans to Greece and the other four countries that can't pay their debt.
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, August 29, 2011
Not a good start to the week; treasuries and mortgage markets trading lower in price and higher yields, at 9:00 the 10 yr note -27/32 at 2.28% +9 bp, mortgage prices -9/32 (.28 bp) frm Friday's close. The global stock markets were better overnight and are propelling US stocks higher this morning. Last Friday Bernanke in his speech at Jackson Hole said he doesn't believe the US will enter another recession as the economy slowly improves. The Fed has no plans at the moment for another easing move, but he said the Fed will move if necessary. Meanwhile Bernanke turned US equity markets around on his economic outlook; the DJIA closed +134 Friday and at 9:00 this morning ahead of the open the DJIA +122.
At 8:30 this morning July personal income and spending; income up 0.3%, June income revised to +0.2% frm +0.1%. Spending in July was a little better than 0.5% expected, up 0.8% and added a little more strength to the pre-open trading in the indexes. The July savings rate +5.0%, down slightly from +5.5% in June. The US savings rate has been strong for the past year; prior to the 2008 calamities US savings were under 1.0%; consumers unlike politicians understand the need to cut spending and increase savings.
At 10:00 NAR June pending home sales were expected down 1.3%; as reported sales fell 1.3%; yr/yr +14.4%. Pending sales are contracts signed but not yet closed, likely some of the contracts will not close. No immediate reaction to the report.
This week is employment week; Friday the August employment report will likely keep markets from substantial moves. Of course treasuries and mortgages will be impacted by trade in the stock market. Given the trading over the last week it is looking less likely the 10 yr note will break below 2.00% and that the lows in rates may have been achieved. To attract buying in treasuries that will drop the 10 yr note below 2.00% the economic outlook would have to revert to a recession view; Bernanke took some of that outlook out of the equation in his speech.
This Week's Economic Calendar;
Today;
8:30 am July personal income and spending (as reported, income up 0.3%, spending +0.8%)
10:00 am June pending home sales (as reported -1.3%)
Tuesday;
9:00 am June Case/Shiller 20 city price index (-4.7%)
10:00 am Aug consumer confidence index (52.0 frm 59.5)
Wednesday;
7:00 am weekly MBA mortgage applications
8:15 am Aug ADP private jobs estimate (+100K)
9:45 am Chicago purchasing mgrs index (53.0 frm 58.8)
10:00 am July factory orders (+1.8%)
Thursday;
8:30 am weekly jobless claims (-10K to 407K)
Q2 productivity (-0.5%)
Q2 unit labor costs (+2.4%)
10:00 am Aug ISM manufacturing index (48.5 frm 50.9)
July construction spending (0.0%)
Friday;
8:30 am Aug employment data (unemployed 9.1%, non-farm jobs +73K, non-farm private jobs +110K)
The DJIA opened +143, the 10 yr at 9:30 -24/32 at 2.27% +8 bp and mortgage prices -8/32 (.25 bp).
In Greece its stock market put in the best performance in the last 23 years on news that tow of their banks will merge, the merger supposedly will increase the ability of the merged banks to avoid defaulting. The strength in Greece fed through most European stock markets; doesn't take a lot these days to bring out bargain hunters after how badly markets have been beaten down. The Greek two year note rate is 46%, after the country was bailed out twice by European Union partners as it struggled to service its debt. Still no real progress from Europe on all of the sovereign debt problems; the ECB, the EU, the IMF, Germany and France can't get banks to write down their loans to Greece and the other four countries that can't pay their debt.
Mortgage Rate Update
This Week; markets will focus on Friday's August employment report as the main event for the week. In the meantime there are key economic data points everyday; July personal income and spending on Monday, consumer confidence on Tuesday, Wednesday has the market-rattling ADP August private jobs estimate and the Chicago purchasing mgrs index, Thursday weekly jobless claims and the August ISM manufacturing index. Last week Bernanke didn't offer up more stimulus but said the Fed has a lot of tools in its box if needed. He once again reminded that increasing employment required more fiscal stimulus from politicians. He said the world’s biggest economy is gradually recovering, the stock market rallied on that view and the bond market also was a little better on Friday. Monday the US stock market will open better; stock markets around the world rallied Monday on Bernanke's view of US recovery.
The US bond and mortgage markets are likely to trade in a sideway pattern through the week. As long as markets believe there will not be another economic decline into recession the bellwether 10 yr note will not likely break below 2.00% and mortgage rates will likely stay about where we have them currently. This week's range for the 10 yr note and mortgage rates should be confined to 15 to 20 basis points in rates.
This Week; markets will focus on Friday's August employment report as the main event for the week. In the meantime there are key economic data points everyday; July personal income and spending on Monday, consumer confidence on Tuesday, Wednesday has the market-rattling ADP August private jobs estimate and the Chicago purchasing mgrs index, Thursday weekly jobless claims and the August ISM manufacturing index. Last week Bernanke didn't offer up more stimulus but said the Fed has a lot of tools in its box if needed. He once again reminded that increasing employment required more fiscal stimulus from politicians. He said the world’s biggest economy is gradually recovering, the stock market rallied on that view and the bond market also was a little better on Friday. Monday the US stock market will open better; stock markets around the world rallied Monday on Bernanke's view of US recovery.
The US bond and mortgage markets are likely to trade in a sideway pattern through the week. As long as markets believe there will not be another economic decline into recession the bellwether 10 yr note will not likely break below 2.00% and mortgage rates will likely stay about where we have them currently. This week's range for the 10 yr note and mortgage rates should be confined to 15 to 20 basis points in rates.
Sunday, August 28, 2011
Monday, August 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.
Monday, August 22, 2011
Treasuries and mortgages opened weaker this morning with the US stock market aiming at a better open at 9:30. At 9:00 the 10 yr -14/32 at 2.12% +5 bp, mortgage prices -12/32 (.37 bp); the DJIA +152. Huge volatile swings in equities continues and will likely be the case through the week. This week there isn't much in the way of economic releases. At 9:30 the DJIA opened +140, the 10 yr note 2.12% +5 bp and mortgage prices -10/32 (.31 bp).
Treasury will sell $99B of notes, beginning with $35B of 2 yr notes Tuesday, $35B of 5 yr notes Wednesday and $29B of 7 yr notes on Thursday. Markets are focused on Friday when Ben Bernanke will open the Jackson Hole conference with a major statement on another Fed easing move, last year at the conference is when he announced QE 2. With the economy weakening and Europe's banks being hammered on the inability of Europe to come up with any plan that will keep the Fab five countries from defaulting on their debts (Greece, Spain, Italy, Portugal and Ireland).
There is some speculation swirling around this morning that Friday's preliminary report on Q2 GDP will be revised lower than the advance report last month (+1.3%). Q1 GDP was revised to +0.4% frm +1.9% that was reported originally. If there is a consensus, the revision is expected to +1.1% frm +1.3%.
Europe remains in the forefront as it has been for the last three weeks; every time there is a meeting of leaders optimism increases that a solution to its debt problems is at hand, every time there is disappointment to the extent Europe's bank stocks were pummeled last week and fed to US banks and in turn beat down US equity markets (DJIA -451, NASDAQ -166, and S&P -55). Steps taken by euro-area leaders to stem the region’s sovereign-debt challenges may not be enough to sustain the rally. German Chancellor Angela Merkel and French President Nicolas Sarkozy have stopped short of supporting euro bonds, which would allow nations to issue debt backed by all members of the region. Jean-Claude Trichet, head of the ECB, and his policy makers have bought government bonds in an effort to contain borrowing costs before a plan by European Union leaders goes into effect. EU leaders last month proposed expanding the role of the 440 billion euro ($632 billion) European Financial Stability Facility -- the fund that has helped bail out Greece, Ireland and Portugal -- to buy bonds in the secondary markets, aid troubled banks and offer lines of credit. The plan will go into effect after the parliaments of member nations approve it.
There are a number of firms out there expecting Bernanke will launch anther easing move to bolster the economy as it sinks back toward recession levels; equally there are a number of big bond houses that don't think another easing move will occur. Two sides to that coin; on one side another easing move could drive rates even lower, the other side is that an easing move will help the economy recover. One side is bullish the bond and mortgage markets the other is bearish for rates. All week the speculation will be a key to trading rates and equities.
This week's Economic Calendar:
Tuesday;
10:00 am July new home sales (-0.7% to 310K)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am weekly MBA mtg applications
8:30 am July durable goods orders (+1.9%, ex transportation orders -0.4%)
10:00 am FHFA June housing price index (N/A)
1:00 pm $35B 5 yr note auction
Thursday;
8:30 am weekly jobless claims (-2K back to 400K)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am Q2 preliminary GDP (+1.1% frm +1.3%)
9:55 am U. of Michigan consumer sentiment index (55.5 frm 54.9)
10:00 am Jackson Hole Bernanke speech
The bond and mortgage markets are due for a correction, higher rates. Last week the 10 yr note fell to 1.97%, as it did selling in the bond market increased. Demand for treasuries is slowing as the rates are declining and some belief the Fed can boost the economy with another easing; if the Fed does another easing it will have to be a move that will be believed to help the economy; a difficult trick to pull of, but Bernanke has pulled rabbits on a couple of occasions during his tenure.
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, August 22, 2011
Treasuries and mortgages opened weaker this morning with the US stock market aiming at a better open at 9:30. At 9:00 the 10 yr -14/32 at 2.12% +5 bp, mortgage prices -12/32 (.37 bp); the DJIA +152. Huge volatile swings in equities continues and will likely be the case through the week. This week there isn't much in the way of economic releases. At 9:30 the DJIA opened +140, the 10 yr note 2.12% +5 bp and mortgage prices -10/32 (.31 bp).
Treasury will sell $99B of notes, beginning with $35B of 2 yr notes Tuesday, $35B of 5 yr notes Wednesday and $29B of 7 yr notes on Thursday. Markets are focused on Friday when Ben Bernanke will open the Jackson Hole conference with a major statement on another Fed easing move, last year at the conference is when he announced QE 2. With the economy weakening and Europe's banks being hammered on the inability of Europe to come up with any plan that will keep the Fab five countries from defaulting on their debts (Greece, Spain, Italy, Portugal and Ireland).
There is some speculation swirling around this morning that Friday's preliminary report on Q2 GDP will be revised lower than the advance report last month (+1.3%). Q1 GDP was revised to +0.4% frm +1.9% that was reported originally. If there is a consensus, the revision is expected to +1.1% frm +1.3%.
Europe remains in the forefront as it has been for the last three weeks; every time there is a meeting of leaders optimism increases that a solution to its debt problems is at hand, every time there is disappointment to the extent Europe's bank stocks were pummeled last week and fed to US banks and in turn beat down US equity markets (DJIA -451, NASDAQ -166, and S&P -55). Steps taken by euro-area leaders to stem the region’s sovereign-debt challenges may not be enough to sustain the rally. German Chancellor Angela Merkel and French President Nicolas Sarkozy have stopped short of supporting euro bonds, which would allow nations to issue debt backed by all members of the region. Jean-Claude Trichet, head of the ECB, and his policy makers have bought government bonds in an effort to contain borrowing costs before a plan by European Union leaders goes into effect. EU leaders last month proposed expanding the role of the 440 billion euro ($632 billion) European Financial Stability Facility -- the fund that has helped bail out Greece, Ireland and Portugal -- to buy bonds in the secondary markets, aid troubled banks and offer lines of credit. The plan will go into effect after the parliaments of member nations approve it.
There are a number of firms out there expecting Bernanke will launch anther easing move to bolster the economy as it sinks back toward recession levels; equally there are a number of big bond houses that don't think another easing move will occur. Two sides to that coin; on one side another easing move could drive rates even lower, the other side is that an easing move will help the economy recover. One side is bullish the bond and mortgage markets the other is bearish for rates. All week the speculation will be a key to trading rates and equities.
This week's Economic Calendar:
Tuesday;
10:00 am July new home sales (-0.7% to 310K)
1:00 pm $35B 2 yr note auction
Wednesday;
7:00 am weekly MBA mtg applications
8:30 am July durable goods orders (+1.9%, ex transportation orders -0.4%)
10:00 am FHFA June housing price index (N/A)
1:00 pm $35B 5 yr note auction
Thursday;
8:30 am weekly jobless claims (-2K back to 400K)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am Q2 preliminary GDP (+1.1% frm +1.3%)
9:55 am U. of Michigan consumer sentiment index (55.5 frm 54.9)
10:00 am Jackson Hole Bernanke speech
The bond and mortgage markets are due for a correction, higher rates. Last week the 10 yr note fell to 1.97%, as it did selling in the bond market increased. Demand for treasuries is slowing as the rates are declining and some belief the Fed can boost the economy with another easing; if the Fed does another easing it will have to be a move that will be believed to help the economy; a difficult trick to pull of, but Bernanke has pulled rabbits on a couple of occasions during his tenure.
Friday, August 19, 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, August 19, 2011
Very early this morning global stock markets have been hit hard again from Asia to Europe and in the US futures pre-opening trading. Last night the US 10 yr note traded down to 2.03%, it may have been lower but at 2:00 am this morning that is where it sat. At 8:00 this morning even with stocks expected to open lower again. the 10 yr note was off 10/32 at 2.10% +3 bp and mortgages were down as much as 14/32 (.44 bp) frm yesterday's close. Volatility continues to increase, as it does the risks increase, whether trading interest rates, currencies or stocks.
Today is going to be very interesting in the bond and mortgage markets; at 9:00 the 10 yr note traded down 5/32 at 2.09% +2 bp and mortgage prices were down 14/32 (.44 bp) frm yesterday's close. At 9:00 the DJIA -137, NASDAQ -22, and S&P -15, and gold up $31.00. That US treasuries and mortgages are trading lower with the stock market also being hit goes contrary to what has been the norm for months. The question now, and one that I don't have an answer, have the US interest rate markets hit their lows in yields? Yesterday the 10 yr made a run down to 1.97% but it quickly jumped back above 2.00% ending the day at 2.07%, last night the 10 made another run towards 2.00% and failed again.
Just about every firm has now lowered the growth forecasts for the US economy. Recession is now the new word of the day. In Europe the banking system remains fragile; earlier this week France and Germany met, avoiding any comments about issuing euro bonds to shore up banks. Early this morning the EU reported it may present draft legislation along with a report on the feasibility of common bonds. More than $6 trillion has been erased from the value of global equities this month on signs the U.S. recovery is stumbling, while the cost of insuring European sovereign debt is back to levels that triggered the region’s central bank to buy Italian and Spanish bonds on Aug. 8.
Bank of America, troubled by increasing losses on mortgage foreclosures and penalties for improper foreclosure processes, announced it will cut another 3500 jobs; previously the bank cut 2500 jobs. Its stock is tumbling as are all the big banks in the US that may have counter-party risks with banks in Europe that are suffering huge losses on their stocks and losses expected when those banks have to write down sovereign debt to the Fab five countries unable to pay their debts.
There are no economic releases to think about today; the stock market trading will dominate all news again today. Going into the weekend traders are likely to level off some of the bearish trades. Although the stock market is opening lower, we wouldn't be surprised that by the end of the day losses may be pared back. Investors are scrambling for liquidity as the economic outlook has turned 180 degrees in just three weeks.
At 9:30 the DJIA opened -95, NASDAQ -24, S&P -9; the open wasn't quite as bad as futures markets were implying. The 10 yr note at 9:30 improved to -3/32 while mortgage prices were -9/32 (.28 bp) frm yesterday's closes. Trade is unusual this morning, there is no movement into US treasuries on additional safe haven buying, it looks like investors are choosing to go into gold and not treasuries, at least so far. The day is setting up for even more potential of volatility; the bond and mortgage markets are surprising traders, actually weaker on another decline in equities.
Treasuries and mortgage markets are unusually soft this morning with the stock market weaker, if the equity markets reverse and improve this afternoon treasuries and mortgages may take additional hits. Technically the 10 failing to hold at 2.00% is momentarily troubling, we have to back 60 years to find interest rates this low. By 10:00 the stock indexes have already shed their opening levels, although still weaker markets are finding some support. Be extremely careful now in floating loans; we suggest locking until the 10 yr can move below 2.00% (it can). Rates are increasing this morning. Interest rate markets at the moment are questionable as to how they will trade the rest of the day. Be very careful now.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, August 19, 2011
Very early this morning global stock markets have been hit hard again from Asia to Europe and in the US futures pre-opening trading. Last night the US 10 yr note traded down to 2.03%, it may have been lower but at 2:00 am this morning that is where it sat. At 8:00 this morning even with stocks expected to open lower again. the 10 yr note was off 10/32 at 2.10% +3 bp and mortgages were down as much as 14/32 (.44 bp) frm yesterday's close. Volatility continues to increase, as it does the risks increase, whether trading interest rates, currencies or stocks.
Today is going to be very interesting in the bond and mortgage markets; at 9:00 the 10 yr note traded down 5/32 at 2.09% +2 bp and mortgage prices were down 14/32 (.44 bp) frm yesterday's close. At 9:00 the DJIA -137, NASDAQ -22, and S&P -15, and gold up $31.00. That US treasuries and mortgages are trading lower with the stock market also being hit goes contrary to what has been the norm for months. The question now, and one that I don't have an answer, have the US interest rate markets hit their lows in yields? Yesterday the 10 yr made a run down to 1.97% but it quickly jumped back above 2.00% ending the day at 2.07%, last night the 10 made another run towards 2.00% and failed again.
Just about every firm has now lowered the growth forecasts for the US economy. Recession is now the new word of the day. In Europe the banking system remains fragile; earlier this week France and Germany met, avoiding any comments about issuing euro bonds to shore up banks. Early this morning the EU reported it may present draft legislation along with a report on the feasibility of common bonds. More than $6 trillion has been erased from the value of global equities this month on signs the U.S. recovery is stumbling, while the cost of insuring European sovereign debt is back to levels that triggered the region’s central bank to buy Italian and Spanish bonds on Aug. 8.
Bank of America, troubled by increasing losses on mortgage foreclosures and penalties for improper foreclosure processes, announced it will cut another 3500 jobs; previously the bank cut 2500 jobs. Its stock is tumbling as are all the big banks in the US that may have counter-party risks with banks in Europe that are suffering huge losses on their stocks and losses expected when those banks have to write down sovereign debt to the Fab five countries unable to pay their debts.
There are no economic releases to think about today; the stock market trading will dominate all news again today. Going into the weekend traders are likely to level off some of the bearish trades. Although the stock market is opening lower, we wouldn't be surprised that by the end of the day losses may be pared back. Investors are scrambling for liquidity as the economic outlook has turned 180 degrees in just three weeks.
At 9:30 the DJIA opened -95, NASDAQ -24, S&P -9; the open wasn't quite as bad as futures markets were implying. The 10 yr note at 9:30 improved to -3/32 while mortgage prices were -9/32 (.28 bp) frm yesterday's closes. Trade is unusual this morning, there is no movement into US treasuries on additional safe haven buying, it looks like investors are choosing to go into gold and not treasuries, at least so far. The day is setting up for even more potential of volatility; the bond and mortgage markets are surprising traders, actually weaker on another decline in equities.
Treasuries and mortgage markets are unusually soft this morning with the stock market weaker, if the equity markets reverse and improve this afternoon treasuries and mortgages may take additional hits. Technically the 10 failing to hold at 2.00% is momentarily troubling, we have to back 60 years to find interest rates this low. By 10:00 the stock indexes have already shed their opening levels, although still weaker markets are finding some support. Be extremely careful now in floating loans; we suggest locking until the 10 yr can move below 2.00% (it can). Rates are increasing this morning. Interest rate markets at the moment are questionable as to how they will trade the rest of the day. Be very careful now.
Thursday, August 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.
Thursday, August 18, 2011
The US stock market is being hit hard this morning on continued weakness in Europe's bank stocks that are seeing heavy selling. This morning the bond and mortgage markets opened strong, the 10 yr note at 2.10% at 8:30, mortgage prices +8/32 (.25 bp), the DJIA futures index -231. The situation in Europe over sovereign debt problems in five of its EU countries isn't getting any closer to a resolution. Tuesday France and German leaders met, it was in market terms a non-event; neither country is willing to do much more to come up with a workable plan, assuming of course there is a chance. Investors are increasingly more concerned the banks in Europe are unprepared for the possibility that there could be actual defaults. The infection in Europe is quickly moving to the US and the economic outlook. Banks in Europe are being hit hard today, down about 8.0% on many bank stocks, even with short selling bans in place in many countries; US and Asian banks are increasingly unwilling to lend the Europe's banks.
The WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe’s largest banks on concern that the sovereign debt crisis may lead to funding problems. The Federal Reserve Bank of New York has been holding talks with the lenders and sought information about their access to funds to maintain operations in the U.S., the newspaper said, citing people it didn’t identify. Europe and its regulators, the IMF and the ECB have made little or no progress toward a plan to avoid defaults; the result is dragging US stocks lower this morning and increasing the idea the US economy will decline further.
Two data points at 8:30; weekly jobless claims increased 9K to back above 400K to 408K, its been 16 weeks with clams at or above 400K (last week's claims revised to 399K frm 395K). Continuing claims increased 7K to 3.702 mil. July consumer price index jumped 0.5%, over twice the expected increase (0.2%); the core rate however was up 0.2% as expected. Yr/yr overall CPI +3.6%, yr/yr on the core rate +1.8%. CPI more tame than producer prices, but may see increase next month if producers have to push through their increasing costs. There was no reaction in markets over the 8:30 data.
At 9:30 the DJIA opened down 230 points, the 10 yr note +30/32 at 2.06% -11 bp and mortgages +17/32 (.53 bp). Gold jumping over $1800.00 to $1821.00. Not a pretty picture to start the day.
Three key economic releases at 10:00. August Philadelphia Fed business index, expected at 4.0 frm 3.2 in July, shocked, down to -30.7, new orders index -26.8, employment component -5.2 frm +8.9 in July. The report is rocking markets even more than prior to the data; any index read under zero is considered contraction, this was a huge hit. More bad news; July existing home sales were expected to be up 3.0%, sales as reported declined 3.5% to 4.67 mil against forecasts of 4.92 mil. The only bright point today, July leading economic indicators were up 0.5%, a little higher but always overlooked by traders. The 10:00 data pushed the 10 yr note yield to 1.97% on the knee jerk reaction.
Interest rates crumbling this morning as the stock market is being hit hard. Mortgage rates and prices improving but will likely drag treasuries with lenders still facing huge problems with re-financing locks that for the most part are falling through the cracks; one lender pointing out the pull-through rate is a low as 20%. That seems extremely low, but it indicates that many of the re-finance applications will not make it to closing, either because of appraisals, credit scores, lack of equity or just backing off as rates decline.
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, August 18, 2011
The US stock market is being hit hard this morning on continued weakness in Europe's bank stocks that are seeing heavy selling. This morning the bond and mortgage markets opened strong, the 10 yr note at 2.10% at 8:30, mortgage prices +8/32 (.25 bp), the DJIA futures index -231. The situation in Europe over sovereign debt problems in five of its EU countries isn't getting any closer to a resolution. Tuesday France and German leaders met, it was in market terms a non-event; neither country is willing to do much more to come up with a workable plan, assuming of course there is a chance. Investors are increasingly more concerned the banks in Europe are unprepared for the possibility that there could be actual defaults. The infection in Europe is quickly moving to the US and the economic outlook. Banks in Europe are being hit hard today, down about 8.0% on many bank stocks, even with short selling bans in place in many countries; US and Asian banks are increasingly unwilling to lend the Europe's banks.
The WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe’s largest banks on concern that the sovereign debt crisis may lead to funding problems. The Federal Reserve Bank of New York has been holding talks with the lenders and sought information about their access to funds to maintain operations in the U.S., the newspaper said, citing people it didn’t identify. Europe and its regulators, the IMF and the ECB have made little or no progress toward a plan to avoid defaults; the result is dragging US stocks lower this morning and increasing the idea the US economy will decline further.
Two data points at 8:30; weekly jobless claims increased 9K to back above 400K to 408K, its been 16 weeks with clams at or above 400K (last week's claims revised to 399K frm 395K). Continuing claims increased 7K to 3.702 mil. July consumer price index jumped 0.5%, over twice the expected increase (0.2%); the core rate however was up 0.2% as expected. Yr/yr overall CPI +3.6%, yr/yr on the core rate +1.8%. CPI more tame than producer prices, but may see increase next month if producers have to push through their increasing costs. There was no reaction in markets over the 8:30 data.
At 9:30 the DJIA opened down 230 points, the 10 yr note +30/32 at 2.06% -11 bp and mortgages +17/32 (.53 bp). Gold jumping over $1800.00 to $1821.00. Not a pretty picture to start the day.
Three key economic releases at 10:00. August Philadelphia Fed business index, expected at 4.0 frm 3.2 in July, shocked, down to -30.7, new orders index -26.8, employment component -5.2 frm +8.9 in July. The report is rocking markets even more than prior to the data; any index read under zero is considered contraction, this was a huge hit. More bad news; July existing home sales were expected to be up 3.0%, sales as reported declined 3.5% to 4.67 mil against forecasts of 4.92 mil. The only bright point today, July leading economic indicators were up 0.5%, a little higher but always overlooked by traders. The 10:00 data pushed the 10 yr note yield to 1.97% on the knee jerk reaction.
Interest rates crumbling this morning as the stock market is being hit hard. Mortgage rates and prices improving but will likely drag treasuries with lenders still facing huge problems with re-financing locks that for the most part are falling through the cracks; one lender pointing out the pull-through rate is a low as 20%. That seems extremely low, but it indicates that many of the re-finance applications will not make it to closing, either because of appraisals, credit scores, lack of equity or just backing off as rates decline.
Wednesday, August 17, 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, August 17, 2011
Yesterday the bond and mortgage markets improved, the stock market declined; on Monday the bond and mortgage markets declined while the stock market rallied. This morning markets continue their now almost predictable moves; since yesterday was a down day for stocks, today is likely an up day and will keep mortgage prices lower. It is becoming a trend; whatever markets do one day, the next day will be the opposite. Meanwhile mortgage lenders continue to set prices that don't always follow the actual market to control flow. Some lenders appear to be unable to keep up with the increased volume and price defensively.
July producer price index at 8:30 was a little stronger than expected; overall PPI increased 0.2% but the core, ex food and energy expected up 0.2% increased 0.4%, Yr/yr overall PPI +7.2% and yr/yr core +2.5%. Treasuries and mortgage markets didn't show any reaction to the hotter inflation core rate. With the US and global economies sluggish there is little concern that inflation will take hold. I am somewhat surprised that the bond market didn't react to the increase on the core inflation rate at 2.5% yr/yr, that is the level of the Fed's target range for the core.
European stocks are little changed, paring earlier losses after German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday rejected an expansion of the region’s rescue fund and rebuffed calls for joint euro borrowing. Asian shares and U.S. index futures are doing a little better this morning in pre-market trading, at 9:00 the DJIA was up 22 points but had backed off better levels seen at 8:00 am.
At 9:30 the DJIA opened +34, the 10 yr note +1/32 at 2.22% and mortgage prices +2/32 (.06 bp) frm yesterday's close. At 9:15 mortgage prices were down 1.32 (.03 bp). By 10:00 stock indexes are moving higher (+91 on the DJIA), the 10 yr note -4/32 and mortgage prices +1/32 (.03 bp).
At 7:00 this morning the weekly MBA mortgage applications. The ongoing drop in interest rates is driving refinancing demand higher but, unfortunately, has yet to drive up demand for home purchases. The refinancing index extended its run of jumps in the August 12 week with an 8.0% gain after a 30% increase last week. The purchase index continues to show weakness, down a very steep 9.1%. The rate for 30-year mortgages fell five basis points in the week to 4.32% with the 15-year rate also down five basis points, to 3.47%; a new low rate. Consumers still not stepping up to buy, very low prices and interest rates have yet to show and positive impact in the housing sector. After the Washington clown act over the debt ceiling and spending cuts, consumer sentiment took a dip. Job insecurity continues, debt deleveraging by consumers is continuing.
Pres Obama will make a Labor Day speech calling on Congress for more money to increase employment. The president also will call for long-term cuts beyond the $1.5 trillion that Congress charged a 12-member bipartisan “super- committee” of lawmakers to trim. His plan will likely have a mix of tax cuts and infrastructure spending and will include proposals beyond the ideas that he has mentioned on his current Midwest bus tour, such as extending a payroll tax cut for workers and unemployment insurance benefits. In addition to tax cuts and infrastructure spending, Obama will offer proposals targeted for the long-term unemployed. The dollar amount of the additional long-term deficit reduction measures will exceed the cost of the new short-term spending that he will propose. On his bus tour the president outlined a number of measures that he wants Congress to approve, including renewing a payroll tax cut for workers, revamping the patent process, approving free-trade deals and setting up a so-called infrastructure bank to help fund construction projects such as road-building.
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, August 17, 2011
Yesterday the bond and mortgage markets improved, the stock market declined; on Monday the bond and mortgage markets declined while the stock market rallied. This morning markets continue their now almost predictable moves; since yesterday was a down day for stocks, today is likely an up day and will keep mortgage prices lower. It is becoming a trend; whatever markets do one day, the next day will be the opposite. Meanwhile mortgage lenders continue to set prices that don't always follow the actual market to control flow. Some lenders appear to be unable to keep up with the increased volume and price defensively.
July producer price index at 8:30 was a little stronger than expected; overall PPI increased 0.2% but the core, ex food and energy expected up 0.2% increased 0.4%, Yr/yr overall PPI +7.2% and yr/yr core +2.5%. Treasuries and mortgage markets didn't show any reaction to the hotter inflation core rate. With the US and global economies sluggish there is little concern that inflation will take hold. I am somewhat surprised that the bond market didn't react to the increase on the core inflation rate at 2.5% yr/yr, that is the level of the Fed's target range for the core.
European stocks are little changed, paring earlier losses after German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday rejected an expansion of the region’s rescue fund and rebuffed calls for joint euro borrowing. Asian shares and U.S. index futures are doing a little better this morning in pre-market trading, at 9:00 the DJIA was up 22 points but had backed off better levels seen at 8:00 am.
At 9:30 the DJIA opened +34, the 10 yr note +1/32 at 2.22% and mortgage prices +2/32 (.06 bp) frm yesterday's close. At 9:15 mortgage prices were down 1.32 (.03 bp). By 10:00 stock indexes are moving higher (+91 on the DJIA), the 10 yr note -4/32 and mortgage prices +1/32 (.03 bp).
At 7:00 this morning the weekly MBA mortgage applications. The ongoing drop in interest rates is driving refinancing demand higher but, unfortunately, has yet to drive up demand for home purchases. The refinancing index extended its run of jumps in the August 12 week with an 8.0% gain after a 30% increase last week. The purchase index continues to show weakness, down a very steep 9.1%. The rate for 30-year mortgages fell five basis points in the week to 4.32% with the 15-year rate also down five basis points, to 3.47%; a new low rate. Consumers still not stepping up to buy, very low prices and interest rates have yet to show and positive impact in the housing sector. After the Washington clown act over the debt ceiling and spending cuts, consumer sentiment took a dip. Job insecurity continues, debt deleveraging by consumers is continuing.
Pres Obama will make a Labor Day speech calling on Congress for more money to increase employment. The president also will call for long-term cuts beyond the $1.5 trillion that Congress charged a 12-member bipartisan “super- committee” of lawmakers to trim. His plan will likely have a mix of tax cuts and infrastructure spending and will include proposals beyond the ideas that he has mentioned on his current Midwest bus tour, such as extending a payroll tax cut for workers and unemployment insurance benefits. In addition to tax cuts and infrastructure spending, Obama will offer proposals targeted for the long-term unemployed. The dollar amount of the additional long-term deficit reduction measures will exceed the cost of the new short-term spending that he will propose. On his bus tour the president outlined a number of measures that he wants Congress to approve, including renewing a payroll tax cut for workers, revamping the patent process, approving free-trade deals and setting up a so-called infrastructure bank to help fund construction projects such as road-building.
Tuesday, August 16, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, August 16, 2011
Treasuries and mortgages started a little better this morning with the stock indexes trading lower, suggesting a weak opening at 9:30. Mortgage markets stalled here for the last few days with markets consolidating recent strong moves. The stock market put three consecutive days up or the best showing in weeks, this morning a little pullback on the open.
At 8:30 July housing starts were expected down 3,5% but declined just 1.5%; building permits were right on forecasts, down 3.2%. Housing still n depression and likely will continue to be well into next year. Housing starts so far this year are running on a 566,000 pace for all of 2011. The result compares with last year’s tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959. During the past decade’s housing boom, starts reached a peak of 2.07 million in 2005. (data frm Bloomberg)
July import prices were up 0.3% while US export prices declined 0.4%. Paying more for imports while earning less on exports. July imports followed a revised 0.6% drop in June.
At 9:15 July industrial production, expected +0.4%, increased 0.9%; July capacity utilization, expected at 77.0% frm 76.7% in June increased to 77.5%. Better than expectations pushed treasuries down a little and mortgages lower. The better reports on housing starts and industrial production and capacity utilization helped take some pressure off stock indexes which were down 100 points on the DJIA to -55.
Fitch out this morning affirming US credit rating at AAA; S&P lowered the US rating to AA2 and sent the stock market into a tail spin before recovering the last three days. S&P is feeling the pressure over its US downgrade. Eleven days after lowering the credit rating on the U.S. for the first time, the rating agency is suffering a downgrade among global investors as American bonds are proving world beaters -- undermining S&P’s mathematical assumptions -- and prompting disbelief among political scientists months after the company upgraded China because of the stability fostered by Communist Party rule.
At 9:30 the DJIA opened -90, the 10 yr note +3/32 at 2.30% and mortgage markets, choppy this morning, down 2/32 (.06 bp) at 9:30.
No growth in Germany in Q2, or in the euro zone overall. Germany's GDP rose 0.1% from the first quarter, when it jumped a revised 1.3%. Economists had forecast growth of 0.5%. A separate report today showed euro-area economic growth slowed in the second quarter more than economists had forecast. Gross domestic product in the 17-nation euro area rose 0.2% from the first quarter, when it increased 0.8%; estimates were for an increase of 0.3%. The German DAX declined to, the first decline in four days, on the soft economic data.
German chancellor Merkel and French Pres Sarkozy will meet later; according to press reports there will be no discussions regarding issuing euro bonds in an effort to shore up those debt ridden economies in the zone.
The wider look for US interest rates remains positive, but we are becoming concerned that the benchmark 10 yr note tested and failed to break below 2.00% last week; below 2.00% would be the lowest rate on the 10 yr note since back n the 50s. The 10 hit 2.00% back in 2008 as the sub prime crisis unfolded and took down Lehman Bros and others. It is less likely now that rates will fall much over the next couple of weeks as markets are likely to swing around with not much change until the Jackson Hole conference that begins August 26th.
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, August 16, 2011
Treasuries and mortgages started a little better this morning with the stock indexes trading lower, suggesting a weak opening at 9:30. Mortgage markets stalled here for the last few days with markets consolidating recent strong moves. The stock market put three consecutive days up or the best showing in weeks, this morning a little pullback on the open.
At 8:30 July housing starts were expected down 3,5% but declined just 1.5%; building permits were right on forecasts, down 3.2%. Housing still n depression and likely will continue to be well into next year. Housing starts so far this year are running on a 566,000 pace for all of 2011. The result compares with last year’s tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959. During the past decade’s housing boom, starts reached a peak of 2.07 million in 2005. (data frm Bloomberg)
July import prices were up 0.3% while US export prices declined 0.4%. Paying more for imports while earning less on exports. July imports followed a revised 0.6% drop in June.
At 9:15 July industrial production, expected +0.4%, increased 0.9%; July capacity utilization, expected at 77.0% frm 76.7% in June increased to 77.5%. Better than expectations pushed treasuries down a little and mortgages lower. The better reports on housing starts and industrial production and capacity utilization helped take some pressure off stock indexes which were down 100 points on the DJIA to -55.
Fitch out this morning affirming US credit rating at AAA; S&P lowered the US rating to AA2 and sent the stock market into a tail spin before recovering the last three days. S&P is feeling the pressure over its US downgrade. Eleven days after lowering the credit rating on the U.S. for the first time, the rating agency is suffering a downgrade among global investors as American bonds are proving world beaters -- undermining S&P’s mathematical assumptions -- and prompting disbelief among political scientists months after the company upgraded China because of the stability fostered by Communist Party rule.
At 9:30 the DJIA opened -90, the 10 yr note +3/32 at 2.30% and mortgage markets, choppy this morning, down 2/32 (.06 bp) at 9:30.
No growth in Germany in Q2, or in the euro zone overall. Germany's GDP rose 0.1% from the first quarter, when it jumped a revised 1.3%. Economists had forecast growth of 0.5%. A separate report today showed euro-area economic growth slowed in the second quarter more than economists had forecast. Gross domestic product in the 17-nation euro area rose 0.2% from the first quarter, when it increased 0.8%; estimates were for an increase of 0.3%. The German DAX declined to, the first decline in four days, on the soft economic data.
German chancellor Merkel and French Pres Sarkozy will meet later; according to press reports there will be no discussions regarding issuing euro bonds in an effort to shore up those debt ridden economies in the zone.
The wider look for US interest rates remains positive, but we are becoming concerned that the benchmark 10 yr note tested and failed to break below 2.00% last week; below 2.00% would be the lowest rate on the 10 yr note since back n the 50s. The 10 hit 2.00% back in 2008 as the sub prime crisis unfolded and took down Lehman Bros and others. It is less likely now that rates will fall much over the next couple of weeks as markets are likely to swing around with not much change until the Jackson Hole conference that begins August 26th.
Monday, August 15, 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, August 15, 2011
Prior to 8:30 treasuries and mortgages were a little weaker in price. At 8:30 the first data point this week, the NY Fed Empire State manufacturing index was expected to have declined to -0.4, as reported it fell to -7.72 frm -3.76 in July (any read under zero is considered contraction). New orders component fell to -7.82 frm -5.45, employment at 3.26 frm 1.11, and prices at 28.26 frm 43.33. The report didn't generate much reaction but kept interest rates in check until the stock market opened at 9:30. At 9:00 the DJIA index traded +41.
At 9:30 the DJIA opened +110, the 10 yr note unchanged at 2.26% while mortgage prices at 9:30 were soft; down 4/32 (.12 bp) on 30 yr conventionals and -11/32 (.34 bp) on 30 FHAs.
At 10:00 the August housing market index from NAHB, expected unchanged at 15, as reported 15; single family home sales index at 16, up from 15 in July. Treasuries and mortgages at 10:00 were losing ground from levels at 9:30. Mtgs at 10:00 -8/32 (.25 bp), the 10 yr at 10:00 -5/32.
Last Thursday and Friday the stock indexes closed better, it has been rare that the indexes improved on two successive days. This morning the stock market has opened better, talk will focus on possible 3 days in a row. The outlook for the economy is likely more pessimistic than it should be but in this panicky environment not many are thinking clearly. The economic outlook isn't what it was two months ago with report after report on the economy weaker than estimates. Mix in the still shocking statement from the Fed last Tuesday that it would keep the Fed funds rate at current levels for two more years; the take away is that the Fed now believes the US and global economies will not improve much and unemployment will stay at recession high levels.
This Week should continue to see increased volatility in the financial markets as investors and traders sift through the ever changing economic outlook. Last week didn't have much in the way of key data points, this week we have a lot of economic food to digest. The bond and mortgage markets remain technically overbought but in this present environment of high volatility and moving to safety the bond market will likely continue to hold low rates, however not quite as low as it was last week. It all depends on the data this week. Expect to hear more about the possibility of another Fed easing (QE 3); whether or not the Fed goes back to purchasing treasuries or MBSs or anything else, it won't likely have any impact on improving the economy or job growth. This week expect another week of interday market volatility. The bond and mortgage markets will continue to move in tandem with stock indexes; better stock market lower prices in mortgages and treasuries.
This week's Economic Calendar:
Monday;
8:30 August Empire State manufacturing index (as reported -7.72 frm -3.76 in July)
10:00 Aug NAHB housing mkt index (expected at 15, as reported
Tuesday;
8:30 am July housing starts (-3.5%)
July building permits (-3.0%)
July export prices
July import prices
9:15 am July industrial production (+0.4%)
July capacity utilization (77.0% frm 76.7% in June)
Wednesday;
7:00 am Weekly MBA mortgage applications
8:30 am July producer price index (0.0% frm -0.4% in June; ex food and energy +0.2%)
Thursday;
8:30 am weekly jobless claims (+5K to 400K; continues claims 3.698 mil frm 3.688 mil)
July consumer price index (+0.2%, ex food and energy +0.2%)
10:00 am July existing home sales (+2.0% at 4.87 mil)
August Philadelphia Fed business index (+1.0 frm +3.20 in July)
July leading economic indicators (+0.2%)
Japan’s economy shrank at an annualized 1.3% rate in the second quarter, compared with the median forecast for a 2.5% drop. Oil traded near its highest in a week as advancing U.S. equity futures and better-than-forecast economic data from Japan allayed concerns that the global recovery has faded. When is bad news good news? These days with markets increasingly worried about a double dip recessions any report that beats estimates is reason for a sigh of relief.
Yields are little changed across Europe as markets take a wait and see approach ahead of tomorrow's crisis management meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel. The little change is somewhat of a surprise as initial reports are suggesting that both France and Germany have ruled out a common Euro zone bond. German Bunds and UK Gilts are seeing some light buying with German yields lower by as much as 5 bps and Gilts off 1 to 2 bps. The 10-yr Bund is now yielding 2.322% while the 10-yr Gilt is near 2.520%.
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, August 15, 2011
Prior to 8:30 treasuries and mortgages were a little weaker in price. At 8:30 the first data point this week, the NY Fed Empire State manufacturing index was expected to have declined to -0.4, as reported it fell to -7.72 frm -3.76 in July (any read under zero is considered contraction). New orders component fell to -7.82 frm -5.45, employment at 3.26 frm 1.11, and prices at 28.26 frm 43.33. The report didn't generate much reaction but kept interest rates in check until the stock market opened at 9:30. At 9:00 the DJIA index traded +41.
At 9:30 the DJIA opened +110, the 10 yr note unchanged at 2.26% while mortgage prices at 9:30 were soft; down 4/32 (.12 bp) on 30 yr conventionals and -11/32 (.34 bp) on 30 FHAs.
At 10:00 the August housing market index from NAHB, expected unchanged at 15, as reported 15; single family home sales index at 16, up from 15 in July. Treasuries and mortgages at 10:00 were losing ground from levels at 9:30. Mtgs at 10:00 -8/32 (.25 bp), the 10 yr at 10:00 -5/32.
Last Thursday and Friday the stock indexes closed better, it has been rare that the indexes improved on two successive days. This morning the stock market has opened better, talk will focus on possible 3 days in a row. The outlook for the economy is likely more pessimistic than it should be but in this panicky environment not many are thinking clearly. The economic outlook isn't what it was two months ago with report after report on the economy weaker than estimates. Mix in the still shocking statement from the Fed last Tuesday that it would keep the Fed funds rate at current levels for two more years; the take away is that the Fed now believes the US and global economies will not improve much and unemployment will stay at recession high levels.
This Week should continue to see increased volatility in the financial markets as investors and traders sift through the ever changing economic outlook. Last week didn't have much in the way of key data points, this week we have a lot of economic food to digest. The bond and mortgage markets remain technically overbought but in this present environment of high volatility and moving to safety the bond market will likely continue to hold low rates, however not quite as low as it was last week. It all depends on the data this week. Expect to hear more about the possibility of another Fed easing (QE 3); whether or not the Fed goes back to purchasing treasuries or MBSs or anything else, it won't likely have any impact on improving the economy or job growth. This week expect another week of interday market volatility. The bond and mortgage markets will continue to move in tandem with stock indexes; better stock market lower prices in mortgages and treasuries.
This week's Economic Calendar:
Monday;
8:30 August Empire State manufacturing index (as reported -7.72 frm -3.76 in July)
10:00 Aug NAHB housing mkt index (expected at 15, as reported
Tuesday;
8:30 am July housing starts (-3.5%)
July building permits (-3.0%)
July export prices
July import prices
9:15 am July industrial production (+0.4%)
July capacity utilization (77.0% frm 76.7% in June)
Wednesday;
7:00 am Weekly MBA mortgage applications
8:30 am July producer price index (0.0% frm -0.4% in June; ex food and energy +0.2%)
Thursday;
8:30 am weekly jobless claims (+5K to 400K; continues claims 3.698 mil frm 3.688 mil)
July consumer price index (+0.2%, ex food and energy +0.2%)
10:00 am July existing home sales (+2.0% at 4.87 mil)
August Philadelphia Fed business index (+1.0 frm +3.20 in July)
July leading economic indicators (+0.2%)
Japan’s economy shrank at an annualized 1.3% rate in the second quarter, compared with the median forecast for a 2.5% drop. Oil traded near its highest in a week as advancing U.S. equity futures and better-than-forecast economic data from Japan allayed concerns that the global recovery has faded. When is bad news good news? These days with markets increasingly worried about a double dip recessions any report that beats estimates is reason for a sigh of relief.
Yields are little changed across Europe as markets take a wait and see approach ahead of tomorrow's crisis management meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel. The little change is somewhat of a surprise as initial reports are suggesting that both France and Germany have ruled out a common Euro zone bond. German Bunds and UK Gilts are seeing some light buying with German yields lower by as much as 5 bps and Gilts off 1 to 2 bps. The 10-yr Bund is now yielding 2.322% while the 10-yr Gilt is near 2.520%.
Friday, August 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.
Friday, August 12, 2011
Rate markets a little better this morning after heavy selling yesterday took mortgage prices down 41/32 (128 bp). The see saw continues in the stock market, down one day hard, up strong the next day; uncertainty still rules markets. Yesterday the stock indexes jumped 423 (DJIA) after dumping 520 on Wednesday; this morning the key indexes are actually better. Can we have two up days in a row? We will have to wait until the close to see, the volatility remains extreme and not possible to predict where markets will trade the next five minutes let alone for the next six hours.
At 8:30 July retail sales were up 0.5% overall and up 0.5% when auto sales are extracted; a little better than forecasts on the ex autos sales. June retail sales, originally reported up a very weak 0.1% were revised to +0.3%. There was no noticeable reaction to it. Sales in July were the best in four months suggesting consumers, while conservative, are still buying.
At 9:30 the DJIA opened up 90, the 10 yr note at 2.28% -5 bp and mortgage prices +16/32 (.50 bp) frm yesterday's close.
At 9:55 the U. of Michigan mid-month consumer sentiment index, expected at 63.0 frm 63.7 at the end of July, tumbled to 54.9, the lowest index read since May 1980. The current conditions component fell to 69.3 frm 75.8 and the 12 month outlook index fell to 40 frm 55. A very weak report that has pushed mortgage prices higher from 9:30 and took some wind out of the stock indexes although still holding gains. Not really much of surprise given the current economic outlook and consumer anger over Was
At 10:00 June business inventories expected up 0.6%, were up 0.3%; sales up 0.4%leaving a 1.28 month supply unchanged from May.
This morning France reported its quarterly GDP at zero, no growth. More evidence that Europe's economies are softening just as we have here. European industrial production unexpectedly fell in June, it fell 0.7% from May. European economic confidence weakened in July and manufacturing growth slowed, based on a survey of purchasing managers. Euro-region growth probably weakened in the second quarter from 0.8% in the previous three months, European Central Bank President Jean-Claude Trichet said on Aug. 4. In the year, the economy may expand about 1.9% before cooling to 1.7% in 2012.
Turkey, Greece and South Korea trying to stem the heavy selling in equity markets have banned short sales. The take away is that by doing so the volatility will lessen and remove some of the panic. Likely the bans have helped our market in early trade this morning. Banning shot sales has never really worked before where it has been implemented, but the initial reaction generally does slow it down. In the longer perspective the markets will go where investors want it to go, based on underlying fundamentals.
Renewed talk this morning that most economists are now expecting another QE move from the Fed. If the Fed does another easing move it isn't likely to increase employment anytime soon. The advantage, and possibly the logic in another easing, is that the Fed could drive long term rates even lower and push mortgage rates down to levels never seen before. Doing so would likely keep re-financing going, lowering debt service for consumers thus increasing consumer spending. Taking it further, if consumers increase spending the hope is that businesses will increase hiring. From my perspective, driving rates lower won't meet the expectations; homeowners will take advantage of it but won't open purses for much increase in discretionary spending. Until consumer confidence increases about our leadership in this country, consumers rightly will continue to be cautious. New polls out show citizens have very little confidence in Washington, Republicans, Democrats and Pres Obama. After the embarrassing performance over the debt ceiling America is fed up. Any QE move from the Fed will likely be announced on August 26th at Jackson Hole.
The mortgage market is continuing to exhibit extreme day to day volatility. Mortgage rates will stay low with the Fed intent on keeping rates down, however until the 10 yr treasury note falls below 2.00% (now 2.27%) prices in the mortgage markets will continue to trade in wide interday swings. The bond and mortgage markets are still technically overbought, that may keep mortgage rates vulnerable for awhile. The wider perspective remains bullish, the near term outlook is for continued choppy trading.
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, August 12, 2011
Rate markets a little better this morning after heavy selling yesterday took mortgage prices down 41/32 (128 bp). The see saw continues in the stock market, down one day hard, up strong the next day; uncertainty still rules markets. Yesterday the stock indexes jumped 423 (DJIA) after dumping 520 on Wednesday; this morning the key indexes are actually better. Can we have two up days in a row? We will have to wait until the close to see, the volatility remains extreme and not possible to predict where markets will trade the next five minutes let alone for the next six hours.
At 8:30 July retail sales were up 0.5% overall and up 0.5% when auto sales are extracted; a little better than forecasts on the ex autos sales. June retail sales, originally reported up a very weak 0.1% were revised to +0.3%. There was no noticeable reaction to it. Sales in July were the best in four months suggesting consumers, while conservative, are still buying.
At 9:30 the DJIA opened up 90, the 10 yr note at 2.28% -5 bp and mortgage prices +16/32 (.50 bp) frm yesterday's close.
At 9:55 the U. of Michigan mid-month consumer sentiment index, expected at 63.0 frm 63.7 at the end of July, tumbled to 54.9, the lowest index read since May 1980. The current conditions component fell to 69.3 frm 75.8 and the 12 month outlook index fell to 40 frm 55. A very weak report that has pushed mortgage prices higher from 9:30 and took some wind out of the stock indexes although still holding gains. Not really much of surprise given the current economic outlook and consumer anger over Was
At 10:00 June business inventories expected up 0.6%, were up 0.3%; sales up 0.4%leaving a 1.28 month supply unchanged from May.
This morning France reported its quarterly GDP at zero, no growth. More evidence that Europe's economies are softening just as we have here. European industrial production unexpectedly fell in June, it fell 0.7% from May. European economic confidence weakened in July and manufacturing growth slowed, based on a survey of purchasing managers. Euro-region growth probably weakened in the second quarter from 0.8% in the previous three months, European Central Bank President Jean-Claude Trichet said on Aug. 4. In the year, the economy may expand about 1.9% before cooling to 1.7% in 2012.
Turkey, Greece and South Korea trying to stem the heavy selling in equity markets have banned short sales. The take away is that by doing so the volatility will lessen and remove some of the panic. Likely the bans have helped our market in early trade this morning. Banning shot sales has never really worked before where it has been implemented, but the initial reaction generally does slow it down. In the longer perspective the markets will go where investors want it to go, based on underlying fundamentals.
Renewed talk this morning that most economists are now expecting another QE move from the Fed. If the Fed does another easing move it isn't likely to increase employment anytime soon. The advantage, and possibly the logic in another easing, is that the Fed could drive long term rates even lower and push mortgage rates down to levels never seen before. Doing so would likely keep re-financing going, lowering debt service for consumers thus increasing consumer spending. Taking it further, if consumers increase spending the hope is that businesses will increase hiring. From my perspective, driving rates lower won't meet the expectations; homeowners will take advantage of it but won't open purses for much increase in discretionary spending. Until consumer confidence increases about our leadership in this country, consumers rightly will continue to be cautious. New polls out show citizens have very little confidence in Washington, Republicans, Democrats and Pres Obama. After the embarrassing performance over the debt ceiling America is fed up. Any QE move from the Fed will likely be announced on August 26th at Jackson Hole.
The mortgage market is continuing to exhibit extreme day to day volatility. Mortgage rates will stay low with the Fed intent on keeping rates down, however until the 10 yr treasury note falls below 2.00% (now 2.27%) prices in the mortgage markets will continue to trade in wide interday swings. The bond and mortgage markets are still technically overbought, that may keep mortgage rates vulnerable for awhile. The wider perspective remains bullish, the near term outlook is for continued choppy trading.
Thursday, August 11, 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, August 11, 2011
Early this morning, prior to 8:30 interest rate markets were somewhat better; at 8:30 weekly jobless claims were better than expected. Claims fell 7K to 395K to a four-month low, signaling the recent slowdown in payroll gains is due to a lack of hiring rather than more firings. Continuing claims fell to 3.688 mil frm 3.748 mil last week. Although claims were better they are still weak but after the serious beatdown of stocks recently and the big decline in rates markets it was enough to stop selling. The mortgage markets continue to be exceptionally volatile, at 9:00 mtg prices down 10/32 (.31 bp). Yesterday MBS markets were swinging back and forth in rapid fashion, one of the most volatile days in mortgage markets in over a year.
The stock market is way oversold based on technicals and psychological readings; the rate markets are equally overbought. Taking any positions in these markets has been risky, this morning the DJIA at 8:00 was down 130 points, at 9:15 +45; mortgage prices at 8:30 +5/32 (.15 bp) at 9:15 -11/32 (.34 bp).
News coming out of Europe has helped the US equity markets a little so far this morning. The NY Times is reporting regulators in Europe are considering barring any short sales in the various stock markets and shorting financial stocks. No solid info yet but when the report hit the wires it did boost stock index trading in pre-market futures. Turkey moved to curb short sales and threatened “severe penalties” for stock manipulation, joining nations from Greece to South Korea in trying to stem bearish bets after the worst tumble in global shares since 2008.
The June Treasury budget balance out at 8:30 was monthly deficit of $53.1B, markets were expecting -$48.0B. It is the highest level since October 2008 as a slump in exports exceeded a decline in shipments from overseas. Red ink continues at record levels while our leaders seem to be living in a fog and apparently do not get it yet.
At 9:30 the DJIA opened +123, the 10 yr note -7/32 at 2,20% +3 bp and mortgage markets, very volatile so far this morning down 11/32 (.34 bp). Prices of MBSs this morning are moving in 4/32 to 10/32 swings from minute to minute, difficult to say just how various lenders priced this morning.
At 1:00 this afternoon Treasury will complete the quarterly refunding with $16B of 30 yr bonds up for sale. The 10 and 3 yr auctions both were very well bid, the 30 should also see strong bidding.
Extreme volatility continuing this morning led by the stock indexes. The US bond market, based on the bellwether 10 yr note is ripe for a retracement as is the stock market. Recent activity has been based on panic and short selling by savvy traders and some hedge funds. The 10 yr hit 2.08% yesterday before closing at 2.16%; since back in the late 40s and early 50s the low yield for the 10 yr has been 2.03% hit in Dec 2008. The rate market is unlikely to push below 2.00% on the 10 yr without some consolidation at present to higher levels. Mortgage rates are also likely to settle down here for a few days. There are no bulls now in stock markets, no bears in the bond market; a perfect set up for rebounds in both markets, although the wider perspective will remain bearish on the economic outlook and bullish for rates, but lower rates from here may be a struggle for awhile. Markets have to settle down now, we expect they will. Lenders are likely to continue defensive pricing, concerns that product locked at prices a week ago may not close is a problem not having much confidence on closings as rates have crashed lower over the past two weeks.
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, August 11, 2011
Early this morning, prior to 8:30 interest rate markets were somewhat better; at 8:30 weekly jobless claims were better than expected. Claims fell 7K to 395K to a four-month low, signaling the recent slowdown in payroll gains is due to a lack of hiring rather than more firings. Continuing claims fell to 3.688 mil frm 3.748 mil last week. Although claims were better they are still weak but after the serious beatdown of stocks recently and the big decline in rates markets it was enough to stop selling. The mortgage markets continue to be exceptionally volatile, at 9:00 mtg prices down 10/32 (.31 bp). Yesterday MBS markets were swinging back and forth in rapid fashion, one of the most volatile days in mortgage markets in over a year.
The stock market is way oversold based on technicals and psychological readings; the rate markets are equally overbought. Taking any positions in these markets has been risky, this morning the DJIA at 8:00 was down 130 points, at 9:15 +45; mortgage prices at 8:30 +5/32 (.15 bp) at 9:15 -11/32 (.34 bp).
News coming out of Europe has helped the US equity markets a little so far this morning. The NY Times is reporting regulators in Europe are considering barring any short sales in the various stock markets and shorting financial stocks. No solid info yet but when the report hit the wires it did boost stock index trading in pre-market futures. Turkey moved to curb short sales and threatened “severe penalties” for stock manipulation, joining nations from Greece to South Korea in trying to stem bearish bets after the worst tumble in global shares since 2008.
The June Treasury budget balance out at 8:30 was monthly deficit of $53.1B, markets were expecting -$48.0B. It is the highest level since October 2008 as a slump in exports exceeded a decline in shipments from overseas. Red ink continues at record levels while our leaders seem to be living in a fog and apparently do not get it yet.
At 9:30 the DJIA opened +123, the 10 yr note -7/32 at 2,20% +3 bp and mortgage markets, very volatile so far this morning down 11/32 (.34 bp). Prices of MBSs this morning are moving in 4/32 to 10/32 swings from minute to minute, difficult to say just how various lenders priced this morning.
At 1:00 this afternoon Treasury will complete the quarterly refunding with $16B of 30 yr bonds up for sale. The 10 and 3 yr auctions both were very well bid, the 30 should also see strong bidding.
Extreme volatility continuing this morning led by the stock indexes. The US bond market, based on the bellwether 10 yr note is ripe for a retracement as is the stock market. Recent activity has been based on panic and short selling by savvy traders and some hedge funds. The 10 yr hit 2.08% yesterday before closing at 2.16%; since back in the late 40s and early 50s the low yield for the 10 yr has been 2.03% hit in Dec 2008. The rate market is unlikely to push below 2.00% on the 10 yr without some consolidation at present to higher levels. Mortgage rates are also likely to settle down here for a few days. There are no bulls now in stock markets, no bears in the bond market; a perfect set up for rebounds in both markets, although the wider perspective will remain bearish on the economic outlook and bullish for rates, but lower rates from here may be a struggle for awhile. Markets have to settle down now, we expect they will. Lenders are likely to continue defensive pricing, concerns that product locked at prices a week ago may not close is a problem not having much confidence on closings as rates have crashed lower over the past two weeks.
Wednesday, August 10, 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, August 10, 2011
Volatility continues to describe the financial markets; this morning in early activity the stock index futures pointing to a down open, treasuries and mortgages continue to improve. Yesterday the Fed shocked markets by actually setting a long term time frame to keep the FF rate at current levels, saying the Fed would hold until mid-2013. I can't recall anytime where the Fed did that; generally the Fed uses more ambiguous language like "extended period of time" to signal its intentions; leaving markets to determine what that meant.
The reaction to the statement at 2:15 yesterday sent the stock indexes higher and took interest rates to lows not seen since Dec 2008; the 10 yr at one point hit 2.03% before backing up to close at 2.27% down 6 bp. Mortgage prices climbed and held gains, up 1.03 bp on 30 yr Fannies. Early this morning (9:00) mortgage prices up 15/32 (.47 bp), the 10 yr note +29/32 at 2.17% -10 bp.
At 9:30 the DJIA opened -200, the 10 yr note +33/32 at 2.16% -11 bp. Mortgages are on fire, up 21/32 (.6 bp) after climbing 1.03 bp yesterday. The spread between MBSs and treasuries is narrowing on the Fed decision yesterday, investors can increase returns over treasuries by moving to MBSs. The swift decline in mortgage rates will set off another re-finance market; the lower mortgage rates are the lower the risk for investors, so MBSs at the moment are very attractive.
Various opinions yesterday and this morning trying to handicap the Fed's surprise yesterday. The obvious is that the Fed now does not expect any real improvement in the economy for a year or more. The Fed did however, say it would continue to monitor markets and would, if the economy actually grows and unemployment declines, be quick to signal a change in thinking. Telling markets the FF rate would stay at present levels for two years implies the economy isn't likely to improve much and inflation will not increase. The FOMC vote was not unanimous though; there were three members that voted against the decision; suggesting the Fed is becoming increasingly divided in its outlook and decisions on monetary policy.
Our take on the Fed's decision yesterday; the Fed is essentially out of bullets that they believe will help revive the economy and lower unemployment. There are however a number of analysts believing the Fed will do another easing later this year; whether it does or doesn't any easing won't help the economy. I believe what Bernanke did is to assure investors rates will stay low and that putting money in treasuries won't provide much, if any, return on parking money. Investors will continue to look for any potential to earn some profits, that makes stocks more attractive; not because the economy will drive equities much higher, but equities will at least allow trading opportunities and stocks that pay dividends will provide better returns than treasuries. Bernanke's decision will keep interest rates low and likely keep the stock market from collapsing. We believe equity markets will trade in a very wide range, a wide enough to provide opportunities. That said, the economic outlook at the moment is such that the key indexes have little chance of making new highs but equally won't likely crash. It was a excellent strategic decision by Bernanke.
Continue to expect extreme volatility in both stocks and interest rates over the next week or two. The week ahead will likely see two way trading; up and down with little change but the daily swings are going to be huge compared to norms. Yesterday a prime example, the DJIA had a 600+ range closing up 429 after dropping 634 points Monday, and down 1000+ points since last Thursday before yesterday's gain.
At 10:00 June wholesale inventories, expected +1.0%, were +0.6%; sales also up 0.6%.
At 1:00 Treasury will sell $24B of 10 yr notes; yesterday the 3 yr auction went well, we expect the 10 today will also see strong bidding.
At 2:00 Treasury will report the July budget; a shortfall of $132B is expected.
How low can rates go? Not sure, but it is likely the 10 yr note rate will fall to 2.00%; it could fall further depending on what happens in Europe and the US economic outlook. Right now MBSs are seeing strong buying as investors seek higher yields. Volatility will continue so be prepared for wide swings.
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, August 10, 2011
Volatility continues to describe the financial markets; this morning in early activity the stock index futures pointing to a down open, treasuries and mortgages continue to improve. Yesterday the Fed shocked markets by actually setting a long term time frame to keep the FF rate at current levels, saying the Fed would hold until mid-2013. I can't recall anytime where the Fed did that; generally the Fed uses more ambiguous language like "extended period of time" to signal its intentions; leaving markets to determine what that meant.
The reaction to the statement at 2:15 yesterday sent the stock indexes higher and took interest rates to lows not seen since Dec 2008; the 10 yr at one point hit 2.03% before backing up to close at 2.27% down 6 bp. Mortgage prices climbed and held gains, up 1.03 bp on 30 yr Fannies. Early this morning (9:00) mortgage prices up 15/32 (.47 bp), the 10 yr note +29/32 at 2.17% -10 bp.
At 9:30 the DJIA opened -200, the 10 yr note +33/32 at 2.16% -11 bp. Mortgages are on fire, up 21/32 (.6 bp) after climbing 1.03 bp yesterday. The spread between MBSs and treasuries is narrowing on the Fed decision yesterday, investors can increase returns over treasuries by moving to MBSs. The swift decline in mortgage rates will set off another re-finance market; the lower mortgage rates are the lower the risk for investors, so MBSs at the moment are very attractive.
Various opinions yesterday and this morning trying to handicap the Fed's surprise yesterday. The obvious is that the Fed now does not expect any real improvement in the economy for a year or more. The Fed did however, say it would continue to monitor markets and would, if the economy actually grows and unemployment declines, be quick to signal a change in thinking. Telling markets the FF rate would stay at present levels for two years implies the economy isn't likely to improve much and inflation will not increase. The FOMC vote was not unanimous though; there were three members that voted against the decision; suggesting the Fed is becoming increasingly divided in its outlook and decisions on monetary policy.
Our take on the Fed's decision yesterday; the Fed is essentially out of bullets that they believe will help revive the economy and lower unemployment. There are however a number of analysts believing the Fed will do another easing later this year; whether it does or doesn't any easing won't help the economy. I believe what Bernanke did is to assure investors rates will stay low and that putting money in treasuries won't provide much, if any, return on parking money. Investors will continue to look for any potential to earn some profits, that makes stocks more attractive; not because the economy will drive equities much higher, but equities will at least allow trading opportunities and stocks that pay dividends will provide better returns than treasuries. Bernanke's decision will keep interest rates low and likely keep the stock market from collapsing. We believe equity markets will trade in a very wide range, a wide enough to provide opportunities. That said, the economic outlook at the moment is such that the key indexes have little chance of making new highs but equally won't likely crash. It was a excellent strategic decision by Bernanke.
Continue to expect extreme volatility in both stocks and interest rates over the next week or two. The week ahead will likely see two way trading; up and down with little change but the daily swings are going to be huge compared to norms. Yesterday a prime example, the DJIA had a 600+ range closing up 429 after dropping 634 points Monday, and down 1000+ points since last Thursday before yesterday's gain.
At 10:00 June wholesale inventories, expected +1.0%, were +0.6%; sales also up 0.6%.
At 1:00 Treasury will sell $24B of 10 yr notes; yesterday the 3 yr auction went well, we expect the 10 today will also see strong bidding.
At 2:00 Treasury will report the July budget; a shortfall of $132B is expected.
How low can rates go? Not sure, but it is likely the 10 yr note rate will fall to 2.00%; it could fall further depending on what happens in Europe and the US economic outlook. Right now MBSs are seeing strong buying as investors seek higher yields. Volatility will continue so be prepared for wide swings.
Tuesday, August 9, 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, August 09, 2011
Very early this morning the bond and mortgage markets were trading lower in price with US stock indexes pointing to a better open at 9:30 after the serious beating taken yesterday. Nothing of substance changed over night, just a bounce in equity indexes after 634 points on the DJIA yesterday and 512 last Thursday, 1146 points. Yesterday the 10 yr note rate fell 25 basis points as money stampeded into the safety of US treasuries. Mortgages did better yesterday but were dragged higher in price primarily on treasury moves, 30 yr prices ended up .53 bp, not nearly the move seen in treasuries as it was driven by safety.
A perfect storm that hit its apex yesterday. The final straw was the S&P downgrade but there have been a few earlier straws that were breaking the backs of investors leading to the recent global panic. For a month we reported and commented on the continuing weaker economic data that in our judgment were suggesting the economy would slow in Q3 and Q4; it took a few weeks for the optimistic outlook to be blunted by reality. In Europe the EU economic outlook is also being revised lower. Emerging markets that depend on growth by exporting goods to the US and Europe also being hit. Take everything together and add in the fumbling out of Washington that fell way short of any significant spending cuts and throw in the increasing concerns that Europe may not have enough capital to fend off sovereign debt defaults and we have the perfect storm that is taking all global equity markets down. The outlook in the present hysterical atmosphere is for another decline into recession.
How bad is it for the economic outlook? It isn't looking good but is unlikely to be as terrible as what markets are currently believing. The economy cannot grow much with high unemployment and a depressed housing sector. As we noted yesterday afternoon, this is a time to take a breath and try to relax some; the outlook is not good, not nearly as was thought just a month ago. However, the outlook isn't quite as serious as the current panic would imply. Give this a week or two to settle, in the meantime interest rate markets and stock markets will be exceptionally volatile.
This isn't 2008 re-visited; in 2008 banks were broke, the financial system almost collapsed. This time banks are flush with cash, businesses are hoarding huge cash reserves and consumers have reduced debt substantially over the past four years. This is a lack of confidence in leadership in Washington and Europe. The recent demonstration in Washington of political ineptness and the continual inability of the EU and ECB to deal with their sovereign debt issues have finally shaken investors and consumers. Measures that gauge the level of European banks’ reluctance to lend to one another are approaching levels unseen since the aftermath of Lehman Brothers Holdings Inc.’s collapse. The result is, and will continue to be, fear; fear and greed drive markets---this is a period of fear. The prudent way to work through the next few months is to avoid risk, let the world settle----and it will in time-----always darkest before.....A few more sessions of hedge funds deleveraging should eventually calm things down. In the meantime expect volatility to remain at extreme levels.
This afternoon the FOMC will issue its policy statement; there is some speculation the Fed will act immediately to stem the current panic. Fed Chairman Ben S. Bernanke and fellow policy makers may extend a pledge following their meeting today to maintain record stimulus, according to economists at JPMorgan Chase & Co., BNP Paribas SA and Goldman Sachs Group Inc. What can the Fed do? There are many saying the Fed will act, but so far there isn't any suggestions of what the Fed could or would do. This isn't 2008 when financial markets were teetering on insolvency; the present situation is a lack of confidence, no jobs on the horizon and nothing that suggests the US has the will to cut spending. The Fed has little power to correct any of the issues facing markets and the economy.
At 9:30 the DJIA opened +137, the 10 yr note -18/32 at 2.38% +5 bp and mortgage prices -5/32 (.15 bp). By 9:45 the DJIA was up just 13, the 10 yr -11/32 at 2.35% and mortgage prices -2/32 (.06 bp). The equity markets still subject to selling. (see below for 10:00 levels for bonds and stocks)
This morning Q2 productivity was reported down 0.3%, a little better than -0.7% expected. Q2 until labor costs increased 2.2%.
At 1:00 Treasury will auction $32B of 3 yr notes.
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, August 09, 2011
Very early this morning the bond and mortgage markets were trading lower in price with US stock indexes pointing to a better open at 9:30 after the serious beating taken yesterday. Nothing of substance changed over night, just a bounce in equity indexes after 634 points on the DJIA yesterday and 512 last Thursday, 1146 points. Yesterday the 10 yr note rate fell 25 basis points as money stampeded into the safety of US treasuries. Mortgages did better yesterday but were dragged higher in price primarily on treasury moves, 30 yr prices ended up .53 bp, not nearly the move seen in treasuries as it was driven by safety.
A perfect storm that hit its apex yesterday. The final straw was the S&P downgrade but there have been a few earlier straws that were breaking the backs of investors leading to the recent global panic. For a month we reported and commented on the continuing weaker economic data that in our judgment were suggesting the economy would slow in Q3 and Q4; it took a few weeks for the optimistic outlook to be blunted by reality. In Europe the EU economic outlook is also being revised lower. Emerging markets that depend on growth by exporting goods to the US and Europe also being hit. Take everything together and add in the fumbling out of Washington that fell way short of any significant spending cuts and throw in the increasing concerns that Europe may not have enough capital to fend off sovereign debt defaults and we have the perfect storm that is taking all global equity markets down. The outlook in the present hysterical atmosphere is for another decline into recession.
How bad is it for the economic outlook? It isn't looking good but is unlikely to be as terrible as what markets are currently believing. The economy cannot grow much with high unemployment and a depressed housing sector. As we noted yesterday afternoon, this is a time to take a breath and try to relax some; the outlook is not good, not nearly as was thought just a month ago. However, the outlook isn't quite as serious as the current panic would imply. Give this a week or two to settle, in the meantime interest rate markets and stock markets will be exceptionally volatile.
This isn't 2008 re-visited; in 2008 banks were broke, the financial system almost collapsed. This time banks are flush with cash, businesses are hoarding huge cash reserves and consumers have reduced debt substantially over the past four years. This is a lack of confidence in leadership in Washington and Europe. The recent demonstration in Washington of political ineptness and the continual inability of the EU and ECB to deal with their sovereign debt issues have finally shaken investors and consumers. Measures that gauge the level of European banks’ reluctance to lend to one another are approaching levels unseen since the aftermath of Lehman Brothers Holdings Inc.’s collapse. The result is, and will continue to be, fear; fear and greed drive markets---this is a period of fear. The prudent way to work through the next few months is to avoid risk, let the world settle----and it will in time-----always darkest before.....A few more sessions of hedge funds deleveraging should eventually calm things down. In the meantime expect volatility to remain at extreme levels.
This afternoon the FOMC will issue its policy statement; there is some speculation the Fed will act immediately to stem the current panic. Fed Chairman Ben S. Bernanke and fellow policy makers may extend a pledge following their meeting today to maintain record stimulus, according to economists at JPMorgan Chase & Co., BNP Paribas SA and Goldman Sachs Group Inc. What can the Fed do? There are many saying the Fed will act, but so far there isn't any suggestions of what the Fed could or would do. This isn't 2008 when financial markets were teetering on insolvency; the present situation is a lack of confidence, no jobs on the horizon and nothing that suggests the US has the will to cut spending. The Fed has little power to correct any of the issues facing markets and the economy.
At 9:30 the DJIA opened +137, the 10 yr note -18/32 at 2.38% +5 bp and mortgage prices -5/32 (.15 bp). By 9:45 the DJIA was up just 13, the 10 yr -11/32 at 2.35% and mortgage prices -2/32 (.06 bp). The equity markets still subject to selling. (see below for 10:00 levels for bonds and stocks)
This morning Q2 productivity was reported down 0.3%, a little better than -0.7% expected. Q2 until labor costs increased 2.2%.
At 1:00 Treasury will auction $32B of 3 yr notes.
Monday, August 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.
Monday, August 08, 2011
You know by now S&P late Friday lowered the US credit rating to AA+ frm AAA; treasuries and mortgages markets opening better today on safety and panic moves while the stock market is being hit hard on the open. S&P has been warning for weeks it was preparing to lower the credit rating, the next thing in the ratings game is that Moody's and Fitch may follow in the next few weeks. What is the real impact? Initially equity markets will be pressured and interest rates will benefit, in the long run S&P has done us a great service in making the move. Congress and the Administration clearly demonstrated they are not willing to make any significant hard choices, maybe the cut in our rating (which is more symbolic than substantive) will shake up voters and politicians that the country is headed for a debt cliff at 100 miles and hour. Lets not get too worked up over S&P move, the US can pay our debts, the country is still the economic engine for the world, and compared to any other country the US is in every respect the strongest and safest place to invest. Don't fall into the camp that is spending the early part of the morning comparing our new credit rating to places like France and other so-called AAA countries.
Tim Geithner out this morning castigating S&P for their decision; Geithner and the Administration are wrong. The downgrade isn't going to matter much, markets understand exactly where the US stands and won't, in the long run, make much of this except that it may help drive home the point the country is on the wrong path and must get serious about the growing debt. S&P can be criticized for the move, the agency has little credibility in our view after being primarily responsible for the sub prime disaster that triggered the global financial meltdown. The agency rated CDOs made up of junk mortgages AAA, then after Wall Street couldn't sell the highest risk tranches of the CDOs, it rated the worst of the junk AAA again. If S&P couldn't understand junk mortgages why does anyone expect they know what they are into now?
There are no economic reports today.
This week has little in the way of data to deal with but there is plenty for the bond and equity markets to think about. Tuesday the FOMC meets and has a lot to talk about, a weakening economic outlook and the rating cut. Treasury will auction $32B of 3 yr notes Tuesday, $24b of 10 yr notes Wednesday, and $16B of 30 yr bonds on Thursday. On Friday July retail sales are expected up 0.5%, ex autos +0.2%. Also on Friday the U. of Michigan consumer sentiment index is expected down to 62.5 frm 63.7, likely that will be revised lower now with the S&P move.
Crude oil falling again, gold up over $1700.00. The stock market opening very weak as investors are totally over doing the situation. The stock market is of course reacting to the economic slowdown but also this morning investors just dumping everything they can. All of it in the early going is a reaction to S&P which as noted, in our judgment not as big a deal as it seems to be in markets.
At 9:30 the DJIA opened -210, NASDAQ -85, S&P -22; 10 yr note +26/32 2.47% -11 bp and mortgage prices +7/32 (.22 bp)
The early going is volatile, lets keep our heads though. Mortgages are better but lagging the 10 yr and treasuries in general. Equity markets will drive treasuries through the day; with the FOMC meeting tomorrow and the weakened economic outlook stocks are struggling. Technically the stock market is very oversold in the near term, the bond market overbought. Fundamentally the outlook for the economy is weakening. Over-extended technicals but the fundamentals are presently over-riding what normally would be improving equities and lower prices on treasuries. As long as panic dominates technical indicators have to take a back seat.
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, August 08, 2011
You know by now S&P late Friday lowered the US credit rating to AA+ frm AAA; treasuries and mortgages markets opening better today on safety and panic moves while the stock market is being hit hard on the open. S&P has been warning for weeks it was preparing to lower the credit rating, the next thing in the ratings game is that Moody's and Fitch may follow in the next few weeks. What is the real impact? Initially equity markets will be pressured and interest rates will benefit, in the long run S&P has done us a great service in making the move. Congress and the Administration clearly demonstrated they are not willing to make any significant hard choices, maybe the cut in our rating (which is more symbolic than substantive) will shake up voters and politicians that the country is headed for a debt cliff at 100 miles and hour. Lets not get too worked up over S&P move, the US can pay our debts, the country is still the economic engine for the world, and compared to any other country the US is in every respect the strongest and safest place to invest. Don't fall into the camp that is spending the early part of the morning comparing our new credit rating to places like France and other so-called AAA countries.
Tim Geithner out this morning castigating S&P for their decision; Geithner and the Administration are wrong. The downgrade isn't going to matter much, markets understand exactly where the US stands and won't, in the long run, make much of this except that it may help drive home the point the country is on the wrong path and must get serious about the growing debt. S&P can be criticized for the move, the agency has little credibility in our view after being primarily responsible for the sub prime disaster that triggered the global financial meltdown. The agency rated CDOs made up of junk mortgages AAA, then after Wall Street couldn't sell the highest risk tranches of the CDOs, it rated the worst of the junk AAA again. If S&P couldn't understand junk mortgages why does anyone expect they know what they are into now?
There are no economic reports today.
This week has little in the way of data to deal with but there is plenty for the bond and equity markets to think about. Tuesday the FOMC meets and has a lot to talk about, a weakening economic outlook and the rating cut. Treasury will auction $32B of 3 yr notes Tuesday, $24b of 10 yr notes Wednesday, and $16B of 30 yr bonds on Thursday. On Friday July retail sales are expected up 0.5%, ex autos +0.2%. Also on Friday the U. of Michigan consumer sentiment index is expected down to 62.5 frm 63.7, likely that will be revised lower now with the S&P move.
Crude oil falling again, gold up over $1700.00. The stock market opening very weak as investors are totally over doing the situation. The stock market is of course reacting to the economic slowdown but also this morning investors just dumping everything they can. All of it in the early going is a reaction to S&P which as noted, in our judgment not as big a deal as it seems to be in markets.
At 9:30 the DJIA opened -210, NASDAQ -85, S&P -22; 10 yr note +26/32 2.47% -11 bp and mortgage prices +7/32 (.22 bp)
The early going is volatile, lets keep our heads though. Mortgages are better but lagging the 10 yr and treasuries in general. Equity markets will drive treasuries through the day; with the FOMC meeting tomorrow and the weakened economic outlook stocks are struggling. Technically the stock market is very oversold in the near term, the bond market overbought. Fundamentally the outlook for the economy is weakening. Over-extended technicals but the fundamentals are presently over-riding what normally would be improving equities and lower prices on treasuries. As long as panic dominates technical indicators have to take a back seat.
Sunday, August 7, 2011
Saturday, August 6, 2011
Friday, August 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.
Friday, August 05, 2011
At 8:30 the BLS employment report; always a surprise and today no different. The unemployment rate was expected at 9.2%, as reported 9.1%. Non-farm jobs expected up 86K increased 117K; private jobs expected +100K increased 154K. The average hourly earnings up 0.4%, much stronger than expected. Revisions to May and June non-farm jobs; increased to 53K frm 25K in May, June to +46K frm +18K. Factory jobs in July increased 24K, factory jobs in June revised to +11K frm +6K.
Markets were extremely volatile on the knee jerk reaction to the better jobs report. The 10 yr note jumped to 2.52% frm 2.42% at yesterday's close; mortgage prices fell 25/32 (.78 bp). The DJIA futures index jumped 150 points. It was however short-lived and markets settled somewhat by 9:00, by 9:30 however the 10 yr was back to 2.52% and mtgs -22/32 (.69 bp).
The DJIA opened +140, NASDAQ +30, S&P +14; 10 yr note 2.52% +10 bp and mortgage prices -23/32 (.72 bp). (see below for 10:00 levels)
Markets were on the edge of even more damage today had the employment report been soft, that it wasn't will help settle things down today. We don't however, believe the report will radically change the sentiment that the economy is slowing, but it should at least take us back from the cliff of more panic selling that we had yesterday. Yesterday hot money stampeded to US bond markets in search of liquidity and a hedge against the crashing stock market. The action yesterday in the equity markets did a lot of technical damage to the key stock indexes, even a little better market today will not likely be strong enough to overcome the damage. The bond market is very overbought technically and is overdue for some retracement, we can expect that the next few days the rate markets will settle and prices will decline. The bullish bias how ever will remain in tact; it would take the 10 yr to climb back above 2.85% to change our outlook to negative.
Part of the heavy selling yesterday was motivated by events out of Europe, that situation is still out there. The banking system in Europe continues to deteriorate, as it does the economy in Europe will slow just as it is doing here. The ECB yesterday announced it would provide loans to euro banks for six months with repurchase agreements , a needed move as the banks are running out of liquidity and eventually will have to take huge hits from Greece, Spain, Italy, Portugal and Ireland. Europe's economy is slowing more rapidly than in the US. Although the US employment report will slightly improve the economic outlook, the problems in Europe will continue to weigh on US markets.
Although the employment data wasn't as weak as thought, the US economy is still soft and our outlook hasn't changed. Growth will continue to slow with only fractional growth. The report this morning was better than thought but it is still confirming jobs are not increasing much and unemployment remains high. Small businesses still face uncertain health care costs and inability to borrow; consumers will continue the deleveraging that has been occurring for two years, home prices still falling----nothing has changed from yesterday except momentary relief that employment wasn't as bad as thought in July, the data confirms a very slow improvement in jobs, almost meaningless. The bond and mortgage markets will remain positive and rates are likely to continue lower but with less pace and and increase in two way trading. After a better open the stock market has already rolled over.
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, August 05, 2011
At 8:30 the BLS employment report; always a surprise and today no different. The unemployment rate was expected at 9.2%, as reported 9.1%. Non-farm jobs expected up 86K increased 117K; private jobs expected +100K increased 154K. The average hourly earnings up 0.4%, much stronger than expected. Revisions to May and June non-farm jobs; increased to 53K frm 25K in May, June to +46K frm +18K. Factory jobs in July increased 24K, factory jobs in June revised to +11K frm +6K.
Markets were extremely volatile on the knee jerk reaction to the better jobs report. The 10 yr note jumped to 2.52% frm 2.42% at yesterday's close; mortgage prices fell 25/32 (.78 bp). The DJIA futures index jumped 150 points. It was however short-lived and markets settled somewhat by 9:00, by 9:30 however the 10 yr was back to 2.52% and mtgs -22/32 (.69 bp).
The DJIA opened +140, NASDAQ +30, S&P +14; 10 yr note 2.52% +10 bp and mortgage prices -23/32 (.72 bp). (see below for 10:00 levels)
Markets were on the edge of even more damage today had the employment report been soft, that it wasn't will help settle things down today. We don't however, believe the report will radically change the sentiment that the economy is slowing, but it should at least take us back from the cliff of more panic selling that we had yesterday. Yesterday hot money stampeded to US bond markets in search of liquidity and a hedge against the crashing stock market. The action yesterday in the equity markets did a lot of technical damage to the key stock indexes, even a little better market today will not likely be strong enough to overcome the damage. The bond market is very overbought technically and is overdue for some retracement, we can expect that the next few days the rate markets will settle and prices will decline. The bullish bias how ever will remain in tact; it would take the 10 yr to climb back above 2.85% to change our outlook to negative.
Part of the heavy selling yesterday was motivated by events out of Europe, that situation is still out there. The banking system in Europe continues to deteriorate, as it does the economy in Europe will slow just as it is doing here. The ECB yesterday announced it would provide loans to euro banks for six months with repurchase agreements , a needed move as the banks are running out of liquidity and eventually will have to take huge hits from Greece, Spain, Italy, Portugal and Ireland. Europe's economy is slowing more rapidly than in the US. Although the US employment report will slightly improve the economic outlook, the problems in Europe will continue to weigh on US markets.
Although the employment data wasn't as weak as thought, the US economy is still soft and our outlook hasn't changed. Growth will continue to slow with only fractional growth. The report this morning was better than thought but it is still confirming jobs are not increasing much and unemployment remains high. Small businesses still face uncertain health care costs and inability to borrow; consumers will continue the deleveraging that has been occurring for two years, home prices still falling----nothing has changed from yesterday except momentary relief that employment wasn't as bad as thought in July, the data confirms a very slow improvement in jobs, almost meaningless. The bond and mortgage markets will remain positive and rates are likely to continue lower but with less pace and and increase in two way trading. After a better open the stock market has already rolled over.
Thursday, August 4, 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, August 04, 2011
Yesterday the bond and mortgage markets were essentially unchanged, the stock indexes all a little better. This morning rates are lower and prices higher as US stocks open down hard. Early this morning comments and actions from the ECB confirms that Europe's financial system may be in worse shape than was thought. The ECB will offer euro banks all the money they need for six months in a re-purchase deal to help shore up banks that are in worse shape than markets thought. Jean Claude Trichet, ECB President, while couching his language, nevertheless sounded concerned and sent Europe's markets lower and US equity markets opening weaker.
European officials are trying to stop the region’s sovereign debt crisis spreading to Italy and Spain. While the comments suggest the ECB is reluctant to shelve further rate increases, traders are looking for signs that the central bank will take direct steps to shore up the bonds of crisis-hit nations.
The world is increasingly focused and concerned over the US economic outlook after a month's worth of data has been much weaker than most were expecting. No job creation in the US, no housing rebound now or on the horizon and weaker earnings coming from businesses. In an effort to keep its economy from falling Japan this morning intervened in the currency markets to sell yen in an attempt to weaken the currency. No country wants its currency to strengthen these days, a weaker currency is good for exports; it a race to see who can beat their currency down against other global competitors.
Weekly jobless claims at 8:30 were down 1K to 400K; continuing claims 3.73 mil from 3.72 mil last week. With employment report tomorrow morning and not a significant change, claims didn't generate much interest with traders.
Nothing left on the calendar today; the focus in the bond market will center on how US stocks perform and positioning for tomorrow's July employment report. The "consensus" is unemployment unchanged at 9.2%, non-farm jobs +75K, non-farm private jobs +100K. If the report is better than estimates look for strong selling in the overbought bond market, and big increases in oversold stock indexes; regardless of how markets act though, the trends in stocks and bonds will remain in tact.
At 9:30 the DJIA opened -136, NASDAQ -44, and S&P -14; the 10 yr at 9:30 +8/32 at 2.58% -3 bp and mortgage prices +7/32 (.22 bp) frm yesterday's close.
How much lower will interest rates decline? We are looking for the 10 yr note to slide to 2.36% eventually, but the move lower from here is likely to be choppy with increasing two way trading. Although the bond and mortgage markets are in near term overbought readings on all of our momentum measurements, the outlook remains bullish for lower rates as the US and global economic outlook has deteriorated recently.
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, August 04, 2011
Yesterday the bond and mortgage markets were essentially unchanged, the stock indexes all a little better. This morning rates are lower and prices higher as US stocks open down hard. Early this morning comments and actions from the ECB confirms that Europe's financial system may be in worse shape than was thought. The ECB will offer euro banks all the money they need for six months in a re-purchase deal to help shore up banks that are in worse shape than markets thought. Jean Claude Trichet, ECB President, while couching his language, nevertheless sounded concerned and sent Europe's markets lower and US equity markets opening weaker.
European officials are trying to stop the region’s sovereign debt crisis spreading to Italy and Spain. While the comments suggest the ECB is reluctant to shelve further rate increases, traders are looking for signs that the central bank will take direct steps to shore up the bonds of crisis-hit nations.
The world is increasingly focused and concerned over the US economic outlook after a month's worth of data has been much weaker than most were expecting. No job creation in the US, no housing rebound now or on the horizon and weaker earnings coming from businesses. In an effort to keep its economy from falling Japan this morning intervened in the currency markets to sell yen in an attempt to weaken the currency. No country wants its currency to strengthen these days, a weaker currency is good for exports; it a race to see who can beat their currency down against other global competitors.
Weekly jobless claims at 8:30 were down 1K to 400K; continuing claims 3.73 mil from 3.72 mil last week. With employment report tomorrow morning and not a significant change, claims didn't generate much interest with traders.
Nothing left on the calendar today; the focus in the bond market will center on how US stocks perform and positioning for tomorrow's July employment report. The "consensus" is unemployment unchanged at 9.2%, non-farm jobs +75K, non-farm private jobs +100K. If the report is better than estimates look for strong selling in the overbought bond market, and big increases in oversold stock indexes; regardless of how markets act though, the trends in stocks and bonds will remain in tact.
At 9:30 the DJIA opened -136, NASDAQ -44, and S&P -14; the 10 yr at 9:30 +8/32 at 2.58% -3 bp and mortgage prices +7/32 (.22 bp) frm yesterday's close.
How much lower will interest rates decline? We are looking for the 10 yr note to slide to 2.36% eventually, but the move lower from here is likely to be choppy with increasing two way trading. Although the bond and mortgage markets are in near term overbought readings on all of our momentum measurements, the outlook remains bullish for lower rates as the US and global economic outlook has deteriorated recently.
Wednesday, August 3, 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, August 03, 2011
At 8:15 the ADP July non-farm private jobs were reported up 114K a little better than 86K consensus; ADP revised June to +145K frm 157K originally reported. There was little reaction to the better report; the 10 yr note traded off 2/32 prior to the release, at 8:45 -3/32. Mortgage prices at 8:45 -1/32 (.03 bp). ADP didn't get the reaction it has in the past, possibly because of the huge miss last month compared to the BLS data; +157K in June compared to +57K frm the BLS.
The deal worked out yesterday to increase the debt ceiling is still being analyzed, most believe it was nothing special in terms of cutting spending, in 2012 actual spending cuts will amount to just $60B, an amount hardly worth thinking about. Neither side of the debate should be touting success. Rating agencies are still sounding like a possible credit down grade on US debt. Not sure the impact of a down grade; most pundits painting it as Titanic problem but we don't see it that way. A down grade of US debt won't hinder investors' appetite for our notes and bonds; US rates have fallen recently primarily on weaker economic forecasts but if a credit down grade were actually expected increase borrowing costs we doubt the recent decline in rates would be as great as it has been.
At 7:00 this morning the weekly MBA mortgage applications report. Mortgage applications increased 7.1% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 29, 2011. The Refinance Index increased 7.8% from the previous week. The seasonally adjusted Purchase Index increased 5.1% from one week earlier. Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5%, the refinance index is still almost 30% below last year’s level. The four week moving average for the seasonally adjusted Market Index is up 2.8%. The refinance share of mortgage activity increased to 70.1% of total applications from 69.6% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.6% from 6.1% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.45% from 4.57%, with points decreasing to 0.78 from 1.14 (including the origination fee) for 80% loans. Both the contract rate and effective rate for 30-year fixed rate mortgages are at their lowest levels since November 5, 2010. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.52% from 3.67%, with points decreasing to 1.02 from 1.08 (including the origination fee) for 80% loans. Both the contract rate and the effective rate for 15-year fixed rate mortgages are the lowest since the survey began in 1990.
Just prior to the 10:00 key ISM services sector report the stock market was lower, the bond and mortgage markets held small price gains after opening generally unchanged.
At 10:00 the July ISM services sector index, expected at 53.0, came at 52.7. New orders component at 51.7 frm 53.6, prices at 56.6 frm 60.9 and employment at 52.5 frm 54.1. Another weak report but not by much, the reaction to the report has been muted with little change from levels just before the 10:00 release.
Also at 10:00 June factory orders, expected down 1.0%; were down 0.8%, ex transportation orders up 0.1%.
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, August 03, 2011
At 8:15 the ADP July non-farm private jobs were reported up 114K a little better than 86K consensus; ADP revised June to +145K frm 157K originally reported. There was little reaction to the better report; the 10 yr note traded off 2/32 prior to the release, at 8:45 -3/32. Mortgage prices at 8:45 -1/32 (.03 bp). ADP didn't get the reaction it has in the past, possibly because of the huge miss last month compared to the BLS data; +157K in June compared to +57K frm the BLS.
The deal worked out yesterday to increase the debt ceiling is still being analyzed, most believe it was nothing special in terms of cutting spending, in 2012 actual spending cuts will amount to just $60B, an amount hardly worth thinking about. Neither side of the debate should be touting success. Rating agencies are still sounding like a possible credit down grade on US debt. Not sure the impact of a down grade; most pundits painting it as Titanic problem but we don't see it that way. A down grade of US debt won't hinder investors' appetite for our notes and bonds; US rates have fallen recently primarily on weaker economic forecasts but if a credit down grade were actually expected increase borrowing costs we doubt the recent decline in rates would be as great as it has been.
At 7:00 this morning the weekly MBA mortgage applications report. Mortgage applications increased 7.1% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 29, 2011. The Refinance Index increased 7.8% from the previous week. The seasonally adjusted Purchase Index increased 5.1% from one week earlier. Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5%, the refinance index is still almost 30% below last year’s level. The four week moving average for the seasonally adjusted Market Index is up 2.8%. The refinance share of mortgage activity increased to 70.1% of total applications from 69.6% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.6% from 6.1% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.45% from 4.57%, with points decreasing to 0.78 from 1.14 (including the origination fee) for 80% loans. Both the contract rate and effective rate for 30-year fixed rate mortgages are at their lowest levels since November 5, 2010. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.52% from 3.67%, with points decreasing to 1.02 from 1.08 (including the origination fee) for 80% loans. Both the contract rate and the effective rate for 15-year fixed rate mortgages are the lowest since the survey began in 1990.
Just prior to the 10:00 key ISM services sector report the stock market was lower, the bond and mortgage markets held small price gains after opening generally unchanged.
At 10:00 the July ISM services sector index, expected at 53.0, came at 52.7. New orders component at 51.7 frm 53.6, prices at 56.6 frm 60.9 and employment at 52.5 frm 54.1. Another weak report but not by much, the reaction to the report has been muted with little change from levels just before the 10:00 release.
Also at 10:00 June factory orders, expected down 1.0%; were down 0.8%, ex transportation orders up 0.1%.
Tuesday, August 2, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, August 02, 2011
Interest rates were better again overnight; the debt ceiling del is all but done, the Senate is scheduled to vote at 12:00 today with more votes than needed to send the bill to Obama for his signature. Politically both parties can claim some form of victory but neither party can leave this with much satisfaction and without eggs all over their faces. While the debt ceiling will cover all of 2012 as Obama wanted, the recent battle over spending vs revenue increases has just begun.
Now we turn back to the economy, and that isn't a pretty picture. GDP growth in Q1 was revised to almost flat (+0.4% frm 1.9%), Q2 advance GDP up 1.3% well off +1.9% expected and likely to be revised lower when we revisit the data next month. This morning June personal income was up 0.1% as expected, spending expected up 0.1% but fell 0.2%.
There still is the media firing up the flame of a possible down grade of US debt by S&P. We have no idea about what the rating agency will do but in the end it won't matter much. As we noted yesterday, a down grade of US debt essentially down grades all other sovereign debt whether or not S&P agrees. The US is still the strongest credit in the world, and will stay that way. Although the recent debt ceiling debates were painful to watch, it is the beginning of a serious debate and major decisions that eventfully will shrink government, lower spending and increase revenues. Eventually taxes will increase (or some forms of increased revenues), spending will be cut, Medicare and Social Security will be revamped. Painful but necessary; as long as the can gets kicked down the road the deeper the hole the US falls into. It is now up to American voters; in 2012 the election results will set the path to a balanced budget (over time) or send the US into debtors prison (over time).
Recent reports on the economy have been much weaker than even the pessimists believed. Personal spending down in June, possibly the temperatures and the heat from Washington soured consumers. Yesterday's ISM July Manufacturing data was the lowest reading on the main index since July 2009 at 50.9; a read below 50 would imply actual contraction. Tomorrow the ISM services sector report, expectations are 53 on the index from 53.3 in June; another weaker than expected reading will drive equity indexes down and continue to swift decline in US interest rates.
This is employment week; tomorrow the ADP payroll people will provide their guesstimate at +100K non-farm private jobs. Friday the official BLS report, unemployment unchanged at 9.2%, non-farm jobs +85K, non-farm private jobs +100K; a rare occurrence when ADP and BLS are both expected at the same level. The actual data will as usual be well off the estimates.
Gold set another new all-time high this morning; driving it is the reality that no country wants its currency to appreciate. Weaker currencies are good for exports, with Western economies teetering on another recession gold is becoming a new reserve "currency". We continue to hear forecasts of $2,000.00/oz.
The DJIA opened -40, 10 yr note at 2.70% -5 bp and mortgage prices at 9:30 +8/32 (.25 bp).
Technically the bond market is obviously bullish, that said, our momentum oscillators are now in overbought levels suggesting we may see some price declines in the next day or two. It will not change the longer bullish outlook but some short term pullback is likely coming. The 10 yr note and mortgage rtes have plummeted in a very short timeframe; the 10 30 basis points in 4 days, mortgages 25 basis points.
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, August 02, 2011
Interest rates were better again overnight; the debt ceiling del is all but done, the Senate is scheduled to vote at 12:00 today with more votes than needed to send the bill to Obama for his signature. Politically both parties can claim some form of victory but neither party can leave this with much satisfaction and without eggs all over their faces. While the debt ceiling will cover all of 2012 as Obama wanted, the recent battle over spending vs revenue increases has just begun.
Now we turn back to the economy, and that isn't a pretty picture. GDP growth in Q1 was revised to almost flat (+0.4% frm 1.9%), Q2 advance GDP up 1.3% well off +1.9% expected and likely to be revised lower when we revisit the data next month. This morning June personal income was up 0.1% as expected, spending expected up 0.1% but fell 0.2%.
There still is the media firing up the flame of a possible down grade of US debt by S&P. We have no idea about what the rating agency will do but in the end it won't matter much. As we noted yesterday, a down grade of US debt essentially down grades all other sovereign debt whether or not S&P agrees. The US is still the strongest credit in the world, and will stay that way. Although the recent debt ceiling debates were painful to watch, it is the beginning of a serious debate and major decisions that eventfully will shrink government, lower spending and increase revenues. Eventually taxes will increase (or some forms of increased revenues), spending will be cut, Medicare and Social Security will be revamped. Painful but necessary; as long as the can gets kicked down the road the deeper the hole the US falls into. It is now up to American voters; in 2012 the election results will set the path to a balanced budget (over time) or send the US into debtors prison (over time).
Recent reports on the economy have been much weaker than even the pessimists believed. Personal spending down in June, possibly the temperatures and the heat from Washington soured consumers. Yesterday's ISM July Manufacturing data was the lowest reading on the main index since July 2009 at 50.9; a read below 50 would imply actual contraction. Tomorrow the ISM services sector report, expectations are 53 on the index from 53.3 in June; another weaker than expected reading will drive equity indexes down and continue to swift decline in US interest rates.
This is employment week; tomorrow the ADP payroll people will provide their guesstimate at +100K non-farm private jobs. Friday the official BLS report, unemployment unchanged at 9.2%, non-farm jobs +85K, non-farm private jobs +100K; a rare occurrence when ADP and BLS are both expected at the same level. The actual data will as usual be well off the estimates.
Gold set another new all-time high this morning; driving it is the reality that no country wants its currency to appreciate. Weaker currencies are good for exports, with Western economies teetering on another recession gold is becoming a new reserve "currency". We continue to hear forecasts of $2,000.00/oz.
The DJIA opened -40, 10 yr note at 2.70% -5 bp and mortgage prices at 9:30 +8/32 (.25 bp).
Technically the bond market is obviously bullish, that said, our momentum oscillators are now in overbought levels suggesting we may see some price declines in the next day or two. It will not change the longer bullish outlook but some short term pullback is likely coming. The 10 yr note and mortgage rtes have plummeted in a very short timeframe; the 10 30 basis points in 4 days, mortgages 25 basis points.
Monday, August 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.
Monday, August 01, 2011
Headlines this morning, a debt ceiling deal was cobbled together over the weekend. The plan calls for cuts of $2.2T in spending and the debt ceiling increased $2.1T, enough to get past the 2012 elections. Leaders expect the bill will be passed by both the full House and Senate. The bond market so far isn't too excited about the compromise, early this morning treasuries and mortgages have been hanging around unchanged from the strong rally Friday, the stock indexes in the futures markets prior to the 9:30 open were stronger on the reaction to the debt ceiling increase.
“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said in an appearance in the White House briefing room last night as. “This compromise does make a serious down payment on the deficit-reduction we need. Most importantly, it will allow us to avoid default.” The House is expected to vote on the bill sometime today, markets will focus on how the rank and file members accept the compromise with the tea party freshmen in the House key to getting it passed. After it passes the House the Senate will likely vote later today or this evening. Both sides of the prolonged wrangling are finding fault with what was worked.
What will the rating agencies do with the compromise once it has passed the Congress? Questions remain whether rating agencies will cut US ratings. The rating agencies will not lower the US credit rating in our opinion; they were completely out to lunch on the sub prime mortgage crisis; lets hope they don't mess up again. German bond yields were near the lowest in over two weeks amid concern a compromise deal on the U.S. debt ceiling won’t prevent a credit-rating downgrade of the world’s largest economy.
At 9:30 the DJIA opened +125, the 10 yr note -6/32 2.81% +1.5%; mortgage prices unchanged from Friday.
Data at 10:00; the July ISM manufacturing index, expected at 54.0 frm 55.3 in June, it took a huge dive to 50.9, the lowest index reading since July 2009 and adds to the confirmation that the economy is slipping quickly. The reaction sent the 10 yr note to 2.75% -4 bp and pushed mortgage prices +11/32 (.34 bp) on the session, up 12/32 (.37 bp) frm 9:30. The report sent the key stock indexes down hard, from +50 on the DJIA to -92 within three minutes of the 10:00 release. (see below for 10:10 prices)
June construction spending at 10:00, forecast unchanged from May, as reported up 0.2%.
This is employment week; Friday July employment data, the early estimates are for 84K non-farm jobs and 100K non-farm private jobs with the unemployment rate unchanged at 9.2%.
This Week's Economic Calendar:
Today 10:00 am July ISM manufacturing index
June construction spending
Tuesday;
8:30 am June personal income and spending (income +0.1%, spending +0.1%)
2:15 July auto and truck sales (N/A)
Wednesday;
7:00 am weekly MBA mortgage applications (N/A)
8:15 am ADP July non-farm private jobs estimate (+100K)
10:00 am June factory orders (-1.0%)
July ISM services sector index (53.7 frm 53.3)
Thursday;
8:30 am weekly jobless claims (+7K to 405K)
Friday;
8:30 am July unemployment (9.2%, non-farm jobs +84K, non-farm private jobs +100K)
3:00 pm June consumer credit (+$5.0B)
Although all focus has been on the debt default debates in Washington, now that it appears they have once again dodged another political bullet it is time to turn back to the economy. The economic outlook is becoming less optimistic with each key economic report. Friday Q2 advance GDP report was much weaker than thought, up just 1.3% with most looking for +1.9%; Q1 GDP was revised from +1.9% to just +0.4% a huge slap in the face of the better economic outlook.
We continue to remain optimistic for interest rates as the economy slides back to the edge of a double dip recession.
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, August 01, 2011
Headlines this morning, a debt ceiling deal was cobbled together over the weekend. The plan calls for cuts of $2.2T in spending and the debt ceiling increased $2.1T, enough to get past the 2012 elections. Leaders expect the bill will be passed by both the full House and Senate. The bond market so far isn't too excited about the compromise, early this morning treasuries and mortgages have been hanging around unchanged from the strong rally Friday, the stock indexes in the futures markets prior to the 9:30 open were stronger on the reaction to the debt ceiling increase.
“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said in an appearance in the White House briefing room last night as. “This compromise does make a serious down payment on the deficit-reduction we need. Most importantly, it will allow us to avoid default.” The House is expected to vote on the bill sometime today, markets will focus on how the rank and file members accept the compromise with the tea party freshmen in the House key to getting it passed. After it passes the House the Senate will likely vote later today or this evening. Both sides of the prolonged wrangling are finding fault with what was worked.
What will the rating agencies do with the compromise once it has passed the Congress? Questions remain whether rating agencies will cut US ratings. The rating agencies will not lower the US credit rating in our opinion; they were completely out to lunch on the sub prime mortgage crisis; lets hope they don't mess up again. German bond yields were near the lowest in over two weeks amid concern a compromise deal on the U.S. debt ceiling won’t prevent a credit-rating downgrade of the world’s largest economy.
At 9:30 the DJIA opened +125, the 10 yr note -6/32 2.81% +1.5%; mortgage prices unchanged from Friday.
Data at 10:00; the July ISM manufacturing index, expected at 54.0 frm 55.3 in June, it took a huge dive to 50.9, the lowest index reading since July 2009 and adds to the confirmation that the economy is slipping quickly. The reaction sent the 10 yr note to 2.75% -4 bp and pushed mortgage prices +11/32 (.34 bp) on the session, up 12/32 (.37 bp) frm 9:30. The report sent the key stock indexes down hard, from +50 on the DJIA to -92 within three minutes of the 10:00 release. (see below for 10:10 prices)
June construction spending at 10:00, forecast unchanged from May, as reported up 0.2%.
This is employment week; Friday July employment data, the early estimates are for 84K non-farm jobs and 100K non-farm private jobs with the unemployment rate unchanged at 9.2%.
This Week's Economic Calendar:
Today 10:00 am July ISM manufacturing index
June construction spending
Tuesday;
8:30 am June personal income and spending (income +0.1%, spending +0.1%)
2:15 July auto and truck sales (N/A)
Wednesday;
7:00 am weekly MBA mortgage applications (N/A)
8:15 am ADP July non-farm private jobs estimate (+100K)
10:00 am June factory orders (-1.0%)
July ISM services sector index (53.7 frm 53.3)
Thursday;
8:30 am weekly jobless claims (+7K to 405K)
Friday;
8:30 am July unemployment (9.2%, non-farm jobs +84K, non-farm private jobs +100K)
3:00 pm June consumer credit (+$5.0B)
Although all focus has been on the debt default debates in Washington, now that it appears they have once again dodged another political bullet it is time to turn back to the economy. The economic outlook is becoming less optimistic with each key economic report. Friday Q2 advance GDP report was much weaker than thought, up just 1.3% with most looking for +1.9%; Q1 GDP was revised from +1.9% to just +0.4% a huge slap in the face of the better economic outlook.
We continue to remain optimistic for interest rates as the economy slides back to the edge of a double dip recession.
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