Mortgage Rates

Mortgage Rates Happy New Years! Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgage markets starting strong this morning as traders seek safety against the potential failure to come to any agreement on the Cliff discussions. Yesterday Sen. majority leader Harry Reidsaid he didn’t think a deal would get done before the first of the year; the stock market took a huge hit with the DJIA down 150 points, then in the afternoon Republicans announced a special session of the House on Sunday evening. After the announcement the stock market recovered and interest rates came well off their best levels. This morning the fear factor is back; the 10 yrat 9:00 at 1.70% -3 bp with 30 yr MBSs +14 bp. Pre-opening trade in the stock indexes had the DJIA down 60 points. President Obama has called a meeting this afternoon at the White House to discuss the pending failure to deal with the Cliff. If there is a deal worked out it won’t be a wide-ranging one that deals with spending cuts or entitlement reforms. The headline will likely be that taxes won’t increase next year. If a deal isn’t accomplished there is still no reason to believe taxes will increase. Neither party, at the core, wants taxes to increase except for those high income people. Both parties have to understand the implications of driving the economy back into recession. In Jan. when Congress returns those tax increases will be retroactively dismissed. The issues of entitlements, the debt ceiling, and spending cuts will occupy legislators in Jan. but we don’t believe there will be much progress until the new Congress is installed, even then it will drag on for months. 2013 isn’t going to be easy for investors or markets. From the bond and mortgage markets’ perspective the next three days will likely be volatile. Normally on New Year’s eve there is nothing to grab much attention but this year is going to be different with the continual negotiations on the Cliff. Monday the stock market will traded all day while the bond and mortgage markets are set to close early at 2:00. At 9:30 the DJIA -73, NASDAQ -19, S&P -8. 10 yr note 1.70% -3 bp, 30yr mortgage price +11 bp. 9:45 the Dec Chicago purchasing mgrs. index was expected at 51.0 frm50.4, it increased to 51.6, the best level since last August, but the employment index at 45.9 was the lowest since Nov 2009. The decline in employment is due to the storm Sandy that hit the NE in Oct. No reaction to the data; economic reports are less significant at the moment with the Cliffhanging over markets. At 10:00 Nov pending home sales from NAR, expected+1.8%, was +1.7%; yr/yr +8.9%. Pending home sales are contracts signed but not yet closed. The potential of high volatility today with talks and comments coming from Washington. We had it yesterday with Reid and Boehner.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A little softness in the bond and mortgage markets to start the day; stock indexes slightly better at 8:30. Weekly jobless claims at 8:30 down 12K to 350K, estimates were for an increase of 4K to 365K. The 4 wk average at 356,750 down 11K. A better report but it didn’t get any reaction in the markets. The economic data is backward looking, normally traders and investors see the data as indications of future outlooks; these days the various data points are pushed to the back with the fiscal Cliff the only thing out there that is important to markets. In this case with claims, the holidays have likely distorted the data. Claims from 19 states were just estimates with government offices closed on 12/24 the prevented a more accurate report. At 9:30 the DJIA opened NASDAQ -4, S&P -1. 10 yr note at 1.76% +0.5%; 30 yr MBSs -14 bp. Two reports at 10:00; Nov new home sales were expected up 1.8%, were up 4.4% to annual pace of 377K units the most since April 2010. Oct sales were revised from 368K units to 361K accounting for the large percentage increase from month to month. The forecast called for Nov sales at 380K. Yet another housing stat that adds to belief the housing sector is well on the way to recovery. The Dec consumer confidence index wasn’t so rosy; the index was expected at 70.0 frm 73.7 in Nov; the index fell to 65.1 frm a revised 71.5 in Nov. Consumers listening to the squabbles from Washington losing confidence that the political system is broken. The President and most Congress people are filtering back to Washington to work on a plan to avoid the Cliff. Given the short time before the year ends markets are now generally expecting we will go over it, however some relaxation is evident now that it appears inevitable our politicians can’t find common ground. Markets are sitting quietly; no panic in either the bond or equity markets. Going over the Cliff theoretically will cause those that actually pay income taxes a substantial increase; but Congress and the Administration still have time to pass a temporary extension of the Bush tax cuts before new withholding tax tables are printed. Or, Congress could retroactively repeal any tax increases. It is very unlikely that most Americans will see higher taxes next year. Most of those that are returning are leaders in the debate. The leaders have indicated they will give members 48 hours to return assuming there is something to vote on. Next Monday Treasury will reach its debt ceiling once again; Geithner is working a plan for emergency spending that would keep the government going through February or into March. Nothing new about it, this is how it starts. Treasury runs out of money, an emergency plan is worked out pushing the inevitable down the road, then a lot of debate before the debt ceiling is increased. Obama wants Congress to give him total control over the debt ceiling; he has almost no chance to achieve that rather audacious demand. 2013 is going to be a year of constant turmoil n Washington; the fiscal cliff, spending cuts, entitlement reforms, debt ceiling, and possibly an actual budget that we haven’t had for four years. So far this morning the MBS market has shown increased volatility. At 9:30 30 yr FNMA MBSs -14 bp, at 9:45 unchanged. Treasuries are generally unchanged as are the stock indexes. 30 yr 3.0 FNMA still trading under its 20 and 40 day averages; the 10 yr note also still above its 20 and 40 day averages on the yield. The 10 yr 20 day at 1.72%, the 40 day at 1.70%. Overall there has been little movement in the bond market over the last week.

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 essentially unchanged on Monday. This morning about the same, at 9:00 the 10 yr note unchanged and 30 yr MBSs +3 bp. Stock indexes a little better early and prior to the 9:30 open. The lights in Washington still off after failure to come to any agreement on the Cliff. President Obama will return to Washington tomorrow and Congress will be back There is still some optimism that the two warring parties will get something done; if so it will be a deal that fails to address spending cuts or deficit reduction. About the best that can be expected now is a plan to avoid tax increases for most citizens. The most recent data on holiday shopping isn’t good. Sales were expected to increase 3.0% frm last year, according to Master Card sales increased just 0.7%. It was the slowest growth in sales since 2008 when sales fell 5.5%; since then holiday sales have increased each year. Mostly it was the fiscal mess and Washington’s ineptness in coming to grips with it. The tropical storm Sandy gets some blame but consumers’ fears of higher taxes in January is the prime reason for the slowdown. The S&P/Case-Shiller index of property values in 20 cities increased 4.3% from October 2011, the biggest 12-month advance since May 2010. Estimates were for an increase of 4.0%. Home prices adjusted for seasonal variations rose 0.7% in October from the prior month, with 17 of 20 cities showing gains. Las Vegas showed the biggest gain with a 2.4% advance, followed by San Diego with a 1.7% increase. Property values dropped the most in Chicago, which fell 0.7% over the month. At 9:30 the DJIA opened +20, MASDAQ unchanged, S&P +2. The 10 yr at 9:30, after starting a little weak, up 3 bp to 1.77% -1 bp; 30 yr MBSs +6 bp. With nothing but the fiscal Cliff on minds, the markets should be relatively quiet through the day. Washington won’t get make to “business” until tomorrow and with the bad weather hitting most of the mid-section of the country some of the legislators may not make it on time. The best outcome now is for an agreement to keep tax increases from increasing on middle America. Nothing will be done on spending cuts or deficit reduction, not to mention reforms of entitlement programs. Kick the can down the road is what we can expect from Washington. A blizzard warning stretches from northeastern Arkansas to Cleveland, Ohio, where almost 14 inches of snow is expected to fall by tomorrow, according to the National Weather Service. Winter storm warnings are in effect from Illinois into Maine. Here in Indy we are going to get 12” by late this evening. Over the last six trading sessions the 10 yr has stayed in a 8 bp range. 30 yr MBSs about unchanged. Technically still slightly bearish but with the Fed supporting rate markets we don’t expect rates will increase much from present levels. IF the economy were to go over the Cliff next week the bond and mortgage markets should improve with the stock market falling on disappointment. Until there is something concrete from Washington traders will continue to keep a minor bid in the bond and mortgage markets. In the equity markets, based on how the indexes have been trading, there is still optimism that the Cliff will be avoided.

Mortgage Rates

Mortgage Rates, Merry Christmas Eve! Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com 2 This Week; actually the week starts on Wednesday although Monday markets will be open in shortened trading. (Stocks close at 1:00, bonds close at 2:00). Many global markets are closed but here in the US for reasons unknown to mankind our markets are open; nothing new however, it’s been this was for decades. This week has two housing data, Nov new home sales on Thursday and Nov pending home sales on Friday. The only thing of importance this week is the Cliff; Congress is due back on Thursday the Administration is in Hawaii. Based on comments there is no plan that both parties will agree on. There is an increase in the view that we will go over the Cliff. Going over it has been built up to a serious fear factor within markets, but now with the Cliff moving closer many are thinking going over won’t be that serious. Of course that is based on the further view that there will be a deal to keep taxes from increasing before the IRS can issue new withholding tables.

Mortgage Rates

Forwarded exclusively by: Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com As far as civilization is concerned the Mayans appear to be wrong; we are still here. As far as the fiscal Cliff is concerned the Mayans may have got it right. Last night the Republican controlled House couldn’t even get enough Republicans to pass the Boehner Plan B that would have increased taxes on those making over a million a year. The Tea Party reigns. The Plan B was supposed to move Republicans closer to Boehner’s original proposal to the President on revenue increase and spending cuts. Even after House Majority Leader Eric Cantor said yesterday that the measure had sufficient support, last night the bill was pulled as there wasn’t enough votes to pass it. Even had the bill passed it would have died a quick death in the Senate; but it is a blow to Republicans and possibly will take the country over the Cliff. Now there won’t be any votes on anything until after Christmas. Until now the Senate was supposed to end today and not re-convene until next Thursday; whether the turn of events will keep legislators at work will be an issue. The clock is ticking down, unless there is a big change in sentiment on both sides falling over the Cliff, at least at this moment looks likely. At 10:00 this morning Boehner is scheduled to make a statement. Can the President and Republicans come together? Based on the number of republicans that would not vote for Plan B it is going to take a number of Democrats in the House to join with Republicans to agree on something that is likely to be closer to what the President is seeking. The reaction to last night’s failure is hitting US and European stocks hard this morning and improving US interest rate markets. At 9:00 the DJIA was down 182 points; the 10 yr note yield at 1.76% down 4 bp, 30 yr MBS prices up 18 bp frm yesterday’s close. New factory orders for durables in November rose 0.7% in November, following a 1.1% gain in October. Analysts expected a 0.5% gain. Excluding transportation, orders increased 1.6%, following a boost of 1.9% in October. Market expectations were for a 0.2% rise in orders excluding transportation. Obviously a much better outcome than forecasts, but it is a Nov report. It was ignored in the markets, as is most economic data these days with the Cliff fiasco dominating everything these days. Nov personal income was expected to be up 0.3%, as reported income increased 0.6%. Personal spending in Nov was expected +0.4%, as reported it was right on at +0.4%. Income got some lift in November as businesses in the Northeast re-opened and employees returned to work after Sandy. The two 8:30 reports on durables and personal income would under normal circumstances been met with enthusiasm in the stock market and likely bothered the bond market. These however are not normal times; it is all about the Cliff, economic data is filed away for later after there is something from Washington. Given the circumstances in Dec personal spending and durable goods orders will likely slow. The DJIA opened -63 at 9:30, NASDAQ -53 and S&P -10. The 10 yr note at 9:30 1.74% -6 bp; 30 yr MBS price +25 bp. Within five minute after the open the DJIA traded down 140 points. At 9:55 the final Dec U. of Michigan consumer sentiment index, expected at 75 frm 74.5, the index fell to 72.9. At the end of Nov the index was at 82.7. It is a volatile index but still disappointing. The 10 yr held support at 1.85% on Tuesday, since then a little improvement in the bond and mortgage markets. This morning the 10 yr is back below its 200 day average on the yield but is still bearish I our opinion. There is the potential for more improvement as the fiscal Cliff looms and since the Plan B couldn’t muster enough votes last night there is an increase in the view that we may actually go over it. Not a certain thing however, there are a few more days to pull the mess out of the fire. If that were to occur the bond and mortgage markets will be pressured again. Take advantage of this rally; it’s all about the Cliff as to how low interest rates will decline.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Started better this morning in the bond and mortgage markets after he 10 yr note yield increased to 1.85% two days ago where strong support resides. At 8:30 the 10 yr note traded at 1.78% down 3 bp with 30 yr FNMA MBS +12 bp. Weekly jobless claims at 8:30 were expected to be up 16K, as reported claims were right on, +17K to 361K. The four-week moving average of claims declined to 367,750, the lowest since the end of October, from 381,500 last week. Continuing claims rose by 12,000 to 3.23 million in the week ended Dec. 8. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 94,000 to 2.14 million in the week ended Dec. 1, the last data available. Q3 final GDP was expected to be unchanged from the preliminary report last month at +2.7%. Growth in the quarter increased more than thought, at +3.1%, a rather surprising increase. According to the Commerce Dept. the increase was due to increased consumer spending and a smaller trade deficit. There was little reaction to the better growth in the quarter, in a few days the fourth quarter will be complete; it is highly unlikely Q4 will come close to the growth in Q3. Slowing growth globally and companies reducing their spending and hiring in the quarter caused by fiscal Cliff concerns may reduce GDP growth in half frm Q3. At 9:30 the DJIA opened +5, NASDAQ +5, S&P +1. The 10 yr note at 9:30 +5/32 at 1.79% -2 bp; 30 yr MBS price +9 bp. Republicans in Congress will vote today on Boehner’s plan to raise taxes on incomes over $1 million. The proposal is aimed at preventing more than $600B of automatic tax increases and spending cuts from coming into effect next year. White House officials told a group of industry representatives that Obama’s budget talks with Boehner have deteriorated. The vote is all about posturing; it may pass the House but that is as far as it will get. Viewed on a day-to-day basis, today it looks bleak for a deal to avoid the Cliff. Tomorrow is another day, and there is still next week. For all the conjecturing and opinions, whether we avoid the Cliff is still highly uncertain regardless of who is talking in Congress or the Administration. Four economic reports at 10:00. Nov existing home sales were thought to be up 2.3% to 4.90 mil annualized units; sales increased 5.9% to 5.04 mil units. Yr/yr sales of existing home sales +14.5%, the 5.04 mil nits is the largest since Nov 2009 which was due to the home owners tax credit. Take that month out and sales are at highs not seen since 2007. There is now just a 4.8 month supply based on present sales. The Dec Philadelphia Fed business index was expected at -2.0, as reported the index increased to +8.1, the best since last April. Nov leading economic indicators was expected -0.2%, as reported it was spot n at -0.2%. Finally, the Oct FHFA house price index was expected +0.3%, the price index increased 0.5%. Technically, we noted two days ago that 1.85% on the 10 yr note was strong support; so far it has held as expected. Rates should improve more but we don’t expect much of an improvement. Suggest using any improvements to lock in rates.

Mortgage Rates

Morgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The day started with stock indexes better and interest rates unchanged from yesterday’s selling. All global stock markets are better today with the belief that the US will avoid going over the Cliff in 12 days. Negations are still rather fragile, at least based on the rhetoric coming from both sides; nevertheless based on how markets are reacting here and around the world there will be a deal before the end of the year. At 9:00 the 10 yr note traded unchanged while mortgage prices were slightly better than the close yesterday. In late trading yesterday MBS prices did improve from levels we marked at 4:00. So far today there isn’t anything out of Washington on the Cliff negotiations. Nov housing starts at 8:30 were down 3.0%, building permits +3.6% both about in line with forecasts. Starts fell to 861K annual units frm revised 888K in Oct, originally 894K. The average rate of housing starts from September through November was the strongest since the three months ended August 2008. Permits increased to 899K units. Construction of single-family houses fell 4.1% to a 565,000 rate. Yesterday the Dec NAHB housing index increased for the 8th straight month. Mortgage applications decreased 12.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 14, 2012. The Refinance Index decreased 14% from the previous week to the lowest level since week ending November 2, 2012. The seasonally adjusted Purchase Index decreased 5% from one week earlier. The refinance share of mortgage activity decreased to 83% of total applications from 84% the previous week. The HARP share of refinance applications fell to 25%. The adjustable-rate mortgage (ARM) share of activity increased to 3% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.50% from 3.47%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 3.73%, the lowest rate in the history of the survey, from 3.77%, with points decreasing to 0.29 from 0.35 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.34% from 3.32%, with points increasing to 0.54 from 0.51 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.83%, the lowest rate in the history of the survey, from 2.85%, with points remaining unchanged at 0.26 (including the origination fee) for 80% loans. Investors continue to move into more risky investments and away from safety of treasuries. The same can be seen in Europe; today’s stronger than expected German Ifo Business Climate survey (102.4 actual v. 101.9 expected) is the latest spark for the ongoing flight into risk assets, causing investors to shed safer ones. This afternoon at 1:00 Treasury will auction $21B of 7 yr notes; yesterday’s 5 yr and Mondays 2 yr auctions didn’t see strong bidding. At 9:30 the DJIA opened -2, NASDAQ +5, S&P +1. The 10 yr note +4/32 at 1.81% -1 bp; 30 yr MBSs +15 bp, FHAs -17 bp. Yesterday the 10 yr note increased to 1.85% where there is very solid support. The 10 yr note has traded over 1.85% for one day since last May (9/14/12). Although the 10 yr yield is presently over its 200 day average at 1.76%, 1.85% has successfully held on five occasions. The momentum oscillators on the note are signaling an oversold market. We expect some improvement at these levels but we do not expect interest rates will decline in an substantial way. Take advantage of price improvements in the mortgage markets.