Mortgage Rates


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




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Friday, March 04, 2011


The Feb employment report this morning was spot on in terms of job growth; non-farm jobs were up 192K overall, private job growth increased 222K. The unemployment rate however was another surprise, expected to have increased from 9.0% in Jan to 9.1% unemployment declined to 8.9%. Hardly any employment report these day isn't without question, the decline in the unemployment rate once again has been largely ignored as flawed; the real rate of unemployment is still well over 10% if those that have not been looking for a job but are employable were to be looking. In Jan and Dec non -farm job revisions added another 58K jobs; Jan from +36K to +63K and Dec up an additional 31K. Feb average hourly earnings were unchanged with forecasts of an increase of 0.2%. Employment rose in manufacturing, construction and temporary help agencies, while state and local government payrolls slumped. Weekly jobless claims yesterday declined 20K, the lowest weekly filings since may 2008. The recent improvements on non-farm jobs and weekly unemployment claims is becoming difficult to ignore. (We criticized ADP yesterday for the lack of accuracy on their job estimates compared with the BLS data, Wednesday they said 217K private jobs, the BLS said today 222K----a stopped watch is accurate two times a day----good work ADP).

Yesterday treasuries and mortgage took a sizeable hit in anticipation of this morning's employment report; this morning after the rep-ort the 10 yr note traded unchanged while mortgage prices after falling 12/32 (.37 bp) yesterday are up 6/32 (.18 bp) at 9:00 am. Yesterday the stock market did the same, rallying in anticipation of the strong employment report; this morning into the open at 9:30 the key indexes were about unchanged-----in the case of stocks, buy the rumor sell the fact, in the case of rate markets its sell the rumor and buy the fact.

Crude oil is higher today as the situations in Libya and other countries in the area haven't subsided. Libya’s opposition leaders rejected a mediation offer by Venezuelan President Hugo Chavez, an ally of Qaddafi. As the prospects of a rapid end to the fighting in Libya faded, protesters elsewhere in the region resumed their demands for civil rights, higher living standards and the ouster of entrenched autocratic regimes. In Yemen, an opposition group said two people were killed when security forces attacked protesters; tens of thousands joined demonstrations calling for the ouster of the present regime. Now after the employment report that turned the focus away from the Mideast, its back to the oil market as it is impacted on any news of potential disruptions in supply. Crude this morning is up over a dollar ($+1.34 at 9:40)

The bond and mortgage markets have experienced an increase in volatility over the last few days. The bellwether 10 yr note, drive for mortgage rates has failed on any rallies when its yield hits 3.40% but finds support when its yield climbs to the 3.60% area; mortgage rates also stuck in a 15 basis point rate range on 30 yr mortgages.

The DJIA opened +2 points at 9:30 while the 10 yr price was up 3/32 and mortgage prices +7/32 (.22 bp). The remainder of the day traders will focus on the oil markets and any potential news from the Mideast. So far today we don't make much out of the rally after the recent sell-offs in mortgages and treasuries both markets are showing no directional movement, a lot of chop but no trend in either direction. The wider picture however is bearish for US rates with inflation concerns still mounting and comments yesterday that the ECB may be ready to raise rates. There is little reason now to hang on to the idea that rates will decline much; as long as civil wars don't break out in the Mideast that would drive oil over $120.00 the bond market will not likely decline a lot.

At 10:00 Jan factory orders were up 3.1% much stronger than expected, in Dec orders were revised from +0.2% to +1.4%. There was no reaction to the better orders report.