Mortgage Rate Update



Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com



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Thursday, September 01, 2011

Treasuries and mortgages opened a little better this morning as the bond and mortgage markets continue to move in a very narrow range ahead of tomorrow's August employment data. At 8:30 weekly jobless claims continue to hang above 400K, also in a tight range for the past month; claims were down 12K to 409K, last week's claims were revised up from 417K to 421K, continuing claims were down 18K. Also at 8:30 Q2 productivity declined 0.7% frm 0.3% and unit labor costs jumped 3.3% revised from 2.2%. None of the data had much impact on the rate markets.

Europe's stock markets ended a three day rally today. A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region fell to 49 in August from 50.4 the month before, London-based Markit Economics said today. That’s below an initial estimate of 49.7 published on Aug. 23 and indicates a contraction. U.K. manufacturing shrank the most in more than two years. Prior to the open here the US indexes traded slightly better but not much.

Yesterday the Administration announced the President's awaited speech would be at 8:00 pm Wednesday; we noted that it appeared to be politics as usual in Washington with the Republican candidates holding a debate in California at the same time. Well, last night the President's speech was changed to Thursday; hope springs eternal. Good for the President. Changing the date to Thursday comes when the NFL kicks off the 2011 season with the Packers. There is no time set yet, likely it will be prior to the game. David Gergen, director of Harvard University’s Center for Public Leadership and an adviser to Presidents Richard Nixon, Gerald Ford, Ronald Reagan and Bill Clinton, called it "a circus that just casts a deeper shadow on their prospects for getting together on substance"..... “We’ve dragged a serious debate about jobs into a crazy debate about scheduling a speech and serious people around the world look at it and say, ‘What the hell are you doing?" If we base the US economic outlook on our politicians, we are in very deep trouble in the future.

At 9:30 the DJIA opened -10, the 10 yr note +10/32 at 2.20% -2 bp and mortgage prices at 9:30 +5/32 (.15 bp).

The most important data today at 10:00; the August ISM manufacturing index, expected at 48.5 from 50.9 in July; as reported at 50.6, it didn't go negative. The components; employment 51.8 frm 53.5 in July, new orders 49.6 frm 49.2 and prices pd at 55.5 from 59.0. Any index under 50 is considered expansion. A better rep-ort than traders were expecting and rapidly turned markets over. The 10 yr note on the reaction declined from +11/32 to -3/32, mortgage prices prior to the 10:00 report +6/32 (.18 bp), dropped to -6/32 (.18 bp) a change of 12/32 (.37 bp).

July construction spending at 10:00, expected unchanged, fell 1.3%; June however was revised from +0.2% to +1.6%.

Rate markets will continue to resist any rallies through the day as long as the equity market holds the gains at 10:00 on the data. The DJIA was off 4 points prior to 10:00, at 10:10 +70. Look for re-pricing soon unless rate markets find support and bounce back up.