Mortgage Rates



Weekly jobless claims this morning were worse than thought; claims were up 6K to 386K, climbing closer to the 400K level markets deem significant. Nevertheless claims are on the increase over the last month, falling to 350K level a month ago, and each week for the last three revisions have been higher. Last week originally at 375K were revised to 380K. Continuing claims fell 33K last week.

May consumer price index was -0.3$ in line with estimates, the core (ex food and energy) +0.2% a little higher than 0.1% expected. Yr/yr overall CPI +1.7% while yr/yr core up 2.3%, a little stronger than thought but not a problem for the inflation outlook.

Q1 current account deficit was much higher than expected, at -$177.3B compared to -$130.9B on the advance look last month; no reaction to it though.

At 9:30 the DJIA opened +12, NASDAQ -3; the 10 yr note traded unchanged and mortgage prices for 30 yr conventional loans -2/32 (.06 bp).

As this week progresses the idea that the FOMC meeting next week will announce another easing move from the Fed is gaining, the idea was further fueled this morning on the increasing weekly unemployment claims. The easiest thing the Fed could do is to extend Operation Twist that is set to expire at the end of the month; the more aggressive move from the Fed would be an outright easing move that keeps the Twist and adds additional Fed buying of notes and bonds. This morning investors and traders are keeping the stock indexes frm falling as they would with the weak claims report, but with increasing belief the Fed will act the equity market is holding well resulting in keeping the bond and mortgage markets in check.

This afternoon Treasury will complete the auctions with $13B of 30 yr bonds; yesterday’s 10 yr auction went OK, not a record setter but in the range of average.

Record-low mortgage rates are triggering a surge in refinancing, which combined with the lowest fuel prices in four months and stabilization in stocks, may be easing constraints on Americans’ financial resources. Consumer confidence in the U.S. climbed for the fourth straight week as more Americans said their personal finances were improving. The Bloomberg Consumer Comfort Index rose to minus 36.4 in the week ended June 10, the highest level since late April, from minus 37.6 the prior period. Each of its three components -- the economy, finances and buying plans -- advanced.

Next week, along with the Greek election and the FOMC meeting, there is a G-20 meeting in Mexico. Germany already setting some of the agenda that the IMF through the G-20 has to help with the debts it cannot pay. Chancellor Angela Merkel rejected quick solutions proposed to fix Europe’s financial crisis such as joint debt sharing, saying Germany can’t save the world economy alone and fellow Group of 20 countries must help. It is unlikely the IMF will step in though with the US unwilling to get too involved at this point. On the Greek elections; the ephemeral view now is that no matter how the elections turn out, Greece will get more money as its exit of the EU would likely set off more countries leaving.