Mortgage Rates


Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com


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Thursday, January 27, 2011


Prior to 8:30 interest rate markets were lower in price with the 10 yr note yield at 3.47%, touching its support level at 3.50%, mortgage prices traded down 9/32 (.28 bp). Two data points at 8:30 stopped the selling while leaving traders trying to square with the data. Weekly jobless claims were expected to increase 1K, as reported claims increased 51K to 454K the highest weekly claims since last Oct. Continuing claims also increased for the first time in four weeks, to 3.99 mil frm 3.87 mil. Unemployment claims were distorted by the winter weather in the South with four states reporting claims higher than normal. It took 30 minutes but by 9:00 the 10 yr note moved back to unchanged at 3.42% and mortgages at 9:00 +2/32 (.06 bp).

Dec durable goods orders were out at 8:30; orders were expected to be up 1.5%, as reported orders fell 2.5%. When transportation orders were excluded orders were thought to be up 0.6%, as reported +0.5%. Durables is a very volatile series and usually sees revisions later when factory orders are released (Feb 3rd), markets normally don't get too worked up over any deviations and with the volatile transportation orders excluded orders were generally in line with forecasts. Bookings for goods like computers and communications gear excluding aircraft climbed 1.4% after a 3.1% gain in November that was larger than previously estimated, figures from the Commerce Department showed today in Washington. Total orders fell 2.5% as noted, depressed by volatile demand for aircraft, which plunged 99%.

Stock indexes were looking good prior to the 8:30 data then backed off; at 9:30 the DJIA opened -2 points but within a few minutes managed to move a little higher. Mtgs at 9:30 +3/32 (.09 bp) and the 10 yr note +2/32 at 3.42%; by 9:45 however the 10 traded lower by 3/32.

Nov pending home sales released at 10:00 were expected to be down 0.5%; sales increased 2.0%, pending sales are sales with contracts but net closed. Yr/yr sales however down 2.2%. The NAR said better employment and good values were forces that improved the sales report. The initial reaction pushed prices on the 10 and mortgages off a little but no major reaction, nevertheless it is another measurement that beat the estimates.

Later this afternoon Treasury will complete this week's auctions with $29B of 7 yr notes. Yesterday's 5 yr note auction was met with strong demand, Tuesday's 2 yr auction however was not well bid.

The bond and mortgage markets continue to show bearish technicals, fundamentals also are working against the rate markets. The economy is improving, while data this morning is weaker investors will likely dismiss them as anomalies as most reports support the improving outlook for the US economy. We believe it is only a matter of time before the 10 yr note and MBSs break their ranges to higher rates. That said, as long as the 10 yr note and MBSs hold within their respective six week ranges there remains the potential of improvement but the potential is lessening with each economic release.