Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Europe’s stock markets better today pushing US stock index futures higher prior to the open at 9:30. Yesterday US stocks fell on weak earnings from Alcoa that said the demand for aluminum was declining as the global economy slows. Treasury sold $21B of 10 yr notes yesterday, the demand for the notes was very strong as was the 3 yr note auction on Tuesday. The 10 yr note yield fell to 1.69%, down 4 bp from Wednesday but MBSs didn’t improve on the day, but were better than when morning prices were set by lenders (most improved prices in the afternoon). At 8:30 weekly jobless claims dropped significantly, down 30K from last week to 339K, the lowest level since Feb 2008. The consensus estimate was for 370K claims about unchanged from the previous week. Last week’s claims were revised; the number of applications for the prior week up to 369,000 from a previously estimated 367,000. Claims typically surge at the start of a quarter as people receiving benefits reapply in order for the government to recertify their applications. The year’s increase was smaller than projected, because one large state showed a drop rather than an increase, don’t know which state yet. The four-week moving average for jobless claims, a less- volatile measure, fell to 364,000 from 375,500. Twenty-eight states and territories reported an increase in claims, while 25 reported a decrease. The bottom line; the report is somewhat flawed due to lack of data. Kind of reminds of the Sept BLS employment data last Friday. The U.S. trade deficit widened in August as slower global growth reduced demand for American exports. The gap grew 4.1% to $44.2B from $42.5B in July, Commerce Department figures showed today in Washington. Exports decreased to the lowest level since February. Sept import prices increased 1.1%, more than the 0.7% expected. Export prices increased 0.8%, double what was expected. Prices increasing while global economy is declining? Nothing significant out of Europe; Spain still refuses to ask the ECB for assistance fearing more austerity will be required. Meanwhile S&P lowered its credit rating to BBB- frm BBB+, one notch above junk bond status. Investors are shunning Spanish securities as Prime Minister Mariano Rajoy weighs a second bailout amid a deepening recession. Rajoy has held off on a decision about whether to request European Central Bank and EU bond buying to lower borrowing costs. He’s called for more details on what would be demanded of Spain in return for the support. If you are having a hard time trying to sift through the mess in Europe, don’t fret, most others are also. It is a maze of incongruities that never ends; we talk about it because whatever happens there has a direct impact on our bond and stock markets. At 9:30 the stock market opened better after three days of declines. The DJIA started +60, NASDAQ +23, S&P +9. The 10 yr note at 9:30 1.73% +5 bp; 30 yr MBS price down 14 bp frm yesterday’s close. At 1:00 Treasury will conclude this week’s borrowing with $13B of 30 yr bonds; the auction will do well as the previous two auctions have seen this week. The nice rally yesterday in treasuries hasn’t seen follow-through this morning. As noted yesterday technically the rally didn’t change the slight negative bias for the 10 yr note. The 10 yield did not break below its 20 and 40 day averages, this morning the yield is up and still above the key levels with the relative strength still slightly bearish. We continue to believe the mortgage rates are not likely to decline much more, the lows have been achieved at the end of Sept.