Mortgage Rates



Quiet this morning but a little soft on prices; the stock market indexes a little better. Germany’s Merkel and France’s Sarkozy meeting today; nothing but talk however. The talks are centered on how to save the euro currency from declining further. This morning the euro slightly better this morning. Greece’s struggle to contain its debt is a “special case “and no country must leave the euro, German Chancellor Angela Merkel told reporters after meeting with French President Sarkozy in Berlin. Additional meetings are planned before the next summit scheduled on Jan 30th in Brussels. The two leaders have sponsored a plan to draw up new fiscal guidelines by March to resolve a crisis that began in Greece more than two years ago. As the contagion moves to the euro-area’s core, policy makers are struggling to persuade investors they can contain the risk and assure the single currency’s survival.

There are no economic releases scheduled today; trade will be driven by how the US stock market acts. In Europe the various stock markets not moving much. This week is light on data, most coming later in the week. Treasury will auction $66B in notes and bonds beginning tomorrow. The Obama Administration is preparing a plan to try and unload foreclosed properties held by Fannie, Freddie and FHA; the plan calls for packaging bundles of REOs with the goal of selling blocks of homes to private investors as income properties (rentals). It is a plan that has been kicked around for a while but until now, only talk. Every key agency frm the Fed to FHFA appears to be involved with the plan. Rental income is up, prices for homes still falling; if the prices are right maybe some of the REOs can be sold---depends mostly on how much the agencies are willing to give up when prices are set. There is little reason to expect the plan will be successful, but is worth a try; what lender will step up to finance a huge pool of foreclosed houses without a huge infusion of up-front cash?

Today begins Q4 earnings reports with Alcoa leading the way as usual. Traders are expecting somewhat more positive guidance from key companies. Equity markets this week will be driven by the data as well as Europe’s travails.

This Week’s Economic calendar:
Monday;
3:00 pm Nov consumer credit (+$7.0B)
Tuesday;
10:00 am Nov wholesale inventories (+0.5%)
1:00 pm $32B 3 yr note auction
Wednesday,
7:00 am Weekly MBA mortgage applications
1:00 pm $21B 10 yr note auction
2:00 pm Fed beige Book
Thursday;
8:30 am weekly jobless claims (+3K to 375K)
Dec retail sales (+0.4%; ex auto sales +0.4%)
1:00 pm $13B 30 yr bond auction
2:00 pm Dec Treasury budget (-$79.0B)
Friday;
8:30 am Nov trade balance (-$44.3B)
Dec export and import prices (N/A)
9:55 am U. of Michigan consumer sentiment index (71.0 frm 69.9)

At 9:30 the DJIA opened +11; the 10 yr note -2/32 at 1.96% and mortgage prices at 9:30 +1/32 (.03 bp).

The charts continue to hold a positive bias; however there has been no real changes in interest rates for weeks, prices are tied to a tight range awaiting more substantial news from Europe. The US economic outlook has improved based on various economic releases over the last couple of months. US markets wrestling with whether the US can grow much with Europe headed for a deeper recession. Trade today will be no different than we have seen over the last couple of months, if stock indexes decline rate markets should hold and improve, a rally in equities will pressure rate markets. Either way, we are not expecting much change by the end of the day.