Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgages were weaker early on better stock index trading, at 8:30 weekly jobless claims were expected to increase 10K, claims declined 10K to 332K and last week’s claims were revised frm 340K to 342K. Weekly claims for unemployment compensation have been falling for weeks now, there can be little argument that the job market is getting better, slowly and not as quickly as anyone wants, but improving. Until the last few weeks claims had been hanging around the 360K to 370K, now 40K a week less, the lowest level in two months. The four-week average declined to a five-year low. The reaction pushed the 10 yr note to 2.07% briefly and 30 yr MBS prices -28 bp frm yesterday’s close. Stock index futures also gained a few more points on the claims data. Feb producer price index, also at 8:30 was in line with forecasts and estimates; +0.7% overall and ex food and energy +0.2%. Yr/yr overall PPI +1.7% and the core also +1.7% for the last 12 months. Inflation based on the PPI this morning is still well within the Fed’s tolerance range and didn’t generate any additional selling in the bond market---it was all about the weekly claims this morning. European stocks rose to an almost five-year high as policy makers gathered for a two-day summit. EU officials are said to be willing to grant France, Spain and Portugal extra time to bring down deficits. The ECB cut its forecasts on March 7 and now expects the 17-nation euro-area economy to contract 0.5% this year before growing 1.0% in 2014. Last week the ECB left its interest rate unchanged, there were some rumors that the ECB would lower the rate. The Q4 current account deficit unexpectedly declined 1.8% to $110.4B with estimates of -$112.5B. The current account is the total measure of international trade including income payments and government transfers. Q3 2012 account deficit was -$112.4B. For all of 2012, the current-account gap expanded 1.9% to $475B, the widest in four years. Not much of a momentary market mover, the current account data usually excites economists that work on longer range implications to the economic outlook. Yesterday Treasury sold $21B of 10 yr notes at auction, the demand was much stronger than most were expecting; today at 1:00 Treasury will sell $13B of 30 yr bonds. Foreign central banks and foreign investors took almost half of the $21B of 10s, US banks took 30.0% leaving Wall Street dealers with just 22% of it to distribute. At 9:30 the DJIA opened +27, NASDAQ +8, S&P +3; 10 yr note at 2.06% +3 bp, 30 yr MBS prices -31 bps. Is this the day when the S&P 500 index makes its new all-time high? The DJIA has been making new highs now for the last nine days but the broad S&P has struggled; the high is 1565, at 9:30 1558. More key data tomorrow; Feb CPI, Mar Empire Sate manufacturing index, Feb industrial production and factory use and the U. of Michigan consumer sentiment index. The bond market is at critical levels this morning; the 10 yr note trading at 2.06%, a close above that level will be a new high for tis recent increase in rates and set up additional bearishness. The highest yield so far on an interday basis was 2.09% on the initial reaction to the Feb employment report last Friday. Fighting the tape with wishful thinking has not been a good idea for those that still believe interest rates will decline. Although we can expect some improvement when (if) the stock market ever retreats, the problem with that strategy is that rates have continued higher as stock indexes increase; so a correction won’t likely take rates down to levels seen a week ago.