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, April 05, 2011
Treasuries and mortgages opened a little better this morning taking the 10 yr treasury down to 3.40% its near term resistance; the stock market indexes in pre-market trade were showing a lower opening. Mortgage prices up slightly at 9:00 about where they were at 9:30 yesterday; but by 9:15 mortgage prices were declining along with the 10 yr which once again failed at 3.40%. 9:15 30 yr mtg price -3/32 (.09 bp), the 10 -4.32 3.44% +1 bp. At 9:30 the DJIA opened -25, the 10 yr -5/32 and mortgage prices -5/32 (.15 bp).
Last night in a speech in Atlanta (Stone Mountain) Bernanke said that the recent rise in commodity prices will likely be "transitory" and prices will fall back. He went on to say though that the Fed must be watched “extremely closely,” encouraging bets that interest rates may be raised sooner than previously expected. The remark that commodity prices and energy prices will back down is somewhat surprising although he couched it with the famous comment that the Fed will watch and react accordingly if inflation creeps into end prices. Bernanke’s comments echoed his March 1 statement to lawmakers that Fed officials were “prepared to respond as necessary” to inflationary pressures. The Federal Open Market Committee, said following its March 15 meeting that it “will pay close attention” to the evolution of inflation and inflation expectations.
Bernanke's comments in his speech shows the increasing division within the Fed about how long to continue keeping the FF rate at zero to +0.25% as it has since 2008; for the last couple of weeks one after another Fed officials have increasingly warned the US should end its tightening and begin to increase rates soon. Bernanke saying present inflation pressures in commodities and energy prices being "transitory" is his apparent response to the increasing concerns within the Fed. Bernanke remains convinced the economic recovery is not yet on solid ground, remarks like he made last night may be his way of jaw-boning the bond market from sending prices lower and yields higher. We don't rally have to say it but, if rates increase even a little the depressed housing sector will be further constrained. Will the markets buy Bernanke's "transitory" view about inflation? Back in the day he also said the sub prime mortgage markets were likely to be contained and managed. Is the US immune to inflation? Brazil, Russia, China, India, likely the European Union on Thursday and emerging market countries all increasing rates. Answer: No.
China increased its interest rates last night by 0.25% for the fourth time since the global financial crisis to limit the risk of asset price bubbles in the world’s fastest-growing major economy. The one-year lending rate will increase to 6.31% from 6.06% effective tomorrow. The one-year deposit rate will rise to 3.25% from 3.0%. On Thursday the ECB is widely expected to increase its base rate to head off inflation in the region which is now at +2.6% and higher than its 2.0% target rate on inflation.
Crude oil is lower today after reaching 30 month highs; with China increasing interest rates and oil supplies seen as increasing oil is a little lower today. That said, it is highly unlikely the demand for oil will decline regardless of increasing rates and China trying to slow its economy. Oil supplies won't likely increase enough to offset the coming summer driving season and the Mideast oil world is far from stable.
The only economic report today; at 10:00 the March ISM services sector index expected at 59.5 frm 59.7. As released the index fell to 57.3; the new orders component 64.1 frm 64.4, prices pd at 72.1 frm 73.3 and employment at 53.7 frm 55.6. The repot not as good as was expected, the reaction is support the bond market and adding additional selling in equity indexes.
Two Fedsters out today: Kocherlakota of Minneapolis and Plosser of Philadelphia; (12;45 for Kocherlakota and 1:30 for Plosser)
Later today at 2:00 the minutes from the March 15th FOMC meeting will be released. Possibly a little more detail on the debate over QE and inflation expectations.
Once again the bellwether 10 yr, driver for mortgage rates, failed on its attempt to move below 3.40% this morning. The 10 has recently found a home trading between 3.40% and 3.50%, not much of a range but keeping mortgage rates stable. We remain bearish for the direction of interest rates on the wider perspective. For all of Bernanke's confidence inflation won't get a toehold, the Fed will end QE and the FF rate will likely be increased before the end of the 3rd Q.
Tuesday, April 5, 2011
Monday, April 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.
Monday, April 04, 2011
No market moving news over the weekend, the 10 yr and mortgages opened better this morning after reversing and rallying a little on Friday. There are no economic releases today and this week is thin on measurements of the economy. The stock market is opening slightly better this morning but a little tedious. Later today (7:15 pm) Ben Bernanke will be speaking to the Atlanta Federal Reserve Bank Financial Markets Conference in Stone Mountain, Georgia.
Goldman Sachs out revising its outlook for Q1 from +3.5% to +2.5% and commented there are risks to the economic outlook. Goldman believes, as most now are coming around to believing, that the Fed will increase interest rates sooner than what had been expected. Most until recently were thinking the Fed would not increase rates until 2012 or later. Rates going higher around the globe, the US will be forced by inflation concerns and a stronger economic outlook to make the move before the end of this year. The Fed will likely increase rates in the 3rd Q unless there is a huge swing in the economic outlook.
Corporate profits have been the driver for the equity markets and the strong gains on the key indexes, going forward however it will be consumers that will set the tone. With crude oil making new highs almost daily these days and food prices likely to jump substantially over the next few months, will consumers have to retrench? Gasoline prices now over $4.00 in most of the country and escalating commodity prices it is reasonable to believe consumers will cut discretionary spending somewhat. Employment is improving yet still quite weak; the real unemployment rate when discouraged workers and those now with temp jobs are added back the true unemployment rate is at 15%.
Thursday the ECB will meet and will likely increase its base rate. The ECB has telegraphed its intentions to do so for the past two weeks and not likely to change. Not sure yet about the impact on US rates but with most major central banks increasing rates the likelihood that US rates will work lower is extremely high. German 10-year government bonds fell for an eighth day, the longest run of declines since June 2006, as speculation mounted the European Central Bank will increase interest rates
At 9:30 the DJIA opened +14, the 10 yr +5/32 at 3.43% -2 bp and mortgage prices +5/32 (.15 bp).
This Week's Economic Calendar:
Monday;
7:15 pm Bernanke speaks
Tuesday;
10:00 am Mar ISM Services Sector index (59.5 frm 59.7)
2:00 pm Fed minutes from Mar 15th FOMC meeting
Wednesday;
7:00 am weekly MBA mortgage applications
Thursday;
8:30 am weekly jobless claims (-2K to 386K; con't claims 3.70 mil frm 3.714 mil)
3:00 pm Feb consumer credit (+$2.5B, Jan +$5.0B)
Friday;
10:00 am Feb wholesale inventories (+1.0%)
The near term outlook for the rate markets will likely be choppy with not much decline but not much increase either. The outlook however is for rates to edge higher. The 10 yr has successfully held 3.50% twice last week, now a key near term support. As long as it holds mortgage rates will not creep higher but won't decline either. The 10 has resistance at 3.40%, unless there a trend reversal in equities 3.40% will probably hold. The longer outlook for rates is for them to move up as long as the economy remains firm as it is presently.
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, April 04, 2011
No market moving news over the weekend, the 10 yr and mortgages opened better this morning after reversing and rallying a little on Friday. There are no economic releases today and this week is thin on measurements of the economy. The stock market is opening slightly better this morning but a little tedious. Later today (7:15 pm) Ben Bernanke will be speaking to the Atlanta Federal Reserve Bank Financial Markets Conference in Stone Mountain, Georgia.
Goldman Sachs out revising its outlook for Q1 from +3.5% to +2.5% and commented there are risks to the economic outlook. Goldman believes, as most now are coming around to believing, that the Fed will increase interest rates sooner than what had been expected. Most until recently were thinking the Fed would not increase rates until 2012 or later. Rates going higher around the globe, the US will be forced by inflation concerns and a stronger economic outlook to make the move before the end of this year. The Fed will likely increase rates in the 3rd Q unless there is a huge swing in the economic outlook.
Corporate profits have been the driver for the equity markets and the strong gains on the key indexes, going forward however it will be consumers that will set the tone. With crude oil making new highs almost daily these days and food prices likely to jump substantially over the next few months, will consumers have to retrench? Gasoline prices now over $4.00 in most of the country and escalating commodity prices it is reasonable to believe consumers will cut discretionary spending somewhat. Employment is improving yet still quite weak; the real unemployment rate when discouraged workers and those now with temp jobs are added back the true unemployment rate is at 15%.
Thursday the ECB will meet and will likely increase its base rate. The ECB has telegraphed its intentions to do so for the past two weeks and not likely to change. Not sure yet about the impact on US rates but with most major central banks increasing rates the likelihood that US rates will work lower is extremely high. German 10-year government bonds fell for an eighth day, the longest run of declines since June 2006, as speculation mounted the European Central Bank will increase interest rates
At 9:30 the DJIA opened +14, the 10 yr +5/32 at 3.43% -2 bp and mortgage prices +5/32 (.15 bp).
This Week's Economic Calendar:
Monday;
7:15 pm Bernanke speaks
Tuesday;
10:00 am Mar ISM Services Sector index (59.5 frm 59.7)
2:00 pm Fed minutes from Mar 15th FOMC meeting
Wednesday;
7:00 am weekly MBA mortgage applications
Thursday;
8:30 am weekly jobless claims (-2K to 386K; con't claims 3.70 mil frm 3.714 mil)
3:00 pm Feb consumer credit (+$2.5B, Jan +$5.0B)
Friday;
10:00 am Feb wholesale inventories (+1.0%)
The near term outlook for the rate markets will likely be choppy with not much decline but not much increase either. The outlook however is for rates to edge higher. The 10 yr has successfully held 3.50% twice last week, now a key near term support. As long as it holds mortgage rates will not creep higher but won't decline either. The 10 has resistance at 3.40%, unless there a trend reversal in equities 3.40% will probably hold. The longer outlook for rates is for them to move up as long as the economy remains firm as it is presently.
Friday, April 1, 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, April 01, 2011
March employment report was better than expectations; non-farm jobs were expected to have increased 195K to 200K, as reported jobs increased 216K the biggest monthly increase since May 2010. Non-farm private jobs also better, up 203K, the unemployment rate fell to 8.8% from 8.9% in Feb as more potential workers dropped out of looking for a job; if discouraged workers are added in the unemployment rate is about 15.5%. Average hourly earnings were unchanged in March.
Treasuries and mortgages were already lower in price prior to the 8:30 employment report, down 7/32 (.22 bp) for mortgages; after the report mortgage prices ticked a little lower to -11/32 (.34 bp) at 8:45 with the 10 yr note at 3.51% slightly higher (+4 bp) and once again testing the psychological 3.50% level that held earlier this week. Although employment was better than thought it wasn't that much better than what markets were expecting. By 9:15 this morning mortgage prices had improved from their lowest prices but still lower; the 10 yr note moved back to 3.49% where support was holding the yield.
At 9:30 the DJIA opened +50, the 10 yr 3.50% +3 bp and mortgage prices -7/32 (.22 bp).
More key data at 10:00; March ISM manufacturing index expected at 61.4 hit at 61.2. Subcomponents; prices pd index 85.0 frm 82.0, new orders at 63.3 frm 68.0 and employment at 63.0 frm 64.5. After the employment report earlier we cam ignore the employment index, new orders still strong above 50 but the focus has to be on the prices pd index that continues to increase. Businesses are beginning to pass along price increases after a year of holding as commodity prices have increased. The reaction to the report in the markets; no change in rates or the stock market.
Feb construction spending at 10:00, expected down 0.7% fell 1.4% after declining 1.8% in Jan. Not much interest in the decline, weather a factor in winter but we know construction is the lager of all lagging data points.
Philadelphia Fed President Charles Plosser out commenting on the employment report saying the strengthening economy may cause the Fed to end its QE 2 sooner than the end of June. One more Fed official increasingly concerned about inflationary impact. Yields on two-year notes increased five basis points to 0.87%, the 2 is more sensitive to inflation fears in the short run but it is the long end that will feel it also as investors will demand higher yields to offset any concerns that inflation would erode returns if it actually increases. The Fed wants inflation slightly higher to 2.0% frm 1.5% presently but unfortunately for the Fed it can't control inflation that precisely. The two-year note yield touched 0.89%, the highest level since May 2010, and was headed for a weekly increase of 14 basis points before settling back a little.
The US dollar is roaring ahead this morning on the better employment report and increasing belief US rates are about to increase as the Fed falls in line with most other central banks that have or are about to increase base lending rates. The impact today is a big decline in gold and stable oil prices that were higher on the day prior to the 8:30 employment report.
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, April 01, 2011
March employment report was better than expectations; non-farm jobs were expected to have increased 195K to 200K, as reported jobs increased 216K the biggest monthly increase since May 2010. Non-farm private jobs also better, up 203K, the unemployment rate fell to 8.8% from 8.9% in Feb as more potential workers dropped out of looking for a job; if discouraged workers are added in the unemployment rate is about 15.5%. Average hourly earnings were unchanged in March.
Treasuries and mortgages were already lower in price prior to the 8:30 employment report, down 7/32 (.22 bp) for mortgages; after the report mortgage prices ticked a little lower to -11/32 (.34 bp) at 8:45 with the 10 yr note at 3.51% slightly higher (+4 bp) and once again testing the psychological 3.50% level that held earlier this week. Although employment was better than thought it wasn't that much better than what markets were expecting. By 9:15 this morning mortgage prices had improved from their lowest prices but still lower; the 10 yr note moved back to 3.49% where support was holding the yield.
At 9:30 the DJIA opened +50, the 10 yr 3.50% +3 bp and mortgage prices -7/32 (.22 bp).
More key data at 10:00; March ISM manufacturing index expected at 61.4 hit at 61.2. Subcomponents; prices pd index 85.0 frm 82.0, new orders at 63.3 frm 68.0 and employment at 63.0 frm 64.5. After the employment report earlier we cam ignore the employment index, new orders still strong above 50 but the focus has to be on the prices pd index that continues to increase. Businesses are beginning to pass along price increases after a year of holding as commodity prices have increased. The reaction to the report in the markets; no change in rates or the stock market.
Feb construction spending at 10:00, expected down 0.7% fell 1.4% after declining 1.8% in Jan. Not much interest in the decline, weather a factor in winter but we know construction is the lager of all lagging data points.
Philadelphia Fed President Charles Plosser out commenting on the employment report saying the strengthening economy may cause the Fed to end its QE 2 sooner than the end of June. One more Fed official increasingly concerned about inflationary impact. Yields on two-year notes increased five basis points to 0.87%, the 2 is more sensitive to inflation fears in the short run but it is the long end that will feel it also as investors will demand higher yields to offset any concerns that inflation would erode returns if it actually increases. The Fed wants inflation slightly higher to 2.0% frm 1.5% presently but unfortunately for the Fed it can't control inflation that precisely. The two-year note yield touched 0.89%, the highest level since May 2010, and was headed for a weekly increase of 14 basis points before settling back a little.
The US dollar is roaring ahead this morning on the better employment report and increasing belief US rates are about to increase as the Fed falls in line with most other central banks that have or are about to increase base lending rates. The impact today is a big decline in gold and stable oil prices that were higher on the day prior to the 8:30 employment report.
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