Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Normally after 4:00 pm each day markets do not move much into the 5:00 close; yesterday additional selling after 4:00 pushed prices down another 16 bp frm levels we recorded on the 4:30 report. On the day yesterday 30 yr FNMA prices plunged 69 bp, GNMAs -72 bp, both 13 bp lower than at 4:00. This morning before the 8:30 Dec employment report 30 yr prices were down another 31 bp frm the close yesterday. The Dec employment report at 8:30 was about in line with estimates. Non-farm jobs increased 155K, non-farm private jobs +168K. The unemployment rate at 7.8% +0.1% frm Nov. The initial reaction in the MBS market improved the price by 20 bp but still -11 bp frm yesterday’s close. (see below for 10:00 levels). Nov non-farm jobs were revised frm +146K to +161K; Nov non-farm private jobs were revised frm +147K to +171K. Average hourly earnings climbed 2.1% from December 2011, to $23.73, the biggest gain in a year. Factory payrolls increased by 25,000, the most since March. Retailers decreased staff by 11,300. Construction companies added 30,000 workers, the most since September 2011; much of the increase due to Sandy. Government payrolls decreased by 13K in December, the third straight month of declines. Service sector jobs were up 109K. The massive selling yesterday was triggered by the FOMC minutes for the Dec 13th meeting. Investors already unwinding the long bond positions established over the past two years, were surprised that the minutes indicated a major discussion within the FOMC focused on when the Fed should back away from its QE easing’s. There were a number of members that were debating the Fed’s exit by the end of 2013. Markets were floored, the overwhelming belief has been the Fed would continue buying MBSs and treasuries well into 2014. FOMC minutes can at times be mis-leading, that may be the case this time; however as we have noted many times here, investors were already seeing the end of the long bond market rally---moving out of safety and back into risk assets (stocks). The rate markets were moving higher in rates, add the FOMC surprise and the flood gates opened. Volatility today in the bond and mortgage markets. At 9:30 the DJIA opened +13, NASDAQ -2, S&P +2. 10 yr note +1/32 at 1.92% after increasing to 1.97% earlier. 30 yr MBS p[rice /2 bp after being down 31 bp earlier. At 10:00 two data points; the Dec ISM services sector index, expected at 54.5 frm 54.7, the index increased to 56.1 the best since Feb 2012. Nov factory orders were expected +0.3%, as reported orders were unchanged. There was no initial reaction to the data. The 10 yr came close to 2.00% this morning but is slightly better now. There should be little doubt now that the long bond and mortgage markets rallies is over. Technically however, the bond market is very oversold on a near term basis and some improvement isn’t out of the question. Any price improvements now should be used to lock in mortgage rates. We believe 2.00% will hold the 10 yr increase for a while but it is not likely the 10 will fall much; best case 1.75% as we see it now. Price volatility will likely continue to be high with big swings on and news.

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 bond and mortgage markets were slightly better after selling of treasuries yesterday and the huge rally in the stock indexes on relief Congress got around to keeping taxes from increasing(although SS taxes will increase by 2.0% after two years of lower taxes). It didn't last; at 8:15 ADP Dec private jobs were widely expected to have increased about 150K, as reported Dec private jobs increased by 215K, the biggest monthly gain since last Feb. Adding more strength to the job markets ADP revised Nov private jobs from +118K to +148K. At 8:30 weekly jobless claims were expected at about363K, claims increased to 372K according to the Labor Dept. Last week’s claims were reported at 350K, in this report last week was revised to 362K. Seasonal factors and special factors are distorting the data recently. The 4 wk average at 360K is about 50K less than last week’s average; that isn’t realistic based on the claims data. Continuing claims are also being distorted though trends here also point to improvement. Continuing claims in data for the December 22 week did rise 44,000 to 3.245 million but the four-week average of 3.224 million is roughly 90,000 below the month-ago trend. The BLS is having to make estimates of its own due to missing data from state offices, many of which have been closed for the holidays. Though trends in this report are favorable, there's too many distortions at play to make this report useful as a fore casting tool for tomorrow's employment report. The weekly MBA mortgage applications, also a distorted report, showed the composite index -21.6%, purchases index -14.8% and re-finance index -23.3%. Because of methodology issues surrounding the holidays, the latest data compare the two weeks ended December 28 against the December 14 week. This report is not meaningful for a gauge on the housing sector. Markets still digesting the Cliff legislation. After the strong rally in the stock market yesterday and more selling in the bond and mortgage markets, and after this morning’s overall better employment reports, at 9:30 the DJIA opened -13, NASDAQ -5, S&P -1. The 10 yr note at 9:30-1/32 at 1.84% unch; 30 yr MBSs Now that the preliminaries are over (the Cliff), the next few months Congress and the President will move to even more difficult decisions. Yesterday Moody’s commented that the agreement didn’t do enough to reduce the deficit. Moody’s saying if Congress doesn’t do more it may lower US credit ratings following S&P’s downgrading. The debt ceiling is coming rapidly, at the end of Feb according to the latest estimates Treasury will not have enough money to pay our debts unless the debt ceiling is increased. On March 1st the across the board spending cuts a part of the Cliff that was deferred, are going to kick. On March 27th, according the WSJ, the government will shut down unless Congress approves funding for government operations through the end of Sept (the end of the fiscal year). We are headed again to alas minute showdown and continued market volatility. The increase in taxes for the wealthy that was passed by Congress is relatively meaningless; estimates are for increased revenue of $737B over the next 10 yrs. That is about $73B a year, the recent four years of annual deficits have been about $1 trillion a year of over spending; not much help. The 10 yr note, director for all long term rates, is at its last solid resistance at 1.85%, if it doesn’t hold look for the note rate to increase to 1.90%, then 2.00%. Technically the 10 yr, 30 yr and 5 yr notes areall bearish; 30 yr MBSs also bearish, trading under the 20 and 40 day averages(prices) but so far has held its 100 day average. MBSs are not quite as weak as the 10 yr based on technical indicators; nevertheless MBSs will track along with the note. If markets hold support levels any improvements now should be used to lock in mortgage rates. We continue to believe the low interest rate markets of a few months ago will not likely to be seen again.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A strong relief rally this morning on the half-baked deal to avoid tax increases and increase taxes on dividends and capital gains. The deal took until the last minute to get done but left all the serious issues to another day; what Congress and this Administration does best----push it down the road. Early this morning the DJIA up over 200 points in the futures markets; the 10 yr note yield at 8:45 at 1.85%, up 9 bp frm Monday’s close and on its last technical support level. The House of Representatives’ 257-167 bipartisan vote breaks a yearlong impasse over how to head off $600B in tax increases and spending cuts that would have started taking effect yesterday. President Barack Obama said he will sign into law the bill undoing tax increases for more than 99% of households as Republicans vowed to fight him for spending cuts in exchange for raising the debt ceiling. The Cliff was avoided. Next up will be serious debate over the debt ceiling that is now $16.4 trillion. Treasury is theoretically out of money now but operating on “emergency” funding until mid-February. The president is already on record saying he won’t negotiate on the debt ceiling that if not increased will automatically set up huge spending cuts. It is going to be another two months of angst for markets. Mortgage rates up this morning, not as much though as in the treasury market. At 9:00 MBS 30 yr prices down 35 bp while the 10 yr note is down 73 bp with its yield up 9 bp after increasing 5 bp on Monday. At 9:30 the DJIA opened +93, NASDAQ +74, S&P +17; the 10 yr note yield at 1.84% and 30 yr MBSs -25, 15 yr mtg price +2 bp. Two data points at 10:00 this morning; the Dec ISM manufacturing index, expected at 50.5 frm 49.5, was fractionally better at 50.7. Nov construction spending expected up 0.6%, declined 0.3%. Although most all focus this morning in the markets is on the passage of the Cliff; this is employment week with Dec employment data on Friday. Early estimates for non-farm jobs in Dec +150K, non-farm private jobs +157K with the unemployment rate at 7.8% +0.1%. ADP will be out with its estimate on private jobs out tomorrow is for an increase of 150K. Technically, the 10 yr note must hold at 1.85%, the level that has held four previous times when rates increased. An increase over 1.85% will push rates even higher, to 1.95%. The MBS markets are worse today but are doing better than treasuries as investors are getting out of treasuries and into higher rates of returns. Keep in mind the Fed is still there buying $85B a month of treasuries and MBSs. Expect increased volatility levels in the coming weeks with more serious debates coming over the debtceiling and sequesters on spending cuts due on the 1st of March, like the fiscal Cliff debates, we won’t expect any agreements until the last minute. What we have endured until now is only a preliminary to the main events.

Mortgage Rates

Mortgage Rates Happy New Years! Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgage markets starting strong this morning as traders seek safety against the potential failure to come to any agreement on the Cliff discussions. Yesterday Sen. majority leader Harry Reidsaid he didn’t think a deal would get done before the first of the year; the stock market took a huge hit with the DJIA down 150 points, then in the afternoon Republicans announced a special session of the House on Sunday evening. After the announcement the stock market recovered and interest rates came well off their best levels. This morning the fear factor is back; the 10 yrat 9:00 at 1.70% -3 bp with 30 yr MBSs +14 bp. Pre-opening trade in the stock indexes had the DJIA down 60 points. President Obama has called a meeting this afternoon at the White House to discuss the pending failure to deal with the Cliff. If there is a deal worked out it won’t be a wide-ranging one that deals with spending cuts or entitlement reforms. The headline will likely be that taxes won’t increase next year. If a deal isn’t accomplished there is still no reason to believe taxes will increase. Neither party, at the core, wants taxes to increase except for those high income people. Both parties have to understand the implications of driving the economy back into recession. In Jan. when Congress returns those tax increases will be retroactively dismissed. The issues of entitlements, the debt ceiling, and spending cuts will occupy legislators in Jan. but we don’t believe there will be much progress until the new Congress is installed, even then it will drag on for months. 2013 isn’t going to be easy for investors or markets. From the bond and mortgage markets’ perspective the next three days will likely be volatile. Normally on New Year’s eve there is nothing to grab much attention but this year is going to be different with the continual negotiations on the Cliff. Monday the stock market will traded all day while the bond and mortgage markets are set to close early at 2:00. At 9:30 the DJIA -73, NASDAQ -19, S&P -8. 10 yr note 1.70% -3 bp, 30yr mortgage price +11 bp. 9:45 the Dec Chicago purchasing mgrs. index was expected at 51.0 frm50.4, it increased to 51.6, the best level since last August, but theemployment index at 45.9 was the lowest since Nov 2009. The decline inemployment is due to the storm Sandy that hit the NE in Oct. No reactionto the data; economic reports are less significant at the moment with the Cliffhanging over markets. At 10:00 Nov pending home sales from NAR, expected+1.8%, was +1.7%; yr/yr +8.9%. Pending home sales are contracts signed but notyet closed. The potential of high volatility today withtalks and comments coming from Washington. We had it yesterday with Reid andBoehner.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A little softness in the bond and mortgage markets to start the day; stock indexes slightly better at 8:30. Weekly jobless claims at 8:30 down 12K to 350K, estimates were for an increase of 4K to 365K. The 4 wk average at 356,750 down 11K. A better report but it didn’t get any reaction in the markets. The economic data is backward looking, normally traders and investors see the data as indications of future outlooks; these days the various data points are pushed to the back with the fiscal Cliff the only thing out there that is important to markets. In this case with claims, the holidays have likely distorted the data. Claims from 19 states were just estimates with government offices closed on 12/24 the prevented a more accurate report. At 9:30 the DJIA opened NASDAQ -4, S&P -1. 10 yr note at 1.76% +0.5%; 30 yr MBSs -14 bp. Two reports at 10:00; Nov new home sales were expected up 1.8%, were up 4.4% to annual pace of 377K units the most since April 2010. Oct sales were revised from 368K units to 361K accounting for the large percentage increase from month to month. The forecast called for Nov sales at 380K. Yet another housing stat that adds to belief the housing sector is well on the way to recovery. The Dec consumer confidence index wasn’t so rosy; the index was expected at 70.0 frm 73.7 in Nov; the index fell to 65.1 frm a revised 71.5 in Nov. Consumers listening to the squabbles from Washington losing confidence that the political system is broken. The President and most Congress people are filtering back to Washington to work on a plan to avoid the Cliff. Given the short time before the year ends markets are now generally expecting we will go over it, however some relaxation is evident now that it appears inevitable our politicians can’t find common ground. Markets are sitting quietly; no panic in either the bond or equity markets. Going over the Cliff theoretically will cause those that actually pay income taxes a substantial increase; but Congress and the Administration still have time to pass a temporary extension of the Bush tax cuts before new withholding tax tables are printed. Or, Congress could retroactively repeal any tax increases. It is very unlikely that most Americans will see higher taxes next year. Most of those that are returning are leaders in the debate. The leaders have indicated they will give members 48 hours to return assuming there is something to vote on. Next Monday Treasury will reach its debt ceiling once again; Geithner is working a plan for emergency spending that would keep the government going through February or into March. Nothing new about it, this is how it starts. Treasury runs out of money, an emergency plan is worked out pushing the inevitable down the road, then a lot of debate before the debt ceiling is increased. Obama wants Congress to give him total control over the debt ceiling; he has almost no chance to achieve that rather audacious demand. 2013 is going to be a year of constant turmoil n Washington; the fiscal cliff, spending cuts, entitlement reforms, debt ceiling, and possibly an actual budget that we haven’t had for four years. So far this morning the MBS market has shown increased volatility. At 9:30 30 yr FNMA MBSs -14 bp, at 9:45 unchanged. Treasuries are generally unchanged as are the stock indexes. 30 yr 3.0 FNMA still trading under its 20 and 40 day averages; the 10 yr note also still above its 20 and 40 day averages on the yield. The 10 yr 20 day at 1.72%, the 40 day at 1.70%. Overall there has been little movement in the bond market over the last week.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and mortgages were essentially unchanged on Monday. This morning about the same, at 9:00 the 10 yr note unchanged and 30 yr MBSs +3 bp. Stock indexes a little better early and prior to the 9:30 open. The lights in Washington still off after failure to come to any agreement on the Cliff. President Obama will return to Washington tomorrow and Congress will be back There is still some optimism that the two warring parties will get something done; if so it will be a deal that fails to address spending cuts or deficit reduction. About the best that can be expected now is a plan to avoid tax increases for most citizens. The most recent data on holiday shopping isn’t good. Sales were expected to increase 3.0% frm last year, according to Master Card sales increased just 0.7%. It was the slowest growth in sales since 2008 when sales fell 5.5%; since then holiday sales have increased each year. Mostly it was the fiscal mess and Washington’s ineptness in coming to grips with it. The tropical storm Sandy gets some blame but consumers’ fears of higher taxes in January is the prime reason for the slowdown. The S&P/Case-Shiller index of property values in 20 cities increased 4.3% from October 2011, the biggest 12-month advance since May 2010. Estimates were for an increase of 4.0%. Home prices adjusted for seasonal variations rose 0.7% in October from the prior month, with 17 of 20 cities showing gains. Las Vegas showed the biggest gain with a 2.4% advance, followed by San Diego with a 1.7% increase. Property values dropped the most in Chicago, which fell 0.7% over the month. At 9:30 the DJIA opened +20, MASDAQ unchanged, S&P +2. The 10 yr at 9:30, after starting a little weak, up 3 bp to 1.77% -1 bp; 30 yr MBSs +6 bp. With nothing but the fiscal Cliff on minds, the markets should be relatively quiet through the day. Washington won’t get make to “business” until tomorrow and with the bad weather hitting most of the mid-section of the country some of the legislators may not make it on time. The best outcome now is for an agreement to keep tax increases from increasing on middle America. Nothing will be done on spending cuts or deficit reduction, not to mention reforms of entitlement programs. Kick the can down the road is what we can expect from Washington. A blizzard warning stretches from northeastern Arkansas to Cleveland, Ohio, where almost 14 inches of snow is expected to fall by tomorrow, according to the National Weather Service. Winter storm warnings are in effect from Illinois into Maine. Here in Indy we are going to get 12” by late this evening. Over the last six trading sessions the 10 yr has stayed in a 8 bp range. 30 yr MBSs about unchanged. Technically still slightly bearish but with the Fed supporting rate markets we don’t expect rates will increase much from present levels. IF the economy were to go over the Cliff next week the bond and mortgage markets should improve with the stock market falling on disappointment. Until there is something concrete from Washington traders will continue to keep a minor bid in the bond and mortgage markets. In the equity markets, based on how the indexes have been trading, there is still optimism that the Cliff will be avoided.

Mortgage Rates

Mortgage Rates, Merry Christmas Eve! Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com 2 This Week; actually the week starts on Wednesday although Monday markets will be open in shortened trading. (Stocks close at 1:00, bonds close at 2:00). Many global markets are closed but here in the US for reasons unknown to mankind our markets are open; nothing new however, it’s been this was for decades. This week has two housing data, Nov new home sales on Thursday and Nov pending home sales on Friday. The only thing of importance this week is the Cliff; Congress is due back on Thursday the Administration is in Hawaii. Based on comments there is no plan that both parties will agree on. There is an increase in the view that we will go over the Cliff. Going over it has been built up to a serious fear factor within markets, but now with the Cliff moving closer many are thinking going over won’t be that serious. Of course that is based on the further view that there will be a deal to keep taxes from increasing before the IRS can issue new withholding tables.