Mortgage Rates

Mortgage Rates Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com US treasuries better this morning; overnight the 10 yr yield fell to 2.41% down 7 bps frm yesterday. By 8:00 the 10 yr at 2.45% -2 bps; stock indexes weaker early today. Treasuries getting some support over the roiling in Egypt where the government is about to collapse with the military saying it would negate the constitution if Mursi doesn’t step down, Mursi saying he will not. Why the concern? Because the Suez Canal may be in play disrupting the flow of oil through it; crude oil this morning now over $100.0 at $101.84. In Portugal more turmoil; bonds slumped after two ministers resigned from the government, reigniting speculation Europe’s debt crisis is worsening. Portuguese Foreign Affairs Minister Paulo Portas, leader of junior coalition party CDS, quit yesterday in protest at the government’s budget policy. Portas was the second minister to resign this week after finance chief Vitor Gaspar stepped down, saying his credibility had been compromised by the government’s failure to meet budget targets set by the European Union. Keep an eye on the EU again, the issue in Portugal suggests countries are struggling to meet the austerity goals. 8:15 the June ADP private jobs were up 188K, better than 165K generally expected; the stock indexes recovered a little and the treasury markets stood still with no movement, the yield on the 10 yr 2.45%. MBS prices at 9:00 unchanged frm yesterday’s 24 bp price decline. The ADP data was the second best of the year. Friday’s BLS June employment report is expected to show private jobs at +179K. At 8:30 weekly jobless claims were -5K to 343K; not much different than what markets were expecting. The four-week moving average, a less-volatile measure than the weekly figures, decreased to 345,500 last week from 346,250. The number of people continuing to receive jobless benefits fell to 2.93 million in the week ended June 22 from 2.99 million in the prior period. The Obama Administration surprised businesses yesterday by delaying the implementation of ObamaCare from the business sector frm 2014 to 2015. Businesses have complained that the law is so convoluted that they would have a difficult time to begin the insurance increase that ObamaCare will create. The delay takes away political fodder for Republicans in the 2014 elections. It isn’t being seen as a political move entirely; the law that impacts businesses is one of the most complex of the entire ObamaCare Bill. May US trade deficit increased to -$45.3B the second highest level on record. The US economy continues to grow while other countries struggle. The trade gap widened to 12.1% frm April, the biggest jump in 2 years. The importance of the increase is that it will subtract the GDP growth in Q1 to 1.6% frm 1.8% as previously reported according to those that focus on such things. At 9:30 the DJIA opened -26, NASDAQ -12, S&P -6; 10 yr note unchanged at 2.48% with mortgage prices general unchanged from yesterday’s closes. At 10:00 the last data before Friday’s June employment; the June ISM services sector index. Estimates were for the index at 54.5 frm 53.7; as reported 52.2 lowest reading since Feb 2010; the employment index improved from 50.1 to 54.1, new orders component at 56.0 frm 58.8. The employment index suggests to some extent a good employment report on Friday. The decline in new orders though isn’t constructive for the economic outlook. Overall not a bad report but certainly not a good one. Earlier this morning the weekly MBA mortgage applications showed re-finances crashed as rates have increased. The overall index -11.7%. Interest rates are rising substantially, choking off demand for refinancing but only limiting demand for purchase mortgages. The refinancing index dropped 16.0% in the June 28 week and is at a two-year low. The purchase index, benefiting from what the Mortgage Bankers Association calls still strong home affordability, has been up and down is down 3.0% in the latest week. The average rate for conforming loans ($417,500 or less) soared 12 basis points in the week to 4.58%. Nothing left now until Friday morning’s June BLS employment data; the current estimates are for the unemployment rate to have declined to 7.5% frm 7.6%, non-farm jobs +161K, non- farm private jobs +179K. As usual the data is not likely to match the estimates; the question for investors and traders, which way will the deviation take? It is unusual to have markets closed the day before the most important data of the month so positioning has to take place today before the early closes in stocks and bonds. The stock market will close at 1:00 this afternoon, the bond market will close at 2:00 PM. We will have a short afternoon report at 2:30 with the day’s closing prices. HAPPY BIRTHDAY AMERICA !