Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 the US stock indexes were trading higher and the bond and mortgage markets slightly weaker. At 8:30 Oct personal income and spending were released; income was expected +0.2%, it was unchanged, personal spending was thought to be +0.1%, it was down 0.2%. The reaction turned the stock index futures lower and boosted bonds and MBS prices. The decline in spending de t the tropical storm Sandy according to the Commerce Dept. Commerce Department said that the storm affected 24 states, it couldn’t precisely quantify Sandy’s total effect on spending and income. Private wages decreased $17.1B in October, and the agency estimated that the storm reduced pay at an annual rate of $18.2B as it interrupted work schedules. It isn’t news, but the entire focus is the fiscal cliff negotiations that yesterday took a turn for the worse as the Administration laid out its desires that are so far off what republicans can accept that it is a step backwards for the moment. Pres. Obama is now asking for more tax revenues and increased amounts in spending than he proposed prior to the election. Today it’s a stand-off, who can predict what the rest of this day will reveal, or tomorrow, or next month? Both political parties negotiating in public now; time to get private and work out a plan. Whatever comes of the Cliff neither party should end up claiming a victory---compromise. The bomb unacceptable to everyone---everyone; a permanent extension of the debt limit, allowing the President to increase the debt limit at any time he chooses. No matter what political view one has, letting any President have carte blanche over the debt ceiling should be completely unacceptable. In Europe German retail sales slumped the most in almost four years in October, falling 2.8% from September when adjusted for inflation and seasonal swings. Increasing belief that Germany may decline into recession on the continual inability to deal with its debt crisis. EU leaders touting the progress on the latest fix for Greece; tilting at windmills and ignoring reality---not a lot different than what is occurring here with our political “leaders”. Most European stocks climbed, extending a 17-month high, as German lawmakers approved a Greek aid plan. At 9:00 the 10 yr note +5/32 at 1.60% at its previous resistance level (1.60%/1.58%), 30 yr MBSs were unchanged. The DJIA at 9:00 unchanged. At 9:30 the DJIA opened +5, NASDAQ and S&P opened -1. The 10 yr note at 1.60% -1 bp and 30 yr MBSs unchanged. 9:45 the Chicago purchasing mgrs. index was expected at 50.7 frm 49.9; the index as reported 50.4; the new orders component was weak and doesn’t portend well for future months, at 45.4 frm 50.3. Employment did increase to 55.2 frm 50.3. Overall a mixed report in terms of economic activity in the Chicago region. The reaction generated a little selling in the stock market but not much; the DJIA was +17 prior to the report, five minutes later +4 points. Nothing changed in the bond and mortgage markets. This morning the 10 yr note is trading at its resistance at 1.60%, not much volatility in the treasury markets, still trading in a narrow range. The safe haven trade still on but with much less momentum that seen last summer. The Fed will likely continue to support long term interest rates with MBS purchases and increased purchases of treasuries after Operation Twist ends at the end of the year. Much depends on what happens in Washington between now and the end of the year with the Cliff. There as many opinions about the outcome as there are politicians; each party playing the media game trying to assess what each can expect to gain with comments that at times are counter-productive.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The stock market rallied yesterday on comments from Washington that were momentarily constructive about the fiscal cliff. This morning the stock market is starting better again. The bond and mortgage markets were a little weaker yesterday, a few lenders took a negative stance and re-priced to either slow production or in anticipation that rates will worsen; unnecessary based on the MBS price movement. Yesterday the MBS price declined 11 bp frm 9:30 yet Wells and Chase lowered prices much more than what the market did. The debate over the cliff will continue through the month; every day there will be comments that likely will influence traders keeping the interday volatility high. The President and the House speaker were talking yesterday with more of a positive spin. The President met with business leaders, likely hearing that businesses and the economy will suffer, unemployment increase unless there is a deal to cut spending on entitlements and loop holes in the tax code. Today Treasury Sec Geithner will meet with congressional leaders, the President will have lunch with Mitt Romney. Weekly jobless claims at 8:30 this morning were down 23K to 393K about where markets were expecting, last week’s claims were revised from 410K to 416K. Claims still being impacted by Sandy, the storm that ravaged a lot of the east coast. Also at 8:30 the revision to Q3 GDP, the preliminary report showed the growth rate in the quarter was +2.7% also in line with forecasts. Last month the advance Q3 GDP was at 2.0%. Q2 GDP growth was +1.3%. At 9:30 the DJIA opened +43, NASDAQ +16, S&P +6. 10 yr note at 9:30 unch at 1.63%, MBS 30 yr price unch. Oct NAR pending home sales (contracts signed but not yet closed) was expected +1.0%; it increased 5.2% with Sept revised higher. The index is now the highest since March 2007 and is up 13.2% yr/yr. Is the Fed going to continue its QE initiatives? Most likely; although the Operation Twist will expire due primarily that the Fed is running out of short-dated maturities to sell while buying longer-dated maturities. Likely the Fed will continue buying MBSs and increase the buying of treasuries after the first of the year. The economy is just muddling along, unemployment still high and Congress still will be struggling with budgets and entitlement discussions. The next FOMC meeting on Dec 11th and 12th is likely to be when the Fed announces its plan(s). Within the FOMC there is some increasing concern the Fed isn’t accomplishing much with the easing and money printing; it hasn’t lowered the unemployment rate that is one of the two Fed mandates. Whatever is happening on a daily basis, the bond and mortgage markets are not changing. The 10 yr treasury note is in a 10 basis point yield range since early Nov., unable to crack 1.60% and finding strong support when it climbs to 1.70%. MBSs are in an even narrower range, and likely to stay relatively flat while the debate on the cliff continues. In Europe there is a slight increase in optimism over the Greek debt crisis but so far after 3 years the country is still broke and isn’t likely to improve without ECB, EU, and IMF assistance; it is about keeping Greece in the EU for fear that if it left it would encourage other debt reddened countries to exit.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries started strong this morning but early trade in the MBS markets was flat with no change from yesterday at 8:30. Stock indexes weaker his morning with Europe’s markets down. Uncertainty over the Greek bailout is still effecting markets and the continued uncertainty over the fiscal cliff adding to investor concerns. Yesterday comments from Washington were not encouraging but there is still a month to go before the cliff edge. Various comments from people like Warren Buffett that going over the cliff won’t be a crisis is softening the fear factor. As long as Congress and this Administration can get a deal early in 2013, according to an increasing number of business leaders, it won’t cause another recession as many have forecast. The drama over the cliff will however keep investors from doing much. Increased taxes are likely in the end, the question on spending cuts is more likely to be difficult. Tax increase are coming, the only issue is who and what taxes will be increased. German 10 yr bund yield fell 5 basis points today as safety concerns increase over the Greek bailout and the US fiscal cliff negotiations that appear once again to be deadlocked with no progress. Yesterday Senate leader Harry Reid commented he was “disappointed” that no progress was occurring, at that moment the stock market rolled over and treasuries improved as increased safety drove money into treasuries and in turn improved MBS prices. In early trade today the 10 yr note rate at 1.61% was approaching the level that has recently capped any additional improvement in rates. President Obama is scheduled to meet more corporate leaders today; he has met with a number of business leaders recently, including small business leaders yesterday. Obama set to talk at 11:30 this morning. At 9:00 30 yr MBS prices up 9 bp, not much but still improving; the 10 yr note at 9:00 at 1.61% -3 bp. At 9:30 the DJIA opened -57, NASDAQ -17 S&P -8; 10 yr note 1.61% -3 bp and 30 yr MBSs +2 bp. The MBA composite index declined 0.9% last week; the purchase index continues to trend higher, up 3.0% for the second week in a row. In contrast, the refinance index is moving lower, down 2.0%. Yet refinancing activity remains very strong, making up 81% of total applications with purchase applications making up the remaining 19%. Mortgage rates remain extremely low, down 1 basis point in the week to 3.53% for the average 30-year loan for conforming mortgages ($417,500 or less). At 10:00 Oct new home sales, expected down 0.5% at 387K; sales declined 0.3% as reported but the decline in units is weaker than thought. Last month’s 389K units was revised to 369K so the decline of 0.3% looks better than actually it was given the decline in Sept sales frm the data originally released. On the rep[ort more selling in the stock market but not much change in the rate markets. At 1:00 Treasury auction $35B of 5 yr notes, it should get good demand, yesterday’s 2 yr was strong. At 2:00 the Fed will release its Beige Book the Fed’s detailed report on the economy in each of the 12 Fed districts.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 and Oct durable goods orders the bond, stock and MBS markets were unchanged from yesterday. At 8:30 Oct durable goods orders were expected to have declined 0.8%, ex-transportation orders -0.4%. As reported durables were unchanged from Sept’s +9.2%; ex transportation orders durables increased 1.5%. The strength in orders was a major surprise as most data that make up the data were weaker. The initial reaction added a little support in the stock index futures trading, the interest rate market saw very minor selling taking the 10 yr note frm +3/32 to unchanged (1.66%) at 8:45. Durables are a very volatile series so not much reaction. German bonds declined, with 10-year yields rising the most in a week, after European finance ministers meeting in Brussels eased the terms on emergency aid for Greece, damping demand for the region’s safest assets. EU finance ministers agreed to allow Greece to receive $44.6B loan in December and worked out a bond buyback of Greece’s debt by Greece. Spain’s interest rates felon the agreement. There is relatively little reaction to the agreement in the EU markets or in the US. The German 10 yr bund yield increased 3 bp to 1.44%, the worst level at 1.47% before some improvement. The euro currency declined on disbelief the deal will work out, Greece unlikely to buy back its debt? Sept Case/Shiller 20 city home price index was about what was expected, up 3.0% yr/yr and the highest prices since July 2010. It is one more data point that confirms the housing sector is recovering. Today’s report also included quarterly national figures. Prices covering all of the U.S. increased 3.6% in the third quarter from the same period in 2011 compared with a 1.6% gain in the year ended June. At 9:30 the DJIA opened -32, NASDAQ -4, S&P -2. 10 yr note at 9:30 1.66% unch; 30 yr MBS price +1 bp. More data at 10:00; Nov consumer confidence index expected at 73.0, increased to 73.7; Oct confidence level revised from 72.2 to 73.1; confidence increasing. The Richmond Fed manufacturing index also better; forecasts were for -8, it increased to +9 frm -7 in Oct---another good number. Not so good; the Sept FHFA housing price index was expected up 0.5%, it was up just 0.2%, kind of contrary to the Case/Shiller report earlier this morning. At 1:00 this afternoon Treasury will begin $99B of auctions with $35B of 2 yr notes. The auctions should go well this week, although two weeks ago the 3 yr and 10 yr didn’t see the demand expected. The technicals on the bond and MBS markets remain generally neutral with no directional trend, but the bias remains slightly weaker for interest rates. Although we are not expecting much increase in rates, the near outlook is bothersome. On the other side, if rates do increase it won’t be by much with the Fed backing the interest rates sector.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Last Friday the bond and mortgage markets were little changed I the shortened day; the US stock market had a strong day however with key indexes rallying. The DJIA +172, the 10 yr note rate 1.69% unch frm last Wednesday and 30 yr MBSs -6 bp. This morning at 8:30 the 10 yr note traded down 3 bp to 1.66% with 30 yr MBS prices up 20 bp frm Friday’s 9 bp decline. US stock indexes in the futures markets traded weaker early implying a weak open at 9:30. There are no scheduled economic releases today but the rest of the week has data each day along with treasury auctioning $99B of notes starting Tuesday. US retailers reporting sales were up 13% frm last year for the Black Friday weekend. Spending in stores and online rose to $59.1B in the four days starting Nov. 22, the National Retail Federation said in a statement yesterday. A year ago, sales advanced 16% over the holiday weekend. Retailers have turned Black Friday into a week’s worth of deals, with earlier openings and online offers. Thanksgiving Day, once reserved for family gatherings, saw the number of shoppers rise to more than 35 million from 29 million last year, the NRF said. People spent an average of $423, up 6.3% frm last year. US interest rate following the lead in Germany with its 10 yr bund down 1 bp in yield; in Italy its 10 yr at 4.77% down 2 bp while Spain’s 10 yr unchanged since last Friday. Europe’s stock market weaker today on the US fiscal cliff and the never-ending Greek debt crisis. The EU unable to agree on a budget that is suitable to allow the next tranche of money for Greece to avoid default. Here in the US, after the Thanksgiving holiday, markets are back to focusing on the fiscal cliff with comments from both parties that have not changed. Republicans want to cut loopholes in the tax code while Democrats insisting on increasing taxes for the so-called wealthy. This is going to go on until the later part of Dec and in the end there will be an agreed extension to the current tax cuts until next year. Pushing the problem down the road is what Congress and the Administration have made an art form. At 9:30 the DJIA opened -60, NASDAQ -7, S&P -6. 10 yr note 1.66% -3 bp; 30 yr MBSs +24 bp. “Uncertainty” about the fiscal cliff, debt limits and the long-term challenges of balancing the U.S. budget are already “affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy,” Fed Chairman Ben S. Bernanke told the Economic Club of New York last Tuesday. Efforts to boost employment and spur the expansion with purchases of $40B in housing debt each month are being impeded by the budget impasse, Bernanke said. Bernanke also admitted in a circuitous way that the Fed is about out of bullets to improve the employment sector (which hasn’t worked so far with all the Fed money printing). It is up to Congress and the Administration. There are no economic reports out today but the week does have a number of key data points and Treasury auction $99B of notes. US interest rates are likely to continue to trade in their narrow ranges. The fiscal cliff comments that will emerge each day and issues in Europe will dominate. The status of the economy seems to be well understood by most traders; like the 3 bears, not too hot but not to cool either. The stock market is suspect through the rest of the year, it remains bearish from a technical perspective with increasing thoughts the key indexes will decline through the remainder of the year. Given the recent action in the bond market when the stock market has seen heavy selling, it is unlikely that any selling in equities will lead to a major rate decline. If lower rates are in the picture it will have to be on a total failure to avoid the cliff, which we don’t expect will happen.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com US markets opened unchanged this morning; the 10 yr and MBSs unchanged from yesterday’s close at 8:00. Weekly jobless claims were released at 8:30, claims were expected to have declined to 415K frm 439K last week. Claims were down 41K to 410K with last week’s claims revised to 451K. Claims are being impacted by Sandy, as such there is little reaction to the data until the effect diminishes. The level of claims reflects the economic drag associated with Sandy, which made landfall in the Northeast on Oct. 29, killing more than 100 in the U.S. and leaving about 8 million homes and businesses without power for days. Before the storm- related surge in unemployment applications, companies limited hiring in the wake of a global economic slowdown and uncertain U.S. fiscal outlook. In Europe Greece is still the topic; European Union finance ministers meeting in Brussels yesterday left the next tranche of Greek aid frozen until another meeting on Nov. 26. They failed to tackle the dual task of steering an extra 32.6 billion euros to Greece through 2016 while finding a way to tame the resulting increase in the nation’s debt, already the highest in Europe. Spain’s interest rates declined today on comments from Angela Merkel that she saw a chance for a deal to save Greece. There isn’t any reaction to current issues on Europe’s debt crisis; no safety moves to US treasuries. At 9:00 the 10 yr note unchanged at 1.67%, 30 yr MBSs +3 bp; a quiet start today in the bond and stock markets ahead of the holiday. A lot of talk about Black Friday and how consumers will spend over the weekend. At 9:30 the stock indexes opened unchanged then gained a some momentum after the open; 10 yr note up 2 bp at 1.69%, now above its 20 and 40 day averages. MBSs at 9:30 unch on 30s. At 9:55 the final Nov. U. of Michigan consumer sentiment index was expected at 84.0 frm 84.9, the index fell to 82.7. There was little reaction to the weaker index; it still is the highest final month index read in four years. Unlikely the decline will have any impact on the outlook for Black Friday and Christmas shopping. The final data this week; at 10:00 October leading economic indicators was expected +0.2%, it was right on at +0.2%. LEI doesn’t generally elicit much market reaction. Trading today will be on the light side ahead of Thanksgiving and a short session on Friday. The stock market will trade all day today and will be open until 1:00 on Friday; the bond market will traded until 2:00 on Friday. Unless there is some kind of unexpected shock out of Europe markets will likely sit quietly now until next week when Congress and the Administration re-start talks on the deficit and that famed cliff. There have been a lot of forecasts that US interest rates are likely to decline and MBS rates hitting new lows in interest rates. Talk is one thing, price action in the markets is where the rubber meets the road and presently rates are increasing. We still hold that MBS rates saw their lows last July and believe rates won’t decline to those low rates. The 10 yr yield fell to 1.40% in late July, now climbing to 1.69% above its 20 and 40 day averages with the relative strength index now slightly bearish. Although we don’t expect new lows in rates, equally we are not expecting rates will increase much. Today and Friday trading will be thin, at times thin markets can exaggerate movements.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and MBSs started lower this morning (price) with pre-market futures trading pointing to a soft open in the stock market. At 9:00 the 10 yr at 1.63% +2 bp and MBS price +2 bp frm yesterday’s close. At 8:30 Oct housing starts and permits were released; starts were expected to have declined but as reported up 3.6% while permits were in line at -2.7%. Starts are at a four year high but well off the norms that were seen prior to the housing market collapse, in the early 2000s starts were at about 1.2 mil annualized units, Oct starts were 849K annualized. Nevertheless starts are growing. Commerce dept. said the super storm that hit the east had little impact on the starts as reported, Nov starts are likely where we will see the effects of Sandy. Yesterday the Nov NAHB housing market index jumped 46 frm 41 in Oct, the highest index reading since May of 2006. The housing sector is definitely moving out of the woods, existing home sales in Oct +2.1%. At 9:30 the DJIA opened -45 after increasing 207 points yesterday, the NASDAQ -8, S&P -5; the 10 yr note at 9:30 1.63% +2 bp, 30 yr MBS price +2 bp frm yesterday’s close. At 12:15 this afternoon Ben Bernanke will speak at the NY Economics Club. Markets will focus on any clue on what the Fed chief has in mind for the future in terms of anymore easing. There is an increasing belief that the FOMC will increase purchases of US treasuries when it meets on Dec 11 and 12. In Europe today European finance ministers will meet in Brussels to discuss the gap in Greece’s public accounts ($19.2B). EU leaders last week gave the country another two years to cut its budget deficit. Moody’s cut France’s credit rating yesterday, nothing unusual as Moody’s is cutting credit ratings everywhere, including US treasuries. The stock market is weaker this morning mostly on news that HP will take an $8.8B hit linked to its acquisition of Autonomy Corp that HP says were serious accounting improprieties that led it to pay much more than the company was worth. HP stock price down to lows not seen in 20 years and dragging the overall market lower. Markets this week are quiet and likely to remain that way through the rest of the week as many are on holiday. The 10 yr note still cannot breach 1.60%/1.58% area and hold it. The general outlook for US long term rates is that rates will fall further; some are even looking for rates to make new lows (the low on the 10 is 1.40%). So far though traders and investors are not stepping into the fixed income markets; foreign investors cut US treasury purchases in Sept to almost nothing. The Mid-East is boiling, the global stock markets have experienced heavy selling over the last month, Europe’s debt crisis is not improving, the US fiscal cliff is still an uncertainty, the Fed is buying treasuries and MBSs, and Europe has fallen back into recession; none of those issues has had any real impact on the bond market---so far.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Friday the 10 yr note managed to move below its strong resistance at 1.58% but this morning the note is under pressure with stronger stock indexes, and is back to 1.61% at 9:00. MBS prices were up 23 bp, at 9:00 prices are down 21 bp. Over the past two weeks the bond and mortgage markets have stayed in very narrow ranges and will likely continue through this week also. This week is a shortened one with markets closed Thursday and will close early Friday, many will; be taking Wednesday afternoon off and all of Friday even though markets will be working. The data this week focuses mostly on housing data. At 9:30 the DJIA opened +97, NASDAQ +32, S&P +12. 10 yr note at 9:30 1.62% +3 bp; 30 yr MBS prices -28 bp. At 10:00 Oct existing home sales, expected down 1.0%, were up 2.1% to 4.79 mil units (annualized), Sept sales were revised slightly lower, from 4.75 mil to 4.69 mil. The average sales price $178,600.00; sales up 11.1% yr/yr. Also at 10:00 the NAHB hosing index was expected at 42 from 41 in Oct, the index jumped to 46, the highest index reading since May 2006. The data gave the stock indexes an additional boost. Tomorrow the EU nations will meet to consider Greece’s debt crisis. Today ahead of the official meeting tomorrow France, Germany, Italy and Spain met to lay out some kind of agreed upon consensus among the four countries. Europe remains the main drag on global growth as it is now officially back in recession. It has been over three years since the debt crisis began, in that time there has never been any plan that has stuck more than a couple of months. The Brussels meeting tomorrow, the second in a week after finance chiefs agreed seven days ago to keep Greece’s bailout aid flowing, underscores skirmishing among EU officials confronting rising unemployment and a slowing economy. Tomorrow at 12:15 Ben Bernanke will speak to the NY Economics Club. There is some thought he may lay the ground work for QE4. Last Friday the key stock indexes closed better, this morning the indexes are starting better on optimism that there will be a deal that avoids the fiscal cliff when the Bush tax cuts expire at the end of the year. Whatever agreement comes from the negotiators will not satisfy anyone, but the consequences going over the cliff are so severe even our politicians will have to agree on something. Obama met with political leaders last Friday, markets are taking it as positive with comments from the participants sounding optimistic. Both sides appear to be softening their long-standing hard core positions. Although treasury and mortgage prices are lower today, the bond and mortgage markets remain slightly bullish from a technical perspective, however there is still no demand for treasuries. The most recent data on Sept international cash flows showed foreign investors have reduced their holdings of US treasuries by about $85B.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Stock indexes in pre-open trading were abut unchanged this morning as was the interest rate market. At 9:15 Oct industrial production was expected to have increased 0.1%, it fell 0.4% and Sept production originally reported +0.4% was revised lower to +0.2%. Oct factory usage was expected at 78.3% unchanged from Sept, it declined to 77.8%, a big decline. On the reports stock indexes came off their best levels but still managed to hold minor gains. The bond and mortgage markets in early activity were unchanged from yesterday, the day before and the day before that. The 10 yr note has closed at 1.59% for the past three sessions, unable to push lower even with weaker equity markets, Europe in recession again, and the Fed continuing to buy MBSs and treasuries. Today the over-riding issue for markets is the meeting this morning between the Administration and Congressional leaders. There is a lot of speculation floating around this morning; from a deal has already been stuck to avoid the cliff to we are going over it and into economic decline. More likely, when the meeting ends what we will hear from both sides is that it was a “good” meeting but there are continuing issues that must be resolved. No matter what comes of the gathering, it is still about posturing; neither political party wants to be seen as capitulating without a fight to defend their principles. At 9:30 the DJIA opened +7, the 10 yr note at 1.59% unchanged and 30 yr MBSs +3 bp frm yesterday’s close. The current sentiment in the bond and mortgage markets is that rates will very likely move lower. Based on the underlying various fundamental factors that is a sensible outlook, however in the very short term the bond market has stalled. There has been no move to lower interest rates this week and most of last week, even with the DJIA down 1000 points, Europe in recession, heightened tensions in the Mid-East with Israel threatening to attack the Gaza Strip, and the potential of continued grid-lock in Washington. Combined, those issues should have driven investors into safe US treasuries; it hasn’t happened. The bond and mortgage markets are stalled although the technical picture based on current price action remains slightly bullish, but weakening daily with strong resistance at present levels. When expectations differ from actual price action there is reason to be concerned, if (and it is a big IF) the stock indexes improve the bond and mortgage markets will likely experience declining prices. The meeting today between Obama and Republican leaders is the main focus. The meeting hosts the same people that couldn’t agree on much over the last two years. Obama wants higher taxes for the wealthy, Republicans oppose and increases. Yesterday on CNBS Simpson and Bowles, the two that did come up with a plan that would accomplish many of the issues facing the economy and budgets, said if you tax the wealthy 100% it would only run the government for 5 months. Also yesterday, retiring Barney Frank the co-author of one of the biggest regulatory bills ever passed and that has slowed potential growth, out saying he wants to tax SS recipients that make over $100K 90% on their SS payments.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 data this morning the stock indexes were trying to hold slight gains; after the data the DJIA futures rolled over and at 8:45 -40. Weekly jobless claims shot up 78K to 439K, due primarily on the impact of Sandy as several states in the path of the carnage reported large increases. We noted yesterday that the claims data today would likely be distorted and should not be taken at face value; nevertheless stock indexes, already in full retreat recently, did roll over. Other data at 8:30; Oct CPI increased 0.1% overall and with food and energy excluded increased 0.2%, a little higher than 0.1 expected for the core. The Nov NY Empire State manufacturing index was expected at -8.5 frm -6.2 ion Oct; the index actually improved to -5.2; still under zero and indicating contraction. Power outages and destruction in New Jersey and New York from Sandy placed a temporary burden on the region’s factories, which have been challenged by a recession in Europe and slower Asian economies. The Empire State covers NY, northern NJ and southern CT. It isn’t fresh news, but Europe has now officially fallen back into recession, the second in the last four years. GDP in the 17-nation bloc slipped 0.1% in the third quarter after a 0.2% decline in the previous three months, the European Union’s statistics office in Luxembourg said today. France and Germany did grow but not enough to out-weigh the weakness in the other 15 countries. Most recent data from Europe had implied that the EU would fall back into recession as defined; two consecutive quarters of declining growth. The annual inflation rate in the euro area dropped to 2.5% annual in October from 2.6% the month before, the statistics office said in a separate report today. MBS 30 yr price at 9:00 -10 bp frm yesterday’s close, the 10 yr note +2 bp to 1.61%, the S&P futures unch and the DJIA futures index -19. At 9:30 the DJIA opened -11, NASDAQ unch, S&P +1, the 10 yr note 1.61% +2 bp and 30 yr MBSs President Obama at his press conference yesterday reiterated his stance that Congress should pass an extension of the Bush tax cuts for incomes under $200K ($250K for couples) while letting the tax cuts expire for those earning more than that; there is nothing new in his desire. Also hanging over investors, the possibility of increased capital gains taxes next year. There still has been little said from either political camp about the expiring payroll tax cut, neither party wants to extend it according to reports from the WSJ a couple of weeks ago. The final data this morning; at 10:00 the Nov Philadelphia Fed business index, expected at 4.0 frm 5.7 in October, the index declined to -10.7. Last month the index was on the plus side, the first in five months, now back below and suggesting contraction. Sandy likely has added to the decline in the index. The initial reaction pushed stock indexes lower but not much; the 10 yr note reacted with the yield declining to 1.59%, unchanged on the day. MBS prices are slightly lower at 10:00 than at 9:30. So far this week there has been little change in interest rates; the 10 yr note confined in a 3 basis point yield range and up against solid resistance at the 1.60% level. Unable to break below it even as the equity markets have been it hard again this week. Safety moves out of stocks have not filtered into treasuries in any degree. Technically the 10 yr and MBSs are still holding bullish trends but both have stalled. The Fed is going to continue to support the long end of curve (mortgages) even after Operation Twist expires at the end of Dec; most likely the Fed will announce it will increase purchases of MBSs and treasuries without selling equivalent amounts of short dated maturities that has been Operation Twist.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries yesterday were slightly better while MBS prices crumbled. This morning treasuries are weaker in price and mortgage prices down again. At 8:30 Oct producer price index was expected to increase 0.2%, as reported overall PPI declined 0.2% and the core (ex food and energy) also down 0.2%, the first decline on the core since Nov 2010. Sept PPI was up 1.1%, the decline of the overall PPI was the first in five months. Inflation isn’t an issue these days and didn’t generate any attention in markets. Yr/yr PPI up 2.3% overall and +2.1% yr/yr on the core rate. The decline in the PPI led by declines in energy prices. Also at 8:30 Oct retail sales, expected -0.2%, declined 0.3%; ex auto sales retail was unchanged; also no initial reaction to the report. It was the first time in four months that sales declined. Sept sales were revised from +1.1% to +1.3%. At 9:00 this morning the 10 yr note yield was 1.62% +2 bp; 30 yr MBS price down 18 bp frm yesterday’s decline of 47 bp. Stock indexes at 9:00 had fallen back from +55 on the DJIA earlier to +23. At 9:30 the DJIA opened +35, NASDAQ +15, S&P +5; 10 yr note 1.63% +4 bp and 30 yr MBSs -15 bp. It didn’t take long however, to push the indexes down; at 9:45 the DJIA was already back to unchanged. Mortgage applications increased 12.6% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 9, 2012. The Refinance Index increased 13% from the previous week, ending a five-week decline. The seasonally adjusted Purchase Index increased 11% from one week earlier. The unadjusted Purchase Index increased 8% compared with the previous week and was 22% higher than the same week one year ago. The refinance share of mortgage activity increased to 81% of total applications from 80% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.52% from 3.61%, with points decreasing to 0.41 from 0.45 (including the origination fee) for 80% loans. This record low rate for 30 year fixed mortgages beats the previous survey low of 3.53% for the week ending September 28, 2012. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 3.83% from 3.88%, with points increasing to 0.41 from 0.36 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.34% from 3.37%, with points increasing to 0.78 from 0.75 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.88% from 2.95%, with points decreasing to 0.37 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.60% from 2.61%, with points decreasing to 0.30 from 0.41 (including the origination fee) for 80% loans. Based on the MBA applications data for last week, 30 yr mortgage rates did hit an all-time low, something we didn’t expect as the bellwether 10 yr note is still 20 basis points higher in yield than its low back in July. The Fed buying $40B a month of MBSs having a positive impact on mortgage rates. President Obama is now asking for increased revenues of $1.6T over the next 10 yrs; double what he wanted in the summer of 2011. Today the President is meeting with business leaders for their input. Yesterday he met with union leaders and continued to pledge he will seek more taxes from the so-called wealthy. Republican leaders are willing to accept new tax revenues but not higher taxes. Increased capital gains rates and other loop holes that mostly affect wealthy investors are the likely outcome. At 10:00 Sept business inventories, expected +0.6%, were up 0.7%. No reaction to the better inventories; last Friday Sept wholesale inventories were also stronger than expected. Increased inventories should have a positive impact on Q3 GDP when the preliminary report is out on 11/29. Later this afternoon (2:00) the FOMC minutes frm the 10/24 FOMC meeting will be released. The overall tone of the FOMC members on further easing moves will be examined within the context of the minutes. The Fed isn’t likely to end easing as long as unemployment remains high; Bernanke is on record to keep rates low as long as the employment situation continues struggle. More easing on the way? Possibly but unlikely until next year and pending how the fiscal cliff is avoided. From the technical perspective everything continues to look bullish for interest rates; traders are focusing on 1.60% for the 10 yr note as a key pivot. So far the 10 has experienced resistance at that level, unable to sustain below 1.60%. A move that holds below 1.60% could drive the rate to its lows last July. That said, we continue to believe the 10 yr won’t likely decline to 1.40%. Nevertheless the rate markets are holding a very positive bias and fighting the tape is a mistake.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Generally quiet in the bond market early this morning; US stock indexes weaker on the continued concerns on how the fiscal cliff will be avoided. Yesterday the bond market was closed for Veteran’s day while the stock market did stay open, at the end of the day yesterday the key indexes ended unchanged. Congress is back today after the break for the elections; number one on the agenda is how to avoid the fiscal cliff, in the end it will be avoided because the consequences of going over it are too serious to let it happen. The issues to be settled are how much more taxes will increase for the wealthy and whether politicians have the stomach for cutting spending. As usual with Congress it will go down to the wire but in the final analysis whether it is pushed into next year or an actual plan emerges, we won’t fall to our economic death. Increasing the dividend tax is being talked about, and cutting some loop hole deductions is on the table. The word ‘tax’ will be avoided as much as possible, replaced with increased ‘revenues’. Greece has apparently gotten another reprieve from defaulting on its debt. In the latest compromise in three years of bailing, creditors including Germany have agreed to keep Greece in the EU by keeping the money flowing. But not all is well; the IMF is taking issue with the decision. There is a meeting scheduled for Nov 20th to ratify the plan. Europe’s stock market declined this moring on the disagreement between the IMF and and euro finance ministers’ on how Greece will repay its debts. Euro fnance ministers gave Greece another two years to get their debt recuced to 2.0% of GDP, a feat impossible to meet, but the EU does not want to risk Greece leaving the Union. At 9:30 the DJIA opened -62, NASDAQ -25, S&P -7. The 10 yr at 9:30 +4/32 at 1.58% -2 bp; 30 yr MBS’s -12 bp. Trerasuries rallying on safety concerns ahead of the beginning of the fiscal cliff negotiations; Pres. Obama and Congressional leaders are scheduled to meet this week to get the ball rolling. Germany’s 10 yr bunds are unchanged at 1.34% after declining to 1.31% earlier. While the fiscal cliff discussions dominate, there are a number of key economic releases this week; Oct retail sales, PPI and CPI, Philly Fed business index and the FOMC minutes from the 10/24 meeting. Expect continued high volatility in the financial markets this week. The only data today; the Oct Treasury budget at 2:00 pm, expected -$113B. The outlook for interest rates remains good; most all of our models remain bullish. How low the rates can go however, is still an issue. Some saying rates will fall below the lows seen in late July (1.40% on the 10 yr note), while an equal number are holding that the lows for treasuries and mortgages will not be breached. Much depends on how Europe’s economy performs and the US fiscal cliff is resolved. Small busnesses are obviously opposed to increasing taxes for incomes over $200K to $250K and are concerned about hiring with Obama Care now more a reality after the elections. If the economy stabilizes interest rates will not likely fall much more, conversely more economic weakness will push rates lower. The question is; would you want lower rates or a growing economy and a little higher rates?

Mortgage Rates

Thank you for your service and happy Veterans Day! Mortgage Market Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com This Week; Monday is Veteran’s Day the bond and mortgage markets will be closed but the stock market will be open all day. Interest rates have fallen and likely to decline more as economic growth slows in Europe and China and the UIS struggles with that fiscal cliff that unless there is an agreed plan between the White House and the House would lead to big increases in taxes and sizeable spending cuts. The cliff will be avoided in the end, but it’s about the “concessions” both parties can agree on that will determine how the economy grows in 2013. The last week was one of increased volatility in financial markets; we expect it to continue this week. A number of key data releases are on tap this week. October retail sales, Oct inflation readings with PPI and CPI, Nov Philadelphia Fed business index, the Empire State manufacturing index, Oct industrial production and factory use and weekly claims. In Europe the Greek debt crisis and Spain’s continued reluctance to agree on austerity conditions in order to convince the ECB to buy its bonds keeping Spain’s interest rates manageable. US stock indexes saw heavy selling last week, concern over the possibility of increases in dividend taxes and health care costs keep investors fearful. The bond and mortgage markets will reap the benefits of uncertainty with lower interest rates an increasing possibility. That said, we continue to believe there isn’t much more left in the bond and mortgage markets.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com More selling of equities yesterday and early this morning; the DJIA futures at 9:00 -61 points, but by 10:00 the index was better on the day. The 10 yr note and mortgage rates continue to fall as investors are leaving the equity markets and parking money in treasuries, in turn improving mortgage rates. Markets facing a number of issues, non are good for the markets and it isn’t just in the US, markets in Europe are down again this morning. The fiscal cliff is the giant in the room but the situation in the EU with Greece about to run out of money pressuring markets, the ECB’s Mario Draghi saying the ECB is done with Greece in terms of buying its debt, saying it is now the responsibility of the EU nations to provide Greece with the needed cash to avoid default. Europe’s economic outlook has been revised lower by the European Commission, adding another reason to exit equities. Germany’s government bonds advanced, pushing 10-year yields to the lowest level in more than two months (1.32%), as reports showed industrial production slumped in France, Italy and Finland. In China there is a change in the leadership with a new President and Prime Minister, its economy has slowed and uncertainty heightened with the changes. Here in the US there is a growing belief in the markets that capital gains taxes will be increased next year and increased taxes on gifts and inheritance taxes are likely. All of those issues are driving global equity markets down, markets are presently expecting the worst outcomes. This afternoon at 1:00 President Obama will address the nation, the first since the election; how he phrases his remarks will be key. Will he offer up an olive branch or stick to his ridged insistence that taxes be increased on the rich and showing little interest in cutting spending? If he appears more conciliatory and willing to negotiate with Republicans the present mood of fear will ease somewhat. Prior to his address, at 11:15 House majority leader John Boehner will speak; he too must demonstrate an increased willingness to cooperate to avoid the fiscal cliff. It is way past time for the two parties to sit down and do the peoples work instead of the gridlock that has dominated the last two years-----we’ll see. October import prices were unch from Sept; yr/yr +1.4%. Export prices +0.5%; yr/yr +0.4%. At 9:30 the DJIA opened -66, NASDAQ -5, S&P -4. The 10 yr note unchanged at 1.61% after being lower earlier to 1.57%; 30 yr MBS prices also slipped a little from early on, at 9:30 -9 bp. At 9:55 the mid-month U. of Michigan consumer sentiment index, expected at 83.0, it increased to 84.9, best since July 2007. At 10:00 Sept wholesale inventories expected +0.4% increased 1.1%; August inventories revised from +0.5% to +0.8%. The stock market has improved frm the early levels; the sentiment index better and wholesale inventories better took some of the bearish away for the moment. The addresses frm John Boehner and President Obama will be closely monitored for any indication of compromise between the two leaders.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries headed for the biggest advance in 11 weeks after President Barack Obama won re- election. U.S. equity-index futures declined, erasing earlier gains and gold climbed for a third day. At 8:30 the DJIA futures traded at -123, yesterday the DJIA closed +133. Treasuries and MBSs are rallying strongly this morning on the results of the election based on the view that the Fed will continue easing whereas if Romney had won he was thought to be ready to end the monetary stimulus, at least at the magnitude is now. He said he would not re-appoint Ben Bernanke when his term ends early 2014. In that regard Bernanke will not likely seek another term even with President Obama winning the election. Nevertheless this morning traders and investors are betting on weaker growth and more Fed stimulus. So far the Fed has helped keep the U.S. economy growing by purchasing $2.3 trillion of Treasuries and mortgage-related bonds and instituting a plan to buy $40 billion of home-loan securities a month. Romney talked about increasing taxes, that didn’t go down well, while Obama must deal with the “cliff” coming he is seen as less cuts and less tax increases than Romney. President Obama got 303 electoral votes compared to 206 for Romney (Florida still hasn’t yet been decided), but Republicans held the House while Democrats remained in control of the Senate. In that respect nothing is different now than prior to the election. According to Bloomberg data, since Lyndon Johnson defeated Barry Goldwater back in 1964, when a Democrat has won the White House the 10 yr note yield has fallen 40 basis points in the following month, while when a Republican wins the note yield increased by 19 basis points. If that holds this time the 10 yr note would test the low yield set back in July at 1.40%. Whether or not that will occur again is questionable but the decline in the 10 yr note rate this morning is adding additional bullish technical bias. The impact on markets from the election results are not likely to be well defined for a few days or more. Nothing has changed in terms of the make-up of the White House, the House or the Senate. Looking beyond the election Europe is climbing back into focus. The European Commission today cut its growth forecast for the euro zone. The 17-nation euro economy will expand 0.1% in 2013, down from a May forecast of 1.0%. It cut the forecast for Germany, Europe’s largest economy, to 0.8% from 1.7%. Europe’s economies are declining leading to slower growth in the US. Retail sales decreased more than economists estimated, a report showed today. Sales fell 0.2% from August, when they rose 0.2%, the European Union’s statistics office in Luxembourg said. Economists had forecast a decline of 0.1%. German stocks fell, erasing yesterday’s gains, as the European Commission cut its growth forecast. Greek lawmakers vote today on an austerity bill that contains austerity measures demanded by the so-called troika that oversees euro-area bailouts insists. A 31.5 billion-euro ($40B) aid payment has been frozen since June. At 9:30 the DJIA opened -143, NASDAQ-39, S&P -15. The 10 yr note yield 1.64% -11 bp; 30 yr MBS price +79 bp frm yesterday’s close. This afternoon at 1:00 Treasury will auction $24B of 10 yr notes; yesterday’s 3 yr auction was on the weak side in terms of demand. At 3:00 Sept consumer credit is expected +$10.0B. Let’s give this a few days for markets to settle down. Today and yesterday have been quite volatile, the implications of volatility is uncertainty; look for more of it today and over the next week or so. That said, the election and the renewed interest in the EU debt mess are combining to drive interest rates down. Some are now outwardly calling for the 10 yr note to fall to 1.40%, the low last July, and possibly below it. We still don’t agree with that, but we have to respect the action and this morning it looks quite bullish at the moment. The 10 yr this morning is 25 bp frm the July low, not an insurmountable task but to get there the economic outlook has to weaken for the US and Europe, and the Fed has to add more stimulus---both possible but at this point we don’t agree.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Very early this morning the stock indexes were trading about unchanged while the Treasury and mortgage markets were better. At 9:00 the 10 yr note yield at 1.69% -3 bp, 30 yr MBSs +18 bp. Friday the bond and mortgage markets traded weaker in the morning then improved in the afternoon with many lenders re-pricing better; this morning the mortgage market better than Friday’s closes. Obviously the markets (and the world) are focused totally on the election tomorrow. The polls continue to be close and regardless of which poll one looks at all are within the margin of error. Most of the talk today is centered on the what if debate; what if Romney wins, what if Obama is re-elected? What is the outlook for the coming fiscal cliff that will increase all taxes if not extended? How will the make-up of the next Congress effect the necessary spending cuts and higher taxes be resolved, or will the gridlock continue? The unanswered questions are many; who will be the next Fed chairman, Bernanke’s term ends in 2014? In the meantime, until the election results are in the markets should trade quietly. At 9:30 the DJIA opened -23, NASADAQ -3, S&P -3. 10 yr note 1.69% -3 bp. 30 yr MBSs +23 bp frm Friday’s close. The only data point today; at 10:00 Oct ISM services index was expected at 54.9 frm 55.1 in Sept. As released the index fell to 54.2; still above 50 indicating expansion but like most of the other economic measurements not indicating a lot of improvement. The data added to selling in the stock markets. Europe still lurks in the background these days and Greece is returning to the front trying to get its budget in line with requirements in order to get another bail-out from the EU. The region has been quiet over the last couple of weeks; no real changes and nothing concrete coming out. Spain and Italy are the giants in the room in terms of getting assistance to keep their banks from defaulting. Spain remains reluctant to ask for aid from the ECB to buy its bonds to keep rates from increasing. Looking for the best deal the country can negotiate with the ECB keeps global markets focused. German 10-year bunds rose for a fourth day, pushing the yield to 1.43%, the lowest in more than a month, as investors sought Europe’s safest government securities. Spain’s 10-year yield climbed 10 basis points to 5.76%, the highest since Oct. 17, and adding to last week’s increase of seven basis points. NY, New Jersey and the rest of the region that suffered the brunt of last week’s storm are continuing to be without power in much of the area and gasoline is now being rationed in New Jersey. Now the weather is turning colder and there is another storm coming according to forecasters. A nor’easter may bring gusty winds, heavy rain and even snow this week across much of the U.S. East Coast that was hit by Hurricane Sandy last week. Winds of 45 to 55 miles (72 to 89 kilometers) per hour are expected to accompany coastal flooding and precipitation in New Jersey as the storm moves up the coast from Nov. 7 to 9, The economic and financial impact yet to be fully assessed. Tomorrow the election, according to some reports there are some precincts that are not likely to be up and running, then there is the difficulty of getting to the polls. Another one of the uncertainties that hang over the markets this week. The bond and mortgage markets continue their positive biases. Technically the 10 yr yield is trading under its 20, 40 and 200 day averages, trading has been choppy however with traders keeping the rates in narrow ranges for the past few weeks. So far any selling has not seen any follow-through, nor have rallies seen much movement. The US bond markets are improving today on minor safe haven moves ahead of the toss-up election.