Wednesday, March 9, 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 09, 2011
Treasuries and mortgages started stronger this morning after two days of declining prices. At 9:00 the 10 yr up 6/32 at 3.53% -2 bp, mortgage prices on 30 yr conventionals +7/32 (.22 bp). Crude oil trading higher this morning as is gold; the stock indexes at 9:00 were generally unchanged. Nothing technically significant in the price gains this morning, the bellwether 10 yr note still confined to its tight range between 3.60% and 3.45%.
Mortgage applications increased 15.5% from one week earlier, according to data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending March 4, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 15.5% on a seasonally adjusted basis from one week earlier. . The previous week did not include a holiday adjustment for Presidents' Day. The Refinance Index increased 17.2% from the previous week and was the highest Refinance Index observed since the week ending January 14, 2011. The seasonally adjusted Purchase Index increased 12.5% from one week earlier and was the highest Purchase Index recorded this year. The four week moving average for the seasonally adjusted Market Index is up 2.7%. The four week moving average is up 1.2% for the seasonally adjusted Purchase Index, while this average is up 3.6% for the Refinance Index. The refinance share of mortgage activity increased to 65.5% of total applications from 64.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.0% from 5.5% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.93% from 4.84%, with points decreasing to 0.87 from 1.29 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 4.17%, with points increasing to 1.15 from 1.07 (including the origination fee) for 80% loans.
Markets still struggling with the potential impact on the economy from rising oil prices. The obvious questions; will oil prices continue to increase and if so how will that impact the fragile economic recovery? Analysts from some of the big brokerages are increasing their expectations that oil will continue to increase, possibly by as much as another $25.00/barrel. If that happens the economic recovery may stall with consumers unable to continue increasing discretionary spending. The equity markets would lose the recent gains and the bond market would once again see money flow back and out of stocks. Presently the interest rate markets are stuck in their respective narrow ranges while the turmoil in the Mideast and in Libya is very fluid and can change quickly. The equity market is vulnerable to continuing selling while the rate markets hold steady.
At 10:00, a few minutes ago, Jan wholesale inventories, the only data today, expected to be up 0.9% were up 1.1%; Dec revised from +1.0% to +1.3%. Sales were up 3.4% with markets looking for +0.5%; Dec sales revised to +1.1% frm +0.4%. The inventory to sales ratio at 1.13 month from 1.15 months in Dec. No reaction to the report.
At 1:00 this afternoon Treasury will sell $21B of 10 yr notes, re-opening the 10 yr note issued last month. Yesterday's 3 yr note went well with good demand.
Crude oil up a little this morning, gold up and stock indexes lower. The bond and mortgage markets benefiting but for three weeks the long end of the yield curve including mortgage rates have not changed appreciably, chopping back and forth with no trend direction. We continue our slightly negative outlook for interest rates; as long as the 10 yr treasury holds above 3.40% (currently 3.53%) we are unwilling to get involved by holding rate locks. There is little to gain but also there is little to lose given the tight trading range. As long as the choppiness continues we suggest caution.
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 09, 2011
Treasuries and mortgages started stronger this morning after two days of declining prices. At 9:00 the 10 yr up 6/32 at 3.53% -2 bp, mortgage prices on 30 yr conventionals +7/32 (.22 bp). Crude oil trading higher this morning as is gold; the stock indexes at 9:00 were generally unchanged. Nothing technically significant in the price gains this morning, the bellwether 10 yr note still confined to its tight range between 3.60% and 3.45%.
Mortgage applications increased 15.5% from one week earlier, according to data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending March 4, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 15.5% on a seasonally adjusted basis from one week earlier. . The previous week did not include a holiday adjustment for Presidents' Day. The Refinance Index increased 17.2% from the previous week and was the highest Refinance Index observed since the week ending January 14, 2011. The seasonally adjusted Purchase Index increased 12.5% from one week earlier and was the highest Purchase Index recorded this year. The four week moving average for the seasonally adjusted Market Index is up 2.7%. The four week moving average is up 1.2% for the seasonally adjusted Purchase Index, while this average is up 3.6% for the Refinance Index. The refinance share of mortgage activity increased to 65.5% of total applications from 64.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.0% from 5.5% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.93% from 4.84%, with points decreasing to 0.87 from 1.29 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 4.17%, with points increasing to 1.15 from 1.07 (including the origination fee) for 80% loans.
Markets still struggling with the potential impact on the economy from rising oil prices. The obvious questions; will oil prices continue to increase and if so how will that impact the fragile economic recovery? Analysts from some of the big brokerages are increasing their expectations that oil will continue to increase, possibly by as much as another $25.00/barrel. If that happens the economic recovery may stall with consumers unable to continue increasing discretionary spending. The equity markets would lose the recent gains and the bond market would once again see money flow back and out of stocks. Presently the interest rate markets are stuck in their respective narrow ranges while the turmoil in the Mideast and in Libya is very fluid and can change quickly. The equity market is vulnerable to continuing selling while the rate markets hold steady.
At 10:00, a few minutes ago, Jan wholesale inventories, the only data today, expected to be up 0.9% were up 1.1%; Dec revised from +1.0% to +1.3%. Sales were up 3.4% with markets looking for +0.5%; Dec sales revised to +1.1% frm +0.4%. The inventory to sales ratio at 1.13 month from 1.15 months in Dec. No reaction to the report.
At 1:00 this afternoon Treasury will sell $21B of 10 yr notes, re-opening the 10 yr note issued last month. Yesterday's 3 yr note went well with good demand.
Crude oil up a little this morning, gold up and stock indexes lower. The bond and mortgage markets benefiting but for three weeks the long end of the yield curve including mortgage rates have not changed appreciably, chopping back and forth with no trend direction. We continue our slightly negative outlook for interest rates; as long as the 10 yr treasury holds above 3.40% (currently 3.53%) we are unwilling to get involved by holding rate locks. There is little to gain but also there is little to lose given the tight trading range. As long as the choppiness continues we suggest caution.
Tuesday, March 8, 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 08, 2011
A little better start to the day with the 10 yr note holding a minor gain at 9:00 and mortgages following as usual. Crude oil is slightly lower on comments that OPEC members are discussing whether to call an emergency meeting. OPEC's next scheduled meeting is set for June but there are talks now about the potential need for a meeting earlier; so far according to current news wires there is no meeting set so far. Crude slipped as Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting” to determine whether more output is needed. Futures trimmed earlier losses after Goldman Sachs Group Inc. and Bank of America Merrill Lynch raised their oil-price forecasts. Violence in Libya, Africa’s third-largest crude producer, has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day in February, down from 1.59 million the previous month, according to recent estimates.
After a little better open early, by 9:15 mortgage prices fell back to unchanged while the 10 yr note traded off 2/32. The stock indexes prior to the 9:30 open pointing to a little better start. All about oil as has been the situation for the past month. If oil is up the equity market struggles; until the last few days if oil prices were higher the bond and mortgage markets held slight gains in prices. Since late last week however the US rate markets have lost some of the safety moves that had pushed interest rates down a tad. There isn't any reason for lower interest rates except the so-called fear factor into safety of US treasuries. With some momentary moderation of the expansion of the Mideast civil protests in the last week treasuries and mortgages are re-focusing on the improving economy and concerns that inflation may begin to increase. Last week the ECB shook up the markets with comments from Jean Claude Trichet the head of ECB that the bank may increase interest rates next month to fend off inflation increases developing in Europe.
Over night more comments of higher rates possible from the ECB; European Central Bank Governing Council member Axel Weber said he doesn’t want to correct market expectations for as many as three quarter-point increases in the bank’s benchmark interest rate this year. Inflation may be “more sustained and more fundamental” than the ECB’s latest projections suggest, Weber said. “There are a number of fundamentals in emerging markets, a number of effects which worsen the medium to long-term inflation outlook,” he said. “This has to be countered in a timely way. I do see considerable future price pressures.” The ECB last week predicted euro-area inflation will average about 2.3% this year and 1.7% in 2012. It aims to keep inflation just below 2.0%.
Why do we care what happens in Europe with their interest rates? Because if the ECB starts increasing base lending rates the US rate markets will move higher on any tightening by the Bank. Our Fed may want to hold the line with the Fed's zero to +0.25% FF rate but that won't matter at the middle and long end of the yield curve. US rates will edge higher if in fact the ECB actually follows through with their comments. The US economic recovery continues with US interest rates still historically low, traders always nervous about inflation and the reality that US rates are very unlikely to decline make any forecast for much lower interest rates questionable. We do not subscribe to the view mortgage rates will decline much, rather we believe interest rates will gradually increase.
This afternoon Treasury begins three days of more borrowing; today at 1:00 $32B of 3 yr notes, tomorrow $21B of 10 yr notes re-opening the 10 yr issued last month, and Thursday $13B of 30 yr bonds re-opening the 30 yr issued last month. Recent Treasury auctions have not been as strongly bid as in the last couple of years, the past two 2 yr note auctions in the last two months haven't gone very well, hedgers and traders are likely to be cautious with the borrowing this week.
There are no scheduled economic reports today; rate markets will focus on equity markets and the oil market as has been the situation for weeks; and the results of the 3 yr auction at 1:00 pm.
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 08, 2011
A little better start to the day with the 10 yr note holding a minor gain at 9:00 and mortgages following as usual. Crude oil is slightly lower on comments that OPEC members are discussing whether to call an emergency meeting. OPEC's next scheduled meeting is set for June but there are talks now about the potential need for a meeting earlier; so far according to current news wires there is no meeting set so far. Crude slipped as Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting” to determine whether more output is needed. Futures trimmed earlier losses after Goldman Sachs Group Inc. and Bank of America Merrill Lynch raised their oil-price forecasts. Violence in Libya, Africa’s third-largest crude producer, has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day in February, down from 1.59 million the previous month, according to recent estimates.
After a little better open early, by 9:15 mortgage prices fell back to unchanged while the 10 yr note traded off 2/32. The stock indexes prior to the 9:30 open pointing to a little better start. All about oil as has been the situation for the past month. If oil is up the equity market struggles; until the last few days if oil prices were higher the bond and mortgage markets held slight gains in prices. Since late last week however the US rate markets have lost some of the safety moves that had pushed interest rates down a tad. There isn't any reason for lower interest rates except the so-called fear factor into safety of US treasuries. With some momentary moderation of the expansion of the Mideast civil protests in the last week treasuries and mortgages are re-focusing on the improving economy and concerns that inflation may begin to increase. Last week the ECB shook up the markets with comments from Jean Claude Trichet the head of ECB that the bank may increase interest rates next month to fend off inflation increases developing in Europe.
Over night more comments of higher rates possible from the ECB; European Central Bank Governing Council member Axel Weber said he doesn’t want to correct market expectations for as many as three quarter-point increases in the bank’s benchmark interest rate this year. Inflation may be “more sustained and more fundamental” than the ECB’s latest projections suggest, Weber said. “There are a number of fundamentals in emerging markets, a number of effects which worsen the medium to long-term inflation outlook,” he said. “This has to be countered in a timely way. I do see considerable future price pressures.” The ECB last week predicted euro-area inflation will average about 2.3% this year and 1.7% in 2012. It aims to keep inflation just below 2.0%.
Why do we care what happens in Europe with their interest rates? Because if the ECB starts increasing base lending rates the US rate markets will move higher on any tightening by the Bank. Our Fed may want to hold the line with the Fed's zero to +0.25% FF rate but that won't matter at the middle and long end of the yield curve. US rates will edge higher if in fact the ECB actually follows through with their comments. The US economic recovery continues with US interest rates still historically low, traders always nervous about inflation and the reality that US rates are very unlikely to decline make any forecast for much lower interest rates questionable. We do not subscribe to the view mortgage rates will decline much, rather we believe interest rates will gradually increase.
This afternoon Treasury begins three days of more borrowing; today at 1:00 $32B of 3 yr notes, tomorrow $21B of 10 yr notes re-opening the 10 yr issued last month, and Thursday $13B of 30 yr bonds re-opening the 30 yr issued last month. Recent Treasury auctions have not been as strongly bid as in the last couple of years, the past two 2 yr note auctions in the last two months haven't gone very well, hedgers and traders are likely to be cautious with the borrowing this week.
There are no scheduled economic reports today; rate markets will focus on equity markets and the oil market as has been the situation for weeks; and the results of the 3 yr auction at 1:00 pm.
Monday, March 7, 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.
Monday, March 07, 2011
Crude oil is up again this morning, the same struggles in Libya but over the weekend focus has shifted slightly to Saudi Arabia, the giant in the room when it comes to oil prices and Mideast unrest. Dissidents in Saudi Arabia have called for a protest on Friday, so far the Saudi situation has not been a direct factor for oil markets therefore for all markets; that there is an organized protest coming is heightening fears that it may lead to some form of revolution. While we don't believe it is likely, the demand for oil versus supply is so tight it doesn't take much to send prices higher. Websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch. Unrest in the region is increasing, in Libya war between dissidents and Qaddafi increased over the weekend.
Crude at 9:13 this morning up $1.23 at $105.65 (see below for 10:00 price). The US stock market is opening better this morning, somewhat out of character with oil prices increasing. Recent trade in equities has been selling on higher oil prices based on the view that as energy prices increase the economy will cool. So far not the case today, apparently some investors don't believe higher energy costs will actually cool of consumer spending. We do not subscribe to that view; the economic recovery remains questionable as to its strength and sustainability with high unemployment, depressed housing sector and only a moderate increase in consumer debt expansion. $4.00/gallon gasoline will have a dampening impact on consumers here and around the globe. Later this afternoon Jan consumer credit will be released, looking for an increase of $3.3B, not much.
This Week's Economic Calendar this week is thin on data:
Monday;
3:00 pm Jan consumer credit (+$3.3B)
Tuesday;
1:00 pm $32B 3 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
10:00 am Jan wholesale inventories (+1.0%)
1:00 pm $21b 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+14K to 382K; con't claims 3.750 mil frm 3.774 mil last week)
Jan trade deficit (-$41.5B)
1:00 pm $13B 30 yr bond auction
2:00 pm Feb Treasury budget (-$196B)
Friday;
8:30 am Feb retail sales (+1.0%, ex autos +0.6%)
9:55 am U. of Michigan sentiment index (76.5 frm 77.5)
10:00 am business inventories (+0.8%)
Gold futures for April delivery rose as much as $16.10, or 1.1%, to $1,444.70 an ounce and were at $1,443.60 at 8 a.m. on the Comex in New York. Prices beat the previous high of $1,441 set March 2 and gained the past six weeks, the longest winning streak since September 2007. Safety moves on Libya's increasing violence and increasing fears of inflation. Inflation fears are always with us especially with concerns over how high commodity prices will go as most commodities keep moving higher. Last week Trichet said the ECB may increase interest rates as inflation is increasing; we don't see it here because markets and the Fed refuse to recognize the implications from increasing food and energy prices; if we don't want something we simply refuse to pay it much attention.
The equity markets are shaking short term traders a little this morning, rallying when oil is increasing. Recently its been easy; sell stock indexes on higher oil, buy when oil is lower. The bond and mortgage markets are pressured this morning on oil prices, the stock market better and this week's $66B of borrowing by Treasury. The bellwether 10 yr is swinging in a 20 basis point yield range taking mortgages with it. Both markets remain bearish for the longer term. Unless the economy flips, and that isn't likely, the path for interest rates is up. Those sitting and waiting for substantially lower mortgage rates are going to end up disappointed; as we have noted previously the likelihood of much lower rates doesn't look good now.
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.
Monday, March 07, 2011
Crude oil is up again this morning, the same struggles in Libya but over the weekend focus has shifted slightly to Saudi Arabia, the giant in the room when it comes to oil prices and Mideast unrest. Dissidents in Saudi Arabia have called for a protest on Friday, so far the Saudi situation has not been a direct factor for oil markets therefore for all markets; that there is an organized protest coming is heightening fears that it may lead to some form of revolution. While we don't believe it is likely, the demand for oil versus supply is so tight it doesn't take much to send prices higher. Websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch. Unrest in the region is increasing, in Libya war between dissidents and Qaddafi increased over the weekend.
Crude at 9:13 this morning up $1.23 at $105.65 (see below for 10:00 price). The US stock market is opening better this morning, somewhat out of character with oil prices increasing. Recent trade in equities has been selling on higher oil prices based on the view that as energy prices increase the economy will cool. So far not the case today, apparently some investors don't believe higher energy costs will actually cool of consumer spending. We do not subscribe to that view; the economic recovery remains questionable as to its strength and sustainability with high unemployment, depressed housing sector and only a moderate increase in consumer debt expansion. $4.00/gallon gasoline will have a dampening impact on consumers here and around the globe. Later this afternoon Jan consumer credit will be released, looking for an increase of $3.3B, not much.
This Week's Economic Calendar this week is thin on data:
Monday;
3:00 pm Jan consumer credit (+$3.3B)
Tuesday;
1:00 pm $32B 3 yr note auction
Wednesday;
7:00 am weekly MBA mortgage applications
10:00 am Jan wholesale inventories (+1.0%)
1:00 pm $21b 10 yr note auction
Thursday;
8:30 am weekly jobless claims (+14K to 382K; con't claims 3.750 mil frm 3.774 mil last week)
Jan trade deficit (-$41.5B)
1:00 pm $13B 30 yr bond auction
2:00 pm Feb Treasury budget (-$196B)
Friday;
8:30 am Feb retail sales (+1.0%, ex autos +0.6%)
9:55 am U. of Michigan sentiment index (76.5 frm 77.5)
10:00 am business inventories (+0.8%)
Gold futures for April delivery rose as much as $16.10, or 1.1%, to $1,444.70 an ounce and were at $1,443.60 at 8 a.m. on the Comex in New York. Prices beat the previous high of $1,441 set March 2 and gained the past six weeks, the longest winning streak since September 2007. Safety moves on Libya's increasing violence and increasing fears of inflation. Inflation fears are always with us especially with concerns over how high commodity prices will go as most commodities keep moving higher. Last week Trichet said the ECB may increase interest rates as inflation is increasing; we don't see it here because markets and the Fed refuse to recognize the implications from increasing food and energy prices; if we don't want something we simply refuse to pay it much attention.
The equity markets are shaking short term traders a little this morning, rallying when oil is increasing. Recently its been easy; sell stock indexes on higher oil, buy when oil is lower. The bond and mortgage markets are pressured this morning on oil prices, the stock market better and this week's $66B of borrowing by Treasury. The bellwether 10 yr is swinging in a 20 basis point yield range taking mortgages with it. Both markets remain bearish for the longer term. Unless the economy flips, and that isn't likely, the path for interest rates is up. Those sitting and waiting for substantially lower mortgage rates are going to end up disappointed; as we have noted previously the likelihood of much lower rates doesn't look good now.
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