Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 the US stock indexes were trading higher and the bond and mortgage markets slightly weaker. At 8:30 Oct personal income and spending were released; income was expected +0.2%, it was unchanged, personal spending was thought to be +0.1%, it was down 0.2%. The reaction turned the stock index futures lower and boosted bonds and MBS prices. The decline in spending de t the tropical storm Sandy according to the Commerce Dept. Commerce Department said that the storm affected 24 states, it couldn’t precisely quantify Sandy’s total effect on spending and income. Private wages decreased $17.1B in October, and the agency estimated that the storm reduced pay at an annual rate of $18.2B as it interrupted work schedules. It isn’t news, but the entire focus is the fiscal cliff negotiations that yesterday took a turn for the worse as the Administration laid out its desires that are so far off what republicans can accept that it is a step backwards for the moment. Pres. Obama is now asking for more tax revenues and increased amounts in spending than he proposed prior to the election. Today it’s a stand-off, who can predict what the rest of this day will reveal, or tomorrow, or next month? Both political parties negotiating in public now; time to get private and work out a plan. Whatever comes of the Cliff neither party should end up claiming a victory---compromise. The bomb unacceptable to everyone---everyone; a permanent extension of the debt limit, allowing the President to increase the debt limit at any time he chooses. No matter what political view one has, letting any President have carte blanche over the debt ceiling should be completely unacceptable. In Europe German retail sales slumped the most in almost four years in October, falling 2.8% from September when adjusted for inflation and seasonal swings. Increasing belief that Germany may decline into recession on the continual inability to deal with its debt crisis. EU leaders touting the progress on the latest fix for Greece; tilting at windmills and ignoring reality---not a lot different than what is occurring here with our political “leaders”. Most European stocks climbed, extending a 17-month high, as German lawmakers approved a Greek aid plan. At 9:00 the 10 yr note +5/32 at 1.60% at its previous resistance level (1.60%/1.58%), 30 yr MBSs were unchanged. The DJIA at 9:00 unchanged. At 9:30 the DJIA opened +5, NASDAQ and S&P opened -1. The 10 yr note at 1.60% -1 bp and 30 yr MBSs unchanged. 9:45 the Chicago purchasing mgrs. index was expected at 50.7 frm 49.9; the index as reported 50.4; the new orders component was weak and doesn’t portend well for future months, at 45.4 frm 50.3. Employment did increase to 55.2 frm 50.3. Overall a mixed report in terms of economic activity in the Chicago region. The reaction generated a little selling in the stock market but not much; the DJIA was +17 prior to the report, five minutes later +4 points. Nothing changed in the bond and mortgage markets. This morning the 10 yr note is trading at its resistance at 1.60%, not much volatility in the treasury markets, still trading in a narrow range. The safe haven trade still on but with much less momentum that seen last summer. The Fed will likely continue to support long term interest rates with MBS purchases and increased purchases of treasuries after Operation Twist ends at the end of the year. Much depends on what happens in Washington between now and the end of the year with the Cliff. There as many opinions about the outcome as there are politicians; each party playing the media game trying to assess what each can expect to gain with comments that at times are counter-productive.