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Thursday, March 3, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, March 03, 2011
Treasuries and mortgages opened weak this morning, prior to 8:30 the 10 yr note off 4/32 and mortgages -2/32 (.06 bp). At 8:30 weekly jobless claims added more selling; weekly claims were expected up 9K, they fell 20K to 368K and last week's claims were revised from 391K to 388K. Continuing claims fell to 3.774 mil frm 3.833 mil last week. Weekly claims are the lowest since May 2008, more evidence the employment situation is improving. The four-week moving average, a less volatile measure, dropped to 388,500, the lowest since the week ended July 12, 2008, from 401,250 last week. It was also the first time the monthly average has been below 400,000 since July 2008. The 10 yr note fell 15/32 to 3.53% at 8:40 while mortgage prices fell 14/32 (.44 bp) in a knee jerk reaction then settled at -9/32 (.28 bp) at 9:00. Also at 8:30 but not a factor; Q4 worker productivity was unrevised at +2.6% and Q4 unit labor costs was also unrevised from the advance report last month at -0.6%.
Tomorrow the Feb employment report will show an addition of 200K new jobs and the unemployment rate up 0.1% to 9.1% according to recent consensus. Prior to yesterday's ADP report that private jobs increased 217K estimates for non-farm jobs was +180K. Always a wild report that most of the time deviates from estimates, the employment report tomorrow won't be any different.
A very strong open in the stock market this morning, the DJIA up 114 points on the open, NASDAQ +33 and the S&P +14. With equity markets strong the bond and mortgage markets are weaker. We note that the 10 yr note, driver for the mortgage markets, has been unable to break below 3.40% where it closed yesterday. Every time the rate falls to that level buying dries up.
At 10:00 the Feb ISM services sector index, expected at 59.0, increased to 59.7 frm 59.4 in Jan. The new orders component at 64.4 frm 64.9, the prices pd component at 73.3 frm 72.1 and employment at 55.6 frm 54.5. Not much initial reaction the report as it was generally in line with forecasts, it was yet another better data point than thought and more evidence the economy is improving. Any reading on the indexes over 50 is considered expansion.
Crude oil is weaker this morning as is the gold market. No new unrest noted in the Mideast or N Africa. The Arab League is holding discussions with Venezuela on sending mediators to Libya to attempt to negotiate Qaddafi's abdication. The Arab League said it’s weighing an offer by Venezuela’s Hugo Chavez to intervene in Libya’s civil conflict. Just what the world needs, Hugo Chavez sticking his nose in the situation. While lower today, crude oil is likely to continue to climb. The unsettled conditions in the Mideast still exist; websites in Saudi Arabia are calling for a nationwide Saudi “Day of Rage” on March 11 and March 20, according to Human Rights Watch. With news like that oil markets will continue to increase as long as protests continue.
Talk of interest rates increasing in Europe will not subside; German two-year government notes plunged, pushing the yield up to the highest in more than 20 months, as European Central Bank President Jean-Claude Trichet said interest rates may be increased at the next meeting. Ten-year yields also surged as Trichet told reporters in Frankfurt that inflation risks have moved to the “upside.” If (when) the ECB increases its base rate it will add pressure to US rate markets even though the Fed is not likely to follow and increase the US base rate. Markets are moving closer to a ratcheting upward move on rates with debt in the US still increasing, all the sovereign debt problems in Europe and inflation increasing in China and all emerging markets.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, March 03, 2011
Treasuries and mortgages opened weak this morning, prior to 8:30 the 10 yr note off 4/32 and mortgages -2/32 (.06 bp). At 8:30 weekly jobless claims added more selling; weekly claims were expected up 9K, they fell 20K to 368K and last week's claims were revised from 391K to 388K. Continuing claims fell to 3.774 mil frm 3.833 mil last week. Weekly claims are the lowest since May 2008, more evidence the employment situation is improving. The four-week moving average, a less volatile measure, dropped to 388,500, the lowest since the week ended July 12, 2008, from 401,250 last week. It was also the first time the monthly average has been below 400,000 since July 2008. The 10 yr note fell 15/32 to 3.53% at 8:40 while mortgage prices fell 14/32 (.44 bp) in a knee jerk reaction then settled at -9/32 (.28 bp) at 9:00. Also at 8:30 but not a factor; Q4 worker productivity was unrevised at +2.6% and Q4 unit labor costs was also unrevised from the advance report last month at -0.6%.
Tomorrow the Feb employment report will show an addition of 200K new jobs and the unemployment rate up 0.1% to 9.1% according to recent consensus. Prior to yesterday's ADP report that private jobs increased 217K estimates for non-farm jobs was +180K. Always a wild report that most of the time deviates from estimates, the employment report tomorrow won't be any different.
A very strong open in the stock market this morning, the DJIA up 114 points on the open, NASDAQ +33 and the S&P +14. With equity markets strong the bond and mortgage markets are weaker. We note that the 10 yr note, driver for the mortgage markets, has been unable to break below 3.40% where it closed yesterday. Every time the rate falls to that level buying dries up.
At 10:00 the Feb ISM services sector index, expected at 59.0, increased to 59.7 frm 59.4 in Jan. The new orders component at 64.4 frm 64.9, the prices pd component at 73.3 frm 72.1 and employment at 55.6 frm 54.5. Not much initial reaction the report as it was generally in line with forecasts, it was yet another better data point than thought and more evidence the economy is improving. Any reading on the indexes over 50 is considered expansion.
Crude oil is weaker this morning as is the gold market. No new unrest noted in the Mideast or N Africa. The Arab League is holding discussions with Venezuela on sending mediators to Libya to attempt to negotiate Qaddafi's abdication. The Arab League said it’s weighing an offer by Venezuela’s Hugo Chavez to intervene in Libya’s civil conflict. Just what the world needs, Hugo Chavez sticking his nose in the situation. While lower today, crude oil is likely to continue to climb. The unsettled conditions in the Mideast still exist; websites in Saudi Arabia are calling for a nationwide Saudi “Day of Rage” on March 11 and March 20, according to Human Rights Watch. With news like that oil markets will continue to increase as long as protests continue.
Talk of interest rates increasing in Europe will not subside; German two-year government notes plunged, pushing the yield up to the highest in more than 20 months, as European Central Bank President Jean-Claude Trichet said interest rates may be increased at the next meeting. Ten-year yields also surged as Trichet told reporters in Frankfurt that inflation risks have moved to the “upside.” If (when) the ECB increases its base rate it will add pressure to US rate markets even though the Fed is not likely to follow and increase the US base rate. Markets are moving closer to a ratcheting upward move on rates with debt in the US still increasing, all the sovereign debt problems in Europe and inflation increasing in China and all emerging markets.
Wednesday, March 2, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, March 02, 2011
The employment dance has begun; ADP starts the waltz with its estimate, out this morning saying non-farm private jobs increased by 217K against estimates ranging from 160K to 170K. The reaction put pressure in the bond and mortgage markets. ADP is almost always wrong compared to the official BLS report that will be released on Friday morning. It is the same every month, why do markets pay it any attention; once the BLS data is released no one gives a damn what ADP had to say. That traders give it any credibility based on past comparisons is an enigma to me. Over the previous six reports, ADP’s initial figures were closest to the Labor Department’s first estimate of private payrolls in November, when it overstated the gain in jobs by 43,000. The estimate was least accurate a month later, when it overestimated the employment gain by 184,000.
Crude oil remains the prime driver in the bond and equity markets; yesterday crude moved above $100.00/barrel in the afternoon but by the close it fell back to $99.63. $100.00/barrel appears to be a hurdle crude hasn't yet been able to clear, tested twice and failed both times. This morning crude at 9:15 traded at $100.58 (see below for 10:00 level). At 9:15 the stock indexes were slightly higher on the ADP jobs report and not much increase in oil prices.
Oil price continues to be the key to US markets. Unrest in the Mideast is continuing but in the last few days nothing critical. In Oman the largest Middle Eastern producer outside of OPEC, protesters blocked a highway linking the northern city of Sohar to the capital Muscat yesterday as the army set up checkpoints around Sohar and inspected vehicles. The country pumped 885,600 barrels of oil a day in January. Demonstrators clashed with security forces in Tehran yesterday. Riots from Morocco to Bahrain have toppled leaders in Tunisia and Egypt and there have been protests in Yemen, to the south of Saudi Arabia, the world’s biggest crude exporter. Saudi Arabia’s stock market dropped 2.6% today, taking declines this week to 14%.
Earlier this morning the weekly MBA mortgage applications were out. Applications decreased 6.5% from one week earlier, The results do not include an adjustment for the Presidents Day holiday. The Refinance Index decreased 6.5% from the previous week. The seasonally adjusted Purchase Index decreased 6.1% and was 19.6% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.5%. The four week moving average is down 2.2% for the seasonally adjusted Purchase Index, while this average is down 2.7% for the Refinance Index. The refinance share of mortgage activity decreased to 64.9% of total applications from 65.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.5% from 5.6% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.84% from 5.00%, with points increasing to 1.30 from 0.96 (including the origination fee) for 80% loans. This is the third consecutive weekly decrease for the 30-year contract rate. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.17% from 4.28%, with points increasing to 1.07 from 0.80 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened down 9 points but quickly moved to up 3 points, the 10 yr note -8/32 back up to 3.43% +3 bp and mortgage prices at 9:30 -3/32 (.09 bp).
Bernanke will testify at the House Financial Services Committee today completing his required semi-annual testimony on the economy and momentary policy. Yesterday at the Senate it was cordial, today it will likely be more contentious with House members not so polite. That said, he won't change anything and in the end it will be more of a venting by Committee members looking for TV coverage and media ink.
At 2:00 this afternoon the Fed will release its Beige Book, the Fed's detailed report on the economy from the 12 Fed districts. Unlikely there will be anything substantial coming out of it.
Technically, the 10 yr note continues to resist breaking below 3.40%, mortgage prices at their resistance at 98-20/32. Oil is driving trading for the most part but the economy isn't being ignored completely. With the Feb employment report on Friday bond and equity markets may stall here for a day or two unless crude oil makes a solid break above $100.00, presently at $100.35. The relative strength index on the FNMA 4.0 coupon is approaching over bought levels.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, March 02, 2011
The employment dance has begun; ADP starts the waltz with its estimate, out this morning saying non-farm private jobs increased by 217K against estimates ranging from 160K to 170K. The reaction put pressure in the bond and mortgage markets. ADP is almost always wrong compared to the official BLS report that will be released on Friday morning. It is the same every month, why do markets pay it any attention; once the BLS data is released no one gives a damn what ADP had to say. That traders give it any credibility based on past comparisons is an enigma to me. Over the previous six reports, ADP’s initial figures were closest to the Labor Department’s first estimate of private payrolls in November, when it overstated the gain in jobs by 43,000. The estimate was least accurate a month later, when it overestimated the employment gain by 184,000.
Crude oil remains the prime driver in the bond and equity markets; yesterday crude moved above $100.00/barrel in the afternoon but by the close it fell back to $99.63. $100.00/barrel appears to be a hurdle crude hasn't yet been able to clear, tested twice and failed both times. This morning crude at 9:15 traded at $100.58 (see below for 10:00 level). At 9:15 the stock indexes were slightly higher on the ADP jobs report and not much increase in oil prices.
Oil price continues to be the key to US markets. Unrest in the Mideast is continuing but in the last few days nothing critical. In Oman the largest Middle Eastern producer outside of OPEC, protesters blocked a highway linking the northern city of Sohar to the capital Muscat yesterday as the army set up checkpoints around Sohar and inspected vehicles. The country pumped 885,600 barrels of oil a day in January. Demonstrators clashed with security forces in Tehran yesterday. Riots from Morocco to Bahrain have toppled leaders in Tunisia and Egypt and there have been protests in Yemen, to the south of Saudi Arabia, the world’s biggest crude exporter. Saudi Arabia’s stock market dropped 2.6% today, taking declines this week to 14%.
Earlier this morning the weekly MBA mortgage applications were out. Applications decreased 6.5% from one week earlier, The results do not include an adjustment for the Presidents Day holiday. The Refinance Index decreased 6.5% from the previous week. The seasonally adjusted Purchase Index decreased 6.1% and was 19.6% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.5%. The four week moving average is down 2.2% for the seasonally adjusted Purchase Index, while this average is down 2.7% for the Refinance Index. The refinance share of mortgage activity decreased to 64.9% of total applications from 65.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.5% from 5.6% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.84% from 5.00%, with points increasing to 1.30 from 0.96 (including the origination fee) for 80% loans. This is the third consecutive weekly decrease for the 30-year contract rate. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.17% from 4.28%, with points increasing to 1.07 from 0.80 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened down 9 points but quickly moved to up 3 points, the 10 yr note -8/32 back up to 3.43% +3 bp and mortgage prices at 9:30 -3/32 (.09 bp).
Bernanke will testify at the House Financial Services Committee today completing his required semi-annual testimony on the economy and momentary policy. Yesterday at the Senate it was cordial, today it will likely be more contentious with House members not so polite. That said, he won't change anything and in the end it will be more of a venting by Committee members looking for TV coverage and media ink.
At 2:00 this afternoon the Fed will release its Beige Book, the Fed's detailed report on the economy from the 12 Fed districts. Unlikely there will be anything substantial coming out of it.
Technically, the 10 yr note continues to resist breaking below 3.40%, mortgage prices at their resistance at 98-20/32. Oil is driving trading for the most part but the economy isn't being ignored completely. With the Feb employment report on Friday bond and equity markets may stall here for a day or two unless crude oil makes a solid break above $100.00, presently at $100.35. The relative strength index on the FNMA 4.0 coupon is approaching over bought levels.
Tuesday, March 1, 2011
Mortgage Rates
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, March 01, 2011
Treasuries and mortgage markets opened weaker this morning; the 10 yr note at 9:00 -15/32 at 3.48% +6 bp and mortgage prices -7/32 (.22 bp) in price. Oil climbed as much as 1.0% after authorities in Iran, the second-largest producer in OPEC, arrested opposition leaders to derail demonstrations scheduled for today. Fighting in Libya may have shut as much as 850,000 barrels a day of output, according to the International Energy Agency. Opposition supporters are planning to hold a demonstration today after leaders Mehdi Karrubi and Mir-Hossein Mousavi were transferred to a Tehran prison, according to the opposition Kaleme website. Protests from Morocco to Bahrain have already toppled leaders in Tunisia and Egypt and protests have erupted in Yemen, to the south of Saudi Arabia, the world’s biggest oil producer. In Oman, the largest Middle Eastern producer outside OPEC, hundreds of demonstrators gathered in Sohar for a third night yesterday, demanding the government open talks on their demands for more jobs, higher pay and more representative political institutions.
Even with tensions increasing overnight in the Mideast, the bond market isn't biting on safety moves this morning. Today the talk is centered on inflation. It just won't go away even though in the US inflation is not a factor now, nor is it likely to be in the near future. In emerging markets however, inflation is spreading quickly leading increased debate that inflation will sooner rather than later filter into the US. Even as Europe struggles with a sovereign debt crisis, inflation in the 17-nation euro region quickened to 2.3% in January, the fastest since October 2008, according to data published by the European Union’s statistics office yesterday. (Bloomberg). An ECB governing council member said on Feb. 26 that inflation pressures are forcing policy makers to focus more closely on the timing of future interest-rate increases.
Fed chief Ben Bernanke is about to begin testimony at the Senate Banking Committee, the semi-annual required appearance to report on monetary policy and the economy. Tomorrow he will go the the House for the same requirement. His prepared remarks usually don't get much attention, it is the Q&A for a few hours that we focus on. In his opening prepared text Bernanke is upbeat on the economy, looking for growth this year at 3.5% to 4.0%.
Two reports at 10:00. Jan construction spending expected to have declined 0.6%, as reported spending was down 0.7%; private construction off 1.2% while public spending +0.1%. The Feb ISM manufacturing index, expected at 60.5 frm 60.8 in Jan increased to 61.4; new orders index increased to 68.0 frm 67.8 the highest index reading on new orders since Jan 2004, the employment component increased to 64.5 frm 61.7 and the prices pd moved a little higher to 82.0 frm 81.5.
The Johnson Redbook same-store sales increased last week, 3.0% yr/yr compared to +2.7% the previous week. Month-to-month a 1.6% gain vs January in what is an indication of major strength for the ex-auto ex-gas category of the government's retail sales report. Redbook reports full price strength for spring apparel and strength in private labels. Chain stores will post individual results for February on Thursday. Earlier this morning, the ICSC-Goldman same store sales reported a year-on-year dip of 0.5% in the February 26 week as high gas prices siphoned off same-store sales at retailers. The year-on-year rate, reflecting a calendar shift for Presidents' Day, rose three tenths in the week to plus 3.3%. The report continues to see a respectable plus 2.5 to 3.0% month-to-month rise for February vs January.
Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Tuesday, March 01, 2011
Treasuries and mortgage markets opened weaker this morning; the 10 yr note at 9:00 -15/32 at 3.48% +6 bp and mortgage prices -7/32 (.22 bp) in price. Oil climbed as much as 1.0% after authorities in Iran, the second-largest producer in OPEC, arrested opposition leaders to derail demonstrations scheduled for today. Fighting in Libya may have shut as much as 850,000 barrels a day of output, according to the International Energy Agency. Opposition supporters are planning to hold a demonstration today after leaders Mehdi Karrubi and Mir-Hossein Mousavi were transferred to a Tehran prison, according to the opposition Kaleme website. Protests from Morocco to Bahrain have already toppled leaders in Tunisia and Egypt and protests have erupted in Yemen, to the south of Saudi Arabia, the world’s biggest oil producer. In Oman, the largest Middle Eastern producer outside OPEC, hundreds of demonstrators gathered in Sohar for a third night yesterday, demanding the government open talks on their demands for more jobs, higher pay and more representative political institutions.
Even with tensions increasing overnight in the Mideast, the bond market isn't biting on safety moves this morning. Today the talk is centered on inflation. It just won't go away even though in the US inflation is not a factor now, nor is it likely to be in the near future. In emerging markets however, inflation is spreading quickly leading increased debate that inflation will sooner rather than later filter into the US. Even as Europe struggles with a sovereign debt crisis, inflation in the 17-nation euro region quickened to 2.3% in January, the fastest since October 2008, according to data published by the European Union’s statistics office yesterday. (Bloomberg). An ECB governing council member said on Feb. 26 that inflation pressures are forcing policy makers to focus more closely on the timing of future interest-rate increases.
Fed chief Ben Bernanke is about to begin testimony at the Senate Banking Committee, the semi-annual required appearance to report on monetary policy and the economy. Tomorrow he will go the the House for the same requirement. His prepared remarks usually don't get much attention, it is the Q&A for a few hours that we focus on. In his opening prepared text Bernanke is upbeat on the economy, looking for growth this year at 3.5% to 4.0%.
Two reports at 10:00. Jan construction spending expected to have declined 0.6%, as reported spending was down 0.7%; private construction off 1.2% while public spending +0.1%. The Feb ISM manufacturing index, expected at 60.5 frm 60.8 in Jan increased to 61.4; new orders index increased to 68.0 frm 67.8 the highest index reading on new orders since Jan 2004, the employment component increased to 64.5 frm 61.7 and the prices pd moved a little higher to 82.0 frm 81.5.
The Johnson Redbook same-store sales increased last week, 3.0% yr/yr compared to +2.7% the previous week. Month-to-month a 1.6% gain vs January in what is an indication of major strength for the ex-auto ex-gas category of the government's retail sales report. Redbook reports full price strength for spring apparel and strength in private labels. Chain stores will post individual results for February on Thursday. Earlier this morning, the ICSC-Goldman same store sales reported a year-on-year dip of 0.5% in the February 26 week as high gas prices siphoned off same-store sales at retailers. The year-on-year rate, reflecting a calendar shift for Presidents' Day, rose three tenths in the week to plus 3.3%. The report continues to see a respectable plus 2.5 to 3.0% month-to-month rise for February vs January.
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