Mortgage Rates



Treasuries and mortgage markets opened better this morning on continued concerns that Greece will leave the euro although officials in the region are saying they are not preparing for a Greek exist. Nothing different in terms of various comments out of Europe, some say one thing while others deny. Nevertheless global investors are more convinced Greece will go. Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro. While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal. Even with more than two years of preparation, banks still are at risk of deposit flight and rising defaults in other indebted euro nations. European leaders are meeting today to discuss the region’s debt crisis. Deepening concern Greece will exit the euro has wiped about $4 trillion from equity markets worldwide this month.

European Union officials damped expectations for the 27-nation summit starting at 7 p.m. in Brussels, looking toward the next meeting on June 28-29 as the time to take pro-growth steps. The crisis in the 17 euro countries will come up tonight only “at the very end,” the EU President said in a pre-summit letter.

German interest rates continued to fall today on the Greek situation, the US 10 yr note is lower in yield early today on the same concerns. That said, while there is little reason to expect interest rates will increase, the US 10 yr still has strong resistance at 1.70%, the level that hasn’t been breached on a closing basis. As long as the on-going uncertainty remains the US interest rate markets will remain at these levels; to crack 1.70% on the 10 yr and send mortgage rates to another historic low Greece will have to actually default. IN the meantime officials in Europe will never acquiesce that Greece will leave the EU, always holding out hope that the contagion will not spread to other indebted countries in the region sitting on the brink.

At 9:30 the DJIA opened -55, NASDAQ -24. The 10 yr note traded at 1.74% -4 bp frm yesterday’s close; MBS 30 yr price +5/32 (.15 bp) frm yesterday’s close.

At 10:00 April new home sales were expected up 3.3%; as reported up 3.3% at 343K units annualized, the median sales price $235,700.00 +4.9% yr/yr; based on present sales there is a 5.1 month supply.

The March FHFA housing price index, expected up 0.3%, increased 1.8% and +2.7% yr/yr.

The weekly MBA mortgage applications were up last week. The Market Composite Index, a measure of mortgage loan application volume, increased 3.8% on a seasonally adjusted basis from one week earlier. The Refinance Index increased 5.6% from the previous week. This is the third consecutive weekly increase in the Refinance Index which is at its highest level since February 10, 2012. The seasonally adjusted Purchase Index decreased 3.0% from one week earlier to its lowest level since April 20, 2012. The four week moving average for the seasonally adjusted Market Index is up 3.72 percent. The four week moving average is up 0.17% for the seasonally adjusted Purchase Index, while this average is up 4.83% for the Refinance Index. The refinance share of mortgage activity increased to 76.6% of total applications from 74.9% the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.93 percent, the lowest rate in the history of the survey, from 3.96 percent, with points increasing to 0.39 from 0.37 (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 4.25 percent from 4.20 percent, with points increasing to 0.42 from 0.36 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.73 percent, the lowest rate in the history of the survey, from 3.75 percent, with points decreasing to 0.57 from 0.66 (including the origination fee) for 80% loans.

At 1:00 Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr auction saw good demand, likely that will be the same today.