Mortgage Rates


Treasuries started a little better this morning, mortgage prices generally unchanged early. Yesterday Europe’s markets rallied as they did the US indexes rallied, better manufacturing readings out of Germany and the US ISM data overrode the debt problems still facing Europe and to an extent global markets. This morning its back to debt concerns that banks will need to raise more capital to weather the debt crisis. Countries in Europe are borrowing these days setting up a question of whether the single euro currency will survive. Germany and Portugal sold bonds today, kicking off a competition for finance. The offers will be followed by auctions from Greece, Italy and Spain later in the month as common-currency members commence sales that may reach 262 billion euros in the first quarter and 865 billion euros in 2012, according to Deutsche Bank AG forecasts.

The weeks may have been short and the seasonal adjustment difficult but mortgage application activity definitely declined during the two weeks ended December 30 (December 23 week included due to holiday). This is the conclusion of the Mortgage Bankers Association whose purchase index over the two week period fell a very steep 9.7%. The drop interrupts what had been a steady stream of good news out of the housing sector. Down 1.9% in refinancing which makes up the great bulk of mortgage activity, at 82% for the highest share of 2011. Homeowners are increasingly refinancing their mortgages as rates sink. For the lowest rate of 2011, the average 30-year conforming mortgage ($417,500 or less) was 4.07% in the period.

At 9:30 the DJIA opened -30, 10 yr -2/32 at 1.96% +1 bp and mortgage prices +2/32 (.06 bp).

The US rate markets are not improving nor are they worsening, just hanging in a narrow range awaiting any solid news out of Europe while focusing on what appears to be at the moment a better economic outlook.
After two hours the bond and mortgage markets are not doing much, it looks like a quiet session. Yesterday’s strong equity market rally has so far shown no follow-through. The bond and mortgage markets relatively unchanged for the past few hours.