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 better this morning, the 10 yr at 1.65% yesterday’s low and -2 bp frm the close. At 9:00 30 yr MBSs +12 bps frm yesterday’s unchanged prices. 8:30 Q1 employment cost index was +0.3%, expectations called for an increase of 0.5%; no reaction to the data as expected. Today the FOMC meeting gets underway but we won’t know anything until tomorrow when the policy statement is released. At 9:00 the Feb Case/Shiller 20 city home price index increased 9.3% yr/yr, slightly better than 9.0% expected; as with the Q1 employment cost index, there was no market reaction to the data. That the index didn’t increase as much suggests there is little reason to be concerned that wages will increase inflation. Inflation, as noted here over the last couple of issues, is dead; the fear now is deflation. At 9:30 the DJIA opened -6,NASDAQ +1, S&P -1; 10 yr note 1.65% -2 bp and 30 yr MBS price +12 bps. Next up this morning, at 9:45 the April Chicago purchasing mgrs. index, expected unchanged at 52.4. The index fell to 49.0, yet one more data point that didn’t meet forecasts. The trend of economic reports that have failed to match optimistic forecasts is continuing. The reaction added a little pressure to the stock indexes but no appreciable movement in interest rates. Economic strength declining, but so far has had little impact on the sky-rocketing stock market as investors ignore the economy in favor of betting on the Fed and continuing easing that so far has accomplished little; a trillion dollars a year added to the Fed’s balance sheet that now sits at $11 trillion. The final data today; at 10:00 the April consumer confidence index frm the Conference Board, expected at 62.0 frm 59.7 in March. The index, contrary to most data these days, increased to 68.1 frm a revised 61.9. The stock market didn’t react positively, the DJIA continued to decline this morning. Gains in the stock market, an increase in property values and cheaper prices at the gas pump are helping stabilize household wealth. One take-away frm the stronger confidence is that consumers may increase spending; like those in Missouri, show me. The share of consumers expecting more jobs to become available in the next six months rose to 14.2% in April from 13 percent in February. The number of respondents who said jobs are currently plentiful advanced to 9.8% in April from 9.5%. The President will hold a news conference later this morning at 10:30, something about jobs. This week some of the focus is on the euro zone as its economy continues to contract. Business confidence fell in April and inflation rates declined. Global inflation is falling as weak economies struggle to keep prices frm continuing their downward pressures. Confidence fell to -0.93 frm -0.75 in March, the lowest since last November. Consumer confidence did increase slightly but the overall confidence index including businesses and consumers fell to 88.6 frm 90.1 in March, a four month low. The numbers are immaterial, what is material is Europe continues to drag and with it the ECB is widely expected to lower interest rates when it meets on Thursday frm 0.75% to 0.50%. The unemployment rate in the zone, 12.1% in March frm 12.0% in Feb. Everything continues to point to lower interest rates; all technical indicators remain bullish. Rates have been declining, albeit slowly recently. Investors still in love with equities and until there is any significant pullback the slide lower in rates is likely to be slow.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Q1 advance GDP was widely expected to be +3.1% growth for the quarter; as reported GDP up just 2.5% after Q4 2012 was up 0.4%. It is the advance report and subject to change next month when we see the preliminary data; nevertheless growth according to the report isn’t as strong as thought. The reaction wasn’t much compared to trade prior to the data; the 10 yr note prior to 8:30 down 1 bp at 1.70%, at 9:00 1.68%. Stock indexes were weaker before GDP but there was not much additional selling when the weaker data hit. The drop in defense spending outweighed the biggest increase in consumer spending in two years. Household consumption, which accounts for about 70% of the economy, climbed at a 3.2% rate following a 1.8% in Q4 2012. Based on the recent data the overall the economy has slowed growth, manufacturing and service data were softer than expected in March and businesses still not increasing borrowing, March durable goods orders released earlier this week were a lot weaker than forecasts. Higher payroll taxes, higher health care costs for businesses and individuals, and the sequester cuts designed by politicians to inflict the most pain on consumers are all dragging the economy down. On the other side; the increase in equity prices has emboldened consumer spending as well as continued low interest rates and rising home prices. Will the stock market ever have a major decline as many believe? First off; I have no idea, but these days it does seem like nothing will interfere with the climbing prices of the key indexes. Simply stated, where else can investors go to earn any kind of return? The Fed and other central banks are keeping interest rates low with easing moves and lowering base lending rates to almost no cost. Now we find in a major report from Central Banking Publications of 60 central bankers said 23% of banks now own stocks in their portfolios. The central banks, supposedly charged with protecting the $11 trillion foreign exchange markets, are buying stocks in record numbers. Central banks’ policies are pushing the envelope, without almost free money the US and global economies, still on very soft footings, would be headed back to recession----Europe already back into another recession. I don’t recall ever in my career that central banks invested heavily in stock markets; the consequences of any misstep now are increasing, yet so far so good. At 9:30 the DJIA opened -7, NASDAQ -5, S&P -2. 10 yr note at 9:30 1.68% -3 bp; 30 yr MBS price +17 bp frm yesterday’s close and +21 bp frm 9:30 yesterday. 9:55; the U. of Michigan consumer sentiment index was expected at 73.0 frm 72.3 at mid-month. The April final read was 76.4, a nice increase, but compared to the final March sentiment index it is lower than 78.6. The reaction pushed stock indexes higher; these days it takes very little to juice stocks while it takes a village to set off selling. That so far today the stock market has not caved on the weaker Q1 GDP data released this morning is evidence of central banks’ influence on markets. As long as the Fed and other central banks keep adding more stimulus it appears, at least at a glance, that nothing about the state of the economy will have any lasting impact on the bull run in stocks. There is simply nowhere for investors to go----in a sense kind of like a no lose investment with the Fed back-stopping any decline in stock indexes. Interest rates holding well, that market also being propped up by the Fed. Technically, every one of our indicators still hold bullish outlooks for interest rates; that should continue, but substantially lower rates is conditioned on whether the US and global equity markets hold together.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Weekly jobless claims at 8:30 were better than forecasts; down 16K to 339K. Claims last week were the lowest since early March, so-called consensus estimates were at 350K. The 4 week average on claims was down 4500 to 357,500. As we said yesterday claims now are free from seasonal machinations. A Labor Department spokesman said there was nothing unusual that affected today’s figures, he said big swings in claims are common this month because of layoffs related to school vacations and holidays such as Easter that don’t always occur during the same week each year. He also said the period of swings in unadjusted data should be coming to an end. The number of people continuing to collect continuing jobless benefits fell by 93,000 to 3 million in the week ended April 13, the lowest since May 2008. 27 states and territories reported a decrease in claims, while 26 reported an increase. Next week, the Labor Department will release April’s report on the U.S. employment situation. Surveys forecast the labor market regained some ground, with payrolls expanding by 155,000 after an 88,000 a month earlier. In the six months ended in March, employment averaged 188,000. Prior to the weekly claims the US stock indexes were a little better, then improved a little more. Europe’s stock markets were better then fell off on data. The 10 yr note prior to the claims data was at 1.71% +1 bp, the rate increased to 1.72% by 9:00 am; 30 yr MBSs at 9:00 -12 bp frm yesterday’s close. At 9:30 the DJIA opened -5, NASDAQ +12, S&P +3; 10 yr note at 1.72% +2 bp and 30 yr MBS price -6 bps. The story continues to be the same in the global financial markets; central banks printing money at light speed to hold economies together. The Fed buying $85B a month outright and using the pay downs on the big MBS portfolio it holds to buy more; Japan now trying to reflate its economy and end its deflationary trend with money printing (easing like the Fed), next week the ECB is likely to lower its base lending rate. It is an experiment that is in virgin territory, massive moves to force investments into equity markets in attempts to increase economic growth and increase employment. So far, at least here in the US, employment hasn’t seen much improvement over the last three years of Fed QEs. Employment better but at what eventual cost when the Fed and other central banks have to stop and reverse the flows. Not only printing money to drive interest rates down; central banks are increasingly buying stocks. That is rather unnerving in the longer run but is in the present time frame holding markets from major declines. A recent survey by Central Banking Publications of 60 central bankers said 23% of banks now own stocks in their portfolios. The central banks, supposedly charged with protecting the $11 trillion foreign exchange markets, are buying stocks in record numbers. These banks are normally risk-adverse but are slowly and without much concern, increasingly taking on risk that someday will be widely seen as a major financial mistake. Central bankers taking on more risk is a disaster waiting to happen; in the meantime it looks good for the bond and stock markets. At 1:00 this afternoon Treasury conclude this week’s auctions with $29B of 7 yr notes. Three times since early April the 10 yr note yield fell below 1.70% in daily trading, each time the note failed to close below it. Ignoring the intraday movements, the 10 has been stuck in a six basis point yield range since early April. No pressure to run rates higher, equally no momentum or buying when the note trades at 1.70%. 30 yr MBSs track the note, they too have been generally unchanged for three weeks. The technicals still hold positive biases after the huge rate decline that began mid-March driving the rate down from 2.05% to 1.70% in two weeks on the 10 and down 20 bp on 30 yr interest rates. We want to continue to float, but also strongly suggest keeping alert; if the 10 closes over 1.75%----just three bps away from present levels, we will quickly lock. Floating has gained about three weeks on MBS pricing, so floating even with the market flat, has improved pricing.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Early this morning prior to 8:30 the 10 yr note traded weaker at 1.72% +1 bp and 30 yr MBSs were down 6 bp frm yesterday’s close; stock indexes slightly better. March durable goods orders were reported at 8:30, the weakest since last August. Orders were expected to decline 2.5%, as reported orders were down 5.7%; ex the volatile transportation orders markets were looking for an increase of 0.5%, as reported orders fell 1.4%; Feb orders ex transportation were down 1.7%. Overall February orders were originally reported +5.7% but were revised lower to +4.3%. Orders for automobiles increased 0.2% after a 4.7% jump in February. Cars and light trucks sold at a 15.2 million annual rate in March after 15.3 million the prior month. The reaction to the weak durable goods orders tempered the initial improvement in US stock index futures and provided support in the bond and mortgage markets. At 9:30 the DJIA opened -20, NASDAQ -9, S&P -2; 10 yr note at 1.71% unch and 30 yr MBS prices +6 bp frm yesterday’s close. In Europe the Ifo institute in Munich said today its index of Germany’s business climate, based on a survey of 7,000 executives, dropped to 104.4 from 106.7 in March. A composite index of euro-area services and factory output based on a survey of purchasing managers in both industries by London-based Markit Economics held at 46.5 for April, indicating a contraction, a report yesterday showed. Similar German PMI data also showed a contraction. There is increasing speculation that when the ECB meets on May 2nd the bank will lower interest rates as the EU economies struggle with Germany’s insistence on strong austerity in the southern Europe countries thatr are teetering on depression with continual increases in unemployment. There is a slowly increasing consensus in the EU that Germany, the only strong economy in the EU, is being too restrictive with its demands, driving the EU economies down. Now Germany’s economy is beginning to feel the pinch as its output slips. The weekly mortgage applications data frm the MBA out this morning; the overall composite index up 0.2%, the purchase index +0.3% and the re-finance index +0.3%. The previous week the composite index was +4.8%, purchase index +4.0% and the re-finance index +5.0%. The purchase index in the latest week is climbing slowly in what is a positive indication for the spring housing season. The index is at its highest level since the stimulus efforts of May 2010. Helping both indexes (purchases and re-finances) was a dip in mortgage, down 2 basis points for conforming loan balances ($417,500 or less) to an average 3.65% (MBA quotes interest rates with points added for origination and other fees). At 1:00 Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr auction continued the trend of so-so auctions. Over the last couple of months the demand for US treasuries at the auctions of treasuries has been a little less than earlier this year but there hasn’t been any significant reaction to lesser demand. Treasury auctions $165B a month frm 2s to 30s. Everything is status quo in the bond and mortgage markets. Technicals still look positive but there has been almost no change in rates for the past two weeks. Yesterday the twitter event that sent bonds lower and stocks down lasted about 10 minutes, the 10 fell to 1.64% frm 1.70% then back to 1.71% in a matter of minutes. We completely ignore the drop in the 10 yr note rate; the 10 cannot so far close below 1.69%. Mortgage prices yesterday were not impacted on the 20 minute volatility caused by the hacking of APs Twitter account.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com After two weeks of trying and failing, today the 10 yr note yield at 8:30 was trading well below 1.70% at 1.66%; all we need now is for the note to close below 1.70% to start another leg lower in interest rates. Getting a close below 1.69% appears to be failing as the day proceeds. Rate markets started strong this morning on belief that the ECB will cut its interest rates when it meets next. Europe’s economy is still slowing increasing optimism that the ECB is about to cut rates to try and stem the tide of continuing decline of the EU economy. Services and manufacturing shrank in the euro area for a 15th month in April, a report showed today. Not only Europe is slowing, so too is China; similar to US ISM reports the preliminary reading of 50.5 for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compared with a final 51.6 for March. China still growing however, leaders in the country are deliberately slowing growth to fend off inflationary pressures. Feb FHFA housing price index was on target, up 0.7% as expected; yr/yr +7.1%. While there has been improvement for a number of months, the U.S. index is 13.6% below its April 2007 peak and is roughly the same as the October 2004 index level. Still, the improving prices will help add supply to the housing market. Shortages of supply for housing markets continue to place upward pressure on prices. Prices jumped 15.3% from a year earlier in the Pacific area, which includes California, Washington and Hawaii. In the Mountain region, including Arizona, Colorado and Nevada, the gain was 14%. The Middle Atlantic area -- New York, New Jersey and Pennsylvania -- had the smallest increase, at 1.9%. The South Atlantic region had the biggest gain from January. Prices climbed 17% in the area, which includes Florida, Maryland and Virginia. At 9:30 the DJIA opened up 97 points, NASDAQ +23, S&P +9; 10 yr note 1.68% -1 bp. 30 yr MBS price at 9:30 +9 bps. The strong open in the stock market took some away frm the earlier improvements seen at 8:30. At 10:00 March new home sales were expected up 2.0% at 419K annualized units. As reported sales were at 417K units up 1.5% frm February. Feb sales were revised to -7.6% frm -4.5%. The median sales price increased to $417K frm $411K in Feb; based on current sales pace there is a 4.4 month supply, unchanged from Feb. Overall the sales were better than expected, especially compared to March existing home sales released yesterday that were down 0.6%. Treasury will auction $35B of 2 yr notes at 1:00 pm; recent auctions have been tepid at best. Today the bond market started at 1.66% for the 10 yr note, by 10:00 however the yield is back to 1.70%. It didn’t hold and now back to key resistance levels at 1.70%?1.69%. All our technical models are still holding bullish reads but for two weeks the 10 hasn’t been able to close below chart resistance. Today the rate markets lost their improvements as the stock market climbed again, the DJIA over 100 points higher.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Interest rates early this morning started weaker but quickly climbed to unchanged by 8:30; the US stock indexes at 8:30 were pointing to a better open at 9:30. Stocks currently exhibiting an increase in volatility, swinging in wide ranges but with no real sustained trend as many still looking for a major correction. The bond and mortgage markets barely changing from day to day over the last couple of weeks. The 10 yr note in a 6 bp range from 1.75% to 1.69%. European stocks rose, rebounding from the biggest weekly drop in five months, as Italy elected a president and the Group of 20 refrained from opposing the Bank of Japan’s stimulus policies. Asian shares and U.S. index futures also advanced. BOJ Governor Haruhiko Kuroda emerged from the G-20 meeting saying he was encouraged to press ahead with the campaign to defeat deflation. The central bank meets this week after pledging April 4 to double the monetary base in two years. At 9:30 the DJIA opened +15 after trading +50 earlier, NASDAQ +9, S&P +2. 10 yr note at 1.69% -1 bp after trading at 1.73% earlier; 30 yr MBSs +6 bp after being down 6 bp at 9:00 am. At 10:00 this morning the first of three housing data points this week; March existing home sales were thought to be up 1.0% frm Feb at 5.03 mil units (annualized). As reported sales decline 0.6% to 4.90 mil units, a big miss with units unable to break above 5.0 mil. Feb sales were revised lower, the median sales price at $184,300 up 11.8% yr/yr. Inventories up 1.6% but down 17% yr/yr. Based on sales there is a 4.7 month supply. Homes were not coming on the market in March, just 30K new listings according to NAR. After starting stronger earlier this morning the index had been sliding since then, at 9:30 the index opened +15; after the existing home sales ell the DJIA traded -44 in yet another session that shows volatility. (see below for 10:05 levels. Beginning tomorrow Treasury will auction $99B of 2s, 5s and 7 yr notes this week. Not counting weekly bill auctions, Treasury is borrowing $165B a month from 2s through 30s funding the deficit. Earlier this morning the Chicago Fed National Activity Index was worse than expected, the index fell to -0.23 frm +0.44 in Feb; the 3 month average -0.1 frm +0.09. A negative reading indicates that national economic activity is below its historical trend. The biggest change in March is in production indicators which still contributed to growth, at plus 0.01, but well down from February's plus 0.47. Helping to pull the index into negative ground during March is employment, at minus 0.06 vs. February's plus 0.31. Sales/orders/inventories fell to minus 0.02 from plus 0.13. Consumption & housing pulled down the index down the most, at minus 0.14 for a second straight month. The Chicago Fed National Activity Index is a monthly index designed to better gauge overall economic activity and inflationary pressure. For two weeks the bond and mortgage markets have been relatively unchanged, after the nice and quick decline in rates frm mid-March over the last two weeks there is no evidence rates will move much. Over that time frame the stock market measured by the three key indexes has declined, but no real push lower for rates. Equally investors are willing to hold some treasuries as a hedge against the potential of a sustained fall in stocks. We believe the Fed will continue its QE for most of the rest of the year, however Fed officials are talking about how to handle it when it is time for exiting. That they are openly talking has opened a lot of debate, but in the end most still believe the Fed isn’t close to winding down the QE. As long as the Fed continues to buy $85B a month in treasuries and MBSs and re-invest the pay downs from its large MBS holdings, interest rates are not likely to increase much on any selling. The key is 1.75% for the 10, if it closes above it we would expect a move up a little more. Interest rates around the world are trending lower----slowly.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Yesterday there was little change in the bond and mortgage markets; the stock indexes were weaker but volume was thin. Yesterday the April Philly Fed business index and March leading economic indicators were two more data points that were weaker than expected. The Philly Fed index of business activity revealed there is no improvement in the business sector in the NE. Leading economic indicators were expected to be +0.2%, the LEI fell 0.1%. The soft data continues to be the prevalent case for most data recently. Nevertheless the stock market so far has held well and the bond market has held its recent rallies. Even on days when the stock market experiences selling the 10 yr note has not demonstrated much improvement. There are no scheduled economic releases today. US financial markets little changed this morning ahead of the 9:30 open in the stock market. Prior to the open the 10 yr note slightly weaker in price but essentially unchanged while 30 yr MBS prices also about unchanged. At 9:30 the DJIA opened -45, NASDAQ +8, S&P +4; 10 yr note a 1.71% +2 bp, 30 yr MBS price unchanged. Not much news today from Europe; the key stock markets in the region are better. Most of the coverage this morning has been about the Boston bombers; one dead, the other being hunted. Citizens told to stay inside, about a million people have been told to stay put, in homes of offices. So far the horrific bombing hasn’t filtered into the stock or bond markets. The bellwether 10 yr note is still unable to break below 1.69% on a closing basis, equally the note hasn’t shown much negativity as the yield on the note remains within a six basis point range (1.75% to 1.69%) over the last nine trading days. Conventional wisdom is that when (if) the stock market began to experience selling that the US interest rates would fall, so far neither has occurred. The stock market has been more volatile with huge swings in both directions but not much decline so far. The fear of inflation, more imagined than real, may be keeping the 10 yr falling more; however inflation is a dead soldier these days. US annual inflation is below the Fed’s 2.0% target (+1.5%) and has a few Fed officials now talking about more easing to boost the rate back to 2.0%. China’s economic slowdown also suggests no inflation, Europe’s inflation rate is declining. This morning Canada reported its inflation rate slowed to the bottom of the central bank’s target range last month as gasoline prices dropped. The consumer price index rose 1% in March from a year ago following a 1.2% gain the prior month, Statistics Canada said. The core rate, which excludes eight volatile products, was unchanged at 1.4%. The Bank of Canada said April 17 inflation will remain below policy makers’ 2% target until the second quarter of 2015 as slower growth creates more slack. Fears of inflation have eroded, eliminating one impediment for lower long term rates. No inflation, weakening economic data, a mixed picture on Q1 earnings reports, and an increasing number of economists saying Q2 growth may slow. The job markets very soft (ignore the decline in the unemployment rate). China’s economy the weakest in 13 years, Europe about to re-enter recession. All of this has yet to seriously impact US stock indexes and the bond and mortgage markets. Technically though stocks, bonds and MBSs still hold bullish biases; the 10 has room to increase to 1.75% and still hold positive, 30 yr Fannie Mae 3.0 coupon price has stalled the last five sessions but is still above its 100 and 200 day averages. Technicals look OK, but are increasingly more vulnerable.

Mortgage Rates

Mortgage Rate Update Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 the 10 yr note was back above 1.70% to 1.71% +1 bp frm yesterday’s close. The stock market had a bad day yesterday, this morning the indexes started better. At 8:30 weekly jobless claims were expected about unchanged, as reported claims increased 4K to 352K; close enough to estimates and little initial reaction to the data. Two states, Kentucky and California, were estimated by the Labor Dept. The steady claims this morning have increased chatter that the labor market is stabilizing; quite a stretch after the March employment report showed very little increase in jobs and the past three weeks of volatile swings in weekly claims. The four-week moving average, a less volatile measure than the weekly figures, rose to 361,250 last week from 358,500. Claims figures jumped in late March and then retreated as the government had difficulty adjusting claims for the Easter and school spring break holidays that occurred a little earlier than usual this year. At 9:30 the DJIA opened +4, NASDAQ +7, S&P +2; the 10 yr at 1.70% and 30 yr MBSs +3 bps. The open was weaker than in pre-open trading earlier this morning. Over the pond in Germany; German lawmakers approved a rescue for Cyprus as Finance Minister Wolfgang Schaeuble warned that refusing aid to a fifth crisis-ravaged state risked triggering a sovereign default and contagion to other euro nations. “We must avoid turning the problems in Cyprus into new problems for other euro countries,” Schaeuble told lawmakers in a speech before the vote. “Cyprus is in a dramatic situation. If we don’t help Cyprus, then Cyprus inevitably faces sovereign default.” Germany also approved extending aid terms for Ireland and Portugal. So far Germany has committed 211B euros to keep the currency union together. Two key reports at 10:00; the April Philadelphia Fed business index and March leading economic indicators. The Philly Fed index was expected at 3.3 frm 2.0, as reported the index was up just 1.3%. No matter how we look at it the index is extremely weak even though still holding above zero. March leading economic indicators, another soft report; expected up 0.2%, the index fell to -0.1% after increasing 0.5% in February. How much more weaker than thought data will it take to drive investors to selling equities? Much of the data for March has been weaker than forecasts yet equity markets, although not rallying stocks are not falling much either. The 10 yr note at 1.69% after the 10:00 data still stalled. The 10 yr note, driver for mortgage rates, has stalled at 1.70% levels; unable to break through on a closing basis. Yesterday at mid-day the note yield dropped to 1.67% but was unable to hold it and closed at 1.70%. Technically everything continues to point to lower rates but until there is a stronger belief that the stock market is actually going to decline rates won’t likely fall from present levels. Recent activity in the US and global equity markets is suggesting that a correction in stocks is at hand. That said, numerous times in the past couple of months it looked like stocks would back off only to drive higher almost daily.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Stock market volatility continues at high levels. This morning the US stock indexes were weaker early after a nice rebound yesterday that followed a huge 266 point decline for the DJIA on Monday. Today there isn’t any economic data to look at, this afternoon the Fed will release its Beige Book, details from all 12 districts. Europe’s stock market were weaker again this morning; the fourth day the markets have fallen. Talk the Germany’s credit rating may be downgraded increased trading volatility in the country as well as through the EU countries. Investors increasingly more concerned that Germany’s economy is slowing, driven lower as the rest of the EU has shown very little growth. Credit downgrade rumors, the fall in gold and surprisingly weak China Q1 GDP are collectively increasing the uncertainty in equity markets. As we noted Monday volatility in global markets will increase as investors consider the validity of the current stock market rally. The volume of shares changing hands in Stoxx 600 companies was 3.6% greater than the average of the last 30 days. U.K. unemployment rose at its fastest pace in more than a year and wage increases slowed. Unemployment as measured by International Labor Organization methods rose by 70,000 to 2.56 million in the three months through February, the most since November 2011, the Office for National Statistics said today in London. A separate release showed that Bank of England Governor Mervyn King was defeated for a third month in a push for more stimulus. Here in the US the Fed is openly talking about the end of its QE; no time frame and likely not anything immediate, now the UK has rejected an increase in stimulus. The weekly MBA mortgage applications released at 7:00 am this morning. Mortgage applications increased 4.8% from one week earlier. The Refinance Index increased 5% from the previous week and is at its highest level since mid-January of 2013. The seasonally adjusted Purchase Index increased 4% from one week earlier is at its highest level since May of 2010 and the adjusted Conventional Purchase Index increased 3% to the highest level since October 2009. The unadjusted Purchase Index increased 5% compared with the previous week and was 20% higher than the same week one year ago. The refinance share of mortgage activity was unchanged at 75% of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity was unchanged at 5% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.67% from 3.68%, with points increasing to 0.50 from 0.43 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 3.77% from 3.79%, with points decreasing to 0.27 from 0.36 (including the origination fee) for 80% loans. At 9:30 the DJIA opened -40, NASDAQ -28, S&P -7. At 9:30 the 10 yr note at 1.72% -1 bp and 30 yr MBSs -3 bp frm yesterday’s close. Is the 10 yr note losing some of its safety haven characteristics? In the last seven trading sessions, a week and a half, the 10 has found strong support at 1.70% and has equally found resistance at 1.75%. Five basis points and finding no momentum to crack 1.70% levels. During that time the DJIA has had swings from -266 on Monday and +157 yesterday. China’s economy slowing, Europe’s economies faltering, gold falling and still investors and traders appear to be reluctant to move into treasuries. With weakening economic outlooks from increasing numbers of economists the Fed is not likely to begin lessening its monthly purchases of treasuries and mortgages anytime soon---at least until the end of the year; nevertheless interest rates are holding firm. Technically, everything remains positive but unless the 10 breaks 1.70% soon interest rates may increase.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Yesterday the stock indexes fell; the DJIA -266 and NASDAQ -78. Some of the selling was a reaction to the Boston bombing, however that didn’t happen until 3:00. Prior to the shock the stock market was under strong selling pressure, frm the time the bombs exploded the DJIA was down over 170 points. The 10 yr note fell to 1.69%, down 4 bp and 30 yr MBSs +16 bps. This morning at 8:30 the US stock indexes trading in the futures markets were suggesting the DJIA would open up 120 points higher. No follow-through this morning; looking for the correction in stocks is about as rewarding as trying to find the proverbial needle. Yesterday it was about the decline in growth in China on the weaker than expected Q1 GDP, the Empire State manufacturing data softer than expected, and the April NAHB housing market index that was thought to have increased from March but fell 2 points to 42 frm 44 (50 is the divide between positive and weaker). The fall in the indexes yesterday was the biggest decline in five months. This morning at 8:30 March CPI was down 0.2% overall; the core (ex food and energy) up 0.1%; estimates were for the index were unchanged overall and +0.2% on the core. Inflation is always a talking point but these days, and for the last three years inflation is completely absent; in fact the new concern is possible deflation resulting from China’s slowdown. Since the Fed began the QEs three years ago there have been fears it would trigger inflation but a still sluggish global economy has kept prices frm increasing. Yr/yr overall CPI +1.5%, core yr/yr +1.94%. The more critical data at 8:30; March housing starts and permits. Starts were estimated up 1.4%, starts jumped 7.0% to 1.036 mil units, the gain mostly in multi-family starts that were the strongest in seven years, estimates were for starts at 930K units (annualized). Building permits a little concerning though, permits dropped 3.9% against estimates of a decline of 0.5%. At 9:15 March industrial production was expected +0.2%; it doubled to 0.4% and Feb production, originally +0.7% was revised to +1.1%. March capacity utilization (factory use) was expected at 78.3% unchanged from Feb, use increased slightly to 78.5%. At 9:30 the DJIA opened +100, NASDAQ +24, S&P +10. The 10 yr note 1.73% +4 bp and 30 year MBSs -16 bp frm yesterday’s close. The IMF out today lowering its outlook for global growth frm +3.5% in January to +3.3% now. IMF urged European policy makers to use “aggressive” monetary policy as a second year of contraction leaves the euro area’s recovery lagging behind the rest of the world. The IMF report describes a “three-speed” recovery led by emerging markets including China, with the U.S. forging ahead and Europe trailing after fighting a debt crisis that has forced bailouts of five countries in the region. Beside the stock market volatility yesterday, gold was beat down hard, -$160 by 5:00 pm and last Friday down $78.00; increased views that inflation isn’t likely to increase and the sell recommendation last week from Goldman/Sachs has driven the price from $1570 four weeks ago to the $1350 level yesterday. This morning gold up $33.00. Crude oil also saw strong selling yesterday, down $3.00 to $88.50 at 4:00 yesterday; the price is higher today. Yesterday’s trading in stocks, gold and oil started the week with an increase in volatility, this morning it is evident with the markets that were hit hard yesterday are snapping back with reversals in the markets. No additional economic data today but there are three Fed officials scheduled to speak; Elizabeth Duke at 12:00 pm, Narayana Kocherlakota at 1:00 and at 3:00 Janet Yellen, the vice chair of the Fed. Technically, the 10 yr note failed yesterday to move below 1.69%, the third time in four days that buying ended when the yield fell to 1.69%. A little concerning that the 10 could not garner buying yesterday with stocks collapsing, gold falling and crude lower. Even the increased concerns the economies of the world are slowing hasn’t pushed the yield lower. All of our models still remain bullish; the rest of this week though will likely be more volatile after yesterday’s market actions.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Yesterday the stock indexes fell; the DJIA -266 and NASDAQ -78. Some of the selling was a reaction to the Boston bombing, however that didn’t happen until 3:00. Prior to the shock the stock market was under strong selling pressure, frm the time the bombs exploded the DJIA was down over 170 points. The 10 yr note fell to 1.69%, down 4 bp and 30 yr MBSs +16 bps. This morning at 8:30 the US stock indexes trading in the futures markets were suggesting the DJIA would open up 120 points higher. No follow-through this morning; looking for the correction in stocks is about as rewarding as trying to find the proverbial needle. Yesterday it was about the decline in growth in China on the weaker than expected Q1 GDP, the Empire State manufacturing data softer than expected, and the April NAHB housing market index that was thought to have increased from March but fell 2 points to 42 frm 44 (50 is the divide between positive and weaker). The fall in the indexes yesterday was the biggest decline in five months. This morning at 8:30 March CPI was down 0.2% overall; the core (ex food and energy) up 0.1%; estimates were for the index were unchanged overall and +0.2% on the core. Inflation is always a talking point but these days, and for the last three years inflation is completely absent; in fact the new concern is possible deflation resulting from China’s slowdown. Since the Fed began the QEs three years ago there have been fears it would trigger inflation but a still sluggish global economy has kept prices frm increasing. Yr/yr overall CPI +1.5%, core yr/yr +1.94%. The more critical data at 8:30; March housing starts and permits. Starts were estimated up 1.4%, starts jumped 7.0% to 1.036 mil units, the gain mostly in multi-family starts that were the strongest in seven years, estimates were for starts at 930K units (annualized). Building permits a little concerning though, permits dropped 3.9% against estimates of a decline of 0.5%. At 9:15 March industrial production was expected +0.2%; it doubled to 0.4% and Feb production, originally +0.7% was revised to +1.1%. March capacity utilization (factory use) was expected at 78.3% unchanged from Feb, use increased slightly to 78.5%. At 9:30 the DJIA opened +100, NASDAQ +24, S&P +10. The 10 yr note 1.73% +4 bp and 30 year MBSs -16 bp frm yesterday’s close. The IMF out today lowering its outlook for global growth frm +3.5% in January to +3.3% now. IMF urged European policy makers to use “aggressive” monetary policy as a second year of contraction leaves the euro area’s recovery lagging behind the rest of the world. The IMF report describes a “three-speed” recovery led by emerging markets including China, with the U.S. forging ahead and Europe trailing after fighting a debt crisis that has forced bailouts of five countries in the region. Beside the stock market volatility yesterday, gold was beat down hard, -$160 by 5:00 pm and last Friday down $78.00; increased views that inflation isn’t likely to increase and the sell recommendation last week from Goldman/Sachs has driven the price from $1570 four weeks ago to the $1350 level yesterday. This morning gold up $33.00. Crude oil also saw strong selling yesterday, down $3.00 to $88.50 at 4:00 yesterday; the price is higher today. Yesterday’s trading in stocks, gold and oil started the week with an increase in volatility, this morning it is evident with the markets that were hit hard yesterday are snapping back with reversals in the markets. No additional economic data today but there are three Fed officials scheduled to speak; Elizabeth Duke at 12:00 pm, Narayana Kocherlakota at 1:00 and at 3:00 Janet Yellen, the vice chair of the Fed. Technically, the 10 yr note failed yesterday to move below 1.69%, the third time in four days that buying ended when the yield fell to 1.69%. A little concerning that the 10 could not garner buying yesterday with stocks collapsing, gold falling and crude lower. Even the increased concerns the economies of the world are slowing hasn’t pushed the yield lower. All of our models still remain bullish; the rest of this week though will likely be more volatile after yesterday’s market actions.

Mortgage Rates

Morgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The day started with better prices for mortgages and the 10 yr note yield at 1.70% at one point about 8:15. Global stock markets weaker this morning on weaker than expected growth in China; the key GDP index rose 7.7% in the first quarter, the National Bureau of Statistics said in Beijing. That compared with the 8% median forecast by analysts and the 7.9% pace in Q4 2012. At 8:30 in the US, the NY Empire State manufacturing index also weaker than forecasts; the index at 3.1 frm 9.2 in March was expected at 7.5. Beside the weaker economic data early this morning that has supported interest rate markets; Fed officials out denying the Fed is ready to end the QE. Charles Evens Chicago Fed President said the Fed’s monetary policy isn’t accommodative enough. Narayana Kocherlakota, Minneapolis Fed President said he would like to see more accommodative polices. Dennis Lockhart, Atlanta Fed President he supports more easing. The three spoke on Saturday. This week has a number of Fed officials speaking; Fed Governor Elizabeth Duke at 12:30 Tuesday, Narayana Kocherlakota at 1:00 Tuesday, Janet Yellen Vice Chair at the Fed at 3:00 Tuesday. On Wednesday at 9:00 am Jeremy Stein, Fed governor, at 9:30 St Louis Fed Pres. Bullard and Eric Rosengren, Boston Feb President at 12:00 pm. The discussions about the QE continues with varying comments frm numerous Fed officials, pro and con. At 9:30 this morning the DJIA opened -34, NASDAQ -17 and S&P -5; the 10 yr note at 1.71% -2 bp, 30 yr MBSs +6 bps. At 10:00 the April NAHB housing market index was expected at 45 frm 44 in March; as reported the index dropped again, the second drop in the last two months to 42. The pivot between gains and weakness is 50. Very disappointing, especially when most have begun to believe the housing sector would pull the economy upward. Tomorrow March housing starts and permits are on the schedule. Gold is collapsing again this morning; Friday selling dropped the metal $77.00, this morning early gold was off over $100.00, at 10:00 down another $90.00. Investors are being forced out of long positions as the exchange will likely increase margin rates. Deflationary fears frm China, last week’s outright sell recommendation frm Goldman/Sachs and talk that Cyprus will begin selling its gold reserves are joining to drop gold that traded at $1570 a few days ago now at $1412.00, (-$170.00 since last Thursday’s close). And not only gold falling, crude oil is down $2.00 this morning and down $9.00/barrel in the last two weeks. The recent drop in the rate on the 10 yr note, frm 1.90% on the first of April to 1.70%, is working on the low this morning. The stock market is under pressure so far today, but we don’t put much emphasis on it until later this afternoon. These days it is more the norm than unusual that movement in the key indexes have a pattern of weakness through the day but recovering in the final hour. At 10:00 today the 10 yr, after being down 2 bps in yield earlier, is trading unchanged frm Friday at 1.73% with MBS prices about unchanged frm Friday.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A nice start today in the bond and mortgage markets with US stock indexes trading lower and Europe’s stock markets weaker. At 8:30 more support for the bond market when March retail sales were much softer than forecasts; sales were expected to be about unchanged from Feb but fell 0.4% and when auto sales are extracted sales still down 0.4%. Sales fell by the most in nine months as employment slowed, showing households ended the first quarter on softer footing. Feb sales originally reported up 1.1% was revised to +1.0%. The weak sales in March add additional concern that the spending cuts and the increase in payroll taxes this year are having more of a negative impact on the economy than economists had forecast. The 8:30 report pushed stock index futures lower and increased the price gains on mortgage prices. Also at 8:30 March producer price index was expected -0.2%, as reported PPI declined 0.6% and when food and energy components were excluded PPI increased 0.2% as expected. Yr/yr PPI +1.1%, ex food and energy yr/yr up 1.7%. Inflation is not a factor these days, well below the levels that would concern the markets or the Fed. The 0.6% drop in the producer price index was the biggest since May and followed a 0.7% gain in the prior month. The cost of energy slumped by the most in three years according to data frm he Labor Dept. At 9:30 the DJIA opened -42, NASDAQ -10, S&P -5. The 10 yr note at 9:30 at 1.74% -5 bp with 30 yr MBS prices +22 bps. At 9:55 the mid-month U. of Michigan consumer sentiment index was expected at 79.0 frm 78.6 at the end of March. The index plunged to 72.3 the lowest index reading since Dec 2011. One more measurement that confirms that consumers are not as euphoric about their economic lives as the equity markets are about their pocketbooks. Once again a weak report didn’t faze the stock market; the three key indexes lower but no noticeable reaction to the decline in sentiment. The final data point this morning, at 10:00 Feb business inventories were expected to have increased 0.4% after increasing 1.0% in January. Inventories increased just 0.1% and Jan revised down to +0.9%. The inventory miss will take away some frm Q1 GDP when it is reported on the 26th. Fed chief Bernanke is on the calendar to speak at 12:30 at a community development conference in Washington. Always important when the Fed head talks, these days even more so with the question about the ending of the QEs hanging out there in the wind. There is no direct reason he will have anything to say, but in the Q&A anything is likely to come up, markets are not concerned with it though. The data this morning is constructive toward the view that the Fed will continue its easing policy for longer than some may have thought yesterday. The economy is clearly not expanding as rapidly as most thought at the beginning of this year. Unless there is a marked reversal in the speed of growth the Fed will not stop now after three years of support with easy monetary policy. Recently released data on employment and now confirmed weakness in retail sales should be lessening the bullish outlook for growth. March saw just 88K new jobs as businesses face uncertainty over the sequester cuts in spending and the realization that health care costs will increase as ObamaCare begin to be implemented. Whether there is anything these days that will set a decline in equity markets is questionable; so far nothing has fazed investors as stock prices continue to climb. Corporate profits are holding well for the most part, driving the market higher and higher in one of the strongest and long-running stock market rally in years. Businesses are getting more from present employees and refrain from hiring, the result is consumers are still being pressured and reluctant to increase spending. What will it take to set off a strong correctional rally in the equity market? So far with the Fed continuing to force investors into stocks, and the global view that the US is the best place to invest are countering the reality that consumers are not spending much and employment not improving much.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Weekly jobless claims out this morning at 8:30; claims were widely expected to have declined 20K to 25K, as reported claims fell 42K to 346K. Last week claims increased 28K, more than was expected at the time. The last two weeks of claims appear to have been to smooth out swings due to the Easter holiday that falls at different times each month. Nevertheless the claims recently have exhibited an increase in volatility. Mix in the March employment report that was exceptionally soft on job creation (+88K) and markets are left scratching heads as to the reality of the employment data recently. The reaction in the markets to the better claims was almost nil; stock indexes little changed and the 10 yr note a little better. March import prices were reported -0.5%, export prices -0.4%; yr/yr import prices own 2.7% while yr/yr export prices +0.3%. Not much direct interest in the monthly report frm traders but the data shows imports falling primarily on lower oil prices and a stronger dollar. At 9:30 the DJIA opened unchanged from yesterday, NASDAQ -7, S&P unchanged. The 10 yr note at 1.80% also unchanged frm yesterday. 30 yr MBS price at 9:30 +11 bp after falling 30 bps yesterday. So far today markets are very still with little movement in equity markets and not much change in the bond and mortgage markets. This week has been absent of key economic releases, mostly reacting to the never-ending rise in US stock indexes. Tomorrow there will be a couple of data points that should get attention; March retail sales and the U. of Michigan consumer sentiment index. March PPI and Feb business inventories also out but there is no inflation so it isn’t likely to move markets and business inventories normally don’t get attention except for deep-thinking economists. March retail sales are expected about unchanged from Feb sales that were up 1.1%. Yesterday’s FOMC minutes indicated an increasing dialogue within the group about how and when to begin ending the $85B a month of buying of treasuries and MBSs. Some discussion ensued about the future effectiveness of Fed money printing; so far not much improvement in employment after three years of Fed purchases that have ballooned its balance sheet to about $4 trillion by the end of this year. The meeting occurred before the March employment report that showed non-farm job growth at an anemic 88K. It isn’t likely the Fed will stop the low interest rate bias anytime soon unless there is a marked improvement in job growth. Keeping businesses frm increasing hiring; the ObamaCare bill and spending cuts frm the sequester. Although the spending cuts are just $85B this year in a $3.0+ trillion budget, most of the cuts are where they hurt the most. The most recent survey of banks and securities firms holds that most are now expecting the 10 yr note at 2.25% at the end of the year, down from 2.32% that was thought in February. Yesterday Bill Gross at PIMCO out saying the largest bond fund in the world is upping its purchases of US treasuries and lessening by the same amount purchases of MBSs. Technically the bond and mortgage markets are holding positive outlooks, but the near term may see some consolidation or slight increases in rates. The last five sessions have seen the 10 yr note yield increase 10 basis points, mostly on overbought momentum oscillators and continued advances in US stock indexes.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The Federal Reserve made a huge error yesterday; it sent out the FOMC minutes yesterday afternoon to members of Congress; a day ahead of when the minutes were supposed to be released. The minutes were expected at 2:00 this afternoon, after the mistake yesterday the minutes were released this morning at 9:00 am. The announcement of the misstep release yesterday wasn’t known until 8:55 am this morning. • Committee members saw the information received over the intermeeting period as suggesting that moderate economic growth had resumed following a pause late last year. • Labor market conditions had shown signs of improvement, but the unemployment rate remained elevated. • all but one member judged that a highly accommodative stance of monetary policy was warranted in order to foster a stronger economic recovery in a context of price stability. • The Committee agreed that it would be appropriate to continue purchases of MBS at a pace of $40 billion per month and purchases of longer-term Treasury securities at a pace of $45 billion per month, as well as to maintain the Committee's reinvestment policies. • A few members felt that the risks and costs of purchases, along with the improved outlook since last fall, would likely make a reduction in the pace of purchases appropriate around midyear, with purchases ending later this year. It was also noted that were the outlook to deteriorate, the pace of purchases could be increased. • Household spending and business fixed investment had advanced, and the housing sector had strengthened further, but fiscal policy had become somewhat more restrictive. The main take away from the minutes is that there are increasing discussions within the Fed about ending the QEs. While there are more discussions, the Fed isn’t likely to end its monetary stimulus without more strength in the economy. Keep in mind that these minutes were frm the 3/21 meeting and before last week’s March employment report that was very soft. At 9:30 the DJIA opened +70, NASDAQ +13, S&P +7; 10 yr note 1.78% +3 bp, 30 yr MBS price -18 bps. At 1:00 this afternoon Treasury will sell $21B of 10 yr notes, yesterday Treasury sold $32B of 3 yr notes that didn’t show great demand. Recent Treasury auctions over the last couple of months have not shown a high degree of demand. At 2:00 Treasury will report the March budget, expected at a deficit of $172.4B frm -$203.5B in Feb. Treasury will likely run an annual deficit this year of about $900B, fiscal 2013 ends at the end of Sept 2013. The weekly MBA mortgage applications out early this morning; the overall composite index increased 4.5% after falling 4.0% the previous week. The purchase index declined 1.0% after being up 1.0% the previous week. The re-finance index up 6.0% after being down 6.0% the week before. Recent weeks have seen large shifts within the purchase category with demand rising for government loans heading into an April 1 increase on FHA insurance premiums then falling following the increase. With demand now thin for government loans, demand for conventional loans is at a recovery high. Re-finances boosted by a sharp weekly drop in mortgage rates to an average of 3.68% for 30-year conforming loans ($417,500 or less).

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Very early this morning the 10 yr note yield was up a basis point at 1.75%; but by 9:00 the 10 improved a little to unchanged at 1.74%. US stock indexes looking better at 9:00 with the DJIA pointing to a 35 point open at 9:30; 30 yr MBS price up 2 bp frm yesterday’s close. U.S. stocks rallied yesterday as investors speculated first-quarter earnings would help equities rally. Income at S&P 500 companies probably fell 1.8% in the first three months of the year, the first year-over-year drop since 2009. At 9:30 the DJIA opened +25, NASDAQ +7, S&P +3; 10 yr note -1 bp at 1.73% and 30 yr MBSs +9 bps. The initial gains failed to hold, at 10:00 the key indexes all lower on the day. Europe’s stock markets are better today on a report that China’s inflation eased a little after a 10 month high last month. The consumer price index increased 2.1% in March frm a year ago, the consensus estimate was an increase of 2.5% yr/yr. There is only one scheduled report out today; Feb wholesale inventories at 10:00, estimates were for an increase of 0.5%, as released inventories were . It isn’t much of a market mover, so no reaction to it. At 1:00 this afternoon Treasury will auction $32B of 3 yr notes. Ben Bernanke spoke last evening in Georgia but there was little news in his comments. He said that economic conditions were far from where he would like them to be. Monetary stimulus in advanced economies “is providing additional support for other countries through stronger financial markets, more exports,” he said in response to an audience question. Nothing in his remarks was noteworthy as far as markets are concerned. Tomorrow the minutes frm the March 21 FOMC meeting will be released wherein we may get a better sense of the members’ ideas about future QEs and/or when the Fed will be thinking about withdrawing. Given the sluggish economic outlook, it is not likely the Fed will begin ending the QE for many months. The NFIB Index of Small Business Optimism fell 1.3 points to 89.5, disappointing, but not a surprise given the current state of paralysis in Washington and the still mixed news on the economy. The Fed is lending the economy a trillion dollars, raising the value of its portfolio to unfathomable levels. In spite of assurances, the impact of creating nearly $2 trillion in reserves that can be loaned out is disconcerting at best, terrifying to some. The economy is hardly growing, but corporate profits are at record levels, an incongruity to most Main Street folk who see the Fortune 500 valuation hitting record highs while millions of small employers struggle to stay in business and tens of thousands have closed their doors, leaving commercial vacancy rates at elevated levels. Virtually no owners think the current period is a good time to expand. Over 75 percent think that business conditions in 6 months will be no better or worse than they currently are. Aggregated, there are no plans to create new jobs in the coming months, although some parts of the U.S. will experience job growth and some sectors will create new jobs (housing and energy in particular). But overall, it appears that there will be little growth coming from the small business half of the economy and as the world economy slows, maybe even less from big business. Interest rate markets here and globally are declining as central banks pile huge sums of stimulus into economies. Japan’s 10 yr note about 0.50%; Germany’s 10 yr note 1.24% and here our 10 yr at 1.73%. Investors seeking safety in government bonds are likely to continue buying US treasuries with our yield better and still considered the safest in the world. Technically the only concern we have these days is that the momentum oscillators are at near term overbought levels; all other data remains bullish.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com This Week follows on the best week’s we have had recently in the interest rate markets. Today should however see some pressure in bonds and mortgages after such a deep decline in rates last week. There isn’t a lot of data this week, March retail sales is the most critical with questions about how consumers are spending. Last week’s two ISM indexes were weak, the March employment report was very disappointing with only 88K new jobs and thousands more dropping completely out of the job market. This week starts earnings season for Q2, Alcoa always leads the way and will report on Monday evening. Probably the most important thing this week is the releases of the FOMC minutes from the 3/21 meeting. Markets will be looking for how discussions developed about how and when the Fed will begin withdrawing frm the easing’s. After the weakness in most economic reports over the last couple of weeks it isn’t likely now that the Fed has any plans to cut back, at least for now. That said, the Fed is talking and discussing the eventual withdrawal the is the main force keeping stock markets moving higher. This evening Ben Bernanke will be speaking in Georgia on Financial Stability; not a direct speech about the economy but in Q&A he will be asked about the March employment data and what if any it means for QEs, will there be more---or less of it? After Friday’s employment report those at the Fed that have been arguing a withdrawal from the QEs won’t have nearly the leverage they may have had. 88K new private jobs and only 63% of all eligible workers still in the job market, the idea that the Fed would consider easing off the $85B of monthly purchases of MBSs and treasuries has lost most all credibility. There is however an argument that can be made, that the Fed’s easy money policy appears to be losing its effectiveness. This week Treasury will auction $66B of notes and bonds beginning Tuesday through Thursday. Early this morning the 10 yr note yield was up a basis point to 1.72%, 30 yr MBSs started a little soft but by 9:30 the 30 yr FNMA coupon was unchanged frm Friday’s close. US stock indexes were better at 8:30 than at 9:00; at 9:30 the DJIA opened -24, NASDAQ +3, S&P unch; 10 yr note 1.72% +1 bp. German production rose 0.5% from January, when it contracted a revised 0.6%, the Economy Ministry said today. Economists forecast a 0.3% gain, according to the median of 41 estimates in a Bloomberg News survey. From a year earlier, production dropped 1.8% when adjusted for working days. The better production data supported Europe’s stock markets. In the EU; over the weekend Portugal’s courts ruled against a plan by the government that was going to help meet the requirements for continued assistance frm the European Commission, the IMF and the ECB for its banking sector and debt problems. It was ruled unconstitutional to cut pay for government workers and cut the pension plans, singling out just one segment of the economy. Now Portugal has to come up with another plan in order to continue getting funds frm the troika. Margaret Thatcher, the former British prime minister who became one of the most influential global leaders of the postwar period, died on Monday, three decades after her championing of free-market economics and individual choice transformed Britain's economy.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The first Friday of every month is almost always one of shock and awe; the release of the monthly employment data is rarely a calm event. Today the March data didn’t disappoint in terms of surprise. The unemployment rate hit at 7.6% down frm 7.7% in Feb, so far on the surface that looks good, but not really. Non-farm job growth was expected at about 190K, job growth as reported increased just 88K; non-farm private job growth was thought to be about 200K, as reported up just 95K. There was revisions to Feb and Jan jobs that totaled an additional 61K jobs from original reports but the increases were minor in comparison to the very weak employment picture painted today. No matter the spin (assuming we hear it from the Administration) the report was the weakest since last June and the miss in forecasts the worst in over two years. As for the decline in the unemployment rate to 7.6%; adds to the concerns, it indicates an increasing number of discouraged workers no longer looking for jobs. Why the serious decline in employment data? That will be the topic for discussion through the rest of the day. The initial reaction to the weak data; at 9:00 this morning the 10 yr note rate was at 1.70% down 6 more basis points, 30 yr MBS prices at 9:00 +53 bp frm yesterday. US stock indexes in the futures markets were down, the DJIA -156, S&P -20. At 9:30 the DJIA opened -120 after trading -160 in the futures markets earlier, NASDAQ -55, S&P -18. The 10 yr at 9:30 1.70% -6 bp and now down 16 bp since Wednesday. 30 yr MBS prices at 9:30 +50 bp frm yesterday’s close and up 125 bp since Wednesday. Two things are contributing to what now appears to be a declining economic outlook. First, the sequester; it is beginning to bite as cuts in spending are now taking a toll on job growth. Congress and the Administration still very dysfunctional, didn’t have the common sense to come to agreement to avoid the automatic cuts that were set in motion in 2011 when the Pres. and Congress couldn’t agree on a budget and instead pushed it down the road. Down the road is now; the cuts have to be made because it’s the law. The second issue, just beginning to have its major negative consequence for job growth, ObamaCare. The health care bill is now beginning to be implemented, with full implementation in 2014. Employers now fully realizing the costs, are going to be less willing to add new hires and will only occur in businesses where it is absolutely necessary. Meanwhile, employers are using temps and driving current employees to increased production. Tempered hiring plans suggest companies are confident in their ability to meet demand with the existing workforce as federal budget cuts cloud the economic outlook. The absence of sustained and bigger gains in employment and earnings underscores the Federal Reserve’s view that more progress is needed before record monetary policy stimulus can be scaled back. Unfortunately the Fed’s QE is having less impact as the easing continues; no significant job growth has occurred, and likely will remain impotent in stimulating the economy. North Korea remains an irritant; although most all of the recent threats are meaningless in terms of implementation i.e., nuke attacks on S. Korea and the US, nevertheless the belligerence is roiling markets. Today the ‘little general’ of North Korea is telling foreign embassies to consider evacuating their diplomats from the capital as tensions mount with South Korea, warning that embassies can’t be protected in the event of a conflict. In other words, the N.K. regime will not protect embassies---they are on their own. A North Korean Foreign Ministry official met with the Russian Ambassador today to deliver the message. The British Embassy was told today that it won’t be able to guarantee the safety of foreign missions starting April 10 if a conflict flares up, the Foreign Office in London said in an e-mailed statement. Saber rattling continues; no way North Korea has any allies now; it is all about the Little General, Kim Jong Un, trying to act like an adult as he sees it. That said, the world is worried as the escalation in rhetoric grows. One more reason global interest rates are falling; safety moves.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 this morning the 10 yr note and MBS prices were slightly better after the strong improvements yesterday. North Korea is rumbling and the US is responding with increased military readiness, investors turning more to safety in US treasuries. The early activity in the stock index futures markets before 8:30 were trading better after the strong selling yesterday, also a reaction over the North Korean’s threats. Yesterday a military leader in the country commented he now had the approval of the leaders of the country to attack the US and South Korea, the remark added additional emphasis to the on-going threats. Although the media and markets are taking the situation seriously, it is very unlikely North Korea will actually follow through with all the rhetoric. Overnight according to the WSJ the Obama administration is backing away from the increasing tough talk on concerns it is fueling even more aggressive threats frm the new N. Korean leadership. At 8:30 this morning weekly jobless claims added more reality that the US economy isn’t growing in terms of job growth. Recently claims have been trending lower until last week when they increased, claims reported this morning were up 28K to 385K, the estimates were for claims to have declined 7K. Much of the recent economic data has been weaker than expected; both ISM indexes (manufacturing and services) were weaker than thought, now the claims are increasing more than thought. The reaction to the increase in claims took most of the early gains out of stock indexes and pushed the 10 yr yield down to 1.76%. The Labor Dept. pointed to the Easter holiday that varies each year making it difficult to smooth out swings in the data. The ECB left interest range unchanged as expected; but Mario Draghi said the bank will keep monetary policy easy for an extended period and further easing is possible if the EU economies weaken further. “Our monetary policy stance will remain accommodative for as long as needed,”…. “In the coming weeks, we will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability.'' He said risks to the economic outlook remain on the downside. The “consensus for the time being was not to look at rates.” Europe’s stock markets fell on his remarks of downside risks; yesterday Europe’s markets dropped the most in five weeks and today down more. At 9:30 the DJIA opened +14, NASDAQ -3, S&P +1; the 10 yr note at 1.78% after trading at 1.76% at 9:00 am. 30 yr MBS price at 9:30 +12 bps. Nothing left today as far as any potential market moving economic data. The North Korea news, if any, will get a lot of attention. Tomorrow the March employment report is going to influence how markets trade today. Investors will be positioning for what they expect. The present estimates are for non-farm jobs to have gained about 193K and private jobs +200K; the unemployment rate at 7.7% unchanged. The jump in weekly jobless claims this morning is not data taken into account for the March employment report. More opinions from Fed officials; various Fed officials have had varying opinions about the economy, the QE buying, and employment. No solid consensus among many regional Fed presidents. Atlanta Fed Pres. Dennis Lockhart is saying he isn’t convinced the 2013 economy will outperform the economic gains of the last few years. Other regional presidents have other thoughts that the economy will be stronger this year. The economy will see “a continuation of the story that we’ve been living,” Lockhart said. “A modest pace of growth, inflation that is pretty well contained and a very gradual reduction in unemployment.” He also questioned the unemployment rate, suggesting the unemployment rate may not fall to 6.5% as Bernanke has used as a trigger to increase the FF rates. Lockhart saying the new normal for unemployment rate may be no lower than 7.0%.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The March ADP private jobs report this morning was weaker than thought; according to ADP private jobs increased 158K, less than the 200K generally thought. The service sector accounted for most of the jobs, +151K, manufacturing jobs +6K while construction jobs showed no gains; the rebuild frm hurricane Sandy that hit the east coast a few months ago is winding down effecting construction employment. . The Feb ADP data was revised higher, from +198K originally reported to +237K. The March increase was the smallest since last October. Prior to the 8:15 report the 10 yr note and MBS prices were lower; after the report the 10 improved a little as did MBSs. The National Federation of Independent Business also out this morning with its survey of small businesses. “Owners reported increasing employment an average of 0.19 workers per firm, the best reading since March, 2012 and the fourth positive sequential monthly gain (last achieved early in 2011). Nine percent of the owners (down 1 point) reported adding an average of 2.3 workers per firm over the past few months. Offsetting that, 11 percent reduced employment (down 1 point) an average of 2.2 workers (seasonally adjusted), producing a seasonally adjusted gain of 0.19 workers per firm overall. The remaining 81 percent of owners made no net change in employment. Forty-seven percent of the owners hired or tried to hire in the last three months and 36 percent (77 percent of those trying to hire or hiring) reported few or no qualified applicants for open positions.” “ Eighteen percent of all owners reported job openings they could not fill in the current period, down 3 points from February. This measure is highly correlated (inversely) with the unemployment rate, so it is suggestive of a minor increase in the percent of our labor force that is unemployed. Much will depend on labor force participation changes of course. Job creation plans fell 4 points to a net 0 percent planning to increase total employment, a disappointing outcome. Not seasonally adjusted, 15 percent plan to increase employment at their firm (down 2 points), and 5 percent plan reductions (down 2 points), a bit of frost on the “green shoots” that appeared to be emerging in the first quarter. Owners are still pessimistic and see little reason to hire.” At 9:30 the DJIA opened +7, NASDAQ +2, S&P unch; the 10 yr note yield at 1.85% -1 bp and 30 yr MBS prices +9 bp frm yesterday’s close. At 10:00 the March ISM services sector index was expected unchanged frm Feb at 56; another disappointment, the index fell to 54.4 the lowest index read since last November. The employment component added more concern, that index fell to 53.3 frm 57.2 in Feb. Monday the ISM manufacturing index was also weaker than thought. With the weaker ADP data this morning and the NFIB report, the employment sector appears to have slowed. The initial reaction to the 10:00 report sent the stock market lower and improved MBS prices since the 9:30 levels below, about 3 bp. The 10 yr note yield managed to break kits 100 day average to 1.83% -3 bp on the session. Earlier this morning the weekly MBA mortgage applications were out; after a very strong week last week applications declined 4.0% overall. Purchase applications were up 1.0% as demand for government loans increased ahead of the hike in FHA premiums. Refinances fell 6.0% last week. The average 30-year loan for conforming balances ($417,500 and under) fell 3 basis points in the week to 3.76% with origination fees. The bond and mortgage markets continue to hold positive outlooks; however the 10 yr that drives mortgages has been in a tight range for the last five days, unable so to break its 100 day average on the rate until 10:00 when the ISM services sector index was weaker than expected. The momentum oscillators are continuing to indicate a momentary overbought situation but demand is holding well. As noted yesterday, it appears investors are using the bond market as a hedge against any decline in stocks; unwilling to exit stocks and fearing a correction, buying US treasuries will partially offset losses occurring in a correction in stocks. After the ADP report this morning traders are likely to lower their forecasts for Friday’s March BLS employment report. Presently the estimate is for non-farm jobs to have increased 193K, non-farm private jobs +200K with the unemployment rate unchanged at 7.7%.

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 a little soft this morning with US stock indexes pointing to a better open at 9:30. European stocks rose to a one-week high as trading resumed after a four-day weekend while Italian and Spanish bond yields declined. Italy’s 10-year rate fell eight basis points to 4.68%, while Spain’s yield slid seven basis points to 4.99%. In Cyprus, reports indicate the country will get an extra year to reduce its banking sector, now the country will have until 2017 to balance its economy; the extension reduces some of the concerns hanging over the country and slightly removes some of the safety moves into US treasuries, although only fractionally. Breaking news in Cyprus; the finance minister has resigned, no market reaction however. Germany’s inflation rate held steady at 1.8%, the lowest in two years. Breaking news in Cyprus; the finance minister has resigned. At 9:30 the DJIA opened +43, NASDAQ +14, S&P +4; the 10 yr note yield at 1.86% +2 bp and 30 yr MBS price down 15 bp frm yesterday’s close but still up 12 bp frm 9:30 yesterday. Feb factory orders out at 10:00; forecasts were for orders to have increased 2.9%, as reported orders were up 3.0%. Jan orders were originally reported down 2.0%, today it was revised to down just 1.0%. The reaction added to the gains in the key stock indexes; no immediate reaction in the interest rate markets. We reported yesterday that Fannie and Freddie are now making solid profits. That the two agencies have apparently turned the corner is befuddling the establishment in Washington. There was a stampeded to do away with the two government entities when the sub-prime debacle hit in 2008. Since then comments from politicians and FHFA have by enlarge been disparaging toward both. The Washington wisdom was to end the government’s involvement in the mortgage lending industry and turn to private markets for mortgage money ( always a non-starter in our opinion). The conventional wisdom was that the two agencies that were taken over by the government would in the end cost tax payers billions in the rescue. Now, five years after the crash, the agencies are actually making profits and causing the “experts” in Washington to scratch their collective heads----what to do? Well, what to do, is to do nothing; let them alone and recoup taxpayers money. Maybe just dump the FHFA? Sounds like a plan to me. Another reminder; this is employment week. Tomorrow starts the debate in earnest when the ADP private jobs are reported for March. In Feb ADP reported private job growth up 198K while the BLS reported private jobs up 246K; the present consensus is ADP will report tomorrow private jobs grew 205K, the present estimate from the BLS for Friday’s March private jobs is 200K. If ADP data is stronger than thought look for the BLS outlook to be revised higher; conversely, a weaker number will cause markets to think lower on the March BLS report. Technically the 10 yr and 30 yr MBSs remain bullish; the 10 yr rate holding below its 20 and 40 day averages while 30 yr MBS price holding above its 20 and 40 day averages. The only concern we have now is that the 10 yr note is overbought based on near term momentum oscillators, the potential for consolidation or some retracement is high. Fundamentally there is still some safety trades in treasuries over the EU debt crisis that surfaced again a couple of weeks ago in Cyprus. There have been some questions about North Korea’s rattling that it would attack the US with nukes; we very much doubt that has any influence on markets however. It isn’t unusual for the country to act up with outrageous comments. The Fed is still a large force in the bond market with its purchasing of treasuries and MBSs.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries opened a little weaker this morning but came back nicely, MBS prices also slightly weaker at 9:00 ahead of the March ISM manufacturing index at 10:00. Last week the 10 yr yield fell 8 bp in rate as investors continue to hold some treasuries as insurance against the banking collapses in Cyprus. So far today, and over the weekend, there hasn’t been any additional news from the little island country. Over the previous two weeks the 10 yr yield fell frm 2.05% to its low last Wednesday at 1.84%, MBS prices improved as well but not as dramatic as treasuries, the safest place to park money in an uncertain situation such as Cyprus. What Cyprus clearly shows is that the banking crisis in the EU is not over; after six months of little news, the region is back on watch. Over the weekend Russia said it won’t bail out people or companies that stand to lose money held at Cyprus’s two largest banks, First Deputy Prime Minister Igor Shuvalov said. Germany alleged that Cyprus was used to launder illegal Russian money. Funds held by Russians on the island aren’t all illegal, Shuvalov said. The only news over the weekend is North Korea’s saber rattling against South Korea and the US. On Saturday the North Koreans said the country was entering a “state of war” and threatening to strike US bases. The North saying it will not quit its nuke development. Most observers believe the increased tough talk is an effort to whip up sentiment in the country for changes in leadership as the new premier cements his hold. So far it is all words and markets overall are not taking it too seriously, at least for now. At 9:30 the DJIA opened -17, NASDAQ +1, S&P -1. 10 yr at 1.87% +1 bp and 30 yr MBSs -2 bps. The bond and mortgage markets trading better than earlier this morning. Two reports at 10:00; the March ISM manufacturing index expected at 54.0, as reported it was at 51.3 frm 54.2 in Feb. Not a good headline but the employment component did increase to 54.2 frm 51.4 in Feb. An index read over 50 indicates expansion. Also at 10:00 Feb construction spending; it was better than expected at +1.2% against forecasts of +1.1%---not much better though. After the data the 10 yr note yield that was at 1.88% early this morning, was unchanged from last Thursday’s close at 1.85%. This week is employment week with March data on Friday. In the meantime there are a number of reports that can move markets. The move to safe US treasuries is likely to keep interest rates frm increasing much with the EU still roiling and now North Korea acting up. This morning China’s Purchasing Mgrs.’ index was better than thought; at 50.9, up frm 50.1 in Feb. A separate gauge from HSBC Holdings Plc and Markit Economics rose to 51.6 in March from 50.4. Technically the only thing we are concerned about now is the momentary overbought momentum oscillators. The wider view is continuing to look friendly, the 10 yr holding below its 20 and 40 day averages on the rate and 30 yr FNMA MBSs above its 20 and 40 day price averages. Neither the 10 or MBSs however are very strong as most economists and traders are holding that interest rates will increase through the year. If there is a consensus now, the outlook is that 10 yr note will increase to 2.25% by the end of the year. The support keeping interest rates from increasing much is the Fed; the Fed is likely to continue buying $85B of treasuries and MBSs through the end of the year.