Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgages started weaker this morning with stock indexes better. At 8:30 weekly jobless claims were about what had been expected, up 4K to 367K; last week’s claims revised from 359K to 363K. Estimates for claims were for an increase of about 7K; a Labor Department official today said there was “nothing unusual” that affected today’s figures, and no states were estimated. The four-week moving average, a less-volatile measure, was unchanged at 375,000. The number of people continuing to collect jobless benefits also was unchanged at 3.28 million. Eighteen states and territories reported an increase in claims, while 35 reported a decrease. There was no reaction in financial markets to the report ahead of tomorrow’s Sept employment data. In the UK the Monetary Policy committee voted to keep its stimulus plan going as increased concerns over inflation begin to roil the opposition to the $640B bond purchase program. Bank of England policy makers also left their key interest rate at a record low of 0.5%. The ECB kept its benchmark interest rate at a record-low 0.75% after a policy meeting today, no surprise there. Speculation that ECB President Draghi will today provide more detail of the bond-purchase program announced last month. Draghi will speak at a news conference to explain the decision at 2:30 p.m. He is waiting for Spain to decide what it will do; ask for the bailout loan or not; one month after the European Central Bank president unveiled an unprecedented bond purchase program to rescue Europe’s embattled southern fringe, Spanish Prime Minister Rajoy is showing reluctance to ask for the aid he pushed for with Italy on concern about the terms attached to it. The Spanish 10-year yield reached a euro-era record 7.75% on July 25, before Draghi pledged the next day to do “whatever it takes” to safeguard the monetary union. It is 5.85% today. At 9:30 the DJIA opened +40, NASDAQ +5, S&P +4. The 10 yr note at 9:30 1.65% +3 bp in rate; 30 yr MBS price -7 bp frm yesterday’s close and down -25 bp frm 9:30 yesterday. August factory orders were expected to have declined 6.0%; as reported orders fell 5.2% and August orders revised to +2.6% frm +2.8%. No noticeable reaction to the report. The Bloomberg Consumer Comfort Index rose in the week ended Sept. 30 to minus 36.9, a three-month high, from minus 39.6 in the previous period. The pickup also included less pessimism among households in their views on the buying climate and the economy. According to the report fifty percent of those surveyed had “positive” views of their finances, the most since July and a sign consumers will maintain their pace of spending. Higher home values, rising stocks and stable gasoline prices may be alleviating some of the anxiety caused by a labor market that’s shown scant improvement. The survey matches the improvement in the Conference Board’s consumer confidence index that increased to 70.1 frm 63.1 on 9/25. Tomorrow is employment day; generally a day accompanied with increased volatility due to the data mostly well off the mark of estimates. The present forecast is that non –farm jobs increased 113K, non-farm private jobs up 130K with the unemployment rate unchanged at 8.1%. A betting person would bet that the actual data will be different than the estimates, nevertheless markets have to have something to hang on. Today, as has been the case for the past seven sessions the bond and mortgage markets are not likely to change much. The 10 yr note yield over the past 7 sessions has been tied between 1.65% and 1.61%; 30 yr MBS prices also in a narrow range of 59 bp (19/32). No matter the Fed is going to buy $40B a month of MBSs through the end of time (no total amount set by the Fed), the treasury market will still lead interest rates higher or lower. This morning the 120 yr is sitting on its high yield over the last seven sessions at 1.65%, a break out of the range over the last 7 sessions is likely to move yields either higher or lower pending which way the break occurs, probably on tomorrow’s Sept employment report. Regardless of the direction we don’t expect interest rates will change much.