Mortgage Rates


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




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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.