Mortgage Rates



Treasuries and mortgages opened a little better this morning after last week that ended with no changes in rates or prices. The EU summit last week was another miss, nothing of consequence out of the continual run of meetings that lead to nowhere; Europe's debts are so huge that there is no solution without a break up of the 13 year experiment that went along OK as long as there wasn't a problem. Moody’s Investors Service said today it will review the ratings of all European Union nations after last week’s summit failed to produce “decisive policy measures,” while Standard & Poor’s announced Dec. 5 it may cut 15 euro members, including AAA rated Germany and France. AAA bonds in Europe are a thing of the past. Disappointed with the outcome of the Brussels talks, the yields on 10-year bonds sold by Italy, that must repay about 53 billion euros in the first quarter of next year, climbed above 6.50% after falling on Dec. 9. France’s note yield was at 3.29%, from 3.13% a week ago.

By 9:00 this morning the 10 yr note yield sat at 2.01% down frm 2.06% Friday; mortgage prices better at 9:00, +6/32 (.18 bp) after declining 13/32 (.41 bp) Friday. The stock indexes at 9:00 weaker. Nothing specific so far this morning, just the usual backing and filling with no real changes. At 9:30 the DJIA opened -72, 10 yr +14/32 at 2.01% -5 bp and mortgage prices +5/32 (.15 bp).

The only scheduled data today comes at 2:00 when Treasury reports the Nov budget deficit at $139.5B, better than -$150.4B in Oct. This week however has data, Treasury auctions and the FOMC meeting. Maybe markets will concentrate on US affairs rather than Europe.

This Week's Economic Calendar:
Monday;
2:00 pm Nov Treasury budget (-$139.5B)
Tuesday;
8:30 am Nov retail sales (+0.6%, ex auto sales +0.5%)
10:00 am Oct business inventories (+0.9%)
1:00 pm $32B 3 yr note auction
2:15 FOMC policy statement
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Nov import ad export prices (N/A)
1:00 pm $21B 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+9K to 390K)
Nov PPI (+0.1%, ex food and energy +0.1%)
Dec NY Empire State manufacturing index (3.0 frm 0.61)
Q3 current account deficit (-$110B)
9:15 am Nov industrial production (+0.2%)
Nov capacity utilization (77.8% unch frm Oct)
10:00 am Philadelphia Fed business index (4.5 frm 3.6)
1:00 pm $13B 30 yr bond auction
Friday;
8:30 am Nov CPI (+0.1%, ex food and energy +0.1%)

The 10 yr note back to 2.00% this morning, at the lower end of its month-long range; of course to have the 10 yr better the stock market must be weaker---and it is this morning. There is no actual movement in the rate markets and it is likely to stay that way with no accomplishment from the EU summit meeting last week. The EU's path now is on fiscal controls of all the EU members; cutting expenses and increasing revenues (taxes). Getting 27 members of the EU and 17 members using the euro currency to agree on budgets isn't likely to achieve much success however; it is difficult to imagine getting all of the sovereigns to agree other than on principle. Europe sliding into another recession while Germany and France call the shots.