Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgages opened lower (price) this morning; yesterday the 10 yr note fell back to its 1st resistance at 1.85%, early today back to 1.89% while MBS prices early down 15 bp at 9:00. Late yesterday 30 yr FNMAs saw some late buying about 4:45 pushed the price up 8 bp frm where we marked tem at 4:00. Weekly jobless claims at 8:30, the first and only key economic release this week, were expected at 362K down 10K frm last week’s claims; as reported claims were at 371K up 4K. Last week’s claims were revised from 372K to 367K, the change with revisions didn’t change the estimates that much. Claims have been about 370K for weeks, no improvement but equally no worsening. No firings or no hiring’s. No state data were estimated, according to a Labor Department official, who said there was “nothing unusual” in the figures. The four-week moving average, a less volatile measure than the weekly figures, climbed to 365,750 last week from 359,000. Continuing claims, those receiving unemployment, dropped 127,000, the most since January 2011, in the week ended Dec. 29 to 3.11 million. The figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 75,500 to 1.99 million in the week ended Dec. 22. There was no change in the markets on the 8:30 report frm levels prior to the release. This afternoon President Obama will officially nominate Jack Lew to replace Tim Geithner as Treasury Secretary. Lew has been Obama’s chief of staff; before that Lew served as Obama’s director of the Office of Management and Budget, a position he also held in the Clinton administration. The theory now is that the Administration will be less attached to the Fed; Geithner before being Secretary was President of the NY Fed tying the Fed and the Administration a little closer than it is likely to be going forward. Lew’s fist test will be the coming debt ceiling battle that will begin next week in Congress. Obama has said a number of times that the problem with the deficit isn’t spending, Republicans see it otherwise. At 9:30 the DJIA opened +52, NASDAQ +22, S&P +8. 10 yr at 9:30 -11/32 to 1.90% +4 bp and 30 yr FNMAs -15 bp, Govvies -24 bp. At 10:00 Nov wholesale inventories was expected 0.3%; as reported inventories increased 0.6% frm Oct, Oct revised lower. Final sales up 2.3% for the month. At 1:00 Treasury will sell $13B of 30 yr bonds to complete this week’s borrowing. Yesterday the 10 yr auction was not met with strong demand. The day is starting about the way markets have acted through the week. Unlikely there will much change now through the rest of the day. Everything is somewhat on hold until the debates start again next week in Congress with the Administration over the debt ceiling, entitlement reforms and potential spending cuts. Interest rate markets remain technically bearish, any rallies should continue to be used to lock in rates. While bearish, we still hold that interest rates are not likely to increase much more, possibly 2.00% on the 10 yr over the next month or two. The risk of increased rates is much higher that the risk for lower rates at the moment. Although the Dec FOMC minutes indicated the Fed is now debating how the Fed will exit its easing moves; the Fed is still buying at the same rate as last year; $45B a month of MBSs and $40B of long dated treasuries. Fed buying will continue to support the bond market, keeping interest rates from increasing much from present levels.