Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 the US stock indexes were trading higher and the bond and mortgage markets slightly weaker. At 8:30 Oct personal income and spending were released; income was expected +0.2%, it was unchanged, personal spending was thought to be +0.1%, it was down 0.2%. The reaction turned the stock index futures lower and boosted bonds and MBS prices. The decline in spending de t the tropical storm Sandy according to the Commerce Dept. Commerce Department said that the storm affected 24 states, it couldn’t precisely quantify Sandy’s total effect on spending and income. Private wages decreased $17.1B in October, and the agency estimated that the storm reduced pay at an annual rate of $18.2B as it interrupted work schedules. It isn’t news, but the entire focus is the fiscal cliff negotiations that yesterday took a turn for the worse as the Administration laid out its desires that are so far off what republicans can accept that it is a step backwards for the moment. Pres. Obama is now asking for more tax revenues and increased amounts in spending than he proposed prior to the election. Today it’s a stand-off, who can predict what the rest of this day will reveal, or tomorrow, or next month? Both political parties negotiating in public now; time to get private and work out a plan. Whatever comes of the Cliff neither party should end up claiming a victory---compromise. The bomb unacceptable to everyone---everyone; a permanent extension of the debt limit, allowing the President to increase the debt limit at any time he chooses. No matter what political view one has, letting any President have carte blanche over the debt ceiling should be completely unacceptable. In Europe German retail sales slumped the most in almost four years in October, falling 2.8% from September when adjusted for inflation and seasonal swings. Increasing belief that Germany may decline into recession on the continual inability to deal with its debt crisis. EU leaders touting the progress on the latest fix for Greece; tilting at windmills and ignoring reality---not a lot different than what is occurring here with our political “leaders”. Most European stocks climbed, extending a 17-month high, as German lawmakers approved a Greek aid plan. At 9:00 the 10 yr note +5/32 at 1.60% at its previous resistance level (1.60%/1.58%), 30 yr MBSs were unchanged. The DJIA at 9:00 unchanged. At 9:30 the DJIA opened +5, NASDAQ and S&P opened -1. The 10 yr note at 1.60% -1 bp and 30 yr MBSs unchanged. 9:45 the Chicago purchasing mgrs. index was expected at 50.7 frm 49.9; the index as reported 50.4; the new orders component was weak and doesn’t portend well for future months, at 45.4 frm 50.3. Employment did increase to 55.2 frm 50.3. Overall a mixed report in terms of economic activity in the Chicago region. The reaction generated a little selling in the stock market but not much; the DJIA was +17 prior to the report, five minutes later +4 points. Nothing changed in the bond and mortgage markets. This morning the 10 yr note is trading at its resistance at 1.60%, not much volatility in the treasury markets, still trading in a narrow range. The safe haven trade still on but with much less momentum that seen last summer. The Fed will likely continue to support long term interest rates with MBS purchases and increased purchases of treasuries after Operation Twist ends at the end of the year. Much depends on what happens in Washington between now and the end of the year with the Cliff. There as many opinions about the outcome as there are politicians; each party playing the media game trying to assess what each can expect to gain with comments that at times are counter-productive.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com The stock market rallied yesterday on comments from Washington that were momentarily constructive about the fiscal cliff. This morning the stock market is starting better again. The bond and mortgage markets were a little weaker yesterday, a few lenders took a negative stance and re-priced to either slow production or in anticipation that rates will worsen; unnecessary based on the MBS price movement. Yesterday the MBS price declined 11 bp frm 9:30 yet Wells and Chase lowered prices much more than what the market did. The debate over the cliff will continue through the month; every day there will be comments that likely will influence traders keeping the interday volatility high. The President and the House speaker were talking yesterday with more of a positive spin. The President met with business leaders, likely hearing that businesses and the economy will suffer, unemployment increase unless there is a deal to cut spending on entitlements and loop holes in the tax code. Today Treasury Sec Geithner will meet with congressional leaders, the President will have lunch with Mitt Romney. Weekly jobless claims at 8:30 this morning were down 23K to 393K about where markets were expecting, last week’s claims were revised from 410K to 416K. Claims still being impacted by Sandy, the storm that ravaged a lot of the east coast. Also at 8:30 the revision to Q3 GDP, the preliminary report showed the growth rate in the quarter was +2.7% also in line with forecasts. Last month the advance Q3 GDP was at 2.0%. Q2 GDP growth was +1.3%. At 9:30 the DJIA opened +43, NASDAQ +16, S&P +6. 10 yr note at 9:30 unch at 1.63%, MBS 30 yr price unch. Oct NAR pending home sales (contracts signed but not yet closed) was expected +1.0%; it increased 5.2% with Sept revised higher. The index is now the highest since March 2007 and is up 13.2% yr/yr. Is the Fed going to continue its QE initiatives? Most likely; although the Operation Twist will expire due primarily that the Fed is running out of short-dated maturities to sell while buying longer-dated maturities. Likely the Fed will continue buying MBSs and increase the buying of treasuries after the first of the year. The economy is just muddling along, unemployment still high and Congress still will be struggling with budgets and entitlement discussions. The next FOMC meeting on Dec 11th and 12th is likely to be when the Fed announces its plan(s). Within the FOMC there is some increasing concern the Fed isn’t accomplishing much with the easing and money printing; it hasn’t lowered the unemployment rate that is one of the two Fed mandates. Whatever is happening on a daily basis, the bond and mortgage markets are not changing. The 10 yr treasury note is in a 10 basis point yield range since early Nov., unable to crack 1.60% and finding strong support when it climbs to 1.70%. MBSs are in an even narrower range, and likely to stay relatively flat while the debate on the cliff continues. In Europe there is a slight increase in optimism over the Greek debt crisis but so far after 3 years the country is still broke and isn’t likely to improve without ECB, EU, and IMF assistance; it is about keeping Greece in the EU for fear that if it left it would encourage other debt reddened countries to exit.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries started strong this morning but early trade in the MBS markets was flat with no change from yesterday at 8:30. Stock indexes weaker his morning with Europe’s markets down. Uncertainty over the Greek bailout is still effecting markets and the continued uncertainty over the fiscal cliff adding to investor concerns. Yesterday comments from Washington were not encouraging but there is still a month to go before the cliff edge. Various comments from people like Warren Buffett that going over the cliff won’t be a crisis is softening the fear factor. As long as Congress and this Administration can get a deal early in 2013, according to an increasing number of business leaders, it won’t cause another recession as many have forecast. The drama over the cliff will however keep investors from doing much. Increased taxes are likely in the end, the question on spending cuts is more likely to be difficult. Tax increase are coming, the only issue is who and what taxes will be increased. German 10 yr bund yield fell 5 basis points today as safety concerns increase over the Greek bailout and the US fiscal cliff negotiations that appear once again to be deadlocked with no progress. Yesterday Senate leader Harry Reid commented he was “disappointed” that no progress was occurring, at that moment the stock market rolled over and treasuries improved as increased safety drove money into treasuries and in turn improved MBS prices. In early trade today the 10 yr note rate at 1.61% was approaching the level that has recently capped any additional improvement in rates. President Obama is scheduled to meet more corporate leaders today; he has met with a number of business leaders recently, including small business leaders yesterday. Obama set to talk at 11:30 this morning. At 9:00 30 yr MBS prices up 9 bp, not much but still improving; the 10 yr note at 9:00 at 1.61% -3 bp. At 9:30 the DJIA opened -57, NASDAQ -17 S&P -8; 10 yr note 1.61% -3 bp and 30 yr MBSs +2 bp. The MBA composite index declined 0.9% last week; the purchase index continues to trend higher, up 3.0% for the second week in a row. In contrast, the refinance index is moving lower, down 2.0%. Yet refinancing activity remains very strong, making up 81% of total applications with purchase applications making up the remaining 19%. Mortgage rates remain extremely low, down 1 basis point in the week to 3.53% for the average 30-year loan for conforming mortgages ($417,500 or less). At 10:00 Oct new home sales, expected down 0.5% at 387K; sales declined 0.3% as reported but the decline in units is weaker than thought. Last month’s 389K units was revised to 369K so the decline of 0.3% looks better than actually it was given the decline in Sept sales frm the data originally released. On the rep[ort more selling in the stock market but not much change in the rate markets. At 1:00 Treasury auction $35B of 5 yr notes, it should get good demand, yesterday’s 2 yr was strong. At 2:00 the Fed will release its Beige Book the Fed’s detailed report on the economy in each of the 12 Fed districts.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Prior to 8:30 and Oct durable goods orders the bond, stock and MBS markets were unchanged from yesterday. At 8:30 Oct durable goods orders were expected to have declined 0.8%, ex-transportation orders -0.4%. As reported durables were unchanged from Sept’s +9.2%; ex transportation orders durables increased 1.5%. The strength in orders was a major surprise as most data that make up the data were weaker. The initial reaction added a little support in the stock index futures trading, the interest rate market saw very minor selling taking the 10 yr note frm +3/32 to unchanged (1.66%) at 8:45. Durables are a very volatile series so not much reaction. German bonds declined, with 10-year yields rising the most in a week, after European finance ministers meeting in Brussels eased the terms on emergency aid for Greece, damping demand for the region’s safest assets. EU finance ministers agreed to allow Greece to receive $44.6B loan in December and worked out a bond buyback of Greece’s debt by Greece. Spain’s interest rates felon the agreement. There is relatively little reaction to the agreement in the EU markets or in the US. The German 10 yr bund yield increased 3 bp to 1.44%, the worst level at 1.47% before some improvement. The euro currency declined on disbelief the deal will work out, Greece unlikely to buy back its debt? Sept Case/Shiller 20 city home price index was about what was expected, up 3.0% yr/yr and the highest prices since July 2010. It is one more data point that confirms the housing sector is recovering. Today’s report also included quarterly national figures. Prices covering all of the U.S. increased 3.6% in the third quarter from the same period in 2011 compared with a 1.6% gain in the year ended June. At 9:30 the DJIA opened -32, NASDAQ -4, S&P -2. 10 yr note at 9:30 1.66% unch; 30 yr MBS price +1 bp. More data at 10:00; Nov consumer confidence index expected at 73.0, increased to 73.7; Oct confidence level revised from 72.2 to 73.1; confidence increasing. The Richmond Fed manufacturing index also better; forecasts were for -8, it increased to +9 frm -7 in Oct---another good number. Not so good; the Sept FHFA housing price index was expected up 0.5%, it was up just 0.2%, kind of contrary to the Case/Shiller report earlier this morning. At 1:00 this afternoon Treasury will begin $99B of auctions with $35B of 2 yr notes. The auctions should go well this week, although two weeks ago the 3 yr and 10 yr didn’t see the demand expected. The technicals on the bond and MBS markets remain generally neutral with no directional trend, but the bias remains slightly weaker for interest rates. Although we are not expecting much increase in rates, the near outlook is bothersome. On the other side, if rates do increase it won’t be by much with the Fed backing the interest rates sector.

Mortgage ates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Last Friday the bond and mortgage markets were little changed I the shortened day; the US stock market had a strong day however with key indexes rallying. The DJIA +172, the 10 yr note rate 1.69% unch frm last Wednesday and 30 yr MBSs -6 bp. This morning at 8:30 the 10 yr note traded down 3 bp to 1.66% with 30 yr MBS prices up 20 bp frm Friday’s 9 bp decline. US stock indexes in the futures markets traded weaker early implying a weak open at 9:30. There are no scheduled economic releases today but the rest of the week has data each day along with treasury auctioning $99B of notes starting Tuesday. US retailers reporting sales were up 13% frm last year for the Black Friday weekend. Spending in stores and online rose to $59.1B in the four days starting Nov. 22, the National Retail Federation said in a statement yesterday. A year ago, sales advanced 16% over the holiday weekend. Retailers have turned Black Friday into a week’s worth of deals, with earlier openings and online offers. Thanksgiving Day, once reserved for family gatherings, saw the number of shoppers rise to more than 35 million from 29 million last year, the NRF said. People spent an average of $423, up 6.3% frm last year. US interest rate following the lead in Germany with its 10 yr bund down 1 bp in yield; in Italy its 10 yr at 4.77% down 2 bp while Spain’s 10 yr unchanged since last Friday. Europe’s stock market weaker today on the US fiscal cliff and the never-ending Greek debt crisis. The EU unable to agree on a budget that is suitable to allow the next tranche of money for Greece to avoid default. Here in the US, after the Thanksgiving holiday, markets are back to focusing on the fiscal cliff with comments from both parties that have not changed. Republicans want to cut loopholes in the tax code while Democrats insisting on increasing taxes for the so-called wealthy. This is going to go on until the later part of Dec and in the end there will be an agreed extension to the current tax cuts until next year. Pushing the problem down the road is what Congress and the Administration have made an art form. At 9:30 the DJIA opened -60, NASDAQ -7, S&P -6. 10 yr note 1.66% -3 bp; 30 yr MBSs +24 bp. “Uncertainty” about the fiscal cliff, debt limits and the long-term challenges of balancing the U.S. budget are already “affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy,” Fed Chairman Ben S. Bernanke told the Economic Club of New York last Tuesday. Efforts to boost employment and spur the expansion with purchases of $40B in housing debt each month are being impeded by the budget impasse, Bernanke said. Bernanke also admitted in a circuitous way that the Fed is about out of bullets to improve the employment sector (which hasn’t worked so far with all the Fed money printing). It is up to Congress and the Administration. There are no economic reports out today but the week does have a number of key data points and Treasury auction $99B of notes. US interest rates are likely to continue to trade in their narrow ranges. The fiscal cliff comments that will emerge each day and issues in Europe will dominate. The status of the economy seems to be well understood by most traders; like the 3 bears, not too hot but not to cool either. The stock market is suspect through the rest of the year, it remains bearish from a technical perspective with increasing thoughts the key indexes will decline through the remainder of the year. Given the recent action in the bond market when the stock market has seen heavy selling, it is unlikely that any selling in equities will lead to a major rate decline. If lower rates are in the picture it will have to be on a total failure to avoid the cliff, which we don’t expect will happen.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com US markets opened unchanged this morning; the 10 yr and MBSs unchanged from yesterday’s close at 8:00. Weekly jobless claims were released at 8:30, claims were expected to have declined to 415K frm 439K last week. Claims were down 41K to 410K with last week’s claims revised to 451K. Claims are being impacted by Sandy, as such there is little reaction to the data until the effect diminishes. The level of claims reflects the economic drag associated with Sandy, which made landfall in the Northeast on Oct. 29, killing more than 100 in the U.S. and leaving about 8 million homes and businesses without power for days. Before the storm- related surge in unemployment applications, companies limited hiring in the wake of a global economic slowdown and uncertain U.S. fiscal outlook. In Europe Greece is still the topic; European Union finance ministers meeting in Brussels yesterday left the next tranche of Greek aid frozen until another meeting on Nov. 26. They failed to tackle the dual task of steering an extra 32.6 billion euros to Greece through 2016 while finding a way to tame the resulting increase in the nation’s debt, already the highest in Europe. Spain’s interest rates declined today on comments from Angela Merkel that she saw a chance for a deal to save Greece. There isn’t any reaction to current issues on Europe’s debt crisis; no safety moves to US treasuries. At 9:00 the 10 yr note unchanged at 1.67%, 30 yr MBSs +3 bp; a quiet start today in the bond and stock markets ahead of the holiday. A lot of talk about Black Friday and how consumers will spend over the weekend. At 9:30 the stock indexes opened unchanged then gained a some momentum after the open; 10 yr note up 2 bp at 1.69%, now above its 20 and 40 day averages. MBSs at 9:30 unch on 30s. At 9:55 the final Nov. U. of Michigan consumer sentiment index was expected at 84.0 frm 84.9, the index fell to 82.7. There was little reaction to the weaker index; it still is the highest final month index read in four years. Unlikely the decline will have any impact on the outlook for Black Friday and Christmas shopping. The final data this week; at 10:00 October leading economic indicators was expected +0.2%, it was right on at +0.2%. LEI doesn’t generally elicit much market reaction. Trading today will be on the light side ahead of Thanksgiving and a short session on Friday. The stock market will trade all day today and will be open until 1:00 on Friday; the bond market will traded until 2:00 on Friday. Unless there is some kind of unexpected shock out of Europe markets will likely sit quietly now until next week when Congress and the Administration re-start talks on the deficit and that famed cliff. There have been a lot of forecasts that US interest rates are likely to decline and MBS rates hitting new lows in interest rates. Talk is one thing, price action in the markets is where the rubber meets the road and presently rates are increasing. We still hold that MBS rates saw their lows last July and believe rates won’t decline to those low rates. The 10 yr yield fell to 1.40% in late July, now climbing to 1.69% above its 20 and 40 day averages with the relative strength index now slightly bearish. Although we don’t expect new lows in rates, equally we are not expecting rates will increase much. Today and Friday trading will be thin, at times thin markets can exaggerate movements.

Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com Treasuries and MBSs started lower this morning (price) with pre-market futures trading pointing to a soft open in the stock market. At 9:00 the 10 yr at 1.63% +2 bp and MBS price +2 bp frm yesterday’s close. At 8:30 Oct housing starts and permits were released; starts were expected to have declined but as reported up 3.6% while permits were in line at -2.7%. Starts are at a four year high but well off the norms that were seen prior to the housing market collapse, in the early 2000s starts were at about 1.2 mil annualized units, Oct starts were 849K annualized. Nevertheless starts are growing. Commerce dept. said the super storm that hit the east had little impact on the starts as reported, Nov starts are likely where we will see the effects of Sandy. Yesterday the Nov NAHB housing market index jumped 46 frm 41 in Oct, the highest index reading since May of 2006. The housing sector is definitely moving out of the woods, existing home sales in Oct +2.1%. At 9:30 the DJIA opened -45 after increasing 207 points yesterday, the NASDAQ -8, S&P -5; the 10 yr note at 9:30 1.63% +2 bp, 30 yr MBS price +2 bp frm yesterday’s close. At 12:15 this afternoon Ben Bernanke will speak at the NY Economics Club. Markets will focus on any clue on what the Fed chief has in mind for the future in terms of anymore easing. There is an increasing belief that the FOMC will increase purchases of US treasuries when it meets on Dec 11 and 12. In Europe today European finance ministers will meet in Brussels to discuss the gap in Greece’s public accounts ($19.2B). EU leaders last week gave the country another two years to cut its budget deficit. Moody’s cut France’s credit rating yesterday, nothing unusual as Moody’s is cutting credit ratings everywhere, including US treasuries. The stock market is weaker this morning mostly on news that HP will take an $8.8B hit linked to its acquisition of Autonomy Corp that HP says were serious accounting improprieties that led it to pay much more than the company was worth. HP stock price down to lows not seen in 20 years and dragging the overall market lower. Markets this week are quiet and likely to remain that way through the rest of the week as many are on holiday. The 10 yr note still cannot breach 1.60%/1.58% area and hold it. The general outlook for US long term rates is that rates will fall further; some are even looking for rates to make new lows (the low on the 10 is 1.40%). So far though traders and investors are not stepping into the fixed income markets; foreign investors cut US treasury purchases in Sept to almost nothing. The Mid-East is boiling, the global stock markets have experienced heavy selling over the last month, Europe’s debt crisis is not improving, the US fiscal cliff is still an uncertainty, the Fed is buying treasuries and MBSs, and Europe has fallen back into recession; none of those issues has had any real impact on the bond market---so far.