Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Last Friday’s better than expected Nov employment report pushed MBS prices lower and the 10 yr note yield up 3 bp. This morning the 10 yr is better by 5/32 at 1.61% -1 bp, 30 yr MBS price at 9:00 +6 bp frm Friday’s close. Stock indexes in pre-opening trade were unchanged at 9:00. MBS prices on Friday down 16 bp but were unchanged compared to 9:30 levels. No known news about the Cliff over the weekend; still a stand-off with the Administration taking an unwavering position. Republicans appear to be weakening on increased taxes for the wealthy, the President unwilling to consider spending cuts. The debate will go down to the wire, however as each day passes with apparent no progress the Cliff edges closer. Based on comments from numerous people CNBC interviews, the thought of going over the Cliff is about 50/50. Obama and Boehner met privately at the White House yesterday. Representatives for both men issued identical statements that provided no details and said that “the lines of communication remain open.” Europe’s stock markets weaker today. Italian Prime Minister Mario Monti said he will resign after losing support in Parliament sparking concern a leadership change will disrupt efforts to reduce debt. Greece extended a deadline to spend 10 billion euros ($13B) buying back sovereign debt until midday London time tomorrow from last Friday. The nation was near to reaching the target in a program that will unlock aid from the International Monetary Fund and the EU. French business confidence and industrial production unexpectedly declined, the economy is on the verge of recession. The US stock market opened weaker at 9:30; DJIA -9, NASDAQ -5, S&P -2. 10 yr note at 1.61% -1 bp; 30 yr MBSs +6 bp frm Friday’s close. There are no data points today. Most of the key data this week comes later on Thursday and Friday. In the meantime the FOMC meeting starts on Tuesday with the policy statement on Wednesday at the conclusion of the meeting. It is widely expected the Fed will announce it will continue to buy long term treasuries when Operation Twist expires at the end of the month. The Fed will also re-affirm its $40B a month of MBS buying. After the statement Bernanke will hold a press conference. This week Treasury will be back to borrowing to fund the continued debt; 3 yr note, 10 yr note and 30 yr bonds totaling $66. The Nov budget deficit is expected -$113.0B. The 10 yr note and 30 yr MBSs continue to hold very modest bullish biases on the technicals but we don’t believe there will be much change until the Cliff issue has some resolution. Failure will send interest rates lower and likely hit equity markets hard; an agreement will hurt rate markets while likely sending stock indexes into a strong rally. In the meantime we don’t expect much change in rates, as has been the case for three weeks.