Mortgage Rates

Forwarded exclusively by: Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com As far as civilization is concerned the Mayans appear to be wrong; we are still here. As far as the fiscal Cliff is concerned the Mayans may have got it right. Last night the Republican controlled House couldn’t even get enough Republicans to pass the Boehner Plan B that would have increased taxes on those making over a million a year. The Tea Party reigns. The Plan B was supposed to move Republicans closer to Boehner’s original proposal to the President on revenue increase and spending cuts. Even after House Majority Leader Eric Cantor said yesterday that the measure had sufficient support, last night the bill was pulled as there wasn’t enough votes to pass it. Even had the bill passed it would have died a quick death in the Senate; but it is a blow to Republicans and possibly will take the country over the Cliff. Now there won’t be any votes on anything until after Christmas. Until now the Senate was supposed to end today and not re-convene until next Thursday; whether the turn of events will keep legislators at work will be an issue. The clock is ticking down, unless there is a big change in sentiment on both sides falling over the Cliff, at least at this moment looks likely. At 10:00 this morning Boehner is scheduled to make a statement. Can the President and Republicans come together? Based on the number of republicans that would not vote for Plan B it is going to take a number of Democrats in the House to join with Republicans to agree on something that is likely to be closer to what the President is seeking. The reaction to last night’s failure is hitting US and European stocks hard this morning and improving US interest rate markets. At 9:00 the DJIA was down 182 points; the 10 yr note yield at 1.76% down 4 bp, 30 yr MBS prices up 18 bp frm yesterday’s close. New factory orders for durables in November rose 0.7% in November, following a 1.1% gain in October. Analysts expected a 0.5% gain. Excluding transportation, orders increased 1.6%, following a boost of 1.9% in October. Market expectations were for a 0.2% rise in orders excluding transportation. Obviously a much better outcome than forecasts, but it is a Nov report. It was ignored in the markets, as is most economic data these days with the Cliff fiasco dominating everything these days. Nov personal income was expected to be up 0.3%, as reported income increased 0.6%. Personal spending in Nov was expected +0.4%, as reported it was right on at +0.4%. Income got some lift in November as businesses in the Northeast re-opened and employees returned to work after Sandy. The two 8:30 reports on durables and personal income would under normal circumstances been met with enthusiasm in the stock market and likely bothered the bond market. These however are not normal times; it is all about the Cliff, economic data is filed away for later after there is something from Washington. Given the circumstances in Dec personal spending and durable goods orders will likely slow. The DJIA opened -63 at 9:30, NASDAQ -53 and S&P -10. The 10 yr note at 9:30 1.74% -6 bp; 30 yr MBS price +25 bp. Within five minute after the open the DJIA traded down 140 points. At 9:55 the final Dec U. of Michigan consumer sentiment index, expected at 75 frm 74.5, the index fell to 72.9. At the end of Nov the index was at 82.7. It is a volatile index but still disappointing. The 10 yr held support at 1.85% on Tuesday, since then a little improvement in the bond and mortgage markets. This morning the 10 yr is back below its 200 day average on the yield but is still bearish I our opinion. There is the potential for more improvement as the fiscal Cliff looms and since the Plan B couldn’t muster enough votes last night there is an increase in the view that we may actually go over it. Not a certain thing however, there are a few more days to pull the mess out of the fire. If that were to occur the bond and mortgage markets will be pressured again. Take advantage of this rally; it’s all about the Cliff as to how low interest rates will decline.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Started better this morning in the bond and mortgage markets after he 10 yr note yield increased to 1.85% two days ago where strong support resides. At 8:30 the 10 yr note traded at 1.78% down 3 bp with 30 yr FNMA MBS +12 bp. Weekly jobless claims at 8:30 were expected to be up 16K, as reported claims were right on, +17K to 361K. The four-week moving average of claims declined to 367,750, the lowest since the end of October, from 381,500 last week. Continuing claims rose by 12,000 to 3.23 million in the week ended Dec. 8. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 94,000 to 2.14 million in the week ended Dec. 1, the last data available. Q3 final GDP was expected to be unchanged from the preliminary report last month at +2.7%. Growth in the quarter increased more than thought, at +3.1%, a rather surprising increase. According to the Commerce Dept. the increase was due to increased consumer spending and a smaller trade deficit. There was little reaction to the better growth in the quarter, in a few days the fourth quarter will be complete; it is highly unlikely Q4 will come close to the growth in Q3. Slowing growth globally and companies reducing their spending and hiring in the quarter caused by fiscal Cliff concerns may reduce GDP growth in half frm Q3. At 9:30 the DJIA opened +5, NASDAQ +5, S&P +1. The 10 yr note at 9:30 +5/32 at 1.79% -2 bp; 30 yr MBS price +9 bp. Republicans in Congress will vote today on Boehner’s plan to raise taxes on incomes over $1 million. The proposal is aimed at preventing more than $600B of automatic tax increases and spending cuts from coming into effect next year. White House officials told a group of industry representatives that Obama’s budget talks with Boehner have deteriorated. The vote is all about posturing; it may pass the House but that is as far as it will get. Viewed on a day-to-day basis, today it looks bleak for a deal to avoid the Cliff. Tomorrow is another day, and there is still next week. For all the conjecturing and opinions, whether we avoid the Cliff is still highly uncertain regardless of who is talking in Congress or the Administration. Four economic reports at 10:00. Nov existing home sales were thought to be up 2.3% to 4.90 mil annualized units; sales increased 5.9% to 5.04 mil units. Yr/yr sales of existing home sales +14.5%, the 5.04 mil nits is the largest since Nov 2009 which was due to the home owners tax credit. Take that month out and sales are at highs not seen since 2007. There is now just a 4.8 month supply based on present sales. The Dec Philadelphia Fed business index was expected at -2.0, as reported the index increased to +8.1, the best since last April. Nov leading economic indicators was expected -0.2%, as reported it was spot n at -0.2%. Finally, the Oct FHFA house price index was expected +0.3%, the price index increased 0.5%. Technically, we noted two days ago that 1.85% on the 10 yr note was strong support; so far it has held as expected. Rates should improve more but we don’t expect much of an improvement. Suggest using any improvements to lock in rates.

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 stock indexes better and interest rates unchanged from yesterday’s selling. All global stock markets are better today with the belief that the US will avoid going over the Cliff in 12 days. Negations are still rather fragile, at least based on the rhetoric coming from both sides; nevertheless based on how markets are reacting here and around the world there will be a deal before the end of the year. At 9:00 the 10 yr note traded unchanged while mortgage prices were slightly better than the close yesterday. In late trading yesterday MBS prices did improve from levels we marked at 4:00. So far today there isn’t anything out of Washington on the Cliff negotiations. Nov housing starts at 8:30 were down 3.0%, building permits +3.6% both about in line with forecasts. Starts fell to 861K annual units frm revised 888K in Oct, originally 894K. The average rate of housing starts from September through November was the strongest since the three months ended August 2008. Permits increased to 899K units. Construction of single-family houses fell 4.1% to a 565,000 rate. Yesterday the Dec NAHB housing index increased for the 8th straight month. Mortgage applications decreased 12.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 14, 2012. The Refinance Index decreased 14% from the previous week to the lowest level since week ending November 2, 2012. The seasonally adjusted Purchase Index decreased 5% from one week earlier. The refinance share of mortgage activity decreased to 83% of total applications from 84% the previous week. The HARP share of refinance applications fell to 25%. The adjustable-rate mortgage (ARM) share of activity increased to 3% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.50% from 3.47%, with points increasing to 0.44 from 0.36 (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 3.73%, the lowest rate in the history of the survey, from 3.77%, with points decreasing to 0.29 from 0.35 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.34% from 3.32%, with points increasing to 0.54 from 0.51 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.83%, the lowest rate in the history of the survey, from 2.85%, with points remaining unchanged at 0.26 (including the origination fee) for 80% loans. Investors continue to move into more risky investments and away from safety of treasuries. The same can be seen in Europe; today’s stronger than expected German Ifo Business Climate survey (102.4 actual v. 101.9 expected) is the latest spark for the ongoing flight into risk assets, causing investors to shed safer ones. This afternoon at 1:00 Treasury will auction $21B of 7 yr notes; yesterday’s 5 yr and Mondays 2 yr auctions didn’t see strong bidding. At 9:30 the DJIA opened -2, NASDAQ +5, S&P +1. The 10 yr note +4/32 at 1.81% -1 bp; 30 yr MBSs +15 bp, FHAs -17 bp. Yesterday the 10 yr note increased to 1.85% where there is very solid support. The 10 yr note has traded over 1.85% for one day since last May (9/14/12). Although the 10 yr yield is presently over its 200 day average at 1.76%, 1.85% has successfully held on five occasions. The momentum oscillators on the note are signaling an oversold market. We expect some improvement at these levels but we do not expect interest rates will decline in an substantial way. Take advantage of price improvements in the mortgage markets.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Stock indexes prior to the 9:30 open were a little better, the 10 yr note yield at 1.72% +1 bp, 30 yr MBSs +5 bp. At 8:30 the Dec Empire State manufacturing index was expected at 0.0, it fell to -8.10 frm -5.2 in Nov. The report showed no effect from Hurricane Sandy or the aftermath. The report for December is filled with negatives that include contraction for new orders, unfilled orders, and employment. The 12-month outlook is still positive but is far from robust. There was no noticeable reaction to the weak report. The Cliff is getting closer; over the weekend Republicans agreed to increase taxes on millionaires. So far no comments from the Administration, a fig leaf but with Obama insistent on taxing those that make $250K it’s a big step down to millionaires. Obama rejected a Dec. 14 offer by Boehner to raise rates on household income above $1 million a year and lift the federal debt ceiling in exchange for containing entitlement program costs. With the Cliff now two weeks away and little to no progress, some now saying Republicans may accept going over it. The thought is it would give Obama some cover on his pledge of increasing taxes for high income earners. $600B of spending cuts would be triggered if we go over the Cliff. Obama also wants total control over extending the debt ceiling while Republicans say any increase in the debt must be accompanied by cuts in spending greater than the amount of any increase in the debt ceiling. The federal debt limit is expected to reach its limit in February. So far markets are not taking going over seriously; stock indexes holding and interest rates slightly higher over the last week. This afternoon Treasury will auction $35B of 2 yr notes, the first of three consecutive auctions this week. Tomorrow $35B of 5s and Wednesday $21B of 7s. At 9:30 the DJIA opened +31, NASDAQ +6, S&P +4. The 10 yr at 9:30 -3/32 at 1.72% +1 bp; 30 yr MBS +5 bp. Nothing on the calendar the rest of the day. Markets will be on alert for any comments on the Cliff talks. As noted above as the end of the year approaches there is chatter that politicians may let the country go over the Cliff. A game of chicken played out by Republicans now thinking people may put increasing lames on the Administration when all taxes will increase because a deal could not be worked out. It is however a quickly moving target. That rate and equity markets are rather subdued is curious given the implications of Cliff consequences. Unless there is an agreement the Congressional Budget Office is saying it may lead to a recession in the first half of 2013; something we believe neither political party wants to see.

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 (7:00 am) the 10 yr note was unchanged, but as the sun rose the 10 managed to improve. At 9:00 the 10 yr +5/32 at 1.71% -2 bp and 30 yr MBSs +6 bp. At 8:30 Nov CPI declined 0.3%, a little weaker than -0.2% expected; the core (ex food and energy) +0.1%, also weaker than +0.2% markets were expecting. The last of this week’s data at 9:15; Nov. industrial production was thought to be up 0.3%, as reported it increased 1.1%, Oct was revised frm -0.4% to -0.7%. Nov factory usages was forecast to have increased to 78.0%, it jumped to 78.4%. There was no immediate reaction to the better manufacturing data in the stock indexes that were about unchanged prior to data this morning. The increase in production increased the most in two years as manufacturers rebounded from Sandy. In China, the December preliminary reading was 50.9 for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics, beating estimates. Late yesterday afternoon Pres. Obama and House speaker Boehner met at the White House for the third time. After the meeting which lasted about an hour, both of their spokespeople said the same thing; it was a “frank” meeting. Pundits saying it indicates that nothing was moved forward. It continues to be a game of chicken, positioning for the best possible face. Although the ink isn’t dry on the election results last month; both parties are already posturing for the 2014 elections. If there is a deal before the country plunges off the Cliff, it won’t satisfy anyone. If there is a deal it won’t happen before Christmas given the intransigence frm both sides. A slightly better start this morning for treasuries and MBS markets; after increasing yields over the last four days the 10 yr is doing better so far. The softer inflation reading on Nov CPI supporting treasuries but mostly just traders squaring positions after the swift decline in prices. The FOMC policy statement and the change in how long the Fed will keep rates low (until unemployment falls to 6.5%) and the Fed’s increase in its inflation threshold frm 2.0% to 2.5% rocked fixed income markets. The Fed’s changes will put a higher floor for rallies; adding additional belief that interest rates will struggle to decline to levels seen last summer as some are touting.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and MBSs took hits yesterday after the FOMC policy statement and Bernanke’s press conference. This morning more minor selling early taking the 10 yr note up another basis point to 1.71%, at 9:00 the 30 yr FNMA 3.0 coupon was unchanged. Early trade in the stock indexes also unchanged from yesterday. 8:30 data; weekly jobless claims were expected to be at 375K up 5K frm 370K last week. Claims fell 29K to 343K and last week’s claims revised frm 370K to 372K. The 4 week average declined 27K to 381K. Nov retail sales expected +0.6% increased just 0.3% after declining 0.3% in Oct; ex auto and truck sales in line with estimates, unchanged. Nov PPI expected -0.5%, was down 0.8%, ex food and energy +0.1% about in line with forecasts. The three data points didn’t have any noticeable reaction in either stock indexes or the bond market. At 9:30 the DJIA opened +6, NASDAQ and S&P unchanged. The 10 yr 1.73% +2 bp while 30 yr MBSs unchanged from yesterday. Yesterday’s reaction to the FOMC policy statement is more indication that the Fed is less and less a factor in the markets. We have noted many times that the Fed’s monetary stimulus hasn’t had much impact on the economy and almost no impact on job creation, even with the Fed saying it would continue to buy treasuries and MBSs at the same amounts over the past six months didn’t impress traders in either stocks or bonds. Low interest rates are a good thing of course, but so far not much has been accomplished. It is the Cliff that overrides everything now. Opinions running about 50/50 on whether we go over or not. In the world of reality though markets are leaning heavily on the idea the Cliff will be avoided. Interest rates increasing slightly and the stock indexes holding well. The take away is that overall markets are expecting a deal will happen before the end of the year. Not set in cement and subject to change on a moment’s notice, but at least for today the sentiment leans toward a deal being achieved. Over the last four sessions the 10 yr note yield has increased 15 bp; 30 yr MBSs about 8 bp (as of 10:00 this morning). The move higher is more technical than fundamental at this point; the 10 failed for the sixth time to break solid resistance at 1.58%, now market longs are exiting pushing rates up a bit. Although we continue to believe, as we have said a number of times here, that the lows in treasury rates occurred last July, we don’t expect rates will increase substantially with the Fed sucking up so much of treasuries and MBSs. The next level of technical support for the 10 yr is at 1.76%, 3 bp higher from here where the 200 day average resides. The safe haven moves into US treasuries over concerns the EU would blow up with the debt crisis that seemed to have no end in sight, is being unwound; the impact is rates increasing a little as concerns over Greece have ebbed for the moment. Also hampering the bond market these days, most recent economic data has been better than economists were expecting; today’s fall in weekly claims is a good example. The economy is teetering but maybe not as vulnerable as many think. The settling down in Europe for the moment and better data on economic performance is currently adding to the weakness in the bond market. Mix in the technical failure to break hard resistance on the 10 yr, traders are currently exiting bullish positions.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The tight trading range in the bond and mortgage markets continues today, however this morning the 10 yr note yield increased to 1.64% +2 bp frm yesterday and MBS prices weaker after increasing yesterday. Since early November the interest rate markets have essentially been flat with no significant changes. There has been literally no change in mortgage rates for six weeks. Both stock investors and bond traders are willing to sit quietly until there is something out of Washington on the Cliff negotiations. No progress is being made; the president refuses to discuss spending cuts until the Republicans agree to increasing taxes on the so-called wealthy. Neither side wants to compromise, each believing the other will get the blame if no deal is reached and the economy goes over the Cliff with higher taxes for all. In his first comments since meeting with Boehner Dec. 9 at the White House, the president didn’t repeat frequent complaints about Republicans holding tax cuts for most Americans “hostage” because they oppose higher rates for wealthiest, and said he was ready to come to an agreement. Since Boehner complained Dec. 7 that Obama had wasted a week, statements from the speaker’s office have been milder, too. Some are now believing there is thaw in the stand-off; we have been here before only to back-slide into recalcitrant squabbling. Europe’s stock markets are better today on increased optimism in Germany; the Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 6.9 this month from minus 15.7 in November. Economists had forecast a gain to minus 11.5. The US equity market is following the movements in Europe’s markets for the last couple of months. This morning the US stock indexes are better. The Oct US trade deficit widened to its worst level in four years; the deficit at $42.2B was widely expected however. Declines in exports as global economies contracted contributed to the increase from -$40.0B in Sept. No reaction to the report, which is normal for the monthly report. At 9:30 the DJIA opened +31, NASDAQ +17, S&P +5. 10 yr note at 1.65% +3 bp. 30 yr MBS price -34 bp. At 10:00, Oct wholesale inventories, not a market mover, expected at +0.4%. Inventories as reported +0.6%. The NFIB (National Federation of Independent Business) index fell by 5.6 points to 87.5, one of the lowest readings on record which the report attributes to "an overwhelmingly negative response" among small businesses to the outcome of the presidential election. The report attributes the pessimism to the fiscal cliff, the "promise" of higher health-care costs and the "endless onslaught" of new regulations. Nine of 10 factors declined in the month with sales expectations and earnings trends especially weak. The one factor that did improve is employment. The FOMC meeting begins today, nothing until tomorrow though when the meeting ends with the policy statement. The Fed is highly likely to announce it will continue to buy treasuries when Operation Twist expires at the end of the month. Tomorrow after the meeting ends Bernanke is scheduled to hold a press conference at 2:15 (the statement will be released at 12:30). Between the FOMC meeting and the Cliff negotiations traders and investors just marking time with no significant movement in bonds or stocks over the last few weeks. With the 10 yr note and MBSs both in tight ranges, the technicals lose a little of their significance. This morning with the 10 yr note yield at 1.65% it is now above its 20 day average and testing its 40 day. The 30 yr FNMA coupon breaking below its 20 and 40 day averages. The relative strength indicator on the 10 yr note continues to hang around the 50 neutral area as we would expect with the non-trending market. Expect another quiet day; stocks better so far but may back off this afternoon. The bond and mortgage markets weaker but also may re-gain some of the price declines this afternoon. That said, we still don’t hold to the view that US interest rates will decline much frm present levels. There is a better chance of rates increasing a little than declining.