Mortgage Rates



April ADP non-farm private jobs estimated at +186K yesterday, as reported at 8:15 jobs increased just 119K. Another huge miss by analysts and those that make those forecasts. The reaction is as you would expect, the 10 yr note rallying taking the interest rate to 1.90% at 9:00 this morning and mortgage prices +4/32 (.12 bp). Stock indexes, also as you would expect, down point to a weaker open at 9:30. According to ADP small businesses added 58K, medium size businesses +57K and large businesses -4K (small is 1 to 49 employees, medium 50 to 499K and large over than 499). Goods producing jobs declined 4K, services +123K , manufacturing -5K.

Prior to the ADP data the consensus estimates for Friday’s non-farm private jobs was +178K with a broad range as usual. Now what will estimates be for Friday’s BLS employment report? Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in October, when it overstated the gain in jobs by 6,000. The estimate was least accurate in December, when it overestimated the employment gain by 113,000.

The jobless rate in the 17-nation euro currency area increased to 10.9% in March from 10.8% in February, the European Union statistics office in Luxembourg said today. That’s the highest since April 1997. Separate reports showed euro-area manufacturing contracted more than initially estimated in April and unemployment in Germany, the region’s largest economy, unexpectedly increased. German unemployment unexpectedly rose in April as the debt crisis in the euro area constrained growth and hiring in Europe’s biggest economy. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Federal Labor Agency in Nuremberg said today. The German jobless rate was unchanged at 6.8%, still a two-decade low, after the agency revised up figures for February and March.

Europe continues to drag the world down economically; the austerity plans jammed down the throats of countries with sovereign debt problems is back-firing in terms of economic health. Before it is over we expect huge push-backs from citizens as wages and jobs are falling like leaves in October. Germany continues to control the situation for now, protecting its wealth and not willing to allow itself to be dragged into the problem to deeply. Germany is the key to re-structuring what was said to be cast in stone a few months ago. It isn’t working though, and in the end the EU, ECB and IMF will have to re-think the debt issues otherwise Europe is headed to depression and likely riots in the streets across the region.

The MBA applications report. The Market Composite Index increased 0.1% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 0.7% from the previous week. The seasonally adjusted Purchase Index increased 2.9% from one week earlier. The refinance share of mortgage activity decreased to 72.6% of total applications from 73.4% the previous week. The government share of purchase applications remained steady at 37.0%. The government share of purchase applications over the last three weeks has been at the lowest level since 2009. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.05% from 4.04%, with points increasing to 0.44 from 0.40 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.32% from 4.27%, with points decreasing to 0.38 from 0.44 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.80%, the lowest rate in the history of the survey, from 3.81%, with points decreasing to 0.50 from 0.52 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.31%, the lowest rate in the history of the survey, from 3.32%, with points decreasing to 0.41 from 0.41 (including the origination fee) for 80% loans.

At 9:30 the DJIA opened -56, the US 10 yr at 1.91% and mortgage prices +5/32 (.15 bp).

At 10:00 March factory orders were expected to have declined 1.8% after increasing 1.3% in February. As released orders

The bellwether 10 yr still testing 1.90%, unable to break it so far. If the 10 does decline below 1.90% on strong volume, and is able to hold below for three days (something it has been unable to do since the recent rate declines that began last September), the next technical resistance is at 1.80%, then 1.70% the absolute low seen on Sept 23rd.