Mortgage Rates


The equity markets opened weaker this morning boosting the rate markets. Still no directional trend though as the bond and mortgage markets continue in their tight ranges. At 8:30 weekly jobless claims were expected down 2K but fell 6K to 386K; however not a good report. Last week’s claims were revised higher to 392K from 387K continuing the trend of upward revisions on claims. Continuing claims did fall, to 3.296 mil frm 3.311.mil and the 4 wk average also declined a little, to 386,750 from 387,500 last week. There wasn’t much reaction in the markets to the data. The final report on Q1 GDP was right on, +1.9% unchanged from last month’s preliminary report.

Unemployment remains elevated on concerns about the fallout from the European debt crisis and the so-called fiscal cliff that will face the U.S. at the end of this year may prompt employers to keep payrolls lean. The Bush tax cuts set to expire at the end of this year and the reduced SS payments also set to end. Given the elections and the inability of Congress to do anything along with declining economic outlooks for most of the global markets are not building blocks to recovery and lower unemployment. Payrolls in May expanded by 69,000 workers, the slowest pace in a year, and have cooled each month since January. The jobless rate, which climbed to 8.2% in May, has been stuck above 8 percent since February 2009, the longest stretch of such elevated levels in the post-World War II era.

JP Morgan Chase’s losses on that hedge trade that went wrong are now seen to be as high as $9B, up from the $2 to $4B that Janie Dimon had talked about. The increased loss estimates are sending the bank’s stock down and dragging the rest of the big banks with it. Yesterday Britain’s Barclay Bank was fined $431 mil for ostensively manipulating LIBOR rates. Its shares dropped as much as 18% as U.K. Chancellor of the Exchequer called for a criminal probe amid speculation that lenders could face billions of dollars in lawsuits. Traders at the U.K.’s second-biggest bank by assets routinely coordinated with counterparts from at least four other banks in an attempt to move interest rate benchmarks, according to documents released yesterday by the U.S. Commodity Futures Trading Commission, the U.S. Justice Department and the U.K. Financial Services Authority. Nearly a day goes by without some kind of scandal or negative news with big banks; a trend that is now 5 years old and with no end of it in sight.

An index of executive and consumer sentiment in the 17-nation euro area dropped to 89.9 from a revised 90.5 in May, the European Commission in Brussels said today. That’s the lowest since October 2009. In Germany, the number of people out of work rose a seasonally adjusted 7,000 to 2.88 million. Germany’s adjusted jobless rate held at 6.8% in June, but with no agreement on how to deal with debts in a number of EU countries the economy of the euro region is going to fall further. A gauge of sentiment among European manufacturers fell to minus 12.7 from minus 11.4 in May, the commission’s report showed. That’s the lowest since February 2010. An indicator of services confidence dropped to minus 7.4 from minus 5.2, while a gauge of consumer sentiment slipped to minus 19.8 from minus 19.3. The EU summit is underway now in Brussels however Germany put a bucket of water on creating euro bonds earlier this week, now there isn’t much expected when the summit concludes tomorrow.

The DJIA opened -85, NASDAQ +23; the 10 yr note at 1.58% down 5 bp and up 12/32; 30 yr mortgage prices up 5/32 (.15 bp) frm yesterday’s closes.

Markets are waiting for the Supreme Court’s decision on Obamacare that will be released today. Talk that in the next hour. The ruling will have a number of potential impacts depending on what the Court says. I the meantime videos of people in front of the Court resembles a circus atmosphere with one sign being carried saying, “you can’t make this kind of thing up”. Just as we send this Reuters is reporting the individual mandate has been upheld.

Treasury will auction $29B of 7 yr note this afternoon at 1:00.