Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to this morning the benchmark 10 yr note rate has increased 12 basis points in yield over the previous two sessions and 18 basis points in the last three sessions. A massive exit from fixed income investments and into the equity markets. Easing of tensions in the EU with Spain’s debt rating re-affirmed by Moody’s that it is still investment grade debt and increasingly better data on the US economy---the two issues that have turned interest rates around. 30 yr mortgage rates over the last three sessions are up 10 basis points. This morning the bond and mortgage markets are rebounding a little from the recent strong selling. The 10 yr note at 9:00 at 1.79% -3 bp and MBS 30 yr price up 17 bp in price, not much but anything is better after yesterday’s price beatdown of 55 bp and 24 bp on Tuesday (total 79 bps). At 8:30 weekly jobless claims were expected to be up 36K after the bad data out last week; as reported claims were up 46K back to 388K. The “consensus” estimate was for claims was 365K. Typically at the beginning of a quarter there is an increase in claims due to adjustments, last week clams fell by 30K as one state didn’t report. The gains this week are higher than forecasts but the four-week moving average, a less volatile measure than the weekly figures, rose to 365,500 last week from 364,750. The average number of claims over the past two weeks was in line with the four-week average, indicating little change in the pace of firings outside the seasonal swings. Spain’s bonds rose for a third day as the nation raised more than planned at a debt sale, while European stocks fluctuated before a two-day summit of leaders in Brussels. Spanish 10-year yields fell to a six-month low and were at 5.41%. As long as Spain’s yields continue to decline the US bond market will struggle to improve. Investors are less concerned about a debt crisis boiling over than just a few weeks ago; no reason now to stay in treasuries with tensions easing and US economic data improving. The EU summit meeting Brussels begins tomorrow; in the past the summit meetings didn’t accomplish much. At 9:30 the DJIA opened -20, NASDAQ -9, S&P -3. The 10 yr note at 1.80% -2 bp; 30 yr MBSs +17 bp in price. 9:45 this morning brought the Bloomberg consumer comfort index at -34.8 frm -38.5. Not a huge improvement but does confirm the U. of Michigan sentiment index and the Conference Board’s consumer confidence improvements. The index is the highest since last April. At 10:00, a few minutes ago, the October Philadelphia Fed business index measuring the situation in the NE region, was expected at +1.0 frm -1.9 in Sept and -7.1 in August; the overall index increased to 5.7 above zero and back to slightly more bullish activity. A reading of zero is the dividing line between expansion and contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. There was little initial reaction to the better index reading. Sept leading economic indicators was expected up 0.2%, as reported it was up 0.6% but August indicators were revised lower, from -0.1% to -0.4% kind of negating the better Sept data. No matter how we look at it, the US and global interest rates are increasing. Technically the 10 yr cracked its 200 day average yesterday, unless it rallies back in the next day or two the outlook is that the note will continue to increase to its recent high on 9/14 at 1.89%. MBSs also technically weak now and will continue to see prices fall unless the 10 rate falls back. Don’t fight the tape.