Be kind, for everyone you meet is fighting a harder battle.
~Plato~
Friday, April 29, 2011
Thursday, April 28, 2011
Mortgage Rates
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.
Thursday, April 28, 2011
Treasuries and mortgages doing better this morning; prior to 8:30 the 10 yr was 6/32 and mtgs +3/23 (.09 bp). At 8:30 weekly jobless claims were thought to have declined 13K last week, as reported claims increased 25K to 429K frm 404K the previous week. Continuing claims did decline as unemployment compensation continues to run out fore many; 3.64 mil frm 3.709 mil. Also at 8:30 the advance look for Q1 GDP, +1.8% about where most had revised their estimates downward. A month ago Q1 GDP was thought to be up 3.0%. The price deflator (inflation read) +1.9% in line with estimates. Initial market reactions to the data; treasuries added to their gains and the stock index futures slipped a little, overall the reactions weren't much given weekly claims now well over the 400K level that most see as pivotal.
At 9:30 the DJIA opened -14 points, the 10 yr note +11/32 at 3.32% -3 bp and mortgage prices at 9:30 +8/32 (.25 bp) frm yesterday's close.
At 10:00 March pending home sales from NAR, contracts signed but not yet closed. Up 5.1% from Feb but down 11.4% yr/yr.
Markets continue to think about what Bernanke said yesterday at his press conference, Bernanke is to be lauded for his willingness to stand up with reporters and provide some additional clarity about what the Fed is thinking about raising rates. He said it would take at least two more FOMC meetings before the Fed considered any tightening. There was a lot to consider from his comments but the most intriguing comment was " Its not clear we can (the Fed) get substantial improvements in payrolls without some additional inflation risks, and in my view we can't achieve a sustainable recovery without keeping inflation under control". What that means to markets remains to be answered; keep unemployment high and keep inflation under control, or do things that lower unemployment and send interest rates higher?
As Bernanke spoke yesterday gold and oil prices exploded and the dollar was racked with more selling against the euro. Investors and traders continue to run to safety, a little into US treasuries but a huge run to gold as the outlook remains muddled to say the least. Employment isn't likely to improve much, US debt increasing is an increasing concern in global markets, inflation in the rest of the world is increasing while the US refuses to admit it, consumers are tightening discretionary spending as gas price, food prices, and price increases are beginning to be passed down to consumers and it isn't just food. The Fed still thinks commodity prices and energy price increases are "transitory" without definition as to what that means in terms of time. Bernanke admitted emerging markets are continuing to expand, yet somehow he appears to believe that the demand from those emerging markets for food and energy will not push US inflation higher and commodity and energy prices will decline.
Forcing investments to US stock markets? The Fed's plan seems to be to keep rates so low that investors are forced to invest in US equities and to keep the dollar falling to help US exports.
Treasuries and mortgage markets continue their slightly positive bullish near term outlook. The economic outlook is being re-assessed lower, markets remain believing that the Fed is correct that inflation won't be a factor for fixed income investments. Gold and silver are climbing the dollar is declining, all of it is safety trades in this very cloudy economic outlook. How much lower US interest rates can decline is questionable, if inflation fears continue to hold long term fixed income investments will not be attractive. Rates around the world are increasing, can the US continue to attract investors for our bond market? The dollar is continuing to fall against most currencies, not much progress or expectations for politicians to deal with the expanding deficit.
This afternoon Treasury will conclude its auctions this week with a $29B 7 yr auction.
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.
Thursday, April 28, 2011
Treasuries and mortgages doing better this morning; prior to 8:30 the 10 yr was 6/32 and mtgs +3/23 (.09 bp). At 8:30 weekly jobless claims were thought to have declined 13K last week, as reported claims increased 25K to 429K frm 404K the previous week. Continuing claims did decline as unemployment compensation continues to run out fore many; 3.64 mil frm 3.709 mil. Also at 8:30 the advance look for Q1 GDP, +1.8% about where most had revised their estimates downward. A month ago Q1 GDP was thought to be up 3.0%. The price deflator (inflation read) +1.9% in line with estimates. Initial market reactions to the data; treasuries added to their gains and the stock index futures slipped a little, overall the reactions weren't much given weekly claims now well over the 400K level that most see as pivotal.
At 9:30 the DJIA opened -14 points, the 10 yr note +11/32 at 3.32% -3 bp and mortgage prices at 9:30 +8/32 (.25 bp) frm yesterday's close.
At 10:00 March pending home sales from NAR, contracts signed but not yet closed. Up 5.1% from Feb but down 11.4% yr/yr.
Markets continue to think about what Bernanke said yesterday at his press conference, Bernanke is to be lauded for his willingness to stand up with reporters and provide some additional clarity about what the Fed is thinking about raising rates. He said it would take at least two more FOMC meetings before the Fed considered any tightening. There was a lot to consider from his comments but the most intriguing comment was " Its not clear we can (the Fed) get substantial improvements in payrolls without some additional inflation risks, and in my view we can't achieve a sustainable recovery without keeping inflation under control". What that means to markets remains to be answered; keep unemployment high and keep inflation under control, or do things that lower unemployment and send interest rates higher?
As Bernanke spoke yesterday gold and oil prices exploded and the dollar was racked with more selling against the euro. Investors and traders continue to run to safety, a little into US treasuries but a huge run to gold as the outlook remains muddled to say the least. Employment isn't likely to improve much, US debt increasing is an increasing concern in global markets, inflation in the rest of the world is increasing while the US refuses to admit it, consumers are tightening discretionary spending as gas price, food prices, and price increases are beginning to be passed down to consumers and it isn't just food. The Fed still thinks commodity prices and energy price increases are "transitory" without definition as to what that means in terms of time. Bernanke admitted emerging markets are continuing to expand, yet somehow he appears to believe that the demand from those emerging markets for food and energy will not push US inflation higher and commodity and energy prices will decline.
Forcing investments to US stock markets? The Fed's plan seems to be to keep rates so low that investors are forced to invest in US equities and to keep the dollar falling to help US exports.
Treasuries and mortgage markets continue their slightly positive bullish near term outlook. The economic outlook is being re-assessed lower, markets remain believing that the Fed is correct that inflation won't be a factor for fixed income investments. Gold and silver are climbing the dollar is declining, all of it is safety trades in this very cloudy economic outlook. How much lower US interest rates can decline is questionable, if inflation fears continue to hold long term fixed income investments will not be attractive. Rates around the world are increasing, can the US continue to attract investors for our bond market? The dollar is continuing to fall against most currencies, not much progress or expectations for politicians to deal with the expanding deficit.
This afternoon Treasury will conclude its auctions this week with a $29B 7 yr auction.
Wednesday, April 27, 2011
Mortgage Rates
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.
Wednesday, April 27, 2011
A little weaker this morning in the rate markets; not really unexpected after the recent improvement in rates and ahead of an historic day with the chairman of the Fed holding a press conference for the first time ever. The FOMC meeting will conclude at 12:30 with its usual short policy statement, then at 2:15 Bernanke will hold a 45 minute press conference to answer questions. It is huge step for the Fed to open the chairman to the media, it also could be just another event that fails to meet expectations. If Bernanke doesn't allow follow up questions then he can waltz through the press conference without breaking a sweat and continue to let markets swing in the wind.
At 9:00 this morning the 10 yr note -12/32 at 3.35% after closing at 3.31% yesterday; mortgage prices off 6/32 (.18 bb), the stock indexes continue to improve as Q1 earnings generally beat estimates. At 9:30 the DJIA opened +11 then immediately retreated to unchanged, the 10 yr at 9:30 -12/32 and mortgages -6/32 (.18 bp).
At 8:30 March durable goods orders expected up 2.0% increased 2.5%, when the volatile transportation orders are ignored durables were up in line with estimates 1.3%; no reaction to the report as everything this morning is completely dependent on the FOMC policy statement and Bernanke's press conference.
Mortgage applications decreased 5.6% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 22. There was no adjustment made for Good Friday. The Market Composite Index, a measure of mortgage loan application volume, decreased 5.6% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 0.6% from the previous week. The seasonally adjusted Purchase Index decreased 13.6% to its lowest level since February 25, 2011, driven by a 26.6% decrease in government purchase applications. The four week moving average for the seasonally adjusted Market Index is down 2.4%. The four week moving average is down 0.8% for the seasonally adjusted Purchase Index, while this average is down 3.2% for the Refinance Index. The refinance share of mortgage activity increased to 61.6% of total applications from 58.5% the previous week. This is the highest refinance share of the month. The adjustable-rate mortgage (ARM) share of activity remained unchanged from the previous week at 6.5% of total applications. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.80% from 4.83%, with points decreasing to 1.01 from 1.06 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.03% from 4.07%, with points decreasing to 0.96 from 1.02 (including the origination fee) for 80% loans.
At 11:30 this morning Treasury will auction $35B of 5 yr notes; normally at 1:00 but with the FOMC policy statement at 12:30 Treasury moved the auction to 11:30. Yesterday the 2 yr note auction wasn't as good as we would have liked but until the press conference is done this afternoon nothing is likely to move traders and investors. Another soft auction will be dealt with after the press conference is debated. As noted above, if no follow up questions are allowed the conference will be seen as just another sound bite.
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.
Wednesday, April 27, 2011
A little weaker this morning in the rate markets; not really unexpected after the recent improvement in rates and ahead of an historic day with the chairman of the Fed holding a press conference for the first time ever. The FOMC meeting will conclude at 12:30 with its usual short policy statement, then at 2:15 Bernanke will hold a 45 minute press conference to answer questions. It is huge step for the Fed to open the chairman to the media, it also could be just another event that fails to meet expectations. If Bernanke doesn't allow follow up questions then he can waltz through the press conference without breaking a sweat and continue to let markets swing in the wind.
At 9:00 this morning the 10 yr note -12/32 at 3.35% after closing at 3.31% yesterday; mortgage prices off 6/32 (.18 bb), the stock indexes continue to improve as Q1 earnings generally beat estimates. At 9:30 the DJIA opened +11 then immediately retreated to unchanged, the 10 yr at 9:30 -12/32 and mortgages -6/32 (.18 bp).
At 8:30 March durable goods orders expected up 2.0% increased 2.5%, when the volatile transportation orders are ignored durables were up in line with estimates 1.3%; no reaction to the report as everything this morning is completely dependent on the FOMC policy statement and Bernanke's press conference.
Mortgage applications decreased 5.6% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 22. There was no adjustment made for Good Friday. The Market Composite Index, a measure of mortgage loan application volume, decreased 5.6% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 0.6% from the previous week. The seasonally adjusted Purchase Index decreased 13.6% to its lowest level since February 25, 2011, driven by a 26.6% decrease in government purchase applications. The four week moving average for the seasonally adjusted Market Index is down 2.4%. The four week moving average is down 0.8% for the seasonally adjusted Purchase Index, while this average is down 3.2% for the Refinance Index. The refinance share of mortgage activity increased to 61.6% of total applications from 58.5% the previous week. This is the highest refinance share of the month. The adjustable-rate mortgage (ARM) share of activity remained unchanged from the previous week at 6.5% of total applications. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.80% from 4.83%, with points decreasing to 1.01 from 1.06 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.03% from 4.07%, with points decreasing to 0.96 from 1.02 (including the origination fee) for 80% loans.
At 11:30 this morning Treasury will auction $35B of 5 yr notes; normally at 1:00 but with the FOMC policy statement at 12:30 Treasury moved the auction to 11:30. Yesterday the 2 yr note auction wasn't as good as we would have liked but until the press conference is done this afternoon nothing is likely to move traders and investors. Another soft auction will be dealt with after the press conference is debated. As noted above, if no follow up questions are allowed the conference will be seen as just another sound bite.
Tuesday, April 26, 2011
Monday, April 25, 2011
Mortgage Rates
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.
Monday, April 25, 2011
Treasuries and mortgage markets opened better this morning in light trading ahead of this week's Treasury auctions and the FOMC meeting on Wednesday. Equity market pre-open trade were up a little, about unchanged from fair value pointing to a flat open. Crude oil continues to increase, up $1.00 at $113.30 at 9:00 am, gold also higher again today (+$10.00 at 9:00 am).
At 9:30 the DJIA opened -17, 10 yr note +2/32 and mortgage prices +4/32 (.12 bp).
At 10:00 the only data point today, March new home sales expected up 10.7%, increased 11.1% to 300K annualized and up from 270K in Feb frm 250K originally reported. Better but not much; the median sales price $213,800.00% down 4.9% frm Mar 2010, based on sales there is a 7.3 month supply down from 8.2 months in Feb.
The major focus this week is the FOMC meeting on Wednesday. Always a key focus for the financial markets, this week even more so as for the first time in history the Fed chief will hold a 45 minute press conference after the meeting. Normally the FOMC releases a short policy statement after the meeting at 2:15 pm; this meeting will conclude with the statement at 12:30 then at 2:15 Bernanke will hold his news conference allowing reporters to ask questions. The Fed is trying to increase certainty and add stability in markets removing much of the speculation about what the Fed really means. Unlikely that his press conference will add more clarity, but at least he will try.
Treasury will auction $99B of 2's, 5's and 7 yr notes Tuesday through Thursday, selling the 5 yr note sandwiched between the Fed's policy statement at 12:30 and Bernanke's press conference at 2:15 on Wednesday. Economic data has new home sales today (see above), weekly claims on Thursday along with the first look at Q1 GDP also on Thursday. This week also has a huge number of Q1 earnings reports that will set the tone for the equity markets. So far earnings overall have generally beaten Street estimates. Technically the bond and mortgage markets are looking good as inflation worries fade and the dollar declining. We don't expect much change in mortgage prices until Wednesday's FOMC meeting.
This Week's Economic Calendar:
Tuesday;
9:00 am Case/Shiller Feb home price index (-3.2% 20 city)
10:00 am April consumer confidence index (64.4 frm 63.4 in March)
1:00 pm $35b 2 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 AM March durable goods orders (+1.8%, ex transportation +1.2%)
12:30 pm FOMC policy statement
1:00 pm $35B 5 yr note auction
2:15 pm Bernanke press conference
Thursday;
8:30 am Q1 advance GDP report (+1.7%)
weekly jobless claims (-13K to 390K, continuing claims 3.69 mil frm 3.695 mil)
10:00 am NAR pending home sales for Mar (+1.7%)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am March personal income and spending (income +0.4%, spending +0.5%)
Q1 employment cost index (+0.5%, Q4 +0.4%)
9:45 am Apr Chicago purchasing mgrs index (68.0 frm 70.6 in Mar)
9:55 am U. of Michigan consumer sentiment index (69.6 unch frm mid-month)
Much of the world markets are closed today, likely will influence trade in US markets today. The bond and mortgage markets sitting relatively unchanged so far this morning. Technically the bond and mortgage markets slightly bullish but any selling could change the technicals quickly. Debate continues about the value of treasuries and the present rates. Recent comments from Bill Gross at PIMCO that returns at present rates are not worth investing, while most dealers continue to prime the pump that bonds are a good investment. Generally we do not expect the bellwether 10 yr note to move above 4.00% this year, which is the general consensus. Gross's criticism of present low rates, and his comment recently that PIMCO was at one point short US rate markets upset many that said it was anti-American. “I could join the dealers and say the 10-year’s not going to go to 4 percent, so what am I left with?” Gross said.......“I’m left with an under-yielding, less-than-inflation security. I have better choices. As a firm we’re not going to put up with it.”
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.
Monday, April 25, 2011
Treasuries and mortgage markets opened better this morning in light trading ahead of this week's Treasury auctions and the FOMC meeting on Wednesday. Equity market pre-open trade were up a little, about unchanged from fair value pointing to a flat open. Crude oil continues to increase, up $1.00 at $113.30 at 9:00 am, gold also higher again today (+$10.00 at 9:00 am).
At 9:30 the DJIA opened -17, 10 yr note +2/32 and mortgage prices +4/32 (.12 bp).
At 10:00 the only data point today, March new home sales expected up 10.7%, increased 11.1% to 300K annualized and up from 270K in Feb frm 250K originally reported. Better but not much; the median sales price $213,800.00% down 4.9% frm Mar 2010, based on sales there is a 7.3 month supply down from 8.2 months in Feb.
The major focus this week is the FOMC meeting on Wednesday. Always a key focus for the financial markets, this week even more so as for the first time in history the Fed chief will hold a 45 minute press conference after the meeting. Normally the FOMC releases a short policy statement after the meeting at 2:15 pm; this meeting will conclude with the statement at 12:30 then at 2:15 Bernanke will hold his news conference allowing reporters to ask questions. The Fed is trying to increase certainty and add stability in markets removing much of the speculation about what the Fed really means. Unlikely that his press conference will add more clarity, but at least he will try.
Treasury will auction $99B of 2's, 5's and 7 yr notes Tuesday through Thursday, selling the 5 yr note sandwiched between the Fed's policy statement at 12:30 and Bernanke's press conference at 2:15 on Wednesday. Economic data has new home sales today (see above), weekly claims on Thursday along with the first look at Q1 GDP also on Thursday. This week also has a huge number of Q1 earnings reports that will set the tone for the equity markets. So far earnings overall have generally beaten Street estimates. Technically the bond and mortgage markets are looking good as inflation worries fade and the dollar declining. We don't expect much change in mortgage prices until Wednesday's FOMC meeting.
This Week's Economic Calendar:
Tuesday;
9:00 am Case/Shiller Feb home price index (-3.2% 20 city)
10:00 am April consumer confidence index (64.4 frm 63.4 in March)
1:00 pm $35b 2 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 AM March durable goods orders (+1.8%, ex transportation +1.2%)
12:30 pm FOMC policy statement
1:00 pm $35B 5 yr note auction
2:15 pm Bernanke press conference
Thursday;
8:30 am Q1 advance GDP report (+1.7%)
weekly jobless claims (-13K to 390K, continuing claims 3.69 mil frm 3.695 mil)
10:00 am NAR pending home sales for Mar (+1.7%)
1:00 pm $29B 7 yr note auction
Friday;
8:30 am March personal income and spending (income +0.4%, spending +0.5%)
Q1 employment cost index (+0.5%, Q4 +0.4%)
9:45 am Apr Chicago purchasing mgrs index (68.0 frm 70.6 in Mar)
9:55 am U. of Michigan consumer sentiment index (69.6 unch frm mid-month)
Much of the world markets are closed today, likely will influence trade in US markets today. The bond and mortgage markets sitting relatively unchanged so far this morning. Technically the bond and mortgage markets slightly bullish but any selling could change the technicals quickly. Debate continues about the value of treasuries and the present rates. Recent comments from Bill Gross at PIMCO that returns at present rates are not worth investing, while most dealers continue to prime the pump that bonds are a good investment. Generally we do not expect the bellwether 10 yr note to move above 4.00% this year, which is the general consensus. Gross's criticism of present low rates, and his comment recently that PIMCO was at one point short US rate markets upset many that said it was anti-American. “I could join the dealers and say the 10-year’s not going to go to 4 percent, so what am I left with?” Gross said.......“I’m left with an under-yielding, less-than-inflation security. I have better choices. As a firm we’re not going to put up with it.”
Friday, April 22, 2011
Mortgage Rates
Mortgage Rates: High-Risk Event Ahead
Mortgage rates are unchanged today as bond markets are closed for Good Friday.
Yesterday, wewrote that loan pricing was in a holding pattern until next week when the market faces a high-risk event, a Federal Reserve meeting. We expect this event to better dictate the direction of mortgage rates in the short-term.
"Holding pattern" doesn't necessarily provide an accurate bias regarding locking or floating as it would tend to suggest some sort of 50/50 scenario with equal chances of rates moving higher or lower. But in all actuality, it will be tougher for mortgage rates to move lower than it would for mortgage rates to move higher. We've talked about why that is the case many times over the past four months. This is the technical explanation we've offered:
"Lenders have moved the Best Execution 30-year fixed note rate as low as they possibly can without drastically altering their pipeline hedging strategies. This is a factor of what production mortgage-backed security coupon is most liquid in the secondary mortgage market. On conventional loans, the 4.50 percent MBS coupon is the hedging vehicle of choice for lock desks. Home loans with note rates between 4.875 and 5.25% are generally used to fill 4.50 percent MBS coupon trades. Until MBS investors demonstrate sustainable demand for 4.00 percent 30-year fixed MBS coupons, lenders will not find it economically efficient to quote 4.75 percent note rates without expensive permanent buydown costs. From that perspective, if you are floating a conventional home loan interest rate, you should not be expecting further improvements to your actual rate in the short term. If the bond market recovery rally continues, closing costs will improve, but on the whole, it will take a sustained move higher in 4.00 percent MBS coupon prices for Best Execution to dip below 4.875 percent."
And here's a simpler way to think about it. Any time someone gets a mortgage, the lender that fronts the money to fund that mortgage throws the borrower's monthly payment in a mortgage-backed security bucket with loans of similar credit quality and rate. For example, home loans with 4.875-5.25% interest rates tend to end up in the same buckets. That is the bucket where a vast majority of mortgages are ending up these days. This bucket has an effective monopoly on mortgage rates and it's simply not safe business for lenders to offer rates that can't fit inside it.
It's possible for lenders to shift mortgage rates into a new, lower bucket, but it takes much convincing in terms of a sustained bullish movement in the bond market. The need for a broad-based shift in lender bucket preference is what puts up a high level of resistance when "Best Execution" mortgage rates seem like they should be moving lower at a faster pace. This is exactly the reason we say it's not the kind of thing you want to plan on until it begins to happen. In other words, it doesn't make much sense to kid-proof your house unless you have kids or have one on the way!
The earthquake crisis in Japan was the only time in recent history where it seemed like this unlikely shift had a chance of occurring. But as the worst-case-scenarios became less likely, lenders quickly returned mortgage rates to their most cost-effective "bucket" (which is based on a variety of technical factors).
Take a look at our most recent chart of the average origination costs tied to specific interest rate quotes (based on the offers from the five major mortgage lenders). You can see at a rate of 5.0% for instance, that current rates are near their best levels of the year with the exception of one day in January and the two most panic driven days of the Japan Crisis in mid-March.
If the note rate line is moving up, the closing costs associated with that note rate are rising. As you can see, consumer borrowing costs shot higher last week before reversing course this week.
Mortgage Rates: High-Risk Event Ahead
Mortgage rates are unchanged today as bond markets are closed for Good Friday.
Yesterday, wewrote that loan pricing was in a holding pattern until next week when the market faces a high-risk event, a Federal Reserve meeting. We expect this event to better dictate the direction of mortgage rates in the short-term.
"Holding pattern" doesn't necessarily provide an accurate bias regarding locking or floating as it would tend to suggest some sort of 50/50 scenario with equal chances of rates moving higher or lower. But in all actuality, it will be tougher for mortgage rates to move lower than it would for mortgage rates to move higher. We've talked about why that is the case many times over the past four months. This is the technical explanation we've offered:
"Lenders have moved the Best Execution 30-year fixed note rate as low as they possibly can without drastically altering their pipeline hedging strategies. This is a factor of what production mortgage-backed security coupon is most liquid in the secondary mortgage market. On conventional loans, the 4.50 percent MBS coupon is the hedging vehicle of choice for lock desks. Home loans with note rates between 4.875 and 5.25% are generally used to fill 4.50 percent MBS coupon trades. Until MBS investors demonstrate sustainable demand for 4.00 percent 30-year fixed MBS coupons, lenders will not find it economically efficient to quote 4.75 percent note rates without expensive permanent buydown costs. From that perspective, if you are floating a conventional home loan interest rate, you should not be expecting further improvements to your actual rate in the short term. If the bond market recovery rally continues, closing costs will improve, but on the whole, it will take a sustained move higher in 4.00 percent MBS coupon prices for Best Execution to dip below 4.875 percent."
And here's a simpler way to think about it. Any time someone gets a mortgage, the lender that fronts the money to fund that mortgage throws the borrower's monthly payment in a mortgage-backed security bucket with loans of similar credit quality and rate. For example, home loans with 4.875-5.25% interest rates tend to end up in the same buckets. That is the bucket where a vast majority of mortgages are ending up these days. This bucket has an effective monopoly on mortgage rates and it's simply not safe business for lenders to offer rates that can't fit inside it.
It's possible for lenders to shift mortgage rates into a new, lower bucket, but it takes much convincing in terms of a sustained bullish movement in the bond market. The need for a broad-based shift in lender bucket preference is what puts up a high level of resistance when "Best Execution" mortgage rates seem like they should be moving lower at a faster pace. This is exactly the reason we say it's not the kind of thing you want to plan on until it begins to happen. In other words, it doesn't make much sense to kid-proof your house unless you have kids or have one on the way!
The earthquake crisis in Japan was the only time in recent history where it seemed like this unlikely shift had a chance of occurring. But as the worst-case-scenarios became less likely, lenders quickly returned mortgage rates to their most cost-effective "bucket" (which is based on a variety of technical factors).
Take a look at our most recent chart of the average origination costs tied to specific interest rate quotes (based on the offers from the five major mortgage lenders). You can see at a rate of 5.0% for instance, that current rates are near their best levels of the year with the exception of one day in January and the two most panic driven days of the Japan Crisis in mid-March.
If the note rate line is moving up, the closing costs associated with that note rate are rising. As you can see, consumer borrowing costs shot higher last week before reversing course this week.
Thursday, April 21, 2011
Mortgage Rates
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.
Thursday, April 21, 2011
A little better start today in the rate markets while the stock indexes early were pointing to another better open at 9:30. More earnings reports late yesterday coming better than expected. At 8:30 weekly jobless claims were widely expected to have declined 22K after increasing 27K the prior week; claims were down 13K to 403K, continuing claims declined to 3.695 mil frm 3.702 mil the week before. The 4 wk average on claims at 399K frm 396.7K. Claims remain elevated showing little progress recently after falling in Feb and Jan. A week ago the NFIB reported small business optimism, after improving since last Oct, fell to the level prior to last Oct; small businesses are the engine for employment, without hiring in that sector unemployment is unlikely to decline much.
Most Q1 earnings reports are hitting better than expected, driving the equity markets higher but having little if any impact in the employment sector. No job growth, no improvement in the housing sector, $4.00+ gas prices, food prices increasing----it doesn't matter as long as investors large and small see their net worth increase. The US approaching bankruptcy with the political outlook less than favorable that a serious budget reduction plan will emerge----who cares? S&P lowering US debt to negative from stable has generally been pushed to the background and dismissed; the consensus among traders, investors, politicians, analysts and economists is still denial, the US will never lose its AAA credit rating. After all this is the strongest economy and nation in the world-----or is it? Republicans don't want to increase taxes, Democrats don't want to cut spending; if both parties don't get close to being on the same page soon we will wake on day with interest rates much higher, the dollar (already falling hard) will not be the reserve currency of the world and the US will be a follower and not a leader. Hard to imagine, but we are closer than most think and many won't admit outwardly.
At 9:30 the DJIA opened +16, 10 yr note +3/32 and mortgage prices +2/32 (.06 bp).
At 10:00 April Philly Fed business index, expected to have declined to 32.9 frm 43.4, as reported the index plunged to 18.5; the new orders component 18.8 frm 40.3, employment 12.3 frm 18.2 and prices pd for materials at 57.1 frm 63.8. The decline in the index took the stock market down initially and boosted prices in the rate markets. The decline in the overall index supports the growing concern that the economy isn't as strong as had been thought as recently as two weeks ago. (any index read over zeros is considered expansion)
March leading economic indicators at 10:00 expected +0.2% jumped 0.4%.
The FHFA housing price index for Feb declined 1.6%, no surprise there.
This is the end of the week with market closed tomorrow. Next week Treasury will auction an estimated $99B of notes and the FOMC meeting on Wednesday. For the first time the Fed will release its policy statement at 12:30 then at 2:15 Fed chief will hold a news conference allowing questions and opening more details about the meeting and the intent of the generally short policy statement. Given recent events and debates and posturing over the coming budget battle the Fed will have the opportunity to say its piece in a manner unlike we haven't had prior to this meeting. The auctions and the FOMC meeting may keep markets steady at present levels.
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.
Thursday, April 21, 2011
A little better start today in the rate markets while the stock indexes early were pointing to another better open at 9:30. More earnings reports late yesterday coming better than expected. At 8:30 weekly jobless claims were widely expected to have declined 22K after increasing 27K the prior week; claims were down 13K to 403K, continuing claims declined to 3.695 mil frm 3.702 mil the week before. The 4 wk average on claims at 399K frm 396.7K. Claims remain elevated showing little progress recently after falling in Feb and Jan. A week ago the NFIB reported small business optimism, after improving since last Oct, fell to the level prior to last Oct; small businesses are the engine for employment, without hiring in that sector unemployment is unlikely to decline much.
Most Q1 earnings reports are hitting better than expected, driving the equity markets higher but having little if any impact in the employment sector. No job growth, no improvement in the housing sector, $4.00+ gas prices, food prices increasing----it doesn't matter as long as investors large and small see their net worth increase. The US approaching bankruptcy with the political outlook less than favorable that a serious budget reduction plan will emerge----who cares? S&P lowering US debt to negative from stable has generally been pushed to the background and dismissed; the consensus among traders, investors, politicians, analysts and economists is still denial, the US will never lose its AAA credit rating. After all this is the strongest economy and nation in the world-----or is it? Republicans don't want to increase taxes, Democrats don't want to cut spending; if both parties don't get close to being on the same page soon we will wake on day with interest rates much higher, the dollar (already falling hard) will not be the reserve currency of the world and the US will be a follower and not a leader. Hard to imagine, but we are closer than most think and many won't admit outwardly.
At 9:30 the DJIA opened +16, 10 yr note +3/32 and mortgage prices +2/32 (.06 bp).
At 10:00 April Philly Fed business index, expected to have declined to 32.9 frm 43.4, as reported the index plunged to 18.5; the new orders component 18.8 frm 40.3, employment 12.3 frm 18.2 and prices pd for materials at 57.1 frm 63.8. The decline in the index took the stock market down initially and boosted prices in the rate markets. The decline in the overall index supports the growing concern that the economy isn't as strong as had been thought as recently as two weeks ago. (any index read over zeros is considered expansion)
March leading economic indicators at 10:00 expected +0.2% jumped 0.4%.
The FHFA housing price index for Feb declined 1.6%, no surprise there.
This is the end of the week with market closed tomorrow. Next week Treasury will auction an estimated $99B of notes and the FOMC meeting on Wednesday. For the first time the Fed will release its policy statement at 12:30 then at 2:15 Fed chief will hold a news conference allowing questions and opening more details about the meeting and the intent of the generally short policy statement. Given recent events and debates and posturing over the coming budget battle the Fed will have the opportunity to say its piece in a manner unlike we haven't had prior to this meeting. The auctions and the FOMC meeting may keep markets steady at present levels.
Wednesday, April 20, 2011
Mortgage Rates
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.
Wednesday, April 20, 2011
So much for outlook that markets would likely be quiet this week; after markets closed yesterday more earnings were reported and were better than expected for Intel and Intel's guidance that the outlook is for better earnings going forward. Intel said yesterday revenue may top analysts’ estimates in the second quarter. United Technologies also reported better than expected earnings and forward guidance. Recent reported Q1 earnings had been generally disappointing; a number of estimates for Q1 growth have been lowered. The stock market looked vulnerable until late yesterday. This morning in pre-market trading at 8:30 the DJIA futures +147 and increasing. The bond and mortgage markets are weaker this morning on the better equity market outlook today. At 8:30 the 10 yr note off 7/32 and mortgage prices off 7/32 (.22 bp).
Earlier this morning the weekly MBA mortgage applications. Mortgage applications increased 5.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 15, 2011. The Refinance Index increased 2.7% from the previous week. The seasonally adjusted Purchase Index increased 10.0% to its highest level since December 3, 2010, driven largely by a 17.6% increase in Government purchase applications. The unadjusted Purchase Index increased 10.9% compared with the previous week and was 11.4% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.9%. The four week moving average is up 2.5% for the seasonally adjusted Purchase Index, while this average is down 5.7% for the Refinance Index. The refinance share of mortgage activity decreased to 58.5% of total applications from 60.3% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.5% from 5.9% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.83% from 4.98%, with points increasing to 1.07 from 0.93 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.07% from 4.17%, with points decreasing to 1.02 from 1.22 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened +160, 10 yr improved to -4/32 and mortgage prices off just 2/32 (.06 bp) after being down 7/32 (.22 bp) at 9:00. Lenders that priced at 9:15 or earlier likely priced at the low, since then prices have improved somewhat.
At 10:00, the only economic data today; Mar existing home sales were expected to have increased 2.5%, sales increased 3.7% to 5.10 mil, estimates were for 5.0 mil. Based on sales there is an 8.4 month supply down from 8.5 months in Feb. The median sales price $159,600.00 down 5.9% frm March last year. There was no market reaction to the report as it is generally in line with estimates and still very weak.
The best open for the stock market in weeks on the strong earnings on tech stocks and forward guidance better than analysts had expected. The economic outlook remains uncertain; recently there have been a number of estimates lowering the growth for Q! that we will get the first look at next Thursday. The IMF went from +2.0% to +1.5% while private estimates also lower but from better levels. Technically the rate markets are slightly bullish for the very near term but the wider perspective both technically and fundamentally remains bearish for interest rates. While the outlook isn't favorable for the bond market, there is little reason currently to expect rates to increase substantially.
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.
Wednesday, April 20, 2011
So much for outlook that markets would likely be quiet this week; after markets closed yesterday more earnings were reported and were better than expected for Intel and Intel's guidance that the outlook is for better earnings going forward. Intel said yesterday revenue may top analysts’ estimates in the second quarter. United Technologies also reported better than expected earnings and forward guidance. Recent reported Q1 earnings had been generally disappointing; a number of estimates for Q1 growth have been lowered. The stock market looked vulnerable until late yesterday. This morning in pre-market trading at 8:30 the DJIA futures +147 and increasing. The bond and mortgage markets are weaker this morning on the better equity market outlook today. At 8:30 the 10 yr note off 7/32 and mortgage prices off 7/32 (.22 bp).
Earlier this morning the weekly MBA mortgage applications. Mortgage applications increased 5.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 15, 2011. The Refinance Index increased 2.7% from the previous week. The seasonally adjusted Purchase Index increased 10.0% to its highest level since December 3, 2010, driven largely by a 17.6% increase in Government purchase applications. The unadjusted Purchase Index increased 10.9% compared with the previous week and was 11.4% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.9%. The four week moving average is up 2.5% for the seasonally adjusted Purchase Index, while this average is down 5.7% for the Refinance Index. The refinance share of mortgage activity decreased to 58.5% of total applications from 60.3% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.5% from 5.9% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.83% from 4.98%, with points increasing to 1.07 from 0.93 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.07% from 4.17%, with points decreasing to 1.02 from 1.22 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened +160, 10 yr improved to -4/32 and mortgage prices off just 2/32 (.06 bp) after being down 7/32 (.22 bp) at 9:00. Lenders that priced at 9:15 or earlier likely priced at the low, since then prices have improved somewhat.
At 10:00, the only economic data today; Mar existing home sales were expected to have increased 2.5%, sales increased 3.7% to 5.10 mil, estimates were for 5.0 mil. Based on sales there is an 8.4 month supply down from 8.5 months in Feb. The median sales price $159,600.00 down 5.9% frm March last year. There was no market reaction to the report as it is generally in line with estimates and still very weak.
The best open for the stock market in weeks on the strong earnings on tech stocks and forward guidance better than analysts had expected. The economic outlook remains uncertain; recently there have been a number of estimates lowering the growth for Q! that we will get the first look at next Thursday. The IMF went from +2.0% to +1.5% while private estimates also lower but from better levels. Technically the rate markets are slightly bullish for the very near term but the wider perspective both technically and fundamentally remains bearish for interest rates. While the outlook isn't favorable for the bond market, there is little reason currently to expect rates to increase substantially.
Tuesday, April 19, 2011
Monday, April 18, 2011
Mortgage Rates
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.
Monday, April 18, 2011
Treasuries and mortgage markets opened better this morning on weaker stock indexes pointing to a weak open at 9:30. Trading this week will be on low volume with Passover and Holy Week. Already this morning there has been an increase in volatility; the 10 yr note traded +10/32 at 9:00 then fell to -5/32 and immediately bounced back to unchanged; mortgage prices at 8:59 this morning +5/32, at 9:07 -1/32, at 9:15 -4/32 (.12 bp). This week will likely be somewhat volatile but by the end of the week not much changed; many investors and traders will be leaving by mid-week.
S&P roiled markets early this morning; saying it has downgraded US debt to negative. The DJIA opened -170 points at 9:30, the bond and mortgage markets were quite volatile as investors were somewhat shocked on the announcement. Treasuries erased an earlier advance, the dollar pared gains versus the euro and gold rallied. S&P affirmed reduced the long-term U.S. debt rating to negative from stable, while affirming its AAA long-term and A-1+ short-term sovereign credit ratings. S&P said that more than two years after the beginning of the recent crisis, U.S. policymakers have not agreed on a strategy to reverse recent fiscal deterioration or address longer-term fiscal pressures. While a shock, it shouldn't have been with our politicians in Washington twinking around with budget cuts that were nothing; they patted themselves on their collective backs and announced a $38B cut in spending, but the actual real cut amounted to just $318 mil. All of the cuts were just not funding what had been approved previously. As long as our "leaders" are unwilling to make serious steps to cut spending and increase revenues (taxes) the US debt rating will continue to be down-graded, and US interest rates will increase.
Listening and watching the reaction from guests on CNBC one would think markets were slapped in the face with the down-grade and are taking offense. We and others have warned for over two years that US debt ratings were going to be lowered. Somehow most in the US believe the US is immune to debt ratings declines; time to wake up folks, the US if corporate accounting were to be applied, is bankrupt. 50% of all Americans pay no federal income tax while politicians don't have the stones to do what everyone knows has to be done. We do not have leaders, we have politicians that above all want to keep their jobs.
This week has little data except for the housing sector; March starts and permits, March existing home sales as well as this morning's NAHB housing market index and Thursday's FHFA housing price index. The only non-housing data comes on Thursday with weekly jobless claims and the April Philadelphia Fed business index. The markets will close early on Thursday and be closed Friday for Good Friday.
This Week's Economic Calendar:
Today;
10:00 am April NAHB housing market index (17 was expected, as reported 16)
Tuesday;
8:30 am March housing starts and permits (starts +7.8%; permits +3.9%)
Wednesday;
7:00 am MBA weekly mortgage applications
10:00 am March existing home sales (+2.5%)
Thursday;
8:30 am weekly jobless claims (-22K back to 390K; con't claims 3.650 mil frm 3.680 mil)
10:00 am April Philadelphia Fed business index (32.9 frm 43.4 in March)
Mar leading economic indicators (+0.2%)
FHFA Feb housing price index (N/A)
Friday;
Markets closed
Fed speak; at 12:30 Dallas Fed's Fisher speaking on the economic outlook. Likely he will continue the Fed's outlook, moderate growth with no inflation concerns but that the Fed will continue to monitor events closely. The Fed will complete the $600B QE 2 by the end of June. His comments won't likely present anything new.
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.
Monday, April 18, 2011
Treasuries and mortgage markets opened better this morning on weaker stock indexes pointing to a weak open at 9:30. Trading this week will be on low volume with Passover and Holy Week. Already this morning there has been an increase in volatility; the 10 yr note traded +10/32 at 9:00 then fell to -5/32 and immediately bounced back to unchanged; mortgage prices at 8:59 this morning +5/32, at 9:07 -1/32, at 9:15 -4/32 (.12 bp). This week will likely be somewhat volatile but by the end of the week not much changed; many investors and traders will be leaving by mid-week.
S&P roiled markets early this morning; saying it has downgraded US debt to negative. The DJIA opened -170 points at 9:30, the bond and mortgage markets were quite volatile as investors were somewhat shocked on the announcement. Treasuries erased an earlier advance, the dollar pared gains versus the euro and gold rallied. S&P affirmed reduced the long-term U.S. debt rating to negative from stable, while affirming its AAA long-term and A-1+ short-term sovereign credit ratings. S&P said that more than two years after the beginning of the recent crisis, U.S. policymakers have not agreed on a strategy to reverse recent fiscal deterioration or address longer-term fiscal pressures. While a shock, it shouldn't have been with our politicians in Washington twinking around with budget cuts that were nothing; they patted themselves on their collective backs and announced a $38B cut in spending, but the actual real cut amounted to just $318 mil. All of the cuts were just not funding what had been approved previously. As long as our "leaders" are unwilling to make serious steps to cut spending and increase revenues (taxes) the US debt rating will continue to be down-graded, and US interest rates will increase.
Listening and watching the reaction from guests on CNBC one would think markets were slapped in the face with the down-grade and are taking offense. We and others have warned for over two years that US debt ratings were going to be lowered. Somehow most in the US believe the US is immune to debt ratings declines; time to wake up folks, the US if corporate accounting were to be applied, is bankrupt. 50% of all Americans pay no federal income tax while politicians don't have the stones to do what everyone knows has to be done. We do not have leaders, we have politicians that above all want to keep their jobs.
This week has little data except for the housing sector; March starts and permits, March existing home sales as well as this morning's NAHB housing market index and Thursday's FHFA housing price index. The only non-housing data comes on Thursday with weekly jobless claims and the April Philadelphia Fed business index. The markets will close early on Thursday and be closed Friday for Good Friday.
This Week's Economic Calendar:
Today;
10:00 am April NAHB housing market index (17 was expected, as reported 16)
Tuesday;
8:30 am March housing starts and permits (starts +7.8%; permits +3.9%)
Wednesday;
7:00 am MBA weekly mortgage applications
10:00 am March existing home sales (+2.5%)
Thursday;
8:30 am weekly jobless claims (-22K back to 390K; con't claims 3.650 mil frm 3.680 mil)
10:00 am April Philadelphia Fed business index (32.9 frm 43.4 in March)
Mar leading economic indicators (+0.2%)
FHFA Feb housing price index (N/A)
Friday;
Markets closed
Fed speak; at 12:30 Dallas Fed's Fisher speaking on the economic outlook. Likely he will continue the Fed's outlook, moderate growth with no inflation concerns but that the Fed will continue to monitor events closely. The Fed will complete the $600B QE 2 by the end of June. His comments won't likely present anything new.
Friday, April 15, 2011
Mortgage Loan Process
This section will give you a good Idea of the mortgage loan process and the time frame involved. The knowledge will help you feel more comfortable with your lender as you go through the loan process and will also help you spot any red flags along the way if they should appear.
The type of loan you are applying for will determine the length of time required for the loan process in completing your loan. Different loan types require different documentation.
Here is the mortgage loan process:
Mortgage Application
The mortgage application process is where you fill out the application, sign various forms that authorize the lender to process your loan, and deliver your documentation requirements. (Bank statements; pay stubs, W2s, Tax Returns, etc…). You should understand that the next process cannot begin until these documents are completed and or received.
Mortgage Processing
When all of your documentation is received it then goes to a processor who verifies and validates all of the information to be true and correct. Verification requests may be sent to your employers, landlord and lending institutions. This is done by fax or email when possible. It is usually during this time frame that the appraisal and the title policy are ordered.
When all the information is collected the processor then verifies that basic lender loan requirements have been met. The file is then packaged in a manner the lender specifies. The completed package (including the appraisal and title report) is then sent to the underwriting department.
The processing of your loan usually takes about one to two weeks but it can often be delayed when third parties do not respond to the validation requests or appraisals are delayed. If your loan qualifies for DU (Desk top Underwriting) or Loan Prospector, these are computer automated systems, the documentation requirements are often cut in half and the process can be completed in three to five days depending on the volume of loans the processor has.
Mortgage Underwriting
The underwriter reviews your loan package to make sure it conforms to all the guidelines required for that loan product. They also review the appraisal and title report and may do additional validation of employment, mortgage payments, and credit. And, anything else they feel is necessary to document your loan. They have ultimate power and decision authority over the approval of your loan. The time required to do this is driven by the volume in the market. If the market is flooded I have seen it take two weeks but under normal conditions it only takes three to five business days.
Automated Mortgage Underwriting
Most lenders today use Automated Underwriting (by computer). The advantage is less documentation and it speeds up the process. The computer actually makes the approval decision and the underwriter only reviews the supporting documentation and the appraisal. However, if any documentation is missing, inaccurate, or does not agree with the 1003 (application), the loan will be kicked out of this system until documentation requirements are met or the loan is turned down or resubmitted. This can cause delays but they are usually resolved quickly. Automated Underwriting can be completed in just a matter of hours. But, ..If the market is flooded expect it to take longer.
Conditions To Close
When the underwriter is done reviewing your loan she will send "conditions to close" to your loan officer. These are normally just requirements for further documentation to support your file. When these needs have been satisfied the underwriter will give a final approval and "clear to close".
Clear To Close
When the loan officer gets the clear to close, he then schedules and coordinates with all the parties the time and location to sign the final documents to close the loan. This normally only takes an hour or so to schedule.
Draw Documents
When everything is scheduled the lender then draws the document package and sends it to the closing company. This can be done by overnight delivery or electronically. It can take one to two days. You meet, sign the papers.
Funding
Next is the funding of your loan. This usually takes about two to three days after you sign your closing documents, since the originals need to be sent overnight to the lender. Once received and revewed to make sure there are no missing signatures or to make sure you signed your name as it appeared on the loan application. The lender will fund your loan. This simply means they have send out the funds to the closing agent (Escrow Company). This is done by wire and usually the cut off time to send a wire out is between 10am and 11am since the wire goes to the Federal Government then they send it to the escrow company.
Recording
Once the escrow company receives the wire they send notification to the county recorder’s office. Once the notifications has been received and recorded with usually takes 24 hours from the time of funding.
Now you receive your keys!
This section will give you a good Idea of the mortgage loan process and the time frame involved. The knowledge will help you feel more comfortable with your lender as you go through the loan process and will also help you spot any red flags along the way if they should appear.
The type of loan you are applying for will determine the length of time required for the loan process in completing your loan. Different loan types require different documentation.
Here is the mortgage loan process:
Mortgage Application
The mortgage application process is where you fill out the application, sign various forms that authorize the lender to process your loan, and deliver your documentation requirements. (Bank statements; pay stubs, W2s, Tax Returns, etc…). You should understand that the next process cannot begin until these documents are completed and or received.
Mortgage Processing
When all of your documentation is received it then goes to a processor who verifies and validates all of the information to be true and correct. Verification requests may be sent to your employers, landlord and lending institutions. This is done by fax or email when possible. It is usually during this time frame that the appraisal and the title policy are ordered.
When all the information is collected the processor then verifies that basic lender loan requirements have been met. The file is then packaged in a manner the lender specifies. The completed package (including the appraisal and title report) is then sent to the underwriting department.
The processing of your loan usually takes about one to two weeks but it can often be delayed when third parties do not respond to the validation requests or appraisals are delayed. If your loan qualifies for DU (Desk top Underwriting) or Loan Prospector, these are computer automated systems, the documentation requirements are often cut in half and the process can be completed in three to five days depending on the volume of loans the processor has.
Mortgage Underwriting
The underwriter reviews your loan package to make sure it conforms to all the guidelines required for that loan product. They also review the appraisal and title report and may do additional validation of employment, mortgage payments, and credit. And, anything else they feel is necessary to document your loan. They have ultimate power and decision authority over the approval of your loan. The time required to do this is driven by the volume in the market. If the market is flooded I have seen it take two weeks but under normal conditions it only takes three to five business days.
Automated Mortgage Underwriting
Most lenders today use Automated Underwriting (by computer). The advantage is less documentation and it speeds up the process. The computer actually makes the approval decision and the underwriter only reviews the supporting documentation and the appraisal. However, if any documentation is missing, inaccurate, or does not agree with the 1003 (application), the loan will be kicked out of this system until documentation requirements are met or the loan is turned down or resubmitted. This can cause delays but they are usually resolved quickly. Automated Underwriting can be completed in just a matter of hours. But, ..If the market is flooded expect it to take longer.
Conditions To Close
When the underwriter is done reviewing your loan she will send "conditions to close" to your loan officer. These are normally just requirements for further documentation to support your file. When these needs have been satisfied the underwriter will give a final approval and "clear to close".
Clear To Close
When the loan officer gets the clear to close, he then schedules and coordinates with all the parties the time and location to sign the final documents to close the loan. This normally only takes an hour or so to schedule.
Draw Documents
When everything is scheduled the lender then draws the document package and sends it to the closing company. This can be done by overnight delivery or electronically. It can take one to two days. You meet, sign the papers.
Funding
Next is the funding of your loan. This usually takes about two to three days after you sign your closing documents, since the originals need to be sent overnight to the lender. Once received and revewed to make sure there are no missing signatures or to make sure you signed your name as it appeared on the loan application. The lender will fund your loan. This simply means they have send out the funds to the closing agent (Escrow Company). This is done by wire and usually the cut off time to send a wire out is between 10am and 11am since the wire goes to the Federal Government then they send it to the escrow company.
Recording
Once the escrow company receives the wire they send notification to the county recorder’s office. Once the notifications has been received and recorded with usually takes 24 hours from the time of funding.
Now you receive your keys!
Mortgage Rates
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.
Friday, April 15, 2011
The bond and mortgage markets continue to swing back and forth within a narrow range, yesterday the 10 yr note rate increased 4 basis points, this morning at 8:45 its yield down 4 bp. Mortgage prices fell yesterday 7/32 (.22 bp), this morning the price up 10/32 (.31 bp) at 8:45.
At 8:30 March consumer price index increased 0.5% in line with estimates, the core (ex food and energy) up 0.1% slightly less than 0.2% expected. Yr/yr overall CPI +2.7%, the core yr/yr +1.2%. Inflation concerns still the great debate with the Fed saying don't worry be happy while markets are worrying and are not happy. Who wins? The Fed isn't concerned that inflation in commodity prices will pass through to consumer prices, markets don't like fading the Fed on such a key issue but evidence is increasing that businesses are beginning to pass price increases down the chain. Not yet a major issue but one that bears watching. Bernanke's key word "transitory" describing inflation of commodity prices is keeping rates from moving higher but equally keeping rates from declining.
There is so much focus on inflation with global inflation increasing in Europe, China, India, Brazil, Russia and emerging markets that markets completely ignored the NY Empire State manufacturing data also out at 8:30 this morning. Normally the NY report gets attention even though it is a a small regional series, this morning it was as if it didn't exist. The overall index was expected to have declined to 15.0 frm 17.5 in March, as reported it jumped to 21.7. The sub-components also stronger; new orders index 22.34 frm 5.81, prices pd 57.69 frm 53.25 and employment at 23.08 frm 9.09. On another day those improvements would have pressured rates and improved stock indexes; today there was no interest in it.
While we hold our outlook that interest rates will slowly rise by the end of the yr, the near term is looking a little better; that said as long as the 10 yr continues to be comfortable in its near term narrow 10 bp range (3.40% to 3.50%) showing no tipping of the balance; mortgage rates also stuck in their ranges and will remain there until the 10 yr breaks in either direction.
Holding rates steady is the increasing realization that Q1 economic growth will be far less than what markets were believing just two weeks ago. More economists and some Fed officials are cutting Q1 GDP estimates to 2.0% growth from 3.55 to 4.0% that had been prevalent. Looks more and more like the unfettered optimism that was the consensus just a week ago has now been rattled especially when we have Fed district Presidents out there down-playing economic growth; a key reason that inflation concerns may be waning. The Fed's Plosser (Philly Fed) out this morning saying he isn't worried about inflation for at least another year; likely he sees economic weakness coming-----we agree but with rates increasing globally the US won't be able to easily fund the deficits at low rates.
At 9:15 March industrial production was expected up 0.5%, it increased 0.8% and factory utilization increased to 77.4% (the highest since August 2008) frm 76.9% in Feb. Both stronger than thought but there was no reaction to the data in the bond and mortgage markets. The stock indexes however have improved; early on the indexes were lower, at 9:20 the DJIA up 10 points and the S&P about unchanged (+1.5 points).
At 9:30 the DJIA opened +26, the 10 yr +19/32 at 3.43% -6 bp and mortgage prices +14/32 (.44 bp).
The final data point today; at 9:55 the U. of Michigan consumer sentiment index, expected at 66.0 frm 67.5, was 69.6, the current conditions index 82.7 frm 82.5, 12 month out expectations 75 frm 60; the 12 month inflation index was unchanged at 4.6. The rate markets got a minor boost on the data, so too the stock market-----a little for everyone in the data.
A couple of Fed speakers today; at 10:00 Alt Fed's Evans, at 1:30 KC Fed Pres Hoenig, Hoenig is the Fed's maverick wanting no QE and the Fed to begin thinking about tightening.
Listening and watching analysts, economists and politicians the take away is at the end of the day uncertainty is how most end their various forecasts. Not unusual to couch forecasts but recently the couching has taken on a higher level. Economic growth but at what pace? China, India, Russia, Germany, and emerging markets expanding at rapid rates; the US dragging along with more now revising growth lower than what had been though a couple of weeks ago. The bond and mortgage markets holding steady with little changes in interest rates over the past three weeks; we will continue our conservative approach to trading as long as our favorite 10 yr note sticks in its 10 bp range---no long positions, no shorting either----sometimes its better to just watch.
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.
Friday, April 15, 2011
The bond and mortgage markets continue to swing back and forth within a narrow range, yesterday the 10 yr note rate increased 4 basis points, this morning at 8:45 its yield down 4 bp. Mortgage prices fell yesterday 7/32 (.22 bp), this morning the price up 10/32 (.31 bp) at 8:45.
At 8:30 March consumer price index increased 0.5% in line with estimates, the core (ex food and energy) up 0.1% slightly less than 0.2% expected. Yr/yr overall CPI +2.7%, the core yr/yr +1.2%. Inflation concerns still the great debate with the Fed saying don't worry be happy while markets are worrying and are not happy. Who wins? The Fed isn't concerned that inflation in commodity prices will pass through to consumer prices, markets don't like fading the Fed on such a key issue but evidence is increasing that businesses are beginning to pass price increases down the chain. Not yet a major issue but one that bears watching. Bernanke's key word "transitory" describing inflation of commodity prices is keeping rates from moving higher but equally keeping rates from declining.
There is so much focus on inflation with global inflation increasing in Europe, China, India, Brazil, Russia and emerging markets that markets completely ignored the NY Empire State manufacturing data also out at 8:30 this morning. Normally the NY report gets attention even though it is a a small regional series, this morning it was as if it didn't exist. The overall index was expected to have declined to 15.0 frm 17.5 in March, as reported it jumped to 21.7. The sub-components also stronger; new orders index 22.34 frm 5.81, prices pd 57.69 frm 53.25 and employment at 23.08 frm 9.09. On another day those improvements would have pressured rates and improved stock indexes; today there was no interest in it.
While we hold our outlook that interest rates will slowly rise by the end of the yr, the near term is looking a little better; that said as long as the 10 yr continues to be comfortable in its near term narrow 10 bp range (3.40% to 3.50%) showing no tipping of the balance; mortgage rates also stuck in their ranges and will remain there until the 10 yr breaks in either direction.
Holding rates steady is the increasing realization that Q1 economic growth will be far less than what markets were believing just two weeks ago. More economists and some Fed officials are cutting Q1 GDP estimates to 2.0% growth from 3.55 to 4.0% that had been prevalent. Looks more and more like the unfettered optimism that was the consensus just a week ago has now been rattled especially when we have Fed district Presidents out there down-playing economic growth; a key reason that inflation concerns may be waning. The Fed's Plosser (Philly Fed) out this morning saying he isn't worried about inflation for at least another year; likely he sees economic weakness coming-----we agree but with rates increasing globally the US won't be able to easily fund the deficits at low rates.
At 9:15 March industrial production was expected up 0.5%, it increased 0.8% and factory utilization increased to 77.4% (the highest since August 2008) frm 76.9% in Feb. Both stronger than thought but there was no reaction to the data in the bond and mortgage markets. The stock indexes however have improved; early on the indexes were lower, at 9:20 the DJIA up 10 points and the S&P about unchanged (+1.5 points).
At 9:30 the DJIA opened +26, the 10 yr +19/32 at 3.43% -6 bp and mortgage prices +14/32 (.44 bp).
The final data point today; at 9:55 the U. of Michigan consumer sentiment index, expected at 66.0 frm 67.5, was 69.6, the current conditions index 82.7 frm 82.5, 12 month out expectations 75 frm 60; the 12 month inflation index was unchanged at 4.6. The rate markets got a minor boost on the data, so too the stock market-----a little for everyone in the data.
A couple of Fed speakers today; at 10:00 Alt Fed's Evans, at 1:30 KC Fed Pres Hoenig, Hoenig is the Fed's maverick wanting no QE and the Fed to begin thinking about tightening.
Listening and watching analysts, economists and politicians the take away is at the end of the day uncertainty is how most end their various forecasts. Not unusual to couch forecasts but recently the couching has taken on a higher level. Economic growth but at what pace? China, India, Russia, Germany, and emerging markets expanding at rapid rates; the US dragging along with more now revising growth lower than what had been though a couple of weeks ago. The bond and mortgage markets holding steady with little changes in interest rates over the past three weeks; we will continue our conservative approach to trading as long as our favorite 10 yr note sticks in its 10 bp range---no long positions, no shorting either----sometimes its better to just watch.
Thursday, April 14, 2011
Mortgage Rates
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.
Thursday, April 14, 2011
Prior to 8:30 this morning the 10 yr note traded slightly better with stock index futures weaker. At 8:30 weekly jobless claims were expected to have increased 3K but jumped 27K back above 400K to 412K; continuing claims however declined from 3.73 mil to 3.68 mil. The 4 wk average increased 5K. Also at 8:30 March producer price index was expected up 1.0%, as reported up 0.7%, the core excluding food and energy was expected up 0.2% but increased 0.3%. Yr/yr overall PPI +5.8% while the yr/yr core +1.9%, up 0.1% frm Feb.
The 10 yr note fell below 3.50% yesterday to 3.46% breaking the near term resistance, this morning after the 8:30 data the rate fell to 3.43% and mortgage prices at 8:45 +4/32 (.12 bp). The 10 yr technicals looking better after two weeks of selling and increasing rates. The stock index futures were pushed lower on the data this morning, at 8:45 the DJIA off 47. As long as equity markets stay weak the bond and mortgage markets will do better.
Obama's call for raising taxes by focusing on spending in the tax code was immediately rejected by top Republicans, signaling that any effort to increase the government’s take from the economy would be difficult to move through Congress. What a surprise! Obama said he wanted Congress to overhaul the tax code by lowering rates, eliminating tax breaks and generating more money than the current system does. The plan would allow tax cuts affecting high-income taxpayers to expire at the end of 2012 and would raise $1T on top of that. As noted yesterday, the budget battle is hardly beginning. That said, the Presidents speech was overall a good one, well framing the issues but the chasm between those wanting more government and less is wider than the Grand Canyon. Obama set a June deadline for a bipartisan deal to cut the federal deficit and offered a path to get there that was designed to contrast with a Republican proposal he called unfair to the elderly and overly generous to the wealthy; it won't likely be achieved though.
Crude oil, after hitting $113.00 last Friday is slightly lower this morning and has fallen to $107.00. Oil inventory levels were higher than traders expected when data was released yesterday. The decline in the price is mostly speculators heavily leveraged being forced out, but they will be back.
At 9:30 the DJIA opened down 50 points, the 10 yr off its best levels earlier, up 3/32 at 3.45% after touching 3.43%. Mortgage prices at 9:30 +2/32 (.06 bp) also falling back from levels at 9:00.
At 1:00 this afternoon Treasury will auction $13B of 30 yr bonds; yesterday's 10 yr auction was OK but not strong bidding.
While the bond and mortgage markets have improved in the last few days, and the 210 yr note took out its near resistance at 3.50%, the 10 has a very critical resistance at 3.40%. Breaking the 3.40% level will need a continuing decline in US equities which doesn't appear likely although recent selling in stock markets has increased concerns and shaken the strong optimism that has captured investors.
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.
Thursday, April 14, 2011
Prior to 8:30 this morning the 10 yr note traded slightly better with stock index futures weaker. At 8:30 weekly jobless claims were expected to have increased 3K but jumped 27K back above 400K to 412K; continuing claims however declined from 3.73 mil to 3.68 mil. The 4 wk average increased 5K. Also at 8:30 March producer price index was expected up 1.0%, as reported up 0.7%, the core excluding food and energy was expected up 0.2% but increased 0.3%. Yr/yr overall PPI +5.8% while the yr/yr core +1.9%, up 0.1% frm Feb.
The 10 yr note fell below 3.50% yesterday to 3.46% breaking the near term resistance, this morning after the 8:30 data the rate fell to 3.43% and mortgage prices at 8:45 +4/32 (.12 bp). The 10 yr technicals looking better after two weeks of selling and increasing rates. The stock index futures were pushed lower on the data this morning, at 8:45 the DJIA off 47. As long as equity markets stay weak the bond and mortgage markets will do better.
Obama's call for raising taxes by focusing on spending in the tax code was immediately rejected by top Republicans, signaling that any effort to increase the government’s take from the economy would be difficult to move through Congress. What a surprise! Obama said he wanted Congress to overhaul the tax code by lowering rates, eliminating tax breaks and generating more money than the current system does. The plan would allow tax cuts affecting high-income taxpayers to expire at the end of 2012 and would raise $1T on top of that. As noted yesterday, the budget battle is hardly beginning. That said, the Presidents speech was overall a good one, well framing the issues but the chasm between those wanting more government and less is wider than the Grand Canyon. Obama set a June deadline for a bipartisan deal to cut the federal deficit and offered a path to get there that was designed to contrast with a Republican proposal he called unfair to the elderly and overly generous to the wealthy; it won't likely be achieved though.
Crude oil, after hitting $113.00 last Friday is slightly lower this morning and has fallen to $107.00. Oil inventory levels were higher than traders expected when data was released yesterday. The decline in the price is mostly speculators heavily leveraged being forced out, but they will be back.
At 9:30 the DJIA opened down 50 points, the 10 yr off its best levels earlier, up 3/32 at 3.45% after touching 3.43%. Mortgage prices at 9:30 +2/32 (.06 bp) also falling back from levels at 9:00.
At 1:00 this afternoon Treasury will auction $13B of 30 yr bonds; yesterday's 10 yr auction was OK but not strong bidding.
While the bond and mortgage markets have improved in the last few days, and the 210 yr note took out its near resistance at 3.50%, the 10 has a very critical resistance at 3.40%. Breaking the 3.40% level will need a continuing decline in US equities which doesn't appear likely although recent selling in stock markets has increased concerns and shaken the strong optimism that has captured investors.
Wednesday, April 13, 2011
Mortgage Rates
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.
Wednesday, April 13, 2011
Treasuries and mortgage markets rallied yesterday on weaker equity markets and Japan raising the disaster index to 7 on the nuke problems. This morning stock indexes, as they seem to do on any declines, are better pushing rate markets higher in yield. Yesterday the 10 yr note rallied nicely taking its yield down 8 bp to 3.50% where we noted resistance would occur, mortgage rates fell about 5 bp. Yesterday gold decline and crude oil fell $4.00, this morning in early trading gold up recovering all of the decline yesterday, crude up about $1.00 at 9:00. At 9:00 the DJIA +84 in pre-market trading after declining 117 points yesterday.
At 8:30 this morning March retail sales were generally in line with forecasts; up 0.4% overall and ex auto sales +0.8%. March sales were the weakest since June 2010; Feb sales revised to +1.1% from +0.7% ex auto sales. Excluding gasoline sales in March sales were up just 0.1%, in Feb ex gas up 1.1%. The rapid increase in gasoline prices as we have noted will cause a decline in consumer spending on discretionary items.
At 9:30 the DJIA opened +64, the 10 yr -11/32 at 3.54% +4 bp and mortgage prices -.18 bp frm yesterday's close.
At 10:00 Feb business inventories, expected +0.8%, increased 0.5%; sales were +0.2% the lowest since June 2010, the inventory to sales ratio 1.24 months unchanged from Jan.
Earlier this morning at 7:00 am the weekly MBA mortgage applications for last week. Mortgage applications decreased 6.7% from one week earlier, weekly mortgage applications survey for the week ending April 8, 2011. The Refinance Index decreased 7.7% to its lowest level since February 11, 2011. The seasonally adjusted Purchase Index decreased 4.7% from one week earlier. The Purchase Index decreased 4.1% compared with the previous week and was 11.4% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market Index is down 3.3%. The four week moving average is up 0.7% for the seasonally adjusted Purchase Index, while this average is down 5.3% for the Refinance Index. The refinance share of mortgage activity decreased to 60.3% of total applications from 61.2% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity decreased to 5.9% from 6.1% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased for the fourth consecutive week to 4.98% from 4.93%, with points increasing to 0.93 from 0.69 (including the origination fee) for 80% loans. This is the highest average contract rate reported since February 18, 2011. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.17% from 4.14%, with points increasing to 1.22 from 1.09 (including the origination fee) for 80% loans. The effective rate also increased from last week.
At 1:00 this afternoon Treasury will auction $21B of 10 yr notes; yesterday's $32B of 3 yr notes went OK, like the Three Bears---not to hot, not too cool, just right. Today's 10 yr should be decently bid but recent Treasury borrowing over the past few months has been a mixed bag, some auctions well-bid while others not so strong.
At 1:30 the President is going to lay out his sketchy ideas for cutting the budget deficit. Likely he will not want to cut entitlements, the path for Democrats to regain power. The budget battles are going to be contentious between Republicans and Democrats and will carry on through most of the summer. Regardless of how the cuts come and whether tax revenue increases occur, the end of it all will be another serious political miss. Our politicians are all about themselves and being re-elected; we do not expect a budget that will be meaningful until we have another election when our elected officials get the temperatures of the country----again.
The Progressive Change Campaign Committee is calling for a "donor strike" by 2008 supporters of Obama if he puts Medicare and Medicare "on the table for potential cuts." Obama is expected to discuss those programs during his speech this afternoon on ways to reduce the federal debt. Conservative Republicans, meanwhile, are already criticizing Obama's planned speech for proposals to eliminate tax loopholes, and end George W. Bush-era tax cuts for wealthy Americans. It is going to be a real Cluster...
And finally today; at 2:00 the Fed will release its Beige Book on the economy from the 12 Fed districts.
With the Pres speaking at 1:30 and the Fed's Beige Book at 2:00 the financial markets will likely not move much this morning. The bond and mortgage markets are technically bearish but as we have noted we are not expecting a spike higher in rates, rates will increase through the rest of the year as long as the economic outlook continues to be positive. That said, the IMF lowered their estimates for growth in the US from 2.0% to 1.5% this year, and lowered growth rates for Europe and Asian economies. The lowered forecasts have opened the door for those that are not so optimistic. A change in the outlook would of course support the rate markets as investors exit equities, that however, at least at this time, isn't the consensus.
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.
Wednesday, April 13, 2011
Treasuries and mortgage markets rallied yesterday on weaker equity markets and Japan raising the disaster index to 7 on the nuke problems. This morning stock indexes, as they seem to do on any declines, are better pushing rate markets higher in yield. Yesterday the 10 yr note rallied nicely taking its yield down 8 bp to 3.50% where we noted resistance would occur, mortgage rates fell about 5 bp. Yesterday gold decline and crude oil fell $4.00, this morning in early trading gold up recovering all of the decline yesterday, crude up about $1.00 at 9:00. At 9:00 the DJIA +84 in pre-market trading after declining 117 points yesterday.
At 8:30 this morning March retail sales were generally in line with forecasts; up 0.4% overall and ex auto sales +0.8%. March sales were the weakest since June 2010; Feb sales revised to +1.1% from +0.7% ex auto sales. Excluding gasoline sales in March sales were up just 0.1%, in Feb ex gas up 1.1%. The rapid increase in gasoline prices as we have noted will cause a decline in consumer spending on discretionary items.
At 9:30 the DJIA opened +64, the 10 yr -11/32 at 3.54% +4 bp and mortgage prices -.18 bp frm yesterday's close.
At 10:00 Feb business inventories, expected +0.8%, increased 0.5%; sales were +0.2% the lowest since June 2010, the inventory to sales ratio 1.24 months unchanged from Jan.
Earlier this morning at 7:00 am the weekly MBA mortgage applications for last week. Mortgage applications decreased 6.7% from one week earlier, weekly mortgage applications survey for the week ending April 8, 2011. The Refinance Index decreased 7.7% to its lowest level since February 11, 2011. The seasonally adjusted Purchase Index decreased 4.7% from one week earlier. The Purchase Index decreased 4.1% compared with the previous week and was 11.4% lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market Index is down 3.3%. The four week moving average is up 0.7% for the seasonally adjusted Purchase Index, while this average is down 5.3% for the Refinance Index. The refinance share of mortgage activity decreased to 60.3% of total applications from 61.2% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity decreased to 5.9% from 6.1% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased for the fourth consecutive week to 4.98% from 4.93%, with points increasing to 0.93 from 0.69 (including the origination fee) for 80% loans. This is the highest average contract rate reported since February 18, 2011. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.17% from 4.14%, with points increasing to 1.22 from 1.09 (including the origination fee) for 80% loans. The effective rate also increased from last week.
At 1:00 this afternoon Treasury will auction $21B of 10 yr notes; yesterday's $32B of 3 yr notes went OK, like the Three Bears---not to hot, not too cool, just right. Today's 10 yr should be decently bid but recent Treasury borrowing over the past few months has been a mixed bag, some auctions well-bid while others not so strong.
At 1:30 the President is going to lay out his sketchy ideas for cutting the budget deficit. Likely he will not want to cut entitlements, the path for Democrats to regain power. The budget battles are going to be contentious between Republicans and Democrats and will carry on through most of the summer. Regardless of how the cuts come and whether tax revenue increases occur, the end of it all will be another serious political miss. Our politicians are all about themselves and being re-elected; we do not expect a budget that will be meaningful until we have another election when our elected officials get the temperatures of the country----again.
The Progressive Change Campaign Committee is calling for a "donor strike" by 2008 supporters of Obama if he puts Medicare and Medicare "on the table for potential cuts." Obama is expected to discuss those programs during his speech this afternoon on ways to reduce the federal debt. Conservative Republicans, meanwhile, are already criticizing Obama's planned speech for proposals to eliminate tax loopholes, and end George W. Bush-era tax cuts for wealthy Americans. It is going to be a real Cluster...
And finally today; at 2:00 the Fed will release its Beige Book on the economy from the 12 Fed districts.
With the Pres speaking at 1:30 and the Fed's Beige Book at 2:00 the financial markets will likely not move much this morning. The bond and mortgage markets are technically bearish but as we have noted we are not expecting a spike higher in rates, rates will increase through the rest of the year as long as the economic outlook continues to be positive. That said, the IMF lowered their estimates for growth in the US from 2.0% to 1.5% this year, and lowered growth rates for Europe and Asian economies. The lowered forecasts have opened the door for those that are not so optimistic. A change in the outlook would of course support the rate markets as investors exit equities, that however, at least at this time, isn't the consensus.
Tuesday, April 12, 2011
Mortgage Rates
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, April 12, 2011
Treasuries rallying this morning on lower equity market trade and another slight run to safety on news that Japan has elevated the condition level on its nuke sites from a 5 to a 7, the same level as Chernobyl in 1986. Officials however are saying the level of radiation leaks is much lower than Chernobyl, still an increase to the highest level for nuke accidents. Also supporting rate markets; in the UK inflation levels slipped a little as is also the case on recent data from Mexico. In Germany investor confidence slid on ECB rate increase last week; German inflation unexpectedly accelerated to 2.3% last month after oil prices surged to more than $110 a barrel. (crude has declined $7.00 in the last 24 hours)
More not so good news for the economic outlook this morning. The National Federation of Independent Business index fell. "It looks like everyone became more pessimistic in March, consumers (The university of Michigan Confidence Index took a dive, tenth largest monthly decline in survey history) and business owners. The Index of Small Business Optimism gave up 2.6 points in March, falling to 91.9, definitely a recession-level reading if history is any guide.".... "The bad news for the Fed (although not for the business owners who need to improve their bottom lines after the recession laid waste to their profits) is that price pressures continue to mount. The decline in the Index was driven by weaker expectations for real sales gains and business conditions and a marked deterioration in profit trends. Job creation plans weakened but remained in positive territory and plans to make capital outlays posted another gain (although reports of actual outlays over the past 6 months were unchanged). Basically, the Index and its components are at recession levels from an historical perspective."
The Feb international trade deficit was about in line; -$45.76B. March import prices increased 2.7%, higher than 2.2% expected; export prices +1.5% higher than +0.8% expected. Food prices up 4.2% the largest increase since July 1994; yr/yr import prices up 9.7%. Yr/yr on export price +9.7%.
The DJIA opened -88, at 9:30 the 10 yr +19/32 at 3.52% -6 bp and mortgages +12/32 (.27 bp). Equity markets were not happy over the Alcoa earnings reported at 4:00 yesterday, the beginning of earnings season. Cisco also not helping equities with news of the company about to cut jobs.
The reactions to weaker earnings, a decline in small business confidence, Japan increasing the nuke emergency level from 5 to the highest 7 level, a sizeable decline in oil prices in the last 24 hours (about $7.00), and lower inflation stats from the UK have momentarily shaken markets. Not a big deal in the larger perspective but enough to pressure stocks for the moment and push interest rates slightly lower this morning.
At 1:00 Treasury will auction $32B of 3 yr notes. At 2:00 this afternoon Treasury will report the March balance, expected a deficit of $189B.
A nice start to the day but we are not swayed, the bond and mortgage markets if we look at it from the technicals are both near term oversold as we noted yesterday; the equity markets equally overbought. Both markets overdue for consolidation. The larger picture remains optimistic fore economic recovery, inflation concerns haven't evaporated as most countries are on a path of rate hikes. Then the much wider perspective; the US budget deficit that will play a huge role in the markets starting again tomorrow after Obama's speech. None of the driving issues justify optimism in the bond markets.
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, April 12, 2011
Treasuries rallying this morning on lower equity market trade and another slight run to safety on news that Japan has elevated the condition level on its nuke sites from a 5 to a 7, the same level as Chernobyl in 1986. Officials however are saying the level of radiation leaks is much lower than Chernobyl, still an increase to the highest level for nuke accidents. Also supporting rate markets; in the UK inflation levels slipped a little as is also the case on recent data from Mexico. In Germany investor confidence slid on ECB rate increase last week; German inflation unexpectedly accelerated to 2.3% last month after oil prices surged to more than $110 a barrel. (crude has declined $7.00 in the last 24 hours)
More not so good news for the economic outlook this morning. The National Federation of Independent Business index fell. "It looks like everyone became more pessimistic in March, consumers (The university of Michigan Confidence Index took a dive, tenth largest monthly decline in survey history) and business owners. The Index of Small Business Optimism gave up 2.6 points in March, falling to 91.9, definitely a recession-level reading if history is any guide.".... "The bad news for the Fed (although not for the business owners who need to improve their bottom lines after the recession laid waste to their profits) is that price pressures continue to mount. The decline in the Index was driven by weaker expectations for real sales gains and business conditions and a marked deterioration in profit trends. Job creation plans weakened but remained in positive territory and plans to make capital outlays posted another gain (although reports of actual outlays over the past 6 months were unchanged). Basically, the Index and its components are at recession levels from an historical perspective."
The Feb international trade deficit was about in line; -$45.76B. March import prices increased 2.7%, higher than 2.2% expected; export prices +1.5% higher than +0.8% expected. Food prices up 4.2% the largest increase since July 1994; yr/yr import prices up 9.7%. Yr/yr on export price +9.7%.
The DJIA opened -88, at 9:30 the 10 yr +19/32 at 3.52% -6 bp and mortgages +12/32 (.27 bp). Equity markets were not happy over the Alcoa earnings reported at 4:00 yesterday, the beginning of earnings season. Cisco also not helping equities with news of the company about to cut jobs.
The reactions to weaker earnings, a decline in small business confidence, Japan increasing the nuke emergency level from 5 to the highest 7 level, a sizeable decline in oil prices in the last 24 hours (about $7.00), and lower inflation stats from the UK have momentarily shaken markets. Not a big deal in the larger perspective but enough to pressure stocks for the moment and push interest rates slightly lower this morning.
At 1:00 Treasury will auction $32B of 3 yr notes. At 2:00 this afternoon Treasury will report the March balance, expected a deficit of $189B.
A nice start to the day but we are not swayed, the bond and mortgage markets if we look at it from the technicals are both near term oversold as we noted yesterday; the equity markets equally overbought. Both markets overdue for consolidation. The larger picture remains optimistic fore economic recovery, inflation concerns haven't evaporated as most countries are on a path of rate hikes. Then the much wider perspective; the US budget deficit that will play a huge role in the markets starting again tomorrow after Obama's speech. None of the driving issues justify optimism in the bond markets.
Monday, April 11, 2011
Mortgage Rates
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.
Monday, April 11, 2011
Last week there wasn't much direct news for the bond and mortgage markets. Interest rates increasing around the globe, no economic reports of consequence and politicians working on a budget to fund deficits through the end of 2011 fiscal year (Sept). The rate markets last week saw the 10 yr yield increase 12 bp, mortgages up 6 bp.
At the 11th hour (literally) the Congress and the Administration agreed on a budget, avoiding a government shutdown. The media made a huge deal out of the inability of Republicans and Democrats to agree, markets however were generally convinced the shut-down would be avoided.
Treasuries and mortgages started the day about unchanged from Friday, a couple of ticks weaker; in pre-market trading the stock indexes were higher and at 9:30 the DJIA opened better (+20) Mortgage prices were down 2/32 (.06 bp) prior to 9:30 but improved a little to +2/32 (.06 bp) . Last week the DJIA up 3 pts, NASDAQ -9, and the S&P -4. Today there are no economic releases for markets; through the week however we will get more data than last week.
Starting tomorrow afternoon Treasury will auction $66B of notes and bonds, recent borrowing demand from investors has been a little soft so demand will be closely watched. Wednesday Pres Obama will speak and release the administrations 2012 budget; politicians had a difficult time over the past few weeks agreeing on a budget for the rest of this year. The 2012 budget battle will make the recent budget battle look like children's play. Cuts in entitlements will be difficult to get agreement but it is necessary to cut them; Medicare and Medicaid and likely talks of revenue increases. Recall Obama extended the Bush tax cuts this year, that isn't likely to happen next year so taxes for many will increase just on that alone.
This Week's Economic Calendar:
Tuesday;
8:30 am Feb trade balance (-$45.7B)
Mar import and export price (N/A)
1:00 pm $32B 3 yr note auction
2:00 Mar treasury budget balance (-$189.0B)
Wednesday;
7:00 am Weekly mortgage applications
8:30 am Mar retail sales (+0.5%; ex auto sales +0.8%)
10:00 am Feb business inventories (+0.8%)
1:00 pm $21B 10 yr note auction
2:00 pm Fed's Beige Book (report on the economy)
Thursday;
8:30 am weekly jobless claims (+3K to 385K; con't claims 3.70 mil frm 3.723 mil)
Mar producer price index (+1.0%, ex food and energy +0.2%)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am Mar consumer price index (+0.5%; ex food and energy +0.2%)
Apr NY Empire State manufacturing index (15.0 frm 17.5 in Mar)
9:15 am Mar industrial production (+0.6% frm unch in Feb)
Mar capacity utilization (77.4% frm 77.0% in Feb)
9:55 am U. of Michigan mid-month consumer sentiment index (66.0 frm 67.5)
Technically the bond and mortgage markets are a little oversold on a near term measurement, a little improvement is likely but the trend won't change---its negative. The 10 yr managed a successful test of longer term support at 3.60% on Friday and fell back to close at 3.58%. We suggest using any improvements to lock loans about to close. The best we can forecast is the 10 may fall back to 3.50% at best. Treasury auctions should keep rates from declining much in the early part of the week.
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.
Monday, April 11, 2011
Last week there wasn't much direct news for the bond and mortgage markets. Interest rates increasing around the globe, no economic reports of consequence and politicians working on a budget to fund deficits through the end of 2011 fiscal year (Sept). The rate markets last week saw the 10 yr yield increase 12 bp, mortgages up 6 bp.
At the 11th hour (literally) the Congress and the Administration agreed on a budget, avoiding a government shutdown. The media made a huge deal out of the inability of Republicans and Democrats to agree, markets however were generally convinced the shut-down would be avoided.
Treasuries and mortgages started the day about unchanged from Friday, a couple of ticks weaker; in pre-market trading the stock indexes were higher and at 9:30 the DJIA opened better (+20) Mortgage prices were down 2/32 (.06 bp) prior to 9:30 but improved a little to +2/32 (.06 bp) . Last week the DJIA up 3 pts, NASDAQ -9, and the S&P -4. Today there are no economic releases for markets; through the week however we will get more data than last week.
Starting tomorrow afternoon Treasury will auction $66B of notes and bonds, recent borrowing demand from investors has been a little soft so demand will be closely watched. Wednesday Pres Obama will speak and release the administrations 2012 budget; politicians had a difficult time over the past few weeks agreeing on a budget for the rest of this year. The 2012 budget battle will make the recent budget battle look like children's play. Cuts in entitlements will be difficult to get agreement but it is necessary to cut them; Medicare and Medicaid and likely talks of revenue increases. Recall Obama extended the Bush tax cuts this year, that isn't likely to happen next year so taxes for many will increase just on that alone.
This Week's Economic Calendar:
Tuesday;
8:30 am Feb trade balance (-$45.7B)
Mar import and export price (N/A)
1:00 pm $32B 3 yr note auction
2:00 Mar treasury budget balance (-$189.0B)
Wednesday;
7:00 am Weekly mortgage applications
8:30 am Mar retail sales (+0.5%; ex auto sales +0.8%)
10:00 am Feb business inventories (+0.8%)
1:00 pm $21B 10 yr note auction
2:00 pm Fed's Beige Book (report on the economy)
Thursday;
8:30 am weekly jobless claims (+3K to 385K; con't claims 3.70 mil frm 3.723 mil)
Mar producer price index (+1.0%, ex food and energy +0.2%)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am Mar consumer price index (+0.5%; ex food and energy +0.2%)
Apr NY Empire State manufacturing index (15.0 frm 17.5 in Mar)
9:15 am Mar industrial production (+0.6% frm unch in Feb)
Mar capacity utilization (77.4% frm 77.0% in Feb)
9:55 am U. of Michigan mid-month consumer sentiment index (66.0 frm 67.5)
Technically the bond and mortgage markets are a little oversold on a near term measurement, a little improvement is likely but the trend won't change---its negative. The 10 yr managed a successful test of longer term support at 3.60% on Friday and fell back to close at 3.58%. We suggest using any improvements to lock loans about to close. The best we can forecast is the 10 may fall back to 3.50% at best. Treasury auctions should keep rates from declining much in the early part of the week.
Saturday, April 9, 2011
Friday, April 8, 2011
Mortgage Rates
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.
Friday, April 08, 2011
Treasuries and mortgages under pressure early this morning with stock indexes looking better for the open at 9:30. At 9:13 the 10 yr -12/32 at 3.59% working to test 3.60%, mortgage prices at 9:15 -7/32 (.22 bp). At 9:30 the DJIA opened +35, 10 yr -12/32 3.59% and mortgage prices -.22 bp.
Crude oil continues to increase on unwavering concerns that oil supplies may be in some kind of jeopardy of decline although so far that hasn't been the case as oil now setting another record. Gold higher also this morning as most (except the Federal Reserve) are increasingly concerned that inflation will edge higher. The Fed of course lead by Bernanke doesn't believe inflation is now, or will be in the future, a problem. Within the Fed there are about as many opinions about ending QE or increasing the FF rate as there are officials which seem to multiply daily. Markets however are not as optimistic on the inflation outlook; inflation is increasing everywhere in the world except the US and it isn't logical that US markets will accept Bernanke's outlook.
The only thing today is the budget battle in Washington where the political misfits continue to argue over five-one thousandths of 1.0% of the total budget. Republicans, Democrats, the White House and tea party people cannot agree to make a $5B additional cut to keep the government from shutting down. Likely it will get done before a shutdown becomes necessary but we shiver at the prospect of our elected officials being able to deal with the budget in 2012 that will (or should) include increases in revenues and cuts in entitlement programs. As always is the case all of them will be more concerned with being re-elected than doing the peoples business.
At 10:00 the only data point, Feb wholesale inventories were expected up 1.0%, as reported up 1.0%; sales were however down 0.8% on expectations of being up 1.8%, the inventory to sales ratio at 1.16 month from 1.14 months in Jan. . This week there hasn't been much in the way of economic measurements; inventories don't get much attention from traders.
This morning the 10 yr note is testing 3.60%, the level that should hold the note at least for the day. If it gives way the next run will take it to 3.75% and push up mortgage rates another 15 basis points in rate. The rest of the day for the bond and mortgage markets will be watching the trade in equities; the DJIA opened +35 but within 10 minutes it slipped back to +17. All of our models and technical indicators are giving off bearish readings now.
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.
Friday, April 08, 2011
Treasuries and mortgages under pressure early this morning with stock indexes looking better for the open at 9:30. At 9:13 the 10 yr -12/32 at 3.59% working to test 3.60%, mortgage prices at 9:15 -7/32 (.22 bp). At 9:30 the DJIA opened +35, 10 yr -12/32 3.59% and mortgage prices -.22 bp.
Crude oil continues to increase on unwavering concerns that oil supplies may be in some kind of jeopardy of decline although so far that hasn't been the case as oil now setting another record. Gold higher also this morning as most (except the Federal Reserve) are increasingly concerned that inflation will edge higher. The Fed of course lead by Bernanke doesn't believe inflation is now, or will be in the future, a problem. Within the Fed there are about as many opinions about ending QE or increasing the FF rate as there are officials which seem to multiply daily. Markets however are not as optimistic on the inflation outlook; inflation is increasing everywhere in the world except the US and it isn't logical that US markets will accept Bernanke's outlook.
The only thing today is the budget battle in Washington where the political misfits continue to argue over five-one thousandths of 1.0% of the total budget. Republicans, Democrats, the White House and tea party people cannot agree to make a $5B additional cut to keep the government from shutting down. Likely it will get done before a shutdown becomes necessary but we shiver at the prospect of our elected officials being able to deal with the budget in 2012 that will (or should) include increases in revenues and cuts in entitlement programs. As always is the case all of them will be more concerned with being re-elected than doing the peoples business.
At 10:00 the only data point, Feb wholesale inventories were expected up 1.0%, as reported up 1.0%; sales were however down 0.8% on expectations of being up 1.8%, the inventory to sales ratio at 1.16 month from 1.14 months in Jan. . This week there hasn't been much in the way of economic measurements; inventories don't get much attention from traders.
This morning the 10 yr note is testing 3.60%, the level that should hold the note at least for the day. If it gives way the next run will take it to 3.75% and push up mortgage rates another 15 basis points in rate. The rest of the day for the bond and mortgage markets will be watching the trade in equities; the DJIA opened +35 but within 10 minutes it slipped back to +17. All of our models and technical indicators are giving off bearish readings now.
Thursday, April 7, 2011
Mortgage Rates
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.
Thursday, April 07, 2011
Treasuries and mortgages started a little weaker this morning; at 8:00 the 10 yr -5/32 and mortgages -2/32 (.06 bp). By 9:00 the 10 moved back to unchanged and mortgages +1/32 (.03 bp) frm yesterday's close. US stock indexes in pre-market trading were unchanged at 9:00. At 9:30 the DJIA opened -9, 10 yr note +1/32 3.55% unch, mortgage prices
+2/32 on 30s, +3/32 on 15s.
Weekly jobless claims at 8:30 were down 10K to 382K after another slight upward revision last week from 388K to 392K, the second week in a row claims have been revised a little higher from original reports. Continuing claims edged lower, to 3.72 mil from 3.73 mil last week.
A lot of media focus on the budget talks in Washington and to keep everyone on edge hyping the possibility of a government shutdown that is very unlikely. The Pres and Congressional leaders are close to an agreement to avoid even a few days of closings. This budget debate only deals with the budget through the end of this fiscal year (Sept); it is a prelim to the big debate (fight) over the 2012 budget. Politicians talk the talk about getting the budget deficit under control but for many years have not had the guts to walk the walk. Even some economists are out there saying the budget isn't a priority, zombies walking in a death gaze.
March chain store sales were better than expected. Not much, but better overall. Markets expected it and the various reports have done little to motivate investors.
Later this morning Treasury will announce the details for next week's auctions; 3 yr and 10 yr notes and 30 yr bond should total $66B down from $72B on last months same auctions.
The European Central Bank did what was widely expected and telegraphed by Jean Claude Trichet the head man at the ECB; it increased its base rate to 1.25% from 1.00%, the first rate increase in three years. Trichet said the increase was not the beginning of a series of increases, but most economists believe it is and that the rate will be at 1.75% by the end of the year. German economic growth and increasing signs of inflation in Europe is setting up more rate hikes justifying that rationale. Today’s ECB rate increase is the first since July 2008 and also the first time in 40 years that Europe’s benchmark has risen before the U.S. equivalent. Our Fed is reluctant to move rates on the belief that inflation isn't a problem and that the economy is still weaker than what the Fed wants to see.
The Bank of England also met today but left its base rate unchanged their policy makers judged the need to aid the recovery took precedence over the fastest inflation in more than two years. England's rate is 0.5% and has been at that level for 26 months. UK service sector saw improvement last month as announced Tuesday but manufacturing stalled in Feb. The UK struggling with inflation increase while consumer spending is being pressured by higher prices. The British Chamber of Commerce this week said first- quarter growth was probably between 0.6% and 0.7%. It said this is weaker than expected and adds to the argument that the Bank of England should delay raising its key interest rate.
Yesterday the 10 yr note broke its near term minor support at 3.50% to close at 3.55%. The 10 is now trading above its 20 and 40 day MAs on the yield chart. Mortgage markets also seeing breaks on its charts, slightly below the 20 and 40 day MAs on the price charts.
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.
Thursday, April 07, 2011
Treasuries and mortgages started a little weaker this morning; at 8:00 the 10 yr -5/32 and mortgages -2/32 (.06 bp). By 9:00 the 10 moved back to unchanged and mortgages +1/32 (.03 bp) frm yesterday's close. US stock indexes in pre-market trading were unchanged at 9:00. At 9:30 the DJIA opened -9, 10 yr note +1/32 3.55% unch, mortgage prices
+2/32 on 30s, +3/32 on 15s.
Weekly jobless claims at 8:30 were down 10K to 382K after another slight upward revision last week from 388K to 392K, the second week in a row claims have been revised a little higher from original reports. Continuing claims edged lower, to 3.72 mil from 3.73 mil last week.
A lot of media focus on the budget talks in Washington and to keep everyone on edge hyping the possibility of a government shutdown that is very unlikely. The Pres and Congressional leaders are close to an agreement to avoid even a few days of closings. This budget debate only deals with the budget through the end of this fiscal year (Sept); it is a prelim to the big debate (fight) over the 2012 budget. Politicians talk the talk about getting the budget deficit under control but for many years have not had the guts to walk the walk. Even some economists are out there saying the budget isn't a priority, zombies walking in a death gaze.
March chain store sales were better than expected. Not much, but better overall. Markets expected it and the various reports have done little to motivate investors.
Later this morning Treasury will announce the details for next week's auctions; 3 yr and 10 yr notes and 30 yr bond should total $66B down from $72B on last months same auctions.
The European Central Bank did what was widely expected and telegraphed by Jean Claude Trichet the head man at the ECB; it increased its base rate to 1.25% from 1.00%, the first rate increase in three years. Trichet said the increase was not the beginning of a series of increases, but most economists believe it is and that the rate will be at 1.75% by the end of the year. German economic growth and increasing signs of inflation in Europe is setting up more rate hikes justifying that rationale. Today’s ECB rate increase is the first since July 2008 and also the first time in 40 years that Europe’s benchmark has risen before the U.S. equivalent. Our Fed is reluctant to move rates on the belief that inflation isn't a problem and that the economy is still weaker than what the Fed wants to see.
The Bank of England also met today but left its base rate unchanged their policy makers judged the need to aid the recovery took precedence over the fastest inflation in more than two years. England's rate is 0.5% and has been at that level for 26 months. UK service sector saw improvement last month as announced Tuesday but manufacturing stalled in Feb. The UK struggling with inflation increase while consumer spending is being pressured by higher prices. The British Chamber of Commerce this week said first- quarter growth was probably between 0.6% and 0.7%. It said this is weaker than expected and adds to the argument that the Bank of England should delay raising its key interest rate.
Yesterday the 10 yr note broke its near term minor support at 3.50% to close at 3.55%. The 10 is now trading above its 20 and 40 day MAs on the yield chart. Mortgage markets also seeing breaks on its charts, slightly below the 20 and 40 day MAs on the price charts.
Wednesday, April 6, 2011
Mortgage Rates
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.
Wednesday, April 06, 2011
The equity markets opened stronger this morning resulting in some minor price declines in treasuries and mortgages. Crude oil high as is gold and silver, precious metals continue to increase on inflation fears and continued concerns about major currencies. Demand for precious metals strengthened over the past week as investors sought a shelter to protect their wealth against the conflict in Libya, the nuclear crisis in Japan and European sovereign debt concerns.
No economic releases today; the DJIA opened +39 at 9:30 keeping a little pressure on the bond and mortgage markets. The 10 yr now at 3.51% right at its near term support; for the past eight days the 10 yr has moved on a tight 10 bp range (3.40% to 3.50%). The wider and more important support for the note comes at 3.60%.
More mixed thoughts from another Fed official on ending QE and increasing the FF rate. Atlanta Fed Pres Lockhart said he doesn’t expect the central bank to tighten U.S. monetary policy by the end of the year with inflation low and the economic recovery fragile. “I wouldn’t rule it out entirely, but at this stage I personally am not leaning in the direction of thinking that is absolutely required.”
Mortgage applications decreased 2.0% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 1, 2011. The Refinance Index decreased 6.2% to its lowest level since February 25, 2011. The Government Purchase Index increased 10.3% to its highest level since May 7, 2010. The unadjusted Purchase Index increased 7.0% compared with the previous week and was 16.8% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 1.9%. The four week moving average is up 0.9% for the seasonally adjusted Purchase Index, while this average is down 3.2% for the Refinance Index. The refinance share of mortgage activity decreased to 61.2 percent of total applications from 64.3 percent the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.7% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.93% from 4.92%, with points decreasing to 0.70 from 0.83 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.14% from 4.16%, with points increasing to 1.09 from 0.99 (including the origination fee) for 80% loans.
The rest of the session today will be watching stock indexes; as long as they are improved the bond market doesn't have much reason to improve. Mortgage prices likely to stay weak also.
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.
Wednesday, April 06, 2011
The equity markets opened stronger this morning resulting in some minor price declines in treasuries and mortgages. Crude oil high as is gold and silver, precious metals continue to increase on inflation fears and continued concerns about major currencies. Demand for precious metals strengthened over the past week as investors sought a shelter to protect their wealth against the conflict in Libya, the nuclear crisis in Japan and European sovereign debt concerns.
No economic releases today; the DJIA opened +39 at 9:30 keeping a little pressure on the bond and mortgage markets. The 10 yr now at 3.51% right at its near term support; for the past eight days the 10 yr has moved on a tight 10 bp range (3.40% to 3.50%). The wider and more important support for the note comes at 3.60%.
More mixed thoughts from another Fed official on ending QE and increasing the FF rate. Atlanta Fed Pres Lockhart said he doesn’t expect the central bank to tighten U.S. monetary policy by the end of the year with inflation low and the economic recovery fragile. “I wouldn’t rule it out entirely, but at this stage I personally am not leaning in the direction of thinking that is absolutely required.”
Mortgage applications decreased 2.0% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 1, 2011. The Refinance Index decreased 6.2% to its lowest level since February 25, 2011. The Government Purchase Index increased 10.3% to its highest level since May 7, 2010. The unadjusted Purchase Index increased 7.0% compared with the previous week and was 16.8% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 1.9%. The four week moving average is up 0.9% for the seasonally adjusted Purchase Index, while this average is down 3.2% for the Refinance Index. The refinance share of mortgage activity decreased to 61.2 percent of total applications from 64.3 percent the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.7% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.93% from 4.92%, with points decreasing to 0.70 from 0.83 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.14% from 4.16%, with points increasing to 1.09 from 0.99 (including the origination fee) for 80% loans.
The rest of the session today will be watching stock indexes; as long as they are improved the bond market doesn't have much reason to improve. Mortgage prices likely to stay weak also.
Tuesday, April 5, 2011
Mortgage Rates
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, April 05, 2011
Treasuries and mortgages opened a little better this morning taking the 10 yr treasury down to 3.40% its near term resistance; the stock market indexes in pre-market trade were showing a lower opening. Mortgage prices up slightly at 9:00 about where they were at 9:30 yesterday; but by 9:15 mortgage prices were declining along with the 10 yr which once again failed at 3.40%. 9:15 30 yr mtg price -3/32 (.09 bp), the 10 -4.32 3.44% +1 bp. At 9:30 the DJIA opened -25, the 10 yr -5/32 and mortgage prices -5/32 (.15 bp).
Last night in a speech in Atlanta (Stone Mountain) Bernanke said that the recent rise in commodity prices will likely be "transitory" and prices will fall back. He went on to say though that the Fed must be watched “extremely closely,” encouraging bets that interest rates may be raised sooner than previously expected. The remark that commodity prices and energy prices will back down is somewhat surprising although he couched it with the famous comment that the Fed will watch and react accordingly if inflation creeps into end prices. Bernanke’s comments echoed his March 1 statement to lawmakers that Fed officials were “prepared to respond as necessary” to inflationary pressures. The Federal Open Market Committee, said following its March 15 meeting that it “will pay close attention” to the evolution of inflation and inflation expectations.
Bernanke's comments in his speech shows the increasing division within the Fed about how long to continue keeping the FF rate at zero to +0.25% as it has since 2008; for the last couple of weeks one after another Fed officials have increasingly warned the US should end its tightening and begin to increase rates soon. Bernanke saying present inflation pressures in commodities and energy prices being "transitory" is his apparent response to the increasing concerns within the Fed. Bernanke remains convinced the economic recovery is not yet on solid ground, remarks like he made last night may be his way of jaw-boning the bond market from sending prices lower and yields higher. We don't rally have to say it but, if rates increase even a little the depressed housing sector will be further constrained. Will the markets buy Bernanke's "transitory" view about inflation? Back in the day he also said the sub prime mortgage markets were likely to be contained and managed. Is the US immune to inflation? Brazil, Russia, China, India, likely the European Union on Thursday and emerging market countries all increasing rates. Answer: No.
China increased its interest rates last night by 0.25% for the fourth time since the global financial crisis to limit the risk of asset price bubbles in the world’s fastest-growing major economy. The one-year lending rate will increase to 6.31% from 6.06% effective tomorrow. The one-year deposit rate will rise to 3.25% from 3.0%. On Thursday the ECB is widely expected to increase its base rate to head off inflation in the region which is now at +2.6% and higher than its 2.0% target rate on inflation.
Crude oil is lower today after reaching 30 month highs; with China increasing interest rates and oil supplies seen as increasing oil is a little lower today. That said, it is highly unlikely the demand for oil will decline regardless of increasing rates and China trying to slow its economy. Oil supplies won't likely increase enough to offset the coming summer driving season and the Mideast oil world is far from stable.
The only economic report today; at 10:00 the March ISM services sector index expected at 59.5 frm 59.7. As released the index fell to 57.3; the new orders component 64.1 frm 64.4, prices pd at 72.1 frm 73.3 and employment at 53.7 frm 55.6. The repot not as good as was expected, the reaction is support the bond market and adding additional selling in equity indexes.
Two Fedsters out today: Kocherlakota of Minneapolis and Plosser of Philadelphia; (12;45 for Kocherlakota and 1:30 for Plosser)
Later today at 2:00 the minutes from the March 15th FOMC meeting will be released. Possibly a little more detail on the debate over QE and inflation expectations.
Once again the bellwether 10 yr, driver for mortgage rates, failed on its attempt to move below 3.40% this morning. The 10 has recently found a home trading between 3.40% and 3.50%, not much of a range but keeping mortgage rates stable. We remain bearish for the direction of interest rates on the wider perspective. For all of Bernanke's confidence inflation won't get a toehold, the Fed will end QE and the FF rate will likely be increased before the end of the 3rd Q.
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, April 05, 2011
Treasuries and mortgages opened a little better this morning taking the 10 yr treasury down to 3.40% its near term resistance; the stock market indexes in pre-market trade were showing a lower opening. Mortgage prices up slightly at 9:00 about where they were at 9:30 yesterday; but by 9:15 mortgage prices were declining along with the 10 yr which once again failed at 3.40%. 9:15 30 yr mtg price -3/32 (.09 bp), the 10 -4.32 3.44% +1 bp. At 9:30 the DJIA opened -25, the 10 yr -5/32 and mortgage prices -5/32 (.15 bp).
Last night in a speech in Atlanta (Stone Mountain) Bernanke said that the recent rise in commodity prices will likely be "transitory" and prices will fall back. He went on to say though that the Fed must be watched “extremely closely,” encouraging bets that interest rates may be raised sooner than previously expected. The remark that commodity prices and energy prices will back down is somewhat surprising although he couched it with the famous comment that the Fed will watch and react accordingly if inflation creeps into end prices. Bernanke’s comments echoed his March 1 statement to lawmakers that Fed officials were “prepared to respond as necessary” to inflationary pressures. The Federal Open Market Committee, said following its March 15 meeting that it “will pay close attention” to the evolution of inflation and inflation expectations.
Bernanke's comments in his speech shows the increasing division within the Fed about how long to continue keeping the FF rate at zero to +0.25% as it has since 2008; for the last couple of weeks one after another Fed officials have increasingly warned the US should end its tightening and begin to increase rates soon. Bernanke saying present inflation pressures in commodities and energy prices being "transitory" is his apparent response to the increasing concerns within the Fed. Bernanke remains convinced the economic recovery is not yet on solid ground, remarks like he made last night may be his way of jaw-boning the bond market from sending prices lower and yields higher. We don't rally have to say it but, if rates increase even a little the depressed housing sector will be further constrained. Will the markets buy Bernanke's "transitory" view about inflation? Back in the day he also said the sub prime mortgage markets were likely to be contained and managed. Is the US immune to inflation? Brazil, Russia, China, India, likely the European Union on Thursday and emerging market countries all increasing rates. Answer: No.
China increased its interest rates last night by 0.25% for the fourth time since the global financial crisis to limit the risk of asset price bubbles in the world’s fastest-growing major economy. The one-year lending rate will increase to 6.31% from 6.06% effective tomorrow. The one-year deposit rate will rise to 3.25% from 3.0%. On Thursday the ECB is widely expected to increase its base rate to head off inflation in the region which is now at +2.6% and higher than its 2.0% target rate on inflation.
Crude oil is lower today after reaching 30 month highs; with China increasing interest rates and oil supplies seen as increasing oil is a little lower today. That said, it is highly unlikely the demand for oil will decline regardless of increasing rates and China trying to slow its economy. Oil supplies won't likely increase enough to offset the coming summer driving season and the Mideast oil world is far from stable.
The only economic report today; at 10:00 the March ISM services sector index expected at 59.5 frm 59.7. As released the index fell to 57.3; the new orders component 64.1 frm 64.4, prices pd at 72.1 frm 73.3 and employment at 53.7 frm 55.6. The repot not as good as was expected, the reaction is support the bond market and adding additional selling in equity indexes.
Two Fedsters out today: Kocherlakota of Minneapolis and Plosser of Philadelphia; (12;45 for Kocherlakota and 1:30 for Plosser)
Later today at 2:00 the minutes from the March 15th FOMC meeting will be released. Possibly a little more detail on the debate over QE and inflation expectations.
Once again the bellwether 10 yr, driver for mortgage rates, failed on its attempt to move below 3.40% this morning. The 10 has recently found a home trading between 3.40% and 3.50%, not much of a range but keeping mortgage rates stable. We remain bearish for the direction of interest rates on the wider perspective. For all of Bernanke's confidence inflation won't get a toehold, the Fed will end QE and the FF rate will likely be increased before the end of the 3rd Q.
Monday, April 4, 2011
Mortgage Rates
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.
Monday, April 04, 2011
No market moving news over the weekend, the 10 yr and mortgages opened better this morning after reversing and rallying a little on Friday. There are no economic releases today and this week is thin on measurements of the economy. The stock market is opening slightly better this morning but a little tedious. Later today (7:15 pm) Ben Bernanke will be speaking to the Atlanta Federal Reserve Bank Financial Markets Conference in Stone Mountain, Georgia.
Goldman Sachs out revising its outlook for Q1 from +3.5% to +2.5% and commented there are risks to the economic outlook. Goldman believes, as most now are coming around to believing, that the Fed will increase interest rates sooner than what had been expected. Most until recently were thinking the Fed would not increase rates until 2012 or later. Rates going higher around the globe, the US will be forced by inflation concerns and a stronger economic outlook to make the move before the end of this year. The Fed will likely increase rates in the 3rd Q unless there is a huge swing in the economic outlook.
Corporate profits have been the driver for the equity markets and the strong gains on the key indexes, going forward however it will be consumers that will set the tone. With crude oil making new highs almost daily these days and food prices likely to jump substantially over the next few months, will consumers have to retrench? Gasoline prices now over $4.00 in most of the country and escalating commodity prices it is reasonable to believe consumers will cut discretionary spending somewhat. Employment is improving yet still quite weak; the real unemployment rate when discouraged workers and those now with temp jobs are added back the true unemployment rate is at 15%.
Thursday the ECB will meet and will likely increase its base rate. The ECB has telegraphed its intentions to do so for the past two weeks and not likely to change. Not sure yet about the impact on US rates but with most major central banks increasing rates the likelihood that US rates will work lower is extremely high. German 10-year government bonds fell for an eighth day, the longest run of declines since June 2006, as speculation mounted the European Central Bank will increase interest rates
At 9:30 the DJIA opened +14, the 10 yr +5/32 at 3.43% -2 bp and mortgage prices +5/32 (.15 bp).
This Week's Economic Calendar:
Monday;
7:15 pm Bernanke speaks
Tuesday;
10:00 am Mar ISM Services Sector index (59.5 frm 59.7)
2:00 pm Fed minutes from Mar 15th FOMC meeting
Wednesday;
7:00 am weekly MBA mortgage applications
Thursday;
8:30 am weekly jobless claims (-2K to 386K; con't claims 3.70 mil frm 3.714 mil)
3:00 pm Feb consumer credit (+$2.5B, Jan +$5.0B)
Friday;
10:00 am Feb wholesale inventories (+1.0%)
The near term outlook for the rate markets will likely be choppy with not much decline but not much increase either. The outlook however is for rates to edge higher. The 10 yr has successfully held 3.50% twice last week, now a key near term support. As long as it holds mortgage rates will not creep higher but won't decline either. The 10 has resistance at 3.40%, unless there a trend reversal in equities 3.40% will probably hold. The longer outlook for rates is for them to move up as long as the economy remains firm as it is presently.
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.
Monday, April 04, 2011
No market moving news over the weekend, the 10 yr and mortgages opened better this morning after reversing and rallying a little on Friday. There are no economic releases today and this week is thin on measurements of the economy. The stock market is opening slightly better this morning but a little tedious. Later today (7:15 pm) Ben Bernanke will be speaking to the Atlanta Federal Reserve Bank Financial Markets Conference in Stone Mountain, Georgia.
Goldman Sachs out revising its outlook for Q1 from +3.5% to +2.5% and commented there are risks to the economic outlook. Goldman believes, as most now are coming around to believing, that the Fed will increase interest rates sooner than what had been expected. Most until recently were thinking the Fed would not increase rates until 2012 or later. Rates going higher around the globe, the US will be forced by inflation concerns and a stronger economic outlook to make the move before the end of this year. The Fed will likely increase rates in the 3rd Q unless there is a huge swing in the economic outlook.
Corporate profits have been the driver for the equity markets and the strong gains on the key indexes, going forward however it will be consumers that will set the tone. With crude oil making new highs almost daily these days and food prices likely to jump substantially over the next few months, will consumers have to retrench? Gasoline prices now over $4.00 in most of the country and escalating commodity prices it is reasonable to believe consumers will cut discretionary spending somewhat. Employment is improving yet still quite weak; the real unemployment rate when discouraged workers and those now with temp jobs are added back the true unemployment rate is at 15%.
Thursday the ECB will meet and will likely increase its base rate. The ECB has telegraphed its intentions to do so for the past two weeks and not likely to change. Not sure yet about the impact on US rates but with most major central banks increasing rates the likelihood that US rates will work lower is extremely high. German 10-year government bonds fell for an eighth day, the longest run of declines since June 2006, as speculation mounted the European Central Bank will increase interest rates
At 9:30 the DJIA opened +14, the 10 yr +5/32 at 3.43% -2 bp and mortgage prices +5/32 (.15 bp).
This Week's Economic Calendar:
Monday;
7:15 pm Bernanke speaks
Tuesday;
10:00 am Mar ISM Services Sector index (59.5 frm 59.7)
2:00 pm Fed minutes from Mar 15th FOMC meeting
Wednesday;
7:00 am weekly MBA mortgage applications
Thursday;
8:30 am weekly jobless claims (-2K to 386K; con't claims 3.70 mil frm 3.714 mil)
3:00 pm Feb consumer credit (+$2.5B, Jan +$5.0B)
Friday;
10:00 am Feb wholesale inventories (+1.0%)
The near term outlook for the rate markets will likely be choppy with not much decline but not much increase either. The outlook however is for rates to edge higher. The 10 yr has successfully held 3.50% twice last week, now a key near term support. As long as it holds mortgage rates will not creep higher but won't decline either. The 10 has resistance at 3.40%, unless there a trend reversal in equities 3.40% will probably hold. The longer outlook for rates is for them to move up as long as the economy remains firm as it is presently.
Friday, April 1, 2011
Mortgage Rates
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.
Friday, April 01, 2011
March employment report was better than expectations; non-farm jobs were expected to have increased 195K to 200K, as reported jobs increased 216K the biggest monthly increase since May 2010. Non-farm private jobs also better, up 203K, the unemployment rate fell to 8.8% from 8.9% in Feb as more potential workers dropped out of looking for a job; if discouraged workers are added in the unemployment rate is about 15.5%. Average hourly earnings were unchanged in March.
Treasuries and mortgages were already lower in price prior to the 8:30 employment report, down 7/32 (.22 bp) for mortgages; after the report mortgage prices ticked a little lower to -11/32 (.34 bp) at 8:45 with the 10 yr note at 3.51% slightly higher (+4 bp) and once again testing the psychological 3.50% level that held earlier this week. Although employment was better than thought it wasn't that much better than what markets were expecting. By 9:15 this morning mortgage prices had improved from their lowest prices but still lower; the 10 yr note moved back to 3.49% where support was holding the yield.
At 9:30 the DJIA opened +50, the 10 yr 3.50% +3 bp and mortgage prices -7/32 (.22 bp).
More key data at 10:00; March ISM manufacturing index expected at 61.4 hit at 61.2. Subcomponents; prices pd index 85.0 frm 82.0, new orders at 63.3 frm 68.0 and employment at 63.0 frm 64.5. After the employment report earlier we cam ignore the employment index, new orders still strong above 50 but the focus has to be on the prices pd index that continues to increase. Businesses are beginning to pass along price increases after a year of holding as commodity prices have increased. The reaction to the report in the markets; no change in rates or the stock market.
Feb construction spending at 10:00, expected down 0.7% fell 1.4% after declining 1.8% in Jan. Not much interest in the decline, weather a factor in winter but we know construction is the lager of all lagging data points.
Philadelphia Fed President Charles Plosser out commenting on the employment report saying the strengthening economy may cause the Fed to end its QE 2 sooner than the end of June. One more Fed official increasingly concerned about inflationary impact. Yields on two-year notes increased five basis points to 0.87%, the 2 is more sensitive to inflation fears in the short run but it is the long end that will feel it also as investors will demand higher yields to offset any concerns that inflation would erode returns if it actually increases. The Fed wants inflation slightly higher to 2.0% frm 1.5% presently but unfortunately for the Fed it can't control inflation that precisely. The two-year note yield touched 0.89%, the highest level since May 2010, and was headed for a weekly increase of 14 basis points before settling back a little.
The US dollar is roaring ahead this morning on the better employment report and increasing belief US rates are about to increase as the Fed falls in line with most other central banks that have or are about to increase base lending rates. The impact today is a big decline in gold and stable oil prices that were higher on the day prior to the 8:30 employment report.
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.
Friday, April 01, 2011
March employment report was better than expectations; non-farm jobs were expected to have increased 195K to 200K, as reported jobs increased 216K the biggest monthly increase since May 2010. Non-farm private jobs also better, up 203K, the unemployment rate fell to 8.8% from 8.9% in Feb as more potential workers dropped out of looking for a job; if discouraged workers are added in the unemployment rate is about 15.5%. Average hourly earnings were unchanged in March.
Treasuries and mortgages were already lower in price prior to the 8:30 employment report, down 7/32 (.22 bp) for mortgages; after the report mortgage prices ticked a little lower to -11/32 (.34 bp) at 8:45 with the 10 yr note at 3.51% slightly higher (+4 bp) and once again testing the psychological 3.50% level that held earlier this week. Although employment was better than thought it wasn't that much better than what markets were expecting. By 9:15 this morning mortgage prices had improved from their lowest prices but still lower; the 10 yr note moved back to 3.49% where support was holding the yield.
At 9:30 the DJIA opened +50, the 10 yr 3.50% +3 bp and mortgage prices -7/32 (.22 bp).
More key data at 10:00; March ISM manufacturing index expected at 61.4 hit at 61.2. Subcomponents; prices pd index 85.0 frm 82.0, new orders at 63.3 frm 68.0 and employment at 63.0 frm 64.5. After the employment report earlier we cam ignore the employment index, new orders still strong above 50 but the focus has to be on the prices pd index that continues to increase. Businesses are beginning to pass along price increases after a year of holding as commodity prices have increased. The reaction to the report in the markets; no change in rates or the stock market.
Feb construction spending at 10:00, expected down 0.7% fell 1.4% after declining 1.8% in Jan. Not much interest in the decline, weather a factor in winter but we know construction is the lager of all lagging data points.
Philadelphia Fed President Charles Plosser out commenting on the employment report saying the strengthening economy may cause the Fed to end its QE 2 sooner than the end of June. One more Fed official increasingly concerned about inflationary impact. Yields on two-year notes increased five basis points to 0.87%, the 2 is more sensitive to inflation fears in the short run but it is the long end that will feel it also as investors will demand higher yields to offset any concerns that inflation would erode returns if it actually increases. The Fed wants inflation slightly higher to 2.0% frm 1.5% presently but unfortunately for the Fed it can't control inflation that precisely. The two-year note yield touched 0.89%, the highest level since May 2010, and was headed for a weekly increase of 14 basis points before settling back a little.
The US dollar is roaring ahead this morning on the better employment report and increasing belief US rates are about to increase as the Fed falls in line with most other central banks that have or are about to increase base lending rates. The impact today is a big decline in gold and stable oil prices that were higher on the day prior to the 8:30 employment report.
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