Mortgage Rate Update



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, January 11, 2011


The rate markets started quiet and about unchanged this morning after a nice move technically yesterday for the bellwether 10 yr note. The note yield closed under its 20 day moving average and the 9 day RSI moved below 50 to 48, the first time the RSI index is below 50 (bullish) since mid-Nov, good but not good enough yet. For over a month on any improvement in its yield the 10 yr note has run into a wall at 3.28%, that occurred yesterday and this morning the 10 yr at 9:30 at 3.31%. Mortgage prices unchanged at 9:00 this morning. No direct news for the markets overnight; Japan announced it would join China in buying debt issues in Europe to assist in the sovereign debt problems that continue to plague the region.

Japan will buy bonds issued by Europe’s financial-aid funds, Finance Minister Yoshihiko Noda said in Tokyo today, joining China in signaling support for the region as Portugal, Spain and Italy prepare to sell debt this week. China’s foreign- exchange reserves jumped by a record last quarter to $2.85 trillion, the central bank said today. The announcement improved Europe's stock markets and supported US stock index futures in pre-market trading.

Somewhat of a negative this morning for the economic outlook; the National Federation of Independent Business index of sentiment of small businesses fell for the first time in six months, down 0.6%. For six months the index had been very slowly improving. According to Wm Dunkelberg, chief economist for the group small businesses are reluctant to spend and hire until they have more evidence consumers will increase spending; the view we have had and continue to have. As we have noted previously, we want to see Jan data before we commit to the current consensus that the US growth in 2011 will meet the 4.0% GDP forecast that has driven equity markets higher. The NFIB monthly report didn't hurt the stock market, the DJIA opened +57 this morning.

The only economic data today, at 10:00 Nov wholesale inventories, expected up 1.0%, were down 0.2%. Oct revised from +0.9% to +1.7%. Nov sales +1.9% with the inventory to sales ratio 1.15 months from +1.17 months in Oct. No initial reaction to the data.

At 1:00 this afternoon Treasury will auction $32B of 3 yr notes; two weeks ago the 2 yr note auction met with soft demand. Likely the bond and mortgage markets will be quiet until the auction results hit.

The Fed will be buying treasuries with matures between 2016 and 2017 today as part of the $600B QE 2, not a big deal though.