Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Another quiet session so far this morning. There is no news to move markets with Congress out this week; the battles over the debt ceiling, entitlements and revenue increases have yet to get under way. Interest rate markets are slightly better in early trade; the 10 yr note rose to 1.97% last week on the FOMC minutes but unable to crack 2.00% the yield has drifted back to 1.88% at 9:00 this morning. Mortgage rates a little better this morning, but overall the bond and mortgage markets have little to think about so far this week. This afternoon Treasury will start 3 days of auctions with $32B of 3 yr notes; tomorrow’s $21B 10 yr note will be closely watched for the level of demand after its yield has increased 20 basis points since the Dec auction. Recent auctions have not seen strong demand with markets expecting interest rates will increase over time. Economic confidence in Europe is improving; an index of executive and consumer sentiment rose for a second month to 87 from 85.7 in November, the European Commission in Brussels said today. Economists had forecast an increase to 86.3. In the most recent report Germany’s business confidence also increased. However, German factory orders declined. Europe’s economy still struggles with recession; although there hasn’t been any headlines on the debt crisis, the crisis hasn’t been alleviated. Today starts the earnings season; at 4:00 this afternoon it is kicked off with Alcoa, always the first to report. 4th Q earnings may lag Q3 but should show decent earnings and guidance. The season lasts for about three weeks. In the absence of anything else this week traders will likely pay a little more attention to the reports. At 9:30 the DJIA opened -20, NASDAQ -1, S&P -2. The 10 yr note yield at 9:30 1.88% -2 bp; 30 yr MBS price +12 bp frm yesterday’s close. As expected, after the swift increase in interest rates last week, markets are bouncing back somewhat. Technically the rate markets became oversold on the reaction to the Dec FOMC minutes released last week, the reaction was magnified as rate markets had already turned negative. It was kind of the last straw for investors still holding big long positions. The 10 has resistance at 1.85% now, just two basis points lower than where we are now.