Mortgage Rates



Treasuries and mortgages are lower in price this morning, driven by the stock market opening better. After five sessions sending the DJIA down 546 points this morning a bounce; not unusual. The bond and mortgage markets have declined in yield on the weak employment report, soft US and global equity markets and renewed thinking that the Fed will have to do another QE. The current decline in rates has about totally discounted another easing into present rates. Going back to early August last year the 10 yr note has traded in a 50 basis point yield range frm 2.40% to 1.90% with the exception of 15 days when it dropped under 1.90%. Yesterday the 10 yr fell to 1.97% before closing at 1.99%; based on the last eight months the 10 is nearing its best levels on weaker global economic outlooks and the belief the Fed will ease again.

At 8:30 March import prices were up more than expect at +1.3%, mostly on energy imports; export prices +0.8%. Yr/yr import prices +3.4%, yr/yr export prices +0.9%. No reaction to the report.

Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2012. The Refinance Index decreased 3.1% from the previous week. The seasonally adjusted Purchase Index decreased 0.5% from one week earlier. The four week moving average for the seasonally adjusted Market Index is down 2.08%. The four week moving average is up 2.19% for the seasonally adjusted Purchase Index, while this average is down 3.45% for the Refinance Index. The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5% of total applications from 71.2% the previous week. This is the lowest refinance share since July 29, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.10% from 4.16%, with points remaining unchanged at 0.43 (including the origination fee) for 80% loans. This is the lowest 30-year fixed rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.43% from 4.46%, with points decreasing to 0.36 from 0.49 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo rate since March 9, 2012. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% from 3.89%, with points decreasing to 0.55 from 0.58 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37% from 3.40%, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs decreased to 2.89% from 2.93%, with points increasing to 0.38 from 0.35 (including the origination fee) for 80% loans.

At 9:30 the DJIA opened +90, NASDAQ +28 and S&P 500 +12. The 10 yr note -14/32 at 2.03 and mortgage prices -6/32 (.18 bp) on 30s and -5/32 (.15 bp;) on 15s.

1:00 this afternoon Treasury will auction $21B of 10 yr notes, a re-open of the 10 yr note issued in February. Yesterday’s 3 yr note was OK, today’s 10 yr should also get solid bidding; if not look for yields to increase.

The Fed’s Beige Book will be released at 2:00 pm. Details from each of the 12 Fed districts. After the weak employment report for March and other recent data points the Book will get a lot of attention. The Book is used by the FOMC when it meets on April 25th.

European stocks rebounded from a two-month low and U.S. equities halted the longest slump of the year as Alcoa Inc. opened the earnings season with an unexpected profit. Spanish bonds rose as a European Central Bank official signaled the ECB may revive its bond-purchase program. The euro strengthened from a seven-week low against the yen as Spain’s bonds climbed after a board member of the European Central Bank indicated it may buy the nation’s debt to reduce borrowing costs. “Spain shows the markets remain nervous,” ECB Executive Board member Benoit Coeure said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.” Last week Spain’s Prime Minister’s comments renewed fears of another debt crisis and it is one of the issues that has led to the decline in US interest rates.