Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Closing in 7 days: LOCK. $0 Closing in 7-15 days: LOCK. $0 Closing in 15-30 days: LOCK. $0 Closing in 30+ days: LOCK ON ANY IMPROVEMENT. $0 $0 Treasury yields increased yesterday. MBS prices lower. This morning in early activity the 10 yr note was unchanged as were all MBS prices until about 9:30; US stock indexes at 9:00 generally unchanged, in Europe a mixed picture, France lower but Germany and England a little better. No major news overnight. At 9:00 the 10 yr traded unchanged, MBS prices unchanged. $0 $0 8:30 Nov US trade deficit was expected -$41.3B, the deficit was larger at $48.7B an increase of 15.8%. Imports increased 3.8% to $231.3B, the most since April, from $222.9B in October. Purchases of foreign-made autos and parts climbed by $1.51B and demand for cellular telephones jumped by $1.81B, the report showed. Exports increased 1% in November to $182.6B, the report showed. The gain was led by sales of automobiles and parts and telecommunications equipment. The jump may mean that trade subtracted from growth last quarter. The report pushed stock indexes down a tad, not much. $0 $0 Also at 8:30; Dec import and export prices. Import prices were expected +0.1% as reported prices were down 0.1%, yr/yr import prices declined 1.5%. Export prices in Dec were thought to be -01%, it was right on, prices did decline 0.1%; yr/yr export prices were +1.1%. Like the trade deficit, no market response to the data as expected. $0 $0 Another hawk has joined the FOMC; KC Fed President Esther George addressed the Fed’s easy money policy saying easy money policy makes her uneasy. Another hawk to replace Richmond Fed Pres. Lacker who will not be a voting FOMC member this year; he dissented about every meeting in 2012 on the Fed’s continuing QE. The arguments against continuing QEs is that the Fed may stay too long and when the time comes to withdraw the Fed could take big losses as interest rates increase along with economic growth; and the potential of creating another bubble because the low rates for such a long period will change investor behavior within asset mixes. Nevertheless the hawks on the FOMC don’t wield enough influence to change the outlook Bernanke favors. Those that are fearing the continuation of easy money have to at least admit that so far the Fed’s buying has been financially a plus. The Fed is making money on interest payments on the treasuries and MBSs it now holds. The Fed sent $88.9B to Treasury in 2012 on gains from the purchases. $0 $0 Philly Fed Pres. Plosser is speaking at the moment in NJ at its Economic Leadership forum. He is saying the central bank’s record stimulus risks a surge in inflation and may impair efforts by households to repair their finances. “Attempts to increase economic ‘stimulus’ may not help speed up the process and may actually prolong it,”…. “Efforts to drive real rates more negative or promises to keep rates low for a long time may have frustrated households’ efforts to rebuild their balance sheets without stimulating aggregate demand or consumption.” Plosser is not a voting member of the FOMC this year. He still believes unemployment will decline to 7.0% by the end of the year. $0 $0 At 9:30 the DJIA opened -15, NASDAQ and S&P -1. The 10 yr note at its highest level this morning at 1.92% +2 b and 30 yr MBSs -5 bps from yesterday’s close. $0 $0 The bond market is softening again yesterday and so far this morning with the 10 yr at 10:00 at 1.93% up 3 bp frm yesterday’s increase of 4 bp. Look for a new trading range between 1.85% and 1.97%; the EU is currently stabilized, the Fed is talking about an exit strategy and the global economic outlook has improved. Next week, and the weeks ahead, will likely increase volatility within the range when Congress returns to take up the debt ceiling, spending cuts sequester, and entitlement reform. $0