Mortgage Rate Update
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Monday, October 31, 2011
This Week and 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, October 31, 2011
This Week; two things dominate. Wednesday Bernanke will hold a press conference at the conclusion of the two day FOMC meeting, and Friday the October employment report. Interest rates have increased from the 21st of Sept FOMC meeting at which the Fed Started Operation Twist, buying long dated treasuries and MBSs with the intent of keeping long term (mortgage rates) low in an effort to help the housing sector. Bernanke said he expected the Twist would push the 10 yr note rte down 50 basis points. It worked for one day but at the moment the 10 yr note is 30 basis points higher than the day the Twist was announced. The Fed has to be concerned, there are no real fiscal efforts in place and lower interest rates have had little positive impact.
The employment report on Friday is expected to be weaker than last month, non-farm jobs up 88K (last month +103k), non-farm private jobs +114K (last month (+137K), the unemployment rate at 9.1% unchanged. There has been no improvement in the unemployment rate this year, Congress and the Administration are impotent and it doesn't seem to phase them as politicians are now only concerned whether they can keep their cushy jobs and huge retirement benefits.
Europe's problems persist but this week likely not much of substance will come out of the region. That said, any news from Europe has a direct impact on US markets. While employment and the FOMC meeting are hardliners this week, there are also a number of key data points to consider. Expect volatility with only minor changes in the bond and mortgage markets with wide swings. Technically the bond market is bearish but somewhat over sold while the stock market is technically bullish but also overbought.
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, October 31, 2011
This Week; two things dominate. Wednesday Bernanke will hold a press conference at the conclusion of the two day FOMC meeting, and Friday the October employment report. Interest rates have increased from the 21st of Sept FOMC meeting at which the Fed Started Operation Twist, buying long dated treasuries and MBSs with the intent of keeping long term (mortgage rates) low in an effort to help the housing sector. Bernanke said he expected the Twist would push the 10 yr note rte down 50 basis points. It worked for one day but at the moment the 10 yr note is 30 basis points higher than the day the Twist was announced. The Fed has to be concerned, there are no real fiscal efforts in place and lower interest rates have had little positive impact.
The employment report on Friday is expected to be weaker than last month, non-farm jobs up 88K (last month +103k), non-farm private jobs +114K (last month (+137K), the unemployment rate at 9.1% unchanged. There has been no improvement in the unemployment rate this year, Congress and the Administration are impotent and it doesn't seem to phase them as politicians are now only concerned whether they can keep their cushy jobs and huge retirement benefits.
Europe's problems persist but this week likely not much of substance will come out of the region. That said, any news from Europe has a direct impact on US markets. While employment and the FOMC meeting are hardliners this week, there are also a number of key data points to consider. Expect volatility with only minor changes in the bond and mortgage markets with wide swings. Technically the bond market is bearish but somewhat over sold while the stock market is technically bullish but also overbought.
Saturday, October 29, 2011
Friday, October 28, 2011
Mortgage Market
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, October 28, 2011
Wednesday and Thursday hit hard on the bond and mortgage markets; the 10 yr note in the two days increased 25 bp in yield, mortgage rates up about 18 bp. The 10 yr price drop was 75/32, mortgage prices fell 34/32. The stock market measured by the DJIA increased 500 points in two days. This morning the 10 yr at 9:00 +12/32 at 2.34% -3 bp, mortgages at 9:00 +11/32 (.34 bp). It is not unusual that markets are trading a little better early this morning after the huge moves since Wednesday. Of course the moves were triggered by what on the surface has been taken as a fix for Europe's debt problems----at least for the time being; That China is saying it may be interested in buying some of the debt from the EFSF has been greeted with optimism (maybe too much), and the increase in the EFSF fund to 1T euros announced yesterday and get banks to take a 50% haircut on Greek debt was likely overdone but it was a little step forward.
In the meantime European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute. China will want a lot from the EU, ECB and IMF before it actually commits; that country is in the driver's seat and will likely extract a lot of guarantees to step into the swamp of debt.
The last couple of months were marked with doom and gloom, savvy investors were heavily short equity markets expecting the US and Europe would fall back into recession. The current news out of Europe that sent US stock markets up yesterday was in part fueled by shorts having to cover as the computers were screaming to get out. Putting some perspective on all of it; Europe's problems are far from being under control, the US stock market has moved to anticipate the end of Europe's problems is at hand; the bond market is simply tracking moves in equities with no confidence on the Fed or economic outlook-----letting stock traders set the tone.
Next week the FOMC will meet, after the meeting and the policy statement Bernanke will hold a press conference, given recent events in Europe and the increase in US interest rates, especially mortgage rates his press conference will be one of the more critical ones he has held in months.
At 9:30 the DJIA opened down 14 points, the 10 yr note -12/32 at 2.34% -3 bp and mortgage prices up 10/32 (.31 bp).
At 8:30 Sept personal income was weaker than expected, up 0.1% against estimates of +0.3%; spending was on the mark, up 0.6%. Q3 employment cost index, expected up 0.6% was better in a sense up 0.3% and +2.0% yr/yr. There was no noticeable reaction to the two releases. At 9:55 the U. of Michigan consumer sentiment index was expected unchanged at 57.5, as reported the index was 60.9; current conditions index 75.1 frm 73.8, expectations index 51.8 frm 47.0 and the 12 month outlook at 45 frm 37. A better read than the consumer confidence report on Tuesday but there was no reaction to it in equities or the bond market.
For three weeks we set 2.30% on the 10 yr as support that must hold; yesterday the note ran through it to a high of 2.41% before closing at 2.37%. Now we look at 2.30% as a resistance level. Yesterday's breakout over 2.30% can't be confirmed yet, we want to see a day or two over that level; short covering yesterday may have exaggerated the move higher. That said, the bond and mortgage markets have been technically bearish for weeks and will not likely change unless there is a major change in sentiment over Europe OR what Bernanke might do at next week's FOMC meeting to drive long rates lower. So far the Fed's moves have failed to keep rates low as the fed had expected.
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, October 28, 2011
Wednesday and Thursday hit hard on the bond and mortgage markets; the 10 yr note in the two days increased 25 bp in yield, mortgage rates up about 18 bp. The 10 yr price drop was 75/32, mortgage prices fell 34/32. The stock market measured by the DJIA increased 500 points in two days. This morning the 10 yr at 9:00 +12/32 at 2.34% -3 bp, mortgages at 9:00 +11/32 (.34 bp). It is not unusual that markets are trading a little better early this morning after the huge moves since Wednesday. Of course the moves were triggered by what on the surface has been taken as a fix for Europe's debt problems----at least for the time being; That China is saying it may be interested in buying some of the debt from the EFSF has been greeted with optimism (maybe too much), and the increase in the EFSF fund to 1T euros announced yesterday and get banks to take a 50% haircut on Greek debt was likely overdone but it was a little step forward.
In the meantime European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute. China will want a lot from the EU, ECB and IMF before it actually commits; that country is in the driver's seat and will likely extract a lot of guarantees to step into the swamp of debt.
The last couple of months were marked with doom and gloom, savvy investors were heavily short equity markets expecting the US and Europe would fall back into recession. The current news out of Europe that sent US stock markets up yesterday was in part fueled by shorts having to cover as the computers were screaming to get out. Putting some perspective on all of it; Europe's problems are far from being under control, the US stock market has moved to anticipate the end of Europe's problems is at hand; the bond market is simply tracking moves in equities with no confidence on the Fed or economic outlook-----letting stock traders set the tone.
Next week the FOMC will meet, after the meeting and the policy statement Bernanke will hold a press conference, given recent events in Europe and the increase in US interest rates, especially mortgage rates his press conference will be one of the more critical ones he has held in months.
At 9:30 the DJIA opened down 14 points, the 10 yr note -12/32 at 2.34% -3 bp and mortgage prices up 10/32 (.31 bp).
At 8:30 Sept personal income was weaker than expected, up 0.1% against estimates of +0.3%; spending was on the mark, up 0.6%. Q3 employment cost index, expected up 0.6% was better in a sense up 0.3% and +2.0% yr/yr. There was no noticeable reaction to the two releases. At 9:55 the U. of Michigan consumer sentiment index was expected unchanged at 57.5, as reported the index was 60.9; current conditions index 75.1 frm 73.8, expectations index 51.8 frm 47.0 and the 12 month outlook at 45 frm 37. A better read than the consumer confidence report on Tuesday but there was no reaction to it in equities or the bond market.
For three weeks we set 2.30% on the 10 yr as support that must hold; yesterday the note ran through it to a high of 2.41% before closing at 2.37%. Now we look at 2.30% as a resistance level. Yesterday's breakout over 2.30% can't be confirmed yet, we want to see a day or two over that level; short covering yesterday may have exaggerated the move higher. That said, the bond and mortgage markets have been technically bearish for weeks and will not likely change unless there is a major change in sentiment over Europe OR what Bernanke might do at next week's FOMC meeting to drive long rates lower. So far the Fed's moves have failed to keep rates low as the fed had expected.
Thursday, October 27, 2011
Mortgage Rate Update
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 27, 2011
The summit in Brussels yesterday is being considered a success this morning; US stock indexes rallying and US interest rates increasing on news that Europe's leaders have actually come with a plan that is supposed to isolate Greece from defaulting and taking some pressure off for the moment. Last-ditch talks with bank representatives led to the debt-relief accord,
bondholders will take 50% losses on Greek debt and boosted the firepower of the rescue fund. Measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market. The rescue fund (EFSF) is to be increased to 1 trillion euros ($1.4T). There are a lot of details yet to be worked out so while this is a breakthrough the problems are still not completely out of the woods; expect Europe to continue to drive global markets as more details must be resolved. It helped yesterday when China said it may be interested in buying some of the debt through the EFSF.
The reaction to European developments this morning is a huge rally in Europe's equity markets and in the US; at 9:00 this morning the DJIA was trading up 246 points, the 10 yr note testing important technical support level at 2.30% and mortgage prices at 9:00 -14/32 (.44 bp).
This morning weekly jobless claims were about as expected, down 2K to 402K, last week claims were revised to 404K frm 403K. Continuing claims were 3.645 mil down from 3.741 mil last week. Q3 GDP expected at +2.2% to +2.5% was on target at +2.5% after Q1 growth grew at 1.3%; final sales in Q3 were up 3.6%. The combination of Europe and Q3 GDP drove the DJIA to open +145 points, NASDAQ +72 and the S&P +23; by 9:35 the DJIA traded up 260 points.
Treasury rates increasing this morning driving mortgage prices lower and rates up. The 10 yr note is sitting right on what we consider key support at 2.30%, it hasn't been above 2.30% since mid-August. Strong GDP, strong auto sales, a slightly better new home sales in Sept and a better outlook in Europe are increasing optimism momentarily. The Europe relief rally began yesterday and is running hot again in early activity. Investors sighing relief but Europe still has a huge problem with Italy and Spain; Italy's debt is well over 1T euros more than the EFSF has in the present fund.
At 10:00 NAR reported August pending home sales were expected to be down 1.0%, sales fell 4.6%; yr/yr up 6.4%. Contracts signed not yet closed, the third month in a row pending sales have declined from the previous month. There has been no immediate reaction to the report.
At 1:00 Treasury will auction $29B of 7 yr notes; yesterday the 5 yr went off well but y the end of the day and this morning those notes are already underwater.
Today is critical for the bond market; the 10 yr note is at 2.28% at 10:00, it has tested 2.30% where we have support that must hold, a move above 2.30% would add additional technical weakness for the bond and mortgage markets.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 27, 2011
The summit in Brussels yesterday is being considered a success this morning; US stock indexes rallying and US interest rates increasing on news that Europe's leaders have actually come with a plan that is supposed to isolate Greece from defaulting and taking some pressure off for the moment. Last-ditch talks with bank representatives led to the debt-relief accord,
bondholders will take 50% losses on Greek debt and boosted the firepower of the rescue fund. Measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market. The rescue fund (EFSF) is to be increased to 1 trillion euros ($1.4T). There are a lot of details yet to be worked out so while this is a breakthrough the problems are still not completely out of the woods; expect Europe to continue to drive global markets as more details must be resolved. It helped yesterday when China said it may be interested in buying some of the debt through the EFSF.
The reaction to European developments this morning is a huge rally in Europe's equity markets and in the US; at 9:00 this morning the DJIA was trading up 246 points, the 10 yr note testing important technical support level at 2.30% and mortgage prices at 9:00 -14/32 (.44 bp).
This morning weekly jobless claims were about as expected, down 2K to 402K, last week claims were revised to 404K frm 403K. Continuing claims were 3.645 mil down from 3.741 mil last week. Q3 GDP expected at +2.2% to +2.5% was on target at +2.5% after Q1 growth grew at 1.3%; final sales in Q3 were up 3.6%. The combination of Europe and Q3 GDP drove the DJIA to open +145 points, NASDAQ +72 and the S&P +23; by 9:35 the DJIA traded up 260 points.
Treasury rates increasing this morning driving mortgage prices lower and rates up. The 10 yr note is sitting right on what we consider key support at 2.30%, it hasn't been above 2.30% since mid-August. Strong GDP, strong auto sales, a slightly better new home sales in Sept and a better outlook in Europe are increasing optimism momentarily. The Europe relief rally began yesterday and is running hot again in early activity. Investors sighing relief but Europe still has a huge problem with Italy and Spain; Italy's debt is well over 1T euros more than the EFSF has in the present fund.
At 10:00 NAR reported August pending home sales were expected to be down 1.0%, sales fell 4.6%; yr/yr up 6.4%. Contracts signed not yet closed, the third month in a row pending sales have declined from the previous month. There has been no immediate reaction to the report.
At 1:00 Treasury will auction $29B of 7 yr notes; yesterday the 5 yr went off well but y the end of the day and this morning those notes are already underwater.
Today is critical for the bond market; the 10 yr note is at 2.28% at 10:00, it has tested 2.30% where we have support that must hold, a move above 2.30% would add additional technical weakness for the bond and mortgage markets.
Wednesday, October 26, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, October 26, 2011
A nice rally yesterday in the bond and mortgage markets; this morning no follow-through. The 10 yr note at 7:00 was off 9/32 with stock indexes showing a better opening at 9:30 after the DJIA fell 207 points yesterday. Rate markets continue to move in tandem with equity indexes; better indexes equals weaker rate markets. The 10 yr note has a well defined range over the last two weeks, frm 2.27% to 2.10% unable to break in either direction. MBS markets also trading in a tight near term trendless range. Note the 10 yr note yield chart above, not only is the range clearly evident, the 10 is still above its key 20 and 40 day averages.
At 8:30 Sept durable goods orders were mixed; the overall down 0.8% with forecasts of 1.0%, ex-transportation orders were expected up 0.5% but increased 1.7%. Stock indexes improved on the data, its a very volatile series and today markets are fixated on the so-called summit meeting of Euro leaders later today. Europe's finance ministers cancelled their scheduled meeting yesterday implying there isn't a plan in place yet to save Greece, Italy and Spain. The issue now is what hits Europe's banks can accept on the worthless debt from those countries. The amount needed to save Italy and Spain is more than can be scraped together. Chancellor Angela Merkel invoked Germany’s “historic obligation” to defend the euro and Europe as she urged lawmakers to back a planned increase in the euro- area rescue fund’s capacity to staunch the debt crisis. The German parliament voted 503 to 89 to increase funding of the European Financial Stability Facility.
At 10:00 Sept new home sales, expected up 1.8% increased 5.7% to 313K annualized; at present pace there is a 6.2 months supply down from 6.6 months in August, the lowest since Apr 2010. The median sales price $204,400, down 10.4% yr/yr. No initial reaction to the better report, all attention is focused on Europe and not so much on US economic reports.
Treasuries being dragged lower on this afternoon's $35B 5 yr note auction, the whip-saw thinking about Europe's debt crisis (today some optimism) and the continually changing economic outlook. Yesterday there was concern that Europe would not get a deal done and some quarterly earnings not meeting expectations sending rates lower and stock indexes down; this morning traders easily selling treasuries as the stock market is better and the 10 yr didn't break down below 2.10%, the low in the last two weeks, that has kept recent rallies in check. The bond and mortgage markets are essentially trading in a narrow flat range as little conviction as to the outlook remains murky.
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, October 26, 2011
A nice rally yesterday in the bond and mortgage markets; this morning no follow-through. The 10 yr note at 7:00 was off 9/32 with stock indexes showing a better opening at 9:30 after the DJIA fell 207 points yesterday. Rate markets continue to move in tandem with equity indexes; better indexes equals weaker rate markets. The 10 yr note has a well defined range over the last two weeks, frm 2.27% to 2.10% unable to break in either direction. MBS markets also trading in a tight near term trendless range. Note the 10 yr note yield chart above, not only is the range clearly evident, the 10 is still above its key 20 and 40 day averages.
At 8:30 Sept durable goods orders were mixed; the overall down 0.8% with forecasts of 1.0%, ex-transportation orders were expected up 0.5% but increased 1.7%. Stock indexes improved on the data, its a very volatile series and today markets are fixated on the so-called summit meeting of Euro leaders later today. Europe's finance ministers cancelled their scheduled meeting yesterday implying there isn't a plan in place yet to save Greece, Italy and Spain. The issue now is what hits Europe's banks can accept on the worthless debt from those countries. The amount needed to save Italy and Spain is more than can be scraped together. Chancellor Angela Merkel invoked Germany’s “historic obligation” to defend the euro and Europe as she urged lawmakers to back a planned increase in the euro- area rescue fund’s capacity to staunch the debt crisis. The German parliament voted 503 to 89 to increase funding of the European Financial Stability Facility.
At 10:00 Sept new home sales, expected up 1.8% increased 5.7% to 313K annualized; at present pace there is a 6.2 months supply down from 6.6 months in August, the lowest since Apr 2010. The median sales price $204,400, down 10.4% yr/yr. No initial reaction to the better report, all attention is focused on Europe and not so much on US economic reports.
Treasuries being dragged lower on this afternoon's $35B 5 yr note auction, the whip-saw thinking about Europe's debt crisis (today some optimism) and the continually changing economic outlook. Yesterday there was concern that Europe would not get a deal done and some quarterly earnings not meeting expectations sending rates lower and stock indexes down; this morning traders easily selling treasuries as the stock market is better and the 10 yr didn't break down below 2.10%, the low in the last two weeks, that has kept recent rallies in check. The bond and mortgage markets are essentially trading in a narrow flat range as little conviction as to the outlook remains murky.
Tuesday, October 25, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, October 25, 2011
EU leaders will return to Brussels tomorrow for a second summit in four days to discuss Europe’s bailout fund. European leaders are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain; a lot of talk about Greece but the real problems are Italy and Spain, keeping them from crashing is what its all about. Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, said yesterday talks on private-sector involvement in a second aid package for Greece are focusing on losses of 50% to 60%. Regardless of what comes from the summit meeting tomorrow the debt crisis in Europe is far from over; it will take years to resolve the sovereign debt that is essentially junk and who will take the losses. No way to avoid the end game here; the countries in Europe that are on the edge and lenders that hold the debt, as well as possible rating downgrade of France debt will continue to face serious financial and fiscal problems for years. German and French two-year notes rose, outperforming longer maturities, amid speculation European leaders will fail to agree on a solution to the region’s debt crisis and avoid a Greek default.
News hit at 9:45 that the EU finance ministers will not hold their meeting tomorrow. Not the summit, but canceling the meeting is seen as more evidence there is still no common ground that will come tomorrow. The reaction was swift, sending the DJIA down 165 points before rebounding a little. So far this morning market volatility is very high.
Given that whatever comes from the meeting tomorrow won't end the crisis, it appears it doesn't matter to equity markets as stocks in the US have rallied strongly in the last month with the DJIA gains the largest point gains ever in the index. Investors had become too bearish over the uncertain situation in Europe and until a few weeks ago economists forecasting decline in the US economy. Investors may be getting used to the reality that Europe's debt mess will not end anytime soon and that the banks in the region won't actually fail as continuous bandages will be applied as needed.
Earlier this morning the rate markets started weaker, the 10 note yield at 8:00 2.27%, the same high we had a week ago. Mortgage prices at 8:30 were down 3/32 (.09 bp), the DJIA was +30 at 8:30. By 9:00 the 10 yr recovered all its slide and was back to 2.23% unchanged, mortgage prices increased from -3/32 to +7/32 (.22 bp) and the DJIA traded down 40 points. So far today with hardly any time off the clock markets have seen a lot of volatility. Overall however the bond and mortgage markets are trendless near term with not much change over the past two weeks.
At 9:00 August Case/Shiller home price index for 20 cities, expected down 3.5% yr/yr was -3.8%; for the month of August +0.2% frm July. No reaction to the report.
At 9:30 mortgage prices +3/32 (.09 bp) on 30s, -1/32 (.03 bp) on 15s; the 10 yr note +2/32 at 2.22% unch. The DJIA opened -50; within 10 minutes the index was down 121 setting off a strong move on the 10 yr, +10/32 at 2.20% -3 bp and mortgages at 9:40 +8/32 (.25 bp).
At 10:00 Oct consumer confidence expected at 46.0 frm 45.4 fell to 39.8 the lowest reading since Mar 2009, the expectations component fell to 48.7 frm 55.1. Also at 10:00 August FHFA home price index fell 0.1% frm July and down 4.0% yr/yr. Treasuries rallied on the data, stock indexes dipped and mortgage prices improved a few basis points. So far today markets have been highly volatile.
Later today at 1:00 Treasury will auction $35B of 2 yr notes, we expect good demand.
The bellwether 10 yr note that sets the pace for mortgage rates is finding technical support at 2.27% with the major support at 2.30%; on the down side the 10 yr can't break below 2.10% and mortgage rates tied into a very narrow range with no direction but tagging along with the 10. Most of our models and various technical indicators remain bearish for now. The direction yet to be determined, once the ranges are broken in either direction we can expect a swift move in the direction of the break whenever it occurs. So far this morning financial markets have been volatile with news dribbling out of Europe that continues a slow water boarding for traders and investors.
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, October 25, 2011
EU leaders will return to Brussels tomorrow for a second summit in four days to discuss Europe’s bailout fund. European leaders are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain; a lot of talk about Greece but the real problems are Italy and Spain, keeping them from crashing is what its all about. Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, said yesterday talks on private-sector involvement in a second aid package for Greece are focusing on losses of 50% to 60%. Regardless of what comes from the summit meeting tomorrow the debt crisis in Europe is far from over; it will take years to resolve the sovereign debt that is essentially junk and who will take the losses. No way to avoid the end game here; the countries in Europe that are on the edge and lenders that hold the debt, as well as possible rating downgrade of France debt will continue to face serious financial and fiscal problems for years. German and French two-year notes rose, outperforming longer maturities, amid speculation European leaders will fail to agree on a solution to the region’s debt crisis and avoid a Greek default.
News hit at 9:45 that the EU finance ministers will not hold their meeting tomorrow. Not the summit, but canceling the meeting is seen as more evidence there is still no common ground that will come tomorrow. The reaction was swift, sending the DJIA down 165 points before rebounding a little. So far this morning market volatility is very high.
Given that whatever comes from the meeting tomorrow won't end the crisis, it appears it doesn't matter to equity markets as stocks in the US have rallied strongly in the last month with the DJIA gains the largest point gains ever in the index. Investors had become too bearish over the uncertain situation in Europe and until a few weeks ago economists forecasting decline in the US economy. Investors may be getting used to the reality that Europe's debt mess will not end anytime soon and that the banks in the region won't actually fail as continuous bandages will be applied as needed.
Earlier this morning the rate markets started weaker, the 10 note yield at 8:00 2.27%, the same high we had a week ago. Mortgage prices at 8:30 were down 3/32 (.09 bp), the DJIA was +30 at 8:30. By 9:00 the 10 yr recovered all its slide and was back to 2.23% unchanged, mortgage prices increased from -3/32 to +7/32 (.22 bp) and the DJIA traded down 40 points. So far today with hardly any time off the clock markets have seen a lot of volatility. Overall however the bond and mortgage markets are trendless near term with not much change over the past two weeks.
At 9:00 August Case/Shiller home price index for 20 cities, expected down 3.5% yr/yr was -3.8%; for the month of August +0.2% frm July. No reaction to the report.
At 9:30 mortgage prices +3/32 (.09 bp) on 30s, -1/32 (.03 bp) on 15s; the 10 yr note +2/32 at 2.22% unch. The DJIA opened -50; within 10 minutes the index was down 121 setting off a strong move on the 10 yr, +10/32 at 2.20% -3 bp and mortgages at 9:40 +8/32 (.25 bp).
At 10:00 Oct consumer confidence expected at 46.0 frm 45.4 fell to 39.8 the lowest reading since Mar 2009, the expectations component fell to 48.7 frm 55.1. Also at 10:00 August FHFA home price index fell 0.1% frm July and down 4.0% yr/yr. Treasuries rallied on the data, stock indexes dipped and mortgage prices improved a few basis points. So far today markets have been highly volatile.
Later today at 1:00 Treasury will auction $35B of 2 yr notes, we expect good demand.
The bellwether 10 yr note that sets the pace for mortgage rates is finding technical support at 2.27% with the major support at 2.30%; on the down side the 10 yr can't break below 2.10% and mortgage rates tied into a very narrow range with no direction but tagging along with the 10. Most of our models and various technical indicators remain bearish for now. The direction yet to be determined, once the ranges are broken in either direction we can expect a swift move in the direction of the break whenever it occurs. So far this morning financial markets have been volatile with news dribbling out of Europe that continues a slow water boarding for traders and investors.
Monday, October 24, 2011
Mortgage Rates the week a head
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, October 24, 2011
This Week; the headline remains the same, will the European officials actually come up with a plan the takes Greece and the other back from the edge of the cliff? We believe they will have something but we also believe whatever comes from the meeting now scheduled for Wednesday will be just a bandage that will not end the crisis facing Europe's banks and the countries in the region hanging by their finger nails. There are no economic reports on Monday; the rest of the week has something everyday; Thursday markets will get the first report on Q3 GDP, expectations are the economy grew 2.2% in the quarter compared with +1.3% growth in Q2.
On top of the uncertainty over Europe and the volatility it has generated in US equity markets; Treasury will auction $99B of notes on Tuesday, Wednesday and Thursday. Recent auctions have been a little disappointing with demand not as strong as it had been for months when Treasury borrowed. The bond and mortgage markets will likely stay within a narrow range as has been the pattern for the last two weeks. The technicals remain bearish, however as long as the 10 doesn't close above 2.30% there remains the possibility mortgage rates may fall somewhat from the present levels.
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, October 24, 2011
This Week; the headline remains the same, will the European officials actually come up with a plan the takes Greece and the other back from the edge of the cliff? We believe they will have something but we also believe whatever comes from the meeting now scheduled for Wednesday will be just a bandage that will not end the crisis facing Europe's banks and the countries in the region hanging by their finger nails. There are no economic reports on Monday; the rest of the week has something everyday; Thursday markets will get the first report on Q3 GDP, expectations are the economy grew 2.2% in the quarter compared with +1.3% growth in Q2.
On top of the uncertainty over Europe and the volatility it has generated in US equity markets; Treasury will auction $99B of notes on Tuesday, Wednesday and Thursday. Recent auctions have been a little disappointing with demand not as strong as it had been for months when Treasury borrowed. The bond and mortgage markets will likely stay within a narrow range as has been the pattern for the last two weeks. The technicals remain bearish, however as long as the 10 doesn't close above 2.30% there remains the possibility mortgage rates may fall somewhat from the present levels.
Sunday, October 23, 2011
Friday, October 21, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, October 21, 2011
Treasuries opened flat this morning, mortgages however are doing better with talk that the Fed will possibly increase its purchases of MBSs. Federal Reserve Governor Daniel Tarullo said the central bank should consider resuming purchases of mortgage bonds to boost U.S. growth. At 9:00 the 10 yr -2/32 while 30 yr mtgs +6/32 (.18 bp). Stock indexes prior to the open were better indicating a strong opening at 9:30.
Trade today will focus primarily on the equity markets, the stock market is strong early but that is no indication that at the end of the day the indexes won't end up lower. Likely to be choppy as has been the case, with not much change in the bond and mortgage markets. Technically the bond and mortgage markets remain bearish but there is room to improve without changing the wider outlook. If equities reverse from morning improvement rate markets will find support. Mortgages doing much better this morning on Fed comments.
News from Europe; there won't be anything coming this weekend but by Wednesday German officials are saying a deal will be resolved by next Wednesday. Still a lot of uncertainty from the region but at the moment markets are believing an end is in sight for the near term. Yesterday Greece parliament voted for additional austerity (lower spending), the vote was close and there was rioting but at the end of the day Greece appears to have met the demands of the ECB, IMF and the EU. European stocks advanced as policy makers discussed deploying $1.3 trillion in funds to help contain the euro area’s debt crisis as they sought to break a deadlock between Germany and France.
At 9:30 the DJIA opened +140, the 10 yr note -6/32 at 2.21% +3 bp; mortgage prices doing better on Fed official comment +4/32 (.12 bp).
The comment from Fed governor Tarullo that the Fed should increase MBS purchases to aid economic recovery comes as a surprise, as do most comments that hit from various Fed officials. A positive for mortgage rates of course, and for the economy if in fact the Fed actually takes his comment and implements it. Keeping mortgage rates low is a plus, however unless there is some relaxation of underwriting and appraisals many that could re-finance are being hampered by requirements that impede many from getting a lower rate even if they are current on their present payments.
There is no data today, investors and traders setting positions for the weekend and next week's meeting in Europe. Mortgage rates doing better today on Tarullo comments but if rates increase in treasuries so too will mortgage rates increase although if the Fed were to actually increase MBS purchases the spread between mortgage rates and the 10 yr note yield will narrow from present levels. Washington regulators and the lending community don't get it, we have harped on it for years with no avail.
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, October 21, 2011
Treasuries opened flat this morning, mortgages however are doing better with talk that the Fed will possibly increase its purchases of MBSs. Federal Reserve Governor Daniel Tarullo said the central bank should consider resuming purchases of mortgage bonds to boost U.S. growth. At 9:00 the 10 yr -2/32 while 30 yr mtgs +6/32 (.18 bp). Stock indexes prior to the open were better indicating a strong opening at 9:30.
Trade today will focus primarily on the equity markets, the stock market is strong early but that is no indication that at the end of the day the indexes won't end up lower. Likely to be choppy as has been the case, with not much change in the bond and mortgage markets. Technically the bond and mortgage markets remain bearish but there is room to improve without changing the wider outlook. If equities reverse from morning improvement rate markets will find support. Mortgages doing much better this morning on Fed comments.
News from Europe; there won't be anything coming this weekend but by Wednesday German officials are saying a deal will be resolved by next Wednesday. Still a lot of uncertainty from the region but at the moment markets are believing an end is in sight for the near term. Yesterday Greece parliament voted for additional austerity (lower spending), the vote was close and there was rioting but at the end of the day Greece appears to have met the demands of the ECB, IMF and the EU. European stocks advanced as policy makers discussed deploying $1.3 trillion in funds to help contain the euro area’s debt crisis as they sought to break a deadlock between Germany and France.
At 9:30 the DJIA opened +140, the 10 yr note -6/32 at 2.21% +3 bp; mortgage prices doing better on Fed official comment +4/32 (.12 bp).
The comment from Fed governor Tarullo that the Fed should increase MBS purchases to aid economic recovery comes as a surprise, as do most comments that hit from various Fed officials. A positive for mortgage rates of course, and for the economy if in fact the Fed actually takes his comment and implements it. Keeping mortgage rates low is a plus, however unless there is some relaxation of underwriting and appraisals many that could re-finance are being hampered by requirements that impede many from getting a lower rate even if they are current on their present payments.
There is no data today, investors and traders setting positions for the weekend and next week's meeting in Europe. Mortgage rates doing better today on Tarullo comments but if rates increase in treasuries so too will mortgage rates increase although if the Fed were to actually increase MBS purchases the spread between mortgage rates and the 10 yr note yield will narrow from present levels. Washington regulators and the lending community don't get it, we have harped on it for years with no avail.
Thursday, October 20, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 20, 2011
Treasuries and mortgages opened a little weaker this morning. At 8:30 more selling after weekly jobless claims that fell 6K to 403K frm 409K last week (revised frm 404K); continuing claims were 3.719 mil up frm 3.694 mil last week.
Claims didn't generate selling, there are early reports unconfirmed so far, that Kaddafi has been killed.
Also there is that ever present belief Europe will get a plan worked out prior to this weekend's G-20 meeting. Germany and France still in disagreement over the role to be played by the ECB in the bank re-capitalization after the banks take huge losses over the bad debt of Greece and then the other troubled counties in the EU. a day before a finance ministers’ meeting in Brussels intended to set a common strategy on dealing with the turmoil there is nothing concrete. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt last night failed to resolve differences. French Prime Minister Francois Fillon stepped up calls for the 440 billion-euro ($608B) European Financial Stability Facility to be turned into a bank and given leverage by the ECB which, along with Germany, has rejected using its balance sheet to bolster the fund. Germany has endorsed enabling the EFSF to insure a portion of cash-strapped nations’ bond sales. Given the news reports over the differences it is a huge step of faith to believe a workable plan can be done prior to the G-20 meeting this weekend. Meanwhile in Greece riots are continuing over the deep austerity that must be in place to get more cash; Greece will run out of money in a few weeks.
Greece will default; I don't think anyone in the EU believes it won't. What seems to be happening in the negotiations is a plan to contain the defaults of Spain, Italy and Portugal. The EU cannot afford to let those countries to fall otherwise it is the end of the EU experiment that began 12 years ago when 17 countries agreed to join together with a common currency and common economic goals.
At 9:00 this morning treasuries and mortgages had come off their lowest prices earlier; the 10 -2/32 and mortgages -4/32 (.12 bp). The DJIA at 8:30 was +45, at 9:00 +2. US interest rate markets still welded to the action in equities. Likely that will be the way it goes the rest of today.
At 9:30 the DJIA +5, 10 yr note -7/32 at 2.18% +2 bp. Mortgage prices at 9:30 -7/32 (.22 bp).
Three key data points hit at 10:00. Sept existing home sales were expected to decline 1.8%, as reported sales fell 3.0% to 4.91 mil annualized; August sales revised to +8.8% frm +7.7%, inventories of unsold homes down 2.0% leaving an 8.5 month supply. Leading economic indicators for Sept was up 0.2% in line with forecasts. The giant in the room; the Oct Philly fed business index was expect -9.6 frm -17.5 in Sept; as reported it increased to +8.7. The components were mixed, new orders at 7.8 frm -11.3, prices pd at 20.0 frm 23.3 and employment at 1.4 frm 5.8. The initial reaction to the three reports didn't do much to stocks or bonds.
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, October 20, 2011
Treasuries and mortgages opened a little weaker this morning. At 8:30 more selling after weekly jobless claims that fell 6K to 403K frm 409K last week (revised frm 404K); continuing claims were 3.719 mil up frm 3.694 mil last week.
Claims didn't generate selling, there are early reports unconfirmed so far, that Kaddafi has been killed.
Also there is that ever present belief Europe will get a plan worked out prior to this weekend's G-20 meeting. Germany and France still in disagreement over the role to be played by the ECB in the bank re-capitalization after the banks take huge losses over the bad debt of Greece and then the other troubled counties in the EU. a day before a finance ministers’ meeting in Brussels intended to set a common strategy on dealing with the turmoil there is nothing concrete. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt last night failed to resolve differences. French Prime Minister Francois Fillon stepped up calls for the 440 billion-euro ($608B) European Financial Stability Facility to be turned into a bank and given leverage by the ECB which, along with Germany, has rejected using its balance sheet to bolster the fund. Germany has endorsed enabling the EFSF to insure a portion of cash-strapped nations’ bond sales. Given the news reports over the differences it is a huge step of faith to believe a workable plan can be done prior to the G-20 meeting this weekend. Meanwhile in Greece riots are continuing over the deep austerity that must be in place to get more cash; Greece will run out of money in a few weeks.
Greece will default; I don't think anyone in the EU believes it won't. What seems to be happening in the negotiations is a plan to contain the defaults of Spain, Italy and Portugal. The EU cannot afford to let those countries to fall otherwise it is the end of the EU experiment that began 12 years ago when 17 countries agreed to join together with a common currency and common economic goals.
At 9:00 this morning treasuries and mortgages had come off their lowest prices earlier; the 10 -2/32 and mortgages -4/32 (.12 bp). The DJIA at 8:30 was +45, at 9:00 +2. US interest rate markets still welded to the action in equities. Likely that will be the way it goes the rest of today.
At 9:30 the DJIA +5, 10 yr note -7/32 at 2.18% +2 bp. Mortgage prices at 9:30 -7/32 (.22 bp).
Three key data points hit at 10:00. Sept existing home sales were expected to decline 1.8%, as reported sales fell 3.0% to 4.91 mil annualized; August sales revised to +8.8% frm +7.7%, inventories of unsold homes down 2.0% leaving an 8.5 month supply. Leading economic indicators for Sept was up 0.2% in line with forecasts. The giant in the room; the Oct Philly fed business index was expect -9.6 frm -17.5 in Sept; as reported it increased to +8.7. The components were mixed, new orders at 7.8 frm -11.3, prices pd at 20.0 frm 23.3 and employment at 1.4 frm 5.8. The initial reaction to the three reports didn't do much to stocks or bonds.
Wednesday, October 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.
Wednesday, October 19, 2011
Prior to 8:30 mortgage prices traded down 6/32 (.18 bp) and the 10 yr -8/32 to 2.20%. At 8:30 Sept CPI increased 0.3% overall and when food and energy are removed up 0.1%; yr/yr CPI +3.9%, the core yr/yr up 2.0%. Yesterday's PPI was stronger than expected increasing concerns that inflation may be increasing, today the CPI takes a little worry away but not totally. Also at 8:30 Sept housing starts and permits; starts were expected up 4.0% as reported starts increased 15.0%; permits were expected down 1.5% but declined 5.0%. Starts are a surprise, so much so that we question the data. Starts totaled 658K annually frm 572K in August; permits at 594K down from 625K in August. Single family starts were up 1.7% the rest was in multi-family starts (+50%). The initial reaction the the 8:30 data took the 10 yr down in price a little, mortgage prices at 8:45 -5/32 (.15 bp).
In Europe this morning, riots in Greece; protestors being gassed as it escalates. Yesterday's maniacal reaction to a headline in a British newspaper that a deal was in the offing to increase the EFSF to re-capitalize the banks in the region sent markets into another round of excessive volatility. One hour after the news it became apparent that the news was woefully lacking in fact and substance. There is no plan that has been resolved. Markets, as noted yesterday, don't wait for facts these days; it is all about headlines and in turn creates huge volatile swings.
Europe continues to drive global markets, every word out of the region is taken as the last word. There is still nothing of substance after over a year of discussions; Europe's banks do not want to take the haircut that will likely be necessary. Most of the sovereign debt has to be taken as losses at least by 50% or more, banks will continue to fight it. Politicians here and there remain convinced a plan will be worked out that will stabilize Italy, Spain and Portugal as well as keeping Greece from default. The problem with that is, so far after all this time there is nothing. On Oct 23rd finance ministers from the G-20 countries will meet in a summit, at the moment its in the hands of Germany and France, the only two EU countries that are not in some way impaired. German Finance Minister Schaeuble hasn’t specified how much additional strength the European bailout fund may have and negotiators are still in “intensive discussions.” What's new about that?
Early this morning the weekly MBA mortgage applications; the composite index declined 14.9%, purchase applications down 8.8% while re-finances declined 16.6%. Higher interest rates dropped the re-finance markets, purchases remain soft. There is an anomaly though, the week included Columbus Day, the few that are optimistic about the housing sector are making a lot out of the holiday, we don't hold much to that. Any even small increase in mortgage rates shuts of the flow, mortgage rates and treasuries were higher last week.
At 9:30 this morning the DJIA opened -22, NASDAQ-12, S&P -3; the 10 yr note -6/32 to 2.19% +2 bp and mortgages unchanged. Until 9:30 mtg prices were generally off 4/32 (.12 bp).
The only other scheduled information today is at 2:00 when the Fed releases its Beige Book, the Fed's detailed report on the economy in the 12 Fed districts. Always some meat in it but generally nothing shocking and new markets are not already thinking about-----that of course is if anyone is actually thinking these days rather than reacting.
Treasury and mortgage markets remain bearish; until the 10 yr can decline below 2.0% the bearish technicals will continue. That said, we remain confident that the 10 yr will find support at 2.30%, the recent high was 2.27% five sessions ago. The Fed's Operation Twist is still out there and the Fed has increased MBS purchases. Interday and intraday volatility will continue following the paranoid equity markets. Already this morning 30 yr MBSs have traded in a .34 basis point range. The treasury market is being stretched between better equity markets and the need for safety as Europe is still in play; equity markets a little weaker early today keeping rate markets generally unchanged so far.
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, October 19, 2011
Prior to 8:30 mortgage prices traded down 6/32 (.18 bp) and the 10 yr -8/32 to 2.20%. At 8:30 Sept CPI increased 0.3% overall and when food and energy are removed up 0.1%; yr/yr CPI +3.9%, the core yr/yr up 2.0%. Yesterday's PPI was stronger than expected increasing concerns that inflation may be increasing, today the CPI takes a little worry away but not totally. Also at 8:30 Sept housing starts and permits; starts were expected up 4.0% as reported starts increased 15.0%; permits were expected down 1.5% but declined 5.0%. Starts are a surprise, so much so that we question the data. Starts totaled 658K annually frm 572K in August; permits at 594K down from 625K in August. Single family starts were up 1.7% the rest was in multi-family starts (+50%). The initial reaction the the 8:30 data took the 10 yr down in price a little, mortgage prices at 8:45 -5/32 (.15 bp).
In Europe this morning, riots in Greece; protestors being gassed as it escalates. Yesterday's maniacal reaction to a headline in a British newspaper that a deal was in the offing to increase the EFSF to re-capitalize the banks in the region sent markets into another round of excessive volatility. One hour after the news it became apparent that the news was woefully lacking in fact and substance. There is no plan that has been resolved. Markets, as noted yesterday, don't wait for facts these days; it is all about headlines and in turn creates huge volatile swings.
Europe continues to drive global markets, every word out of the region is taken as the last word. There is still nothing of substance after over a year of discussions; Europe's banks do not want to take the haircut that will likely be necessary. Most of the sovereign debt has to be taken as losses at least by 50% or more, banks will continue to fight it. Politicians here and there remain convinced a plan will be worked out that will stabilize Italy, Spain and Portugal as well as keeping Greece from default. The problem with that is, so far after all this time there is nothing. On Oct 23rd finance ministers from the G-20 countries will meet in a summit, at the moment its in the hands of Germany and France, the only two EU countries that are not in some way impaired. German Finance Minister Schaeuble hasn’t specified how much additional strength the European bailout fund may have and negotiators are still in “intensive discussions.” What's new about that?
Early this morning the weekly MBA mortgage applications; the composite index declined 14.9%, purchase applications down 8.8% while re-finances declined 16.6%. Higher interest rates dropped the re-finance markets, purchases remain soft. There is an anomaly though, the week included Columbus Day, the few that are optimistic about the housing sector are making a lot out of the holiday, we don't hold much to that. Any even small increase in mortgage rates shuts of the flow, mortgage rates and treasuries were higher last week.
At 9:30 this morning the DJIA opened -22, NASDAQ-12, S&P -3; the 10 yr note -6/32 to 2.19% +2 bp and mortgages unchanged. Until 9:30 mtg prices were generally off 4/32 (.12 bp).
The only other scheduled information today is at 2:00 when the Fed releases its Beige Book, the Fed's detailed report on the economy in the 12 Fed districts. Always some meat in it but generally nothing shocking and new markets are not already thinking about-----that of course is if anyone is actually thinking these days rather than reacting.
Treasury and mortgage markets remain bearish; until the 10 yr can decline below 2.0% the bearish technicals will continue. That said, we remain confident that the 10 yr will find support at 2.30%, the recent high was 2.27% five sessions ago. The Fed's Operation Twist is still out there and the Fed has increased MBS purchases. Interday and intraday volatility will continue following the paranoid equity markets. Already this morning 30 yr MBSs have traded in a .34 basis point range. The treasury market is being stretched between better equity markets and the need for safety as Europe is still in play; equity markets a little weaker early today keeping rate markets generally unchanged so far.
Tuesday, October 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.
Tuesday, October 18, 2011
Prior to 8:30 this morning the 10 yr note traded up 12/32 to 2.11% -5 bp frm yesterday's close; the MBS market up 4/32 (.12 bp). At 8:30 Sept PPI took some wind away, the overall PPI increased by 0.8%, markets were expecting an increase of 0.2%. The core rate however was in line up 0.2%. Yr/yr data is where the cheese binds; up 6.9% on the overall, up frm +6.5% in August, yr/yr on the core was +2.5% unchanged from August. While inflation isn't on the radar now, with the increase in the overall PPI and the core at what the Fed considers neutral (not too hot but not too tame either) inflation concerns notched up fractionally in the backs of the minds of traders. Inflation in Britain is at a three year high and may translate into the trading of US treasuries at the long end particularly. At 8:45, 15 minutes after the PPI mortgage prices traded unchanged on the day.
By 9:00 the early strong rally in the bond and mortgage markets had vanished; the 10 yr unchanged and mortgage prices down 3/32 (.09 bp). In early trading in stock indexes were lower (DJIA -50), at 9:00 the key indexes had improved to point to a firmer open at 9:30. Treasury and mortgage markets are completely controlled by how stock markets trade; with the huge volatile swings in the indexes trading bonds and MBSs keeps the rate markets volatile.
At 9:30 the DJIA opened -27, but the NASDAQ and S&P did open a little better. Mtg prices at 9:30 +1/32 (.03 bp) and the 10 yr note up 4/32 at 2.14% -2 bp.
At 10:00 the Oct NAHB housing mkt index, expected at 14, jumped to 18, the highest index reading in months. Last month the index was 14. Any improvement is good news; the line between positive and negative is 50. There has been no initial reaction to the improvement.
Europe still carries heavy weight on global markets as it can't step up and get some kind of resolution resolved. Eventually it will but as has been the case for over a year now, it won't solve the longer term problems. The on again off again travails are the prime drivers in the global markets. In China the economy grew 9.1% in the third quarter from a year earlier, the slowest pace since 2009, driving stocks lower on concern that Europe’s debt crisis is dragging on the global recovery. China, an export economy, saw shipments to the European Union tumbled to 9.8% in September from 22% in the previous month. U.S. corporate credit risk rose on concern that Europe’s debt crisis may spread after Moody’s Investors Service signaled that France’s Aaa credit rating is under pressure.
Regardless of all other fundamentals the bond and mortgage markets are tied to stock indexes tighter than a hangman's knot. Moody's saying today it may downgrade France credit rating aided the early morning improvement but with the US equity markets opening better at 9:30, it trumped any safety moves to bonds. It didn't help this morning when over PPI increase by a huge 0.8% and news that Britain's inflation rate the highest in 3 years.
At 1:15 this afternoon Bernanke will speak at a conference at the Boston Fed. With the current increase in rates after Operation Twist that was supposed to keep rates down, traders will focus on any remarks that address inflation and what Bernanke says regarding interest rates. Speculation on remarks about Europe, the economy, and comments on what the Fed is thinking about the mess in Congress and this Administration. He has made it clear the next major steps on reviving the economy must be fiscal, not monetary.
We remind that the bond and mortgage markets are still technically bearish, any improvement on the 10 yr note down to 2.05% area won't change the near term outlook. That said, we continue to expect any selling in the 120 yr note will hold at 2.30%, the recent interday high hit 2.27% last Wednesday and Friday.
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, October 18, 2011
Prior to 8:30 this morning the 10 yr note traded up 12/32 to 2.11% -5 bp frm yesterday's close; the MBS market up 4/32 (.12 bp). At 8:30 Sept PPI took some wind away, the overall PPI increased by 0.8%, markets were expecting an increase of 0.2%. The core rate however was in line up 0.2%. Yr/yr data is where the cheese binds; up 6.9% on the overall, up frm +6.5% in August, yr/yr on the core was +2.5% unchanged from August. While inflation isn't on the radar now, with the increase in the overall PPI and the core at what the Fed considers neutral (not too hot but not too tame either) inflation concerns notched up fractionally in the backs of the minds of traders. Inflation in Britain is at a three year high and may translate into the trading of US treasuries at the long end particularly. At 8:45, 15 minutes after the PPI mortgage prices traded unchanged on the day.
By 9:00 the early strong rally in the bond and mortgage markets had vanished; the 10 yr unchanged and mortgage prices down 3/32 (.09 bp). In early trading in stock indexes were lower (DJIA -50), at 9:00 the key indexes had improved to point to a firmer open at 9:30. Treasury and mortgage markets are completely controlled by how stock markets trade; with the huge volatile swings in the indexes trading bonds and MBSs keeps the rate markets volatile.
At 9:30 the DJIA opened -27, but the NASDAQ and S&P did open a little better. Mtg prices at 9:30 +1/32 (.03 bp) and the 10 yr note up 4/32 at 2.14% -2 bp.
At 10:00 the Oct NAHB housing mkt index, expected at 14, jumped to 18, the highest index reading in months. Last month the index was 14. Any improvement is good news; the line between positive and negative is 50. There has been no initial reaction to the improvement.
Europe still carries heavy weight on global markets as it can't step up and get some kind of resolution resolved. Eventually it will but as has been the case for over a year now, it won't solve the longer term problems. The on again off again travails are the prime drivers in the global markets. In China the economy grew 9.1% in the third quarter from a year earlier, the slowest pace since 2009, driving stocks lower on concern that Europe’s debt crisis is dragging on the global recovery. China, an export economy, saw shipments to the European Union tumbled to 9.8% in September from 22% in the previous month. U.S. corporate credit risk rose on concern that Europe’s debt crisis may spread after Moody’s Investors Service signaled that France’s Aaa credit rating is under pressure.
Regardless of all other fundamentals the bond and mortgage markets are tied to stock indexes tighter than a hangman's knot. Moody's saying today it may downgrade France credit rating aided the early morning improvement but with the US equity markets opening better at 9:30, it trumped any safety moves to bonds. It didn't help this morning when over PPI increase by a huge 0.8% and news that Britain's inflation rate the highest in 3 years.
At 1:15 this afternoon Bernanke will speak at a conference at the Boston Fed. With the current increase in rates after Operation Twist that was supposed to keep rates down, traders will focus on any remarks that address inflation and what Bernanke says regarding interest rates. Speculation on remarks about Europe, the economy, and comments on what the Fed is thinking about the mess in Congress and this Administration. He has made it clear the next major steps on reviving the economy must be fiscal, not monetary.
We remind that the bond and mortgage markets are still technically bearish, any improvement on the 10 yr note down to 2.05% area won't change the near term outlook. That said, we continue to expect any selling in the 120 yr note will hold at 2.30%, the recent interday high hit 2.27% last Wednesday and Friday.
Monday, October 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.
Monday, October 17, 2011
Treasuries and MBS markets opened flat early this morning but got some support at 9:00 as stock indexes softened a little. Helping the bond market some this morning, the Oct NY Empire State manufacturing index expected -4.4 frm -8.82% in Sept was -8.48; the sub components were a little better but still very weak. At 9:15 Sept industrial production reported +0.2% right on the forecasts. Sept capacity utilization also in line, at 77.4% frm 77.3% in August. No initial reaction to the reports.
Europe will continue to draw attention this week, it may not be obvious but under the radar and other driving events Europe is still unsettled. Last week markets were enthused on comments that the EU has com up with a plan that includes banks taking huge hits. Over the weekend the has been some push-back from Europe's banks. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French President Nicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency. In the end the situation is still unresolved and is unlikely to be resolved by Oct 23, the so-called date to have it all worked out. The significance is that as long as there is no actual resolution the US interest rate markets and the US equity markets will continue with their volatility.
At 9:30 the DJIA opened -50, the 10 yr +9/32 at 2.22% -3 bps; mortgage prices at 9:30 +4/32 (.12 bp).
This Week's Economic Calendar:
Today;
8:30 am NY Empire State index -8.48 frm -8.82
9:15 am Sept Capacity Utilization 77.4% frm 77.3%
Sept industrial production +0.2%
Tuesday;
8:30 am Sept PPI (+0.2%, ex food and energy +0.1%)
10:00 am Oct NAHB housing mkt index (14, unchanged from Sept)
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Sept CPI (+0.3%, ex food and energy +0.2%)
Sept housing starts and permits( starts +4.0%, permits -1.5%)
2:00 pm Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (unch at 404K)
10:00 am Sept existing home sales (-1.8%)
Oct Philly Feed business index (-9.6 frm -17.5)
Sept leading economic indicators (+0.3%)
Treasury 10-year notes better, pushing yields down from the highest level in seven weeks, as concern Europe may take longer to contain sovereign debt turmoil boosted demand for the safest assets. We still believe the 10 yr note yield won't increase past 2.30%; the high in the recent increase has been 2.27%. With continued concerns over how, or if, Europe can solve its debt issues US markets will continue to trade in swings on each comment out of the region. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
Although there is no way Europe can meet the Oct 23rd target that had been thought, markets still believe some kind of resolution, foreign investors in US bond markets are selling on that belief. The Federal Reserve reported its holdings of U.S. government debt on behalf of central bankers and institutional investors outside America has plunged $76.5B in the last seven weeks, the most since August 2007. At the same time, bond mutual funds are adding Treasuries, banks have increased their holdings 45% in the past five years and the Fed has added $656B to its balance sheet this year.
Technically the 10 yr note and MBSs are bearish at the moment.
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, October 17, 2011
Treasuries and MBS markets opened flat early this morning but got some support at 9:00 as stock indexes softened a little. Helping the bond market some this morning, the Oct NY Empire State manufacturing index expected -4.4 frm -8.82% in Sept was -8.48; the sub components were a little better but still very weak. At 9:15 Sept industrial production reported +0.2% right on the forecasts. Sept capacity utilization also in line, at 77.4% frm 77.3% in August. No initial reaction to the reports.
Europe will continue to draw attention this week, it may not be obvious but under the radar and other driving events Europe is still unsettled. Last week markets were enthused on comments that the EU has com up with a plan that includes banks taking huge hits. Over the weekend the has been some push-back from Europe's banks. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French President Nicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency. In the end the situation is still unresolved and is unlikely to be resolved by Oct 23, the so-called date to have it all worked out. The significance is that as long as there is no actual resolution the US interest rate markets and the US equity markets will continue with their volatility.
At 9:30 the DJIA opened -50, the 10 yr +9/32 at 2.22% -3 bps; mortgage prices at 9:30 +4/32 (.12 bp).
This Week's Economic Calendar:
Today;
8:30 am NY Empire State index -8.48 frm -8.82
9:15 am Sept Capacity Utilization 77.4% frm 77.3%
Sept industrial production +0.2%
Tuesday;
8:30 am Sept PPI (+0.2%, ex food and energy +0.1%)
10:00 am Oct NAHB housing mkt index (14, unchanged from Sept)
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Sept CPI (+0.3%, ex food and energy +0.2%)
Sept housing starts and permits( starts +4.0%, permits -1.5%)
2:00 pm Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (unch at 404K)
10:00 am Sept existing home sales (-1.8%)
Oct Philly Feed business index (-9.6 frm -17.5)
Sept leading economic indicators (+0.3%)
Treasury 10-year notes better, pushing yields down from the highest level in seven weeks, as concern Europe may take longer to contain sovereign debt turmoil boosted demand for the safest assets. We still believe the 10 yr note yield won't increase past 2.30%; the high in the recent increase has been 2.27%. With continued concerns over how, or if, Europe can solve its debt issues US markets will continue to trade in swings on each comment out of the region. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
Although there is no way Europe can meet the Oct 23rd target that had been thought, markets still believe some kind of resolution, foreign investors in US bond markets are selling on that belief. The Federal Reserve reported its holdings of U.S. government debt on behalf of central bankers and institutional investors outside America has plunged $76.5B in the last seven weeks, the most since August 2007. At the same time, bond mutual funds are adding Treasuries, banks have increased their holdings 45% in the past five years and the Fed has added $656B to its balance sheet this year.
Technically the 10 yr note and MBSs are bearish at the moment.
Mortgage Market
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Monday, October 17, 2011
Treasuries and MBS markets opened flat early this morning but got some support at 9:00 as stock indexes softened a little. Helping the bond market some this morning, the Oct NY Empire State manufacturing index expected -4.4 frm -8.82% in Sept was -8.48; the sub components were a little better but still very weak. At 9:15 Sept industrial production reported +0.2% right on the forecasts. Sept capacity utilization also in line, at 77.4% frm 77.3% in August. No initial reaction to the reports.
Europe will continue to draw attention this week, it may not be obvious but under the radar and other driving events Europe is still unsettled. Last week markets were enthused on comments that the EU has com up with a plan that includes banks taking huge hits. Over the weekend the has been some push-back from Europe's banks. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French President Nicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency. In the end the situation is still unresolved and is unlikely to be resolved by Oct 23, the so-called date to have it all worked out. The significance is that as long as there is no actual resolution the US interest rate markets and the US equity markets will continue with their volatility.
At 9:30 the DJIA opened -50, the 10 yr +9/32 at 2.22% -3 bps; mortgage prices at 9:30 +4/32 (.12 bp).
This Week's Economic Calendar:
Today;
8:30 am NY Empire State index -8.48 frm -8.82
9:15 am Sept Capacity Utilization 77.4% frm 77.3%
Sept industrial production +0.2%
Tuesday;
8:30 am Sept PPI (+0.2%, ex food and energy +0.1%)
10:00 am Oct NAHB housing mkt index (14, unchanged from Sept)
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Sept CPI (+0.3%, ex food and energy +0.2%)
Sept housing starts and permits( starts +4.0%, permits -1.5%)
2:00 pm Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (unch at 404K)
10:00 am Sept existing home sales (-1.8%)
Oct Philly Feed business index (-9.6 frm -17.5)
Sept leading economic indicators (+0.3%)
Treasury 10-year notes better, pushing yields down from the highest level in seven weeks, as concern Europe may take longer to contain sovereign debt turmoil boosted demand for the safest assets. We still believe the 10 yr note yield won't increase past 2.30%; the high in the recent increase has been 2.27%. With continued concerns over how, or if, Europe can solve its debt issues US markets will continue to trade in swings on each comment out of the region. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
Although there is no way Europe can meet the Oct 23rd target that had been thought, markets still believe some kind of resolution, foreign investors in US bond markets are selling on that belief. The Federal Reserve reported its holdings of U.S. government debt on behalf of central bankers and institutional investors outside America has plunged $76.5B in the last seven weeks, the most since August 2007. At the same time, bond mutual funds are adding Treasuries, banks have increased their holdings 45% in the past five years and the Fed has added $656B to its balance sheet this year.
Technically the 10 yr note and MBSs are bearish at the moment.
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, October 17, 2011
Treasuries and MBS markets opened flat early this morning but got some support at 9:00 as stock indexes softened a little. Helping the bond market some this morning, the Oct NY Empire State manufacturing index expected -4.4 frm -8.82% in Sept was -8.48; the sub components were a little better but still very weak. At 9:15 Sept industrial production reported +0.2% right on the forecasts. Sept capacity utilization also in line, at 77.4% frm 77.3% in August. No initial reaction to the reports.
Europe will continue to draw attention this week, it may not be obvious but under the radar and other driving events Europe is still unsettled. Last week markets were enthused on comments that the EU has com up with a plan that includes banks taking huge hits. Over the weekend the has been some push-back from Europe's banks. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French President Nicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency. In the end the situation is still unresolved and is unlikely to be resolved by Oct 23, the so-called date to have it all worked out. The significance is that as long as there is no actual resolution the US interest rate markets and the US equity markets will continue with their volatility.
At 9:30 the DJIA opened -50, the 10 yr +9/32 at 2.22% -3 bps; mortgage prices at 9:30 +4/32 (.12 bp).
This Week's Economic Calendar:
Today;
8:30 am NY Empire State index -8.48 frm -8.82
9:15 am Sept Capacity Utilization 77.4% frm 77.3%
Sept industrial production +0.2%
Tuesday;
8:30 am Sept PPI (+0.2%, ex food and energy +0.1%)
10:00 am Oct NAHB housing mkt index (14, unchanged from Sept)
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Sept CPI (+0.3%, ex food and energy +0.2%)
Sept housing starts and permits( starts +4.0%, permits -1.5%)
2:00 pm Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (unch at 404K)
10:00 am Sept existing home sales (-1.8%)
Oct Philly Feed business index (-9.6 frm -17.5)
Sept leading economic indicators (+0.3%)
Treasury 10-year notes better, pushing yields down from the highest level in seven weeks, as concern Europe may take longer to contain sovereign debt turmoil boosted demand for the safest assets. We still believe the 10 yr note yield won't increase past 2.30%; the high in the recent increase has been 2.27%. With continued concerns over how, or if, Europe can solve its debt issues US markets will continue to trade in swings on each comment out of the region. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
Although there is no way Europe can meet the Oct 23rd target that had been thought, markets still believe some kind of resolution, foreign investors in US bond markets are selling on that belief. The Federal Reserve reported its holdings of U.S. government debt on behalf of central bankers and institutional investors outside America has plunged $76.5B in the last seven weeks, the most since August 2007. At the same time, bond mutual funds are adding Treasuries, banks have increased their holdings 45% in the past five years and the Fed has added $656B to its balance sheet this year.
Technically the 10 yr note and MBSs are bearish at the moment.
Sunday, October 16, 2011
Thursday, October 13, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 13, 2011
After seven days of decline in bond and mortgage prices, this morning some support. The early trade this morning had the stock indexes a little weaker, also after seven days of improvement. Yesterday the 10 yr note came very close to our expected target at 2.30% when it hit 2.27% on reaction to the poor 10 yr note auction; the 10 closed yesterday at 2.21%. Still technically bearish but possible to see some bounce as long as equity markets also slip back a little.
Weekly jobless claims were -1K to 404K, expectations were for an increase to 410K; continuing claims -55K to 3.67 mil. There was no market reaction on the report at 8:30. Also at 8:30 the August trade deficit hit at -$45.6B at a four-month low as exports held close to an all-time high.
Nothing new of substance out of Europe this morning, just more talk from the ECB. Europe continues to hold the global economic recovery in its claws and is dragging every economy lower. The inability to come up with a plan is getting very old; 17 countries and large banks jockeying to avoid defaults and losses. It isn't possible though the keep on tilting at windmills. Policy makers earlier this month pushed back a debt-crisis summit to Oct. 23, as leaders are try to solve the crisis. European Central Bank President Jean-Claude Trichet said it’s now up to governments to solve Europe’s debt crisis as leaders get ready for a summit in Brussels in 10 days.
At 9:30 the DJIA opened -80; the 10 yr note +11/32 at 2.17% -4 bp and mortgage prices at 9:30 +7/32 (.22 bp) on 30s and +4/32 (.12 bp) on 15s.
Besides trading on each click on stock indexes the bond and mortgage markets will have to contend with this afternoon's $13B 30 yr bond auction. Yesterday the 10 yr auction didn't generate as much demand as expected.
So far this morning we are getting the bounce we were looking for. The 10 yr at 10:00 at 2.14% -7 bp and mortgage prices at 10:00 +12/32 (.37 bp). As long as there is weakness in equity markets as is the case so far, the bond and mortgage markets should hold gains today. That said, the stock market has built a had of stem recently with improved forecasts by most economists for Q3 and Q4 growth. Technically the bond and mortgage markets remain bearish in the near term, any improvements should be used to get business done. To change the outlook the 10 yr note would have to fall back to 2.04% and lower, until that occurs treat rallies as counter trend moves.
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, October 13, 2011
After seven days of decline in bond and mortgage prices, this morning some support. The early trade this morning had the stock indexes a little weaker, also after seven days of improvement. Yesterday the 10 yr note came very close to our expected target at 2.30% when it hit 2.27% on reaction to the poor 10 yr note auction; the 10 closed yesterday at 2.21%. Still technically bearish but possible to see some bounce as long as equity markets also slip back a little.
Weekly jobless claims were -1K to 404K, expectations were for an increase to 410K; continuing claims -55K to 3.67 mil. There was no market reaction on the report at 8:30. Also at 8:30 the August trade deficit hit at -$45.6B at a four-month low as exports held close to an all-time high.
Nothing new of substance out of Europe this morning, just more talk from the ECB. Europe continues to hold the global economic recovery in its claws and is dragging every economy lower. The inability to come up with a plan is getting very old; 17 countries and large banks jockeying to avoid defaults and losses. It isn't possible though the keep on tilting at windmills. Policy makers earlier this month pushed back a debt-crisis summit to Oct. 23, as leaders are try to solve the crisis. European Central Bank President Jean-Claude Trichet said it’s now up to governments to solve Europe’s debt crisis as leaders get ready for a summit in Brussels in 10 days.
At 9:30 the DJIA opened -80; the 10 yr note +11/32 at 2.17% -4 bp and mortgage prices at 9:30 +7/32 (.22 bp) on 30s and +4/32 (.12 bp) on 15s.
Besides trading on each click on stock indexes the bond and mortgage markets will have to contend with this afternoon's $13B 30 yr bond auction. Yesterday the 10 yr auction didn't generate as much demand as expected.
So far this morning we are getting the bounce we were looking for. The 10 yr at 10:00 at 2.14% -7 bp and mortgage prices at 10:00 +12/32 (.37 bp). As long as there is weakness in equity markets as is the case so far, the bond and mortgage markets should hold gains today. That said, the stock market has built a had of stem recently with improved forecasts by most economists for Q3 and Q4 growth. Technically the bond and mortgage markets remain bearish in the near term, any improvements should be used to get business done. To change the outlook the 10 yr note would have to fall back to 2.04% and lower, until that occurs treat rallies as counter trend moves.
Wednesday, October 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.
Wednesday, October 12, 2011
Interest rates continue to increase this morning; the 10 yr note yield at 2.22% at 9:00 and in our opinion is headed to support at 2.30%. Technically the rate markets have broken down and are now bearish; a double bottom on the 10 yield chart, breaking above its 20 and 40 day averages, and the momentum oscillators now bearish. The MBS market also bearish but holding a little better than treasuries as safety trades are lifted with increased optimism that Europe will actually come up with a plan that will keep Greece from defaulting for the moment. Also putting pressure on US interest rates, the equity markets are continuing to rally on Europe's improved outlook.
Little Slovakia rejected the vote on the plan to increase funding for the European Financial Stability Facility. The no vote however isn't indicative that the country won't go along, it was a negative vote based on internal politics amid a dispute over the future of Prime Minister Iveta Radicova. Global stock and currency markets rebounded from earlier declines on optimism the EFSF changes will be approved by Parliament in the country of 5.4 million people. Slovak approval of enhanced powers of the EFSF, the temporary bailout fund, is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries in the region. Markets believe in the end the country will vote along with the other 16 countries.
At 9:30 the DJIA opened higher, +67, the 10 yr note -17/32 at 2.22% and mortgage prices -8/32 (.25 bp).
Earlier this morning the weekly MBA mortgage applications for last week were slightly better, but not much. Hard to turn the ship around in the minds of consumers and most lenders that the interest rate markets may have hit their lows for quite sometime. The applications should have been better as rates continue to climb. The composite index +1.3%; the purchase index up 1.1% in the October 7 week. The gain in this index is a positive indication for underlying home sales. The refinance index was up 1.3%.Interest rates, at 4.25% for conforming 30-year loans under $417,500 and at 4.59% for jumbo loans over $417,500. Purchase demand is also getting a boost from continued discounting in home prices, indicated in this report by a fall in the average loan size to $210,863 in September vs $212,736 in August.
At 1:00 this afternoon Treasury will auction $21B of 10 yr notes, with 10 yr rate up 33 bp since last Wednesday the auction should see good demand.
At 2:00 the minutes from the Sept 21st FOMC meeting will be released; should get attention as in the meeting the FOMC decided to launch Operation Twist in an effort to keep long term rates low. So far ever since the plan that the Fed would sell short term treasuries while simultaneously buying longer dated notes and bonds and buy MBSs to keep mortgage rates and treasury rates from increasing has failed. On the 21st of Sept the 10 yr yield stood at 1.86%, it fell to 1.67% the next day then ran up to 2.04%, then back again to 1.72%; now at 2.22% and headed to 2.30%. Mortgage rates up 35 basis points in the same time frame.
Although the rate markets are bearish now, we expect some improvement simply because rates have increased for six sessions with no pause. Use any improvement now to get deals done. As has been the case these days, any bounce is dependent on how equity markets trade. Traders are feasting on the trade, buy bonds on weakness in equities, sell them when the key indexes are rallying. This morning the stock market is better but looks soft so far and is subject to some declines, the same rationale why we look for a bounce in mortgage prices.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, October 12, 2011
Interest rates continue to increase this morning; the 10 yr note yield at 2.22% at 9:00 and in our opinion is headed to support at 2.30%. Technically the rate markets have broken down and are now bearish; a double bottom on the 10 yield chart, breaking above its 20 and 40 day averages, and the momentum oscillators now bearish. The MBS market also bearish but holding a little better than treasuries as safety trades are lifted with increased optimism that Europe will actually come up with a plan that will keep Greece from defaulting for the moment. Also putting pressure on US interest rates, the equity markets are continuing to rally on Europe's improved outlook.
Little Slovakia rejected the vote on the plan to increase funding for the European Financial Stability Facility. The no vote however isn't indicative that the country won't go along, it was a negative vote based on internal politics amid a dispute over the future of Prime Minister Iveta Radicova. Global stock and currency markets rebounded from earlier declines on optimism the EFSF changes will be approved by Parliament in the country of 5.4 million people. Slovak approval of enhanced powers of the EFSF, the temporary bailout fund, is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries in the region. Markets believe in the end the country will vote along with the other 16 countries.
At 9:30 the DJIA opened higher, +67, the 10 yr note -17/32 at 2.22% and mortgage prices -8/32 (.25 bp).
Earlier this morning the weekly MBA mortgage applications for last week were slightly better, but not much. Hard to turn the ship around in the minds of consumers and most lenders that the interest rate markets may have hit their lows for quite sometime. The applications should have been better as rates continue to climb. The composite index +1.3%; the purchase index up 1.1% in the October 7 week. The gain in this index is a positive indication for underlying home sales. The refinance index was up 1.3%.Interest rates, at 4.25% for conforming 30-year loans under $417,500 and at 4.59% for jumbo loans over $417,500. Purchase demand is also getting a boost from continued discounting in home prices, indicated in this report by a fall in the average loan size to $210,863 in September vs $212,736 in August.
At 1:00 this afternoon Treasury will auction $21B of 10 yr notes, with 10 yr rate up 33 bp since last Wednesday the auction should see good demand.
At 2:00 the minutes from the Sept 21st FOMC meeting will be released; should get attention as in the meeting the FOMC decided to launch Operation Twist in an effort to keep long term rates low. So far ever since the plan that the Fed would sell short term treasuries while simultaneously buying longer dated notes and bonds and buy MBSs to keep mortgage rates and treasury rates from increasing has failed. On the 21st of Sept the 10 yr yield stood at 1.86%, it fell to 1.67% the next day then ran up to 2.04%, then back again to 1.72%; now at 2.22% and headed to 2.30%. Mortgage rates up 35 basis points in the same time frame.
Although the rate markets are bearish now, we expect some improvement simply because rates have increased for six sessions with no pause. Use any improvement now to get deals done. As has been the case these days, any bounce is dependent on how equity markets trade. Traders are feasting on the trade, buy bonds on weakness in equities, sell them when the key indexes are rallying. This morning the stock market is better but looks soft so far and is subject to some declines, the same rationale why we look for a bounce in mortgage prices.
Tuesday, October 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.
Tuesday, October 11, 2011
Yesterday the Treasury market and banks were closed for Columbus Day while the rest of the markets were open; a huge rally in stocks marked the day, this morning in pre-market trade the key stock indexes were a little lower. Reuters posted mortgage prices yesterday afternoon down 8/32 (.25 bp) which was probably right given the stock market rally and interest rates in Germany were higher.
Yesterday's moves in stocks was driven by news over the weekend that Germany and France came to an agreement to re-capitalize banks in the region after having to take much bigger losses on Greece debt. European Union and International Monetary Fund officials indicated Greece will get an 8 billion- euro ($11 billion) loan next month under a 110 billion-euro bailout, as European leaders move to reopen talks on a new package that may mean deeper writedowns on Greek debt. The debt crisis in Europe has reached a “systemic dimension,” European Central Bank President Jean-Claude Trichet said today. He spoke to European lawmakers in Brussels as Slovakia, the only country in the region that hasn’t ratified the retooled bailout fund, prepared to vote on the package.
There are no economic reports today. Treasury will begin three days of auctions to borrow a total of $66B; at 1:00 today $32B of 3 yr notes will be auctioned. Wednesday $21B of 10 yr notes and Thursday $13B of 30 yr bonds. Recent auctions have met with very good demand, with the recent spike higher in rates the auctions are expected to see strong demand.
The DJIA rallied 330 points yesterday, it was all good except the volume was thin, likely due to Columbus Day holiday. This morning the indexes opened weaker, the DJIA -54. At 9:30 the 10 yr note yield at 2.14% well above its key 20 and 40 day averages; the averages haven't been penetrated since early July. Not a lot of talk about the breakdown of the technicals but in our view we deem it substantial. The bond and mortgage markets are now bearish; the 10 yr note twice in a matter of two weeks fell to the 1.70% area and each time there was no support for the 10 trading below 2.00%.
With Europe's mess seen as being close to a resolution and increased estimates being touted for GDP growth in Q3 and Q4 the rate markets will not likely improve unless or until those fundamentals change. It isn't that far a stretch to assume Europe will fumble again but at the moment the need for safety into US treasuries has lessened substantially. That said, we don't see rates increasing past 2.30% for the 10 yr note, 16 basis points higher than where it trades this morning. Under everything these days there is a lack of solid conviction on anything, with uncertainty dominate volatility is likely to remain high.
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, October 11, 2011
Yesterday the Treasury market and banks were closed for Columbus Day while the rest of the markets were open; a huge rally in stocks marked the day, this morning in pre-market trade the key stock indexes were a little lower. Reuters posted mortgage prices yesterday afternoon down 8/32 (.25 bp) which was probably right given the stock market rally and interest rates in Germany were higher.
Yesterday's moves in stocks was driven by news over the weekend that Germany and France came to an agreement to re-capitalize banks in the region after having to take much bigger losses on Greece debt. European Union and International Monetary Fund officials indicated Greece will get an 8 billion- euro ($11 billion) loan next month under a 110 billion-euro bailout, as European leaders move to reopen talks on a new package that may mean deeper writedowns on Greek debt. The debt crisis in Europe has reached a “systemic dimension,” European Central Bank President Jean-Claude Trichet said today. He spoke to European lawmakers in Brussels as Slovakia, the only country in the region that hasn’t ratified the retooled bailout fund, prepared to vote on the package.
There are no economic reports today. Treasury will begin three days of auctions to borrow a total of $66B; at 1:00 today $32B of 3 yr notes will be auctioned. Wednesday $21B of 10 yr notes and Thursday $13B of 30 yr bonds. Recent auctions have met with very good demand, with the recent spike higher in rates the auctions are expected to see strong demand.
The DJIA rallied 330 points yesterday, it was all good except the volume was thin, likely due to Columbus Day holiday. This morning the indexes opened weaker, the DJIA -54. At 9:30 the 10 yr note yield at 2.14% well above its key 20 and 40 day averages; the averages haven't been penetrated since early July. Not a lot of talk about the breakdown of the technicals but in our view we deem it substantial. The bond and mortgage markets are now bearish; the 10 yr note twice in a matter of two weeks fell to the 1.70% area and each time there was no support for the 10 trading below 2.00%.
With Europe's mess seen as being close to a resolution and increased estimates being touted for GDP growth in Q3 and Q4 the rate markets will not likely improve unless or until those fundamentals change. It isn't that far a stretch to assume Europe will fumble again but at the moment the need for safety into US treasuries has lessened substantially. That said, we don't see rates increasing past 2.30% for the 10 yr note, 16 basis points higher than where it trades this morning. Under everything these days there is a lack of solid conviction on anything, with uncertainty dominate volatility is likely to remain high.
Monday, October 10, 2011
Sunday, October 9, 2011
Friday, October 7, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, October 07, 2011
The bond and mortgage markets prior to 8:30 were already weak and breaking key near term technical levels. The Sept employment report added to the selling with much better data than was expected. Non-farm jobs increased 103K, 40K more than what was expected, non-farm private jobs +137K, 50K more than expected. Adding to the improvement, August and July jobs were revised higher by a total of 99K more jobs than originally reported. The unemployment rate was unchanged at 9.1%. One area of weakness was in factory jobs; factory payrolls declined 13,000 in September, the biggest decrease since August 2010, after a 4,000 decline in August. Average hourly earnings rose 0.2% to $23.12. The average work week for all workers climbed six minutes to 34.3 hours.
The initial knee jerk reaction sent the 10 yr yield to 2.11% +12 bp frm yesterday's close, by 9:00 though the 10 settled at 2.08% with mortgage prices at 9:00 very volatile swinging in .12 bp moves click to click, down 14/32 (.44 bp).
In Europe EU leaders are trying to devise a comprehensive plan to rescue the region’s banks before a Group of 20 summit in November. There continues to be progress but at a speed that makes a snail a racer. The ECB also reintroduced yearlong loans, giving banks unlimited access to cash through January 2013. Lenders in the region may need as much as 200 billion euros ($269B) of additional capital, according to the International Monetary Fund. Global criticism is mounting and driving increased pessimism that a default in Greece will drag global economies into another much worse problem than in 2008 when Lehman failed. EU leaders are looking at the November G-20 summit in Cannes as a deadline to show they are in control of events.
By 9:30 rate markets had settled down from the volatile reaction to the better employment report. The DJIA opened +68, the 10 at 2.07% +8 bp and mortgage prices -10/32 (.31 bp). Not much gain in the stock indexes, the DJIA had already moved in anticipation of a better jobs report with the index up 314 points in the last two days.
At 10:00 August wholesale inventories. With employment this morning not much interest in the report. Inventories up +0.4% in line with expectations, sales were up 1.0%, sales in July revised to +0.3% frm unchanged; 1.16 months supply unchanged from July.
Later this afternoon at 3:00 August consumer credit is expected +$7B. We focus heavily on the data as a good measurement of consumer attitudes; borrowing is significant in understanding how consumers are actually acting versus much of the other consumer measurements. Revolving credit (credit cards) is what we want to see.
Technically; as we have noted previously, the 10 yr note has to hold at 2.04% on a closing basis in order to keep the bullish bias. This morning the 10 yr is at 2.06% at 10:00, earlier on the knee jerk it hit 2.11%. A close today over 2.04% on the 10 will close above its 20 and 40 day averages, there have been only seven sessions since early April the 10 has traded above those averages. The MBS markets are also testing the same key averages. Momentum oscillators are also showing increased weakness. Unless the bond market can find support at these levels the outlook for rates will become increasingly negative. Twice now in the last two weeks the 10 has fallen to the 1.70% area, both times markets rejected that level and rates spiked back to levels we have this morning, a close over 2.04% on the note will set technicians looking at a bearish double bottom for US 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, October 07, 2011
The bond and mortgage markets prior to 8:30 were already weak and breaking key near term technical levels. The Sept employment report added to the selling with much better data than was expected. Non-farm jobs increased 103K, 40K more than what was expected, non-farm private jobs +137K, 50K more than expected. Adding to the improvement, August and July jobs were revised higher by a total of 99K more jobs than originally reported. The unemployment rate was unchanged at 9.1%. One area of weakness was in factory jobs; factory payrolls declined 13,000 in September, the biggest decrease since August 2010, after a 4,000 decline in August. Average hourly earnings rose 0.2% to $23.12. The average work week for all workers climbed six minutes to 34.3 hours.
The initial knee jerk reaction sent the 10 yr yield to 2.11% +12 bp frm yesterday's close, by 9:00 though the 10 settled at 2.08% with mortgage prices at 9:00 very volatile swinging in .12 bp moves click to click, down 14/32 (.44 bp).
In Europe EU leaders are trying to devise a comprehensive plan to rescue the region’s banks before a Group of 20 summit in November. There continues to be progress but at a speed that makes a snail a racer. The ECB also reintroduced yearlong loans, giving banks unlimited access to cash through January 2013. Lenders in the region may need as much as 200 billion euros ($269B) of additional capital, according to the International Monetary Fund. Global criticism is mounting and driving increased pessimism that a default in Greece will drag global economies into another much worse problem than in 2008 when Lehman failed. EU leaders are looking at the November G-20 summit in Cannes as a deadline to show they are in control of events.
By 9:30 rate markets had settled down from the volatile reaction to the better employment report. The DJIA opened +68, the 10 at 2.07% +8 bp and mortgage prices -10/32 (.31 bp). Not much gain in the stock indexes, the DJIA had already moved in anticipation of a better jobs report with the index up 314 points in the last two days.
At 10:00 August wholesale inventories. With employment this morning not much interest in the report. Inventories up +0.4% in line with expectations, sales were up 1.0%, sales in July revised to +0.3% frm unchanged; 1.16 months supply unchanged from July.
Later this afternoon at 3:00 August consumer credit is expected +$7B. We focus heavily on the data as a good measurement of consumer attitudes; borrowing is significant in understanding how consumers are actually acting versus much of the other consumer measurements. Revolving credit (credit cards) is what we want to see.
Technically; as we have noted previously, the 10 yr note has to hold at 2.04% on a closing basis in order to keep the bullish bias. This morning the 10 yr is at 2.06% at 10:00, earlier on the knee jerk it hit 2.11%. A close today over 2.04% on the 10 will close above its 20 and 40 day averages, there have been only seven sessions since early April the 10 has traded above those averages. The MBS markets are also testing the same key averages. Momentum oscillators are also showing increased weakness. Unless the bond market can find support at these levels the outlook for rates will become increasingly negative. Twice now in the last two weeks the 10 has fallen to the 1.70% area, both times markets rejected that level and rates spiked back to levels we have this morning, a close over 2.04% on the note will set technicians looking at a bearish double bottom for US rates.
Thursday, October 6, 2011
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 06, 2011
Another weak start this morning for the rate markets. Treasuries and MBSs fell for a third day as speculation European leaders are stepping up efforts to resolve the debt crisis reduced demand for the safest assets. The risk trade is being lifted again after Germany' Merkel said yesterday she agrees that Europe's banks need to re-capitalized to take the hits on sovereign debt losses that will have to taken to save Greece and other faltering countries in the EU. The cost of insuring against default on European corporate debt fell on speculation policy makers are working on plans to inject more capital into lenders, credit-default swaps showed this morning.
For a year now it has been on again, off again on the debt issues in Greece, Portugal, Ireland, Spain and Italy. It has been ping pong as news one day positive, the next day not so much. Is this time going to different? Markets at the moment believe it will be as for the first time Germany is outwardly agreeing to support the regions banks that will have to take a huge haircut on the sovereign debt they hold from those countries facing bankruptcy. We have been here before a few times over the past six months, now however Europe is at the end of the road; either a plan is resolved now or Europe will drag the rest of the world back into recession.
The ECB was expected to cut rates this morning but left rates unchanged. German 10-year bonds erased a decline, leaving the yield little changed at 1.83%. The rate earlier rose seven basis points to 1.91%.
The only data this morning, weekly jobless claims, increased 6K to 401K. Last week's claims were revised from 3991K to 395K. Claims have been about 400K for six weeks, analysts like to think 400K is a key pivotal level in measuring employment changes. Continuing claims declined to 3.70 mil frm 3.752 mil.
Later this morning Treasury announce next week's 2, 5 and 7 yr auctions; likely unchanged from last month at a total of $99B.
The rest of the day will be preparing for tomorrow's employment report. Increasing numbers of analysts are speculating the report will show more job creation than what has been estimated (+65K non-farm jobs, +83K non-farm private jobs). Job growth at those levels is meaningless in the larger view, but with the bearish outlook so dominant any improvement is seen as positive.
The DJIA at 9:30 opened -15, the 10 yr note -12/32 to 1.93% and mortgage prices -4/32 (.12 BP).
Technically, the 10 yr is acting the same way it did when on 21st of Sept the Fed announced Operation Twist; the 10 yr rallied to 1.67% then in three days was back over 2.00%. Since then the 10 five days to drop back to 1.72% on Tuesday, from there we are back to 1.93% at 9:30 this morning (1.96% at 8:30). Huge swings in short time frames; if selling takes the 10 yr over 2.04% it will change the near term outlook to a more negative outlook, a double bottom for the 10 yr that would send mortgage rates a little higher. The Fed's increased purchases of long dated treasuries and increased MBS purchases should keep rates from significant increases, a close over 2.04% would project a move to 2.30% and mortgage rates up 25 basis points. Tomorrow's employment report and improving outlook in Europe's debt crisis will tell the tale.
Steve Jobs; 1955-2011. May he rest in peace. Probably the most important influence on the computer industry; he revolutionized how we live.
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, October 06, 2011
Another weak start this morning for the rate markets. Treasuries and MBSs fell for a third day as speculation European leaders are stepping up efforts to resolve the debt crisis reduced demand for the safest assets. The risk trade is being lifted again after Germany' Merkel said yesterday she agrees that Europe's banks need to re-capitalized to take the hits on sovereign debt losses that will have to taken to save Greece and other faltering countries in the EU. The cost of insuring against default on European corporate debt fell on speculation policy makers are working on plans to inject more capital into lenders, credit-default swaps showed this morning.
For a year now it has been on again, off again on the debt issues in Greece, Portugal, Ireland, Spain and Italy. It has been ping pong as news one day positive, the next day not so much. Is this time going to different? Markets at the moment believe it will be as for the first time Germany is outwardly agreeing to support the regions banks that will have to take a huge haircut on the sovereign debt they hold from those countries facing bankruptcy. We have been here before a few times over the past six months, now however Europe is at the end of the road; either a plan is resolved now or Europe will drag the rest of the world back into recession.
The ECB was expected to cut rates this morning but left rates unchanged. German 10-year bonds erased a decline, leaving the yield little changed at 1.83%. The rate earlier rose seven basis points to 1.91%.
The only data this morning, weekly jobless claims, increased 6K to 401K. Last week's claims were revised from 3991K to 395K. Claims have been about 400K for six weeks, analysts like to think 400K is a key pivotal level in measuring employment changes. Continuing claims declined to 3.70 mil frm 3.752 mil.
Later this morning Treasury announce next week's 2, 5 and 7 yr auctions; likely unchanged from last month at a total of $99B.
The rest of the day will be preparing for tomorrow's employment report. Increasing numbers of analysts are speculating the report will show more job creation than what has been estimated (+65K non-farm jobs, +83K non-farm private jobs). Job growth at those levels is meaningless in the larger view, but with the bearish outlook so dominant any improvement is seen as positive.
The DJIA at 9:30 opened -15, the 10 yr note -12/32 to 1.93% and mortgage prices -4/32 (.12 BP).
Technically, the 10 yr is acting the same way it did when on 21st of Sept the Fed announced Operation Twist; the 10 yr rallied to 1.67% then in three days was back over 2.00%. Since then the 10 five days to drop back to 1.72% on Tuesday, from there we are back to 1.93% at 9:30 this morning (1.96% at 8:30). Huge swings in short time frames; if selling takes the 10 yr over 2.04% it will change the near term outlook to a more negative outlook, a double bottom for the 10 yr that would send mortgage rates a little higher. The Fed's increased purchases of long dated treasuries and increased MBS purchases should keep rates from significant increases, a close over 2.04% would project a move to 2.30% and mortgage rates up 25 basis points. Tomorrow's employment report and improving outlook in Europe's debt crisis will tell the tale.
Steve Jobs; 1955-2011. May he rest in peace. Probably the most important influence on the computer industry; he revolutionized how we live.
Wednesday, October 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.
Wednesday, October 05, 2011
Mortgage markets opened a little weaker this morning on a better ADP Sept jobs report than was expected. ADP re;ported non-farm private jobs increased by 91K, the estimate was for an increase of about 60K to 75K. Treasuries and mortgages were lower in price prior to the 8:15 report but didn't fall more after the release. Stock indexes a little better at 9:00, however there was not much reaction on the data. At 9:00 the 10 yr note off 8/32 at 1.85% +3 bp, yesterday it dropped to 1.72% during the day but couldn't hold; mortgage prices yesterday ended -13/32 (.41 bp) on 30 yr conventionals. The intraday volatility yesterday was extreme, MBS prices swinging .15 bp at a time through most of the session.
Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in March, when it understated the gain in jobs by 29,000. The estimate was least accurate in June, when it overestimated the increase in employment by 100,000. Last month, ADP’s initial figures showed a 91,000 gain in company payrolls for August, while the Labor Department’s data showed an increase of 17,000 private payrolls. ADP data is interesting but its the BLS report Friday that is the so-called "official". Current estimates for Friday's report is an increase of 90K, earlier n the week the estimate was +83K. The unemployment rate in Sept is expected unchanged at 9.1%.
Earlier this morning the MBA mortgage applications declined last week. Purchase applications fell 0.8% in the September 30 week in a soft ending to a solid month. Mortgage rates, the lowest since the 1940s, are a positive for housing demand as they are for refinancing demand. The refinance index, though down 5.2% in the latest week, has been rising sharply. The report notes that many refinance borrowers are deleveraging by moving to 15-year terms with the maturity making up 27% of the week's refinancing volume for the highest share on record. The average 15-year rate is 3.49%, up three basis points in the week. Total applications were down 4.3%.
Nothing new from Europe on a plan to give Greece more money to avoid default, now instead of getting funds in Oct it looks like it may be in Nov as there is no consensus among the ECB, IMF and the EU. Greece didn't meet the austerity measures laid out in order to get another injection of money. Greece is the poster country in the Euro region for the other countries on the edge. Europe's banks are unwilling to take increased write-offs on Greece debt they hold, fearing it would be the first of four more huge write downs on debts of Italy, Spain, Portugal and Ireland. Moody's downgraded Italy's debt rating three levels to A2 and said it may lower those of other European countries with debt rankings below its top level. It cut the rating on concern Prime Minister Berlusconi’s government will struggle to reduce the region’s second-largest debt amid weak growth. Moody’s gave the lower rating a negative outlook.
At 9:30 the DJIA opened -25, the 10 yr note -11/32 to 1.85% +3 bp and mortgage prices down 5/32 (.15 bp).
At 10:00 the Sept ISM services sector index was expected at 52.9 frm 53.3 in August. As reported the overall index hit at 53.0; new orders component at 56.6 frm 52.8, employment at 48.7 frm 51.6 and prices pd at 61.9 frm 64.2. Employment fell to contraction, under 50 the level between expansion and contraction. The initial reaction turned stock indexes from lower to slightly higher, no change in the bond and mortgage markets from prior to the 10:00 report.
Treasuries and mortgages are hitting a wall; once again the 10 yr fell to 1.72% yesterday then moved to close at 1.82%; two weeks ago the 10 dropped to 1.67% then ran up to 2.03%. The same pattern is occurring again suggesting that the low rates may have been achieved for the moment. That said, technicals still are bullish for treasuries and MBS markets. Yesterday's very volatile action is reflective of what we have noted previously, that when the 10 is under 2.00% it sets up uncertainty and whether rates can move lower. We can expect high levels of intraday volatility to continue.
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, October 05, 2011
Mortgage markets opened a little weaker this morning on a better ADP Sept jobs report than was expected. ADP re;ported non-farm private jobs increased by 91K, the estimate was for an increase of about 60K to 75K. Treasuries and mortgages were lower in price prior to the 8:15 report but didn't fall more after the release. Stock indexes a little better at 9:00, however there was not much reaction on the data. At 9:00 the 10 yr note off 8/32 at 1.85% +3 bp, yesterday it dropped to 1.72% during the day but couldn't hold; mortgage prices yesterday ended -13/32 (.41 bp) on 30 yr conventionals. The intraday volatility yesterday was extreme, MBS prices swinging .15 bp at a time through most of the session.
Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in March, when it understated the gain in jobs by 29,000. The estimate was least accurate in June, when it overestimated the increase in employment by 100,000. Last month, ADP’s initial figures showed a 91,000 gain in company payrolls for August, while the Labor Department’s data showed an increase of 17,000 private payrolls. ADP data is interesting but its the BLS report Friday that is the so-called "official". Current estimates for Friday's report is an increase of 90K, earlier n the week the estimate was +83K. The unemployment rate in Sept is expected unchanged at 9.1%.
Earlier this morning the MBA mortgage applications declined last week. Purchase applications fell 0.8% in the September 30 week in a soft ending to a solid month. Mortgage rates, the lowest since the 1940s, are a positive for housing demand as they are for refinancing demand. The refinance index, though down 5.2% in the latest week, has been rising sharply. The report notes that many refinance borrowers are deleveraging by moving to 15-year terms with the maturity making up 27% of the week's refinancing volume for the highest share on record. The average 15-year rate is 3.49%, up three basis points in the week. Total applications were down 4.3%.
Nothing new from Europe on a plan to give Greece more money to avoid default, now instead of getting funds in Oct it looks like it may be in Nov as there is no consensus among the ECB, IMF and the EU. Greece didn't meet the austerity measures laid out in order to get another injection of money. Greece is the poster country in the Euro region for the other countries on the edge. Europe's banks are unwilling to take increased write-offs on Greece debt they hold, fearing it would be the first of four more huge write downs on debts of Italy, Spain, Portugal and Ireland. Moody's downgraded Italy's debt rating three levels to A2 and said it may lower those of other European countries with debt rankings below its top level. It cut the rating on concern Prime Minister Berlusconi’s government will struggle to reduce the region’s second-largest debt amid weak growth. Moody’s gave the lower rating a negative outlook.
At 9:30 the DJIA opened -25, the 10 yr note -11/32 to 1.85% +3 bp and mortgage prices down 5/32 (.15 bp).
At 10:00 the Sept ISM services sector index was expected at 52.9 frm 53.3 in August. As reported the overall index hit at 53.0; new orders component at 56.6 frm 52.8, employment at 48.7 frm 51.6 and prices pd at 61.9 frm 64.2. Employment fell to contraction, under 50 the level between expansion and contraction. The initial reaction turned stock indexes from lower to slightly higher, no change in the bond and mortgage markets from prior to the 10:00 report.
Treasuries and mortgages are hitting a wall; once again the 10 yr fell to 1.72% yesterday then moved to close at 1.82%; two weeks ago the 10 dropped to 1.67% then ran up to 2.03%. The same pattern is occurring again suggesting that the low rates may have been achieved for the moment. That said, technicals still are bullish for treasuries and MBS markets. Yesterday's very volatile action is reflective of what we have noted previously, that when the 10 is under 2.00% it sets up uncertainty and whether rates can move lower. We can expect high levels of intraday volatility to continue.
Tuesday, October 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.
Tuesday, October 04, 2011
Treasuries rallied big yesterday on news out of Europe that Greece failed the austerity tests that the EU and IMF had set out in order to get another dose of financial support to avoid default. European finance chiefs meeting yesterday considered “technical revisions” for a second Greek bailout. Europe’s financial leaders are fighting on multiple fronts, trying to extinguish the Greek crisis while insulating Italy and Spain and coming up with a formula for banks that the International Monetary Fund says face as much as 300 billion euros in credit risk.
The rally yesterday was huge and the mortgage markets went along but not nearly as strong as treasuries; the 10 yr yield dropped 14 basis points, its price up 49/32 while mortgage prices increased 11/32 (.34 bp). The stock market fell 258 on the DJIA.
This morning in early trading in stock indexes had the DJIA, NASDAQ and S&P all lower at 8:30 implying a weak opening at 9:30. Treasuries essentially unchanged from yesterday with mortgage prices down .06 bp at 8:30. At 9:30 the DJIA opened -100, the 10 yr note unchanged and mortgage prices -4/32 (.12 bp) frm yesterday's close.
At 10:00 Bernanke will begin testimony to the Joint Economic Committee on the US economy. Likely he will be questioned about Operation Twist and its impact on the economy and what the Fed has described as a significant risk of further decline. As is always the case when the head of the Fed testifies markets will listen closely. We would like the committee to ask Bernanke detailed questions about the European debt crisis and the impact it has had, and will have on the US economy and US banks. US bank stocks are being hammered recently, partly over Europe's banks fall even though there is no evidence US banks are involved directly. The fear is that if big banks in Europe and US banks have inter-related swaps and other relationships our banks will suffer if Europe doesn't fix the mess quickly. At times it appears Europe's leaders don't realize the negative global impact it is causing by its inability to solve the mess; 17 counties tied together by a common currency sounded great in 1999, now maybe not so good.
Goldman-Sachs out predicting Germany and France will fall back into recession.
At 10:00 August factory orders, the only data today, expected -0.2% was -0.2%, July revised to +2.1% frm +2.4% originally reported. No reaction.
Crude for November delivery declined as much as $2.16 to $75.45 a barrel in early electronic trading this morning, the lowest since Sept. 24, 2010. Supplies of crude are increasing with Libya back on line with more output than what had been expected, and weakening demand as the economic outlook is worsening.
The stock market in early activity is being hit hard so this morning, however there is not much improvement in the bond and mortgage markets after yesterday's huge rally. MBSs are lagging treasuries as the move to lower rates is safety buys as Greece teeters on default while European officials and the IMF cannot work out a deal acceptable to banks or the 17 countries. Traders waiting to hear from Bernanke as he begins testimony now (10:00 am). We have noted many times that when the 10 yr is trading below 2.00% as it is now, volatility will remain high; at 1.72% to move lower equities have to fall and Europe has to falter in efforts to avoid Greek default. The MBS market will follow treasuries but at this moment in time its all about safety, leaving the MBS markets behind somewhat.
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, October 04, 2011
Treasuries rallied big yesterday on news out of Europe that Greece failed the austerity tests that the EU and IMF had set out in order to get another dose of financial support to avoid default. European finance chiefs meeting yesterday considered “technical revisions” for a second Greek bailout. Europe’s financial leaders are fighting on multiple fronts, trying to extinguish the Greek crisis while insulating Italy and Spain and coming up with a formula for banks that the International Monetary Fund says face as much as 300 billion euros in credit risk.
The rally yesterday was huge and the mortgage markets went along but not nearly as strong as treasuries; the 10 yr yield dropped 14 basis points, its price up 49/32 while mortgage prices increased 11/32 (.34 bp). The stock market fell 258 on the DJIA.
This morning in early trading in stock indexes had the DJIA, NASDAQ and S&P all lower at 8:30 implying a weak opening at 9:30. Treasuries essentially unchanged from yesterday with mortgage prices down .06 bp at 8:30. At 9:30 the DJIA opened -100, the 10 yr note unchanged and mortgage prices -4/32 (.12 bp) frm yesterday's close.
At 10:00 Bernanke will begin testimony to the Joint Economic Committee on the US economy. Likely he will be questioned about Operation Twist and its impact on the economy and what the Fed has described as a significant risk of further decline. As is always the case when the head of the Fed testifies markets will listen closely. We would like the committee to ask Bernanke detailed questions about the European debt crisis and the impact it has had, and will have on the US economy and US banks. US bank stocks are being hammered recently, partly over Europe's banks fall even though there is no evidence US banks are involved directly. The fear is that if big banks in Europe and US banks have inter-related swaps and other relationships our banks will suffer if Europe doesn't fix the mess quickly. At times it appears Europe's leaders don't realize the negative global impact it is causing by its inability to solve the mess; 17 counties tied together by a common currency sounded great in 1999, now maybe not so good.
Goldman-Sachs out predicting Germany and France will fall back into recession.
At 10:00 August factory orders, the only data today, expected -0.2% was -0.2%, July revised to +2.1% frm +2.4% originally reported. No reaction.
Crude for November delivery declined as much as $2.16 to $75.45 a barrel in early electronic trading this morning, the lowest since Sept. 24, 2010. Supplies of crude are increasing with Libya back on line with more output than what had been expected, and weakening demand as the economic outlook is worsening.
The stock market in early activity is being hit hard so this morning, however there is not much improvement in the bond and mortgage markets after yesterday's huge rally. MBSs are lagging treasuries as the move to lower rates is safety buys as Greece teeters on default while European officials and the IMF cannot work out a deal acceptable to banks or the 17 countries. Traders waiting to hear from Bernanke as he begins testimony now (10:00 am). We have noted many times that when the 10 yr is trading below 2.00% as it is now, volatility will remain high; at 1.72% to move lower equities have to fall and Europe has to falter in efforts to avoid Greek default. The MBS market will follow treasuries but at this moment in time its all about safety, leaving the MBS markets behind somewhat.
Monday, October 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.
Monday, October 03, 2011
The bond and mortgage markets started nicely this morning with early trading in stock index futures were pointing to a weaker open at 9:30. Friday the bond market held its key supports then rallied as the stock market basis the DJIA dropped 240 points. Stock indexes still quite volatile and likely will remain that way for a long time as investors and traders try to make a buck with high frequency trading.
The economy is declining yet there are those that believe these are buying opportunities for that "in the long run" investments----most that espouse that view are Wall Street firms that make money on investor buying. Greece failed its austerity tests the the EU, IMF and the ECB demanded but the EU isn't ready to let Greece fail yet, only a matter of time though it will. Its time to cut the country loose and let it fail. For months global markets and economies have been focusing on Greece and what European leaders will do. Europe's banks don't want to take loses, unfortunately for them there isn't any choice in the end.
This week has a lot of economic releases but the key is Friday's employment report. Euro-area finance chiefs will meet today in Luxembourg to weigh the threat of a Greek default, grapple with how to shield banks from the fallout and consider a further boost to the rescue fund. A much-needed “liquidity backstop” for the region must come from governments because the European Central Bank’s mandate requires it to keep purchases of sovereign debt extremely limited.
At 9:30 the DJIA opened -30, NASDAQ -12, S&P -4; the 10 yr note +15/32 to 1.87% -5 bp, mortgage prices on 30s +13/32 (.41 bp).
At 10:00 this morning Sept ISM manufacturing index expected at 50.5 frm 50.6, increased to 51.6; new orders component unchanged at 49.6, prices pd at 56.0 frm 55.5 and employment at 53.8 frm 51.8. The initial reaction to the better data turned stock indexes from -89 on the DJIA to -25, the 10 yr note traded +198/32 prior to 10:00 but generally held as safety trades being put back on with Greece unable to meet the goals for more funds.
Also at 10:00 August construction spending expected own -0.5%, as reported spending increased 1.4%.
This Week's Economic Calendar:
Monday;
10:00 am Sept ISM manufacturing index (as reported 51.6)
August construction spending (as reported +1.4%)
3:00 pm Sept auto and truck sales (autos 4.1 mil, trucks +5.5 mil)
Tuesday;
10:00 am August factory orders (-0.1%)
Wednesday;
7:00 am MBA weekly mortgage applications
8:15 am ADP private jobs for Sept (+45K)
10:00 am ISM Sept services sector index (52.8 frm 53.3)
Thursday;
8:30 weekly jobless claims (+11K to 402K)
Friday;
8:30 Sept employment data (non-farm jobs +60K, non-farm private jobs +83K, unemployment rate unch at 9.1%)
10:00 am August wholesale inventories +0.5%)
3:00 pm August consumer credit (+$7.0B)
10:00 ISM took some of the bullishness away from early activity in the bond market and stopped selling in equity markets. Still not much investing in equities, just traders moving the indexes in huge wide ranges. Technically the 10 yr and mortgages held key technical bullish levels last week. The rest of the day will be, as usual these days, will be watching stock indexes and any news out of Europe.
At 10:15 the bond and mortgage markets were -6/32 (.18 bp) frm 9:30.
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, October 03, 2011
The bond and mortgage markets started nicely this morning with early trading in stock index futures were pointing to a weaker open at 9:30. Friday the bond market held its key supports then rallied as the stock market basis the DJIA dropped 240 points. Stock indexes still quite volatile and likely will remain that way for a long time as investors and traders try to make a buck with high frequency trading.
The economy is declining yet there are those that believe these are buying opportunities for that "in the long run" investments----most that espouse that view are Wall Street firms that make money on investor buying. Greece failed its austerity tests the the EU, IMF and the ECB demanded but the EU isn't ready to let Greece fail yet, only a matter of time though it will. Its time to cut the country loose and let it fail. For months global markets and economies have been focusing on Greece and what European leaders will do. Europe's banks don't want to take loses, unfortunately for them there isn't any choice in the end.
This week has a lot of economic releases but the key is Friday's employment report. Euro-area finance chiefs will meet today in Luxembourg to weigh the threat of a Greek default, grapple with how to shield banks from the fallout and consider a further boost to the rescue fund. A much-needed “liquidity backstop” for the region must come from governments because the European Central Bank’s mandate requires it to keep purchases of sovereign debt extremely limited.
At 9:30 the DJIA opened -30, NASDAQ -12, S&P -4; the 10 yr note +15/32 to 1.87% -5 bp, mortgage prices on 30s +13/32 (.41 bp).
At 10:00 this morning Sept ISM manufacturing index expected at 50.5 frm 50.6, increased to 51.6; new orders component unchanged at 49.6, prices pd at 56.0 frm 55.5 and employment at 53.8 frm 51.8. The initial reaction to the better data turned stock indexes from -89 on the DJIA to -25, the 10 yr note traded +198/32 prior to 10:00 but generally held as safety trades being put back on with Greece unable to meet the goals for more funds.
Also at 10:00 August construction spending expected own -0.5%, as reported spending increased 1.4%.
This Week's Economic Calendar:
Monday;
10:00 am Sept ISM manufacturing index (as reported 51.6)
August construction spending (as reported +1.4%)
3:00 pm Sept auto and truck sales (autos 4.1 mil, trucks +5.5 mil)
Tuesday;
10:00 am August factory orders (-0.1%)
Wednesday;
7:00 am MBA weekly mortgage applications
8:15 am ADP private jobs for Sept (+45K)
10:00 am ISM Sept services sector index (52.8 frm 53.3)
Thursday;
8:30 weekly jobless claims (+11K to 402K)
Friday;
8:30 Sept employment data (non-farm jobs +60K, non-farm private jobs +83K, unemployment rate unch at 9.1%)
10:00 am August wholesale inventories +0.5%)
3:00 pm August consumer credit (+$7.0B)
10:00 ISM took some of the bullishness away from early activity in the bond market and stopped selling in equity markets. Still not much investing in equities, just traders moving the indexes in huge wide ranges. Technically the 10 yr and mortgages held key technical bullish levels last week. The rest of the day will be, as usual these days, will be watching stock indexes and any news out of Europe.
At 10:15 the bond and mortgage markets were -6/32 (.18 bp) frm 9:30.
Sunday, October 2, 2011
Saturday, October 1, 2011
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