Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A little softness in the bond and mortgage markets to start the day; stock indexes slightly better at 8:30. Weekly jobless claims at 8:30 down 12K to 350K, estimates were for an increase of 4K to 365K. The 4 wk average at 356,750 down 11K. A better report but it didn’t get any reaction in the markets. The economic data is backward looking, normally traders and investors see the data as indications of future outlooks; these days the various data points are pushed to the back with the fiscal Cliff the only thing out there that is important to markets. In this case with claims, the holidays have likely distorted the data. Claims from 19 states were just estimates with government offices closed on 12/24 the prevented a more accurate report. At 9:30 the DJIA opened NASDAQ -4, S&P -1. 10 yr note at 1.76% +0.5%; 30 yr MBSs -14 bp. Two reports at 10:00; Nov new home sales were expected up 1.8%, were up 4.4% to annual pace of 377K units the most since April 2010. Oct sales were revised from 368K units to 361K accounting for the large percentage increase from month to month. The forecast called for Nov sales at 380K. Yet another housing stat that adds to belief the housing sector is well on the way to recovery. The Dec consumer confidence index wasn’t so rosy; the index was expected at 70.0 frm 73.7 in Nov; the index fell to 65.1 frm a revised 71.5 in Nov. Consumers listening to the squabbles from Washington losing confidence that the political system is broken. The President and most Congress people are filtering back to Washington to work on a plan to avoid the Cliff. Given the short time before the year ends markets are now generally expecting we will go over it, however some relaxation is evident now that it appears inevitable our politicians can’t find common ground. Markets are sitting quietly; no panic in either the bond or equity markets. Going over the Cliff theoretically will cause those that actually pay income taxes a substantial increase; but Congress and the Administration still have time to pass a temporary extension of the Bush tax cuts before new withholding tax tables are printed. Or, Congress could retroactively repeal any tax increases. It is very unlikely that most Americans will see higher taxes next year. Most of those that are returning are leaders in the debate. The leaders have indicated they will give members 48 hours to return assuming there is something to vote on. Next Monday Treasury will reach its debt ceiling once again; Geithner is working a plan for emergency spending that would keep the government going through February or into March. Nothing new about it, this is how it starts. Treasury runs out of money, an emergency plan is worked out pushing the inevitable down the road, then a lot of debate before the debt ceiling is increased. Obama wants Congress to give him total control over the debt ceiling; he has almost no chance to achieve that rather audacious demand. 2013 is going to be a year of constant turmoil n Washington; the fiscal cliff, spending cuts, entitlement reforms, debt ceiling, and possibly an actual budget that we haven’t had for four years. So far this morning the MBS market has shown increased volatility. At 9:30 30 yr FNMA MBSs -14 bp, at 9:45 unchanged. Treasuries are generally unchanged as are the stock indexes. 30 yr 3.0 FNMA still trading under its 20 and 40 day averages; the 10 yr note also still above its 20 and 40 day averages on the yield. The 10 yr 20 day at 1.72%, the 40 day at 1.70%. Overall there has been little movement in the bond market over the last week.