Mortgage Rates






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


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Thursday, February 10, 2011


Weekly jobless claims at 8:30 were another surprise; claims were expected to be down 3K to 412K as reported claims fell 36K to 383K, the lowest level of weekly filings since July 2008. Continuing claims also fell more than expected, to 3.888 mil frm 3.935 mil. Measuring the actual status of the employment sector is increasingly more difficult. In Jan the unemployment rate fell to 9.0% from 9.4% in Dec, non-farm jobs were anemic at best. Today weekly claims added more confusion. Is the weather the culprit or is the employment situation actually better than most believe? Eighteen states and territories reported an increase in claims, while 35 had a decrease. The initial reaction to the data wasn't much, the stock indexes didn't budge, the rate markets held levels prior to the report. By 9:00 however the bearish interest rate markets did back off, prices of mortgages and treasuries fell.

Recent employment data is almost impossible to square with conflicting data becoming the norm. Spinning the employment report in either direction to fit ones outlook has become easy with recent data points measuring the job sector. Earlier this week a Labor Department report showed job openings in the U.S. decreased by 139,000 to 3.06 million, the fewest since September. The number of people hired also dropped along with the number of workers fired. Fed Chairman Bernanke told the House Budget Committee yesterday that while the declines in the jobless rate in December and January “do provide some grounds for optimism,” companies need to hire more to reduce joblessness. “With employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,” Bernanke said.

At 9:30 the stock market opened weaker; the DJIA down 50 on the open. The 10 yr note lower in price with its yield up 2 basis points on the new 10 yr auctioned yesterday. Mortgage prices at 9:30 -7.32 (.22 bp)

At 10:00 Dec wholesale inventories, expected up 0.6%, were up 1.0%. Sales increased 0.4% with consensus at +1.3%; the sales to inventory ratio at 1.16 months from 1.5 months in Nov. No initial reaction to the report.

At 1:00 Treasury will auction $16B of 30 yr bonds; the 10 yr auction yesterday was exceptionally well bid fueling short-covering and improvement in the rate markets.

Over night the Bank of England left its base interest rate unchanged as expected. Stock markets in Europe all weaker today. Today’s debates were based on new quarterly economic forecasts, that will be released on Feb. 16. Inflation accelerated to 3.7% in December, the fastest pace in eight months, and the rate may rise above 4% before easing to the bank’s 2% target. Food prices increased the most in 19 months in January. The BOE as well as Germany and other European countries facing inflation while here in the US our Fed is more concerned that our inflation remains too low.

The recent spike in interest rates wasn't unexpected; the rate markets have been technically bearish for three months. Rates likely will continue to increase through the year however we still hold that while rates are likely to increase the magnitude won't be severe. Presently we are not expecting the bellwether 10 yr note to exceed 4.00% and mortgage rates to hold at 5.50%.