Rate Lock Advisory - Sunday Nov. 13th
This week brings us the release of six monthly economic reports for the markets to digest. With very important data scheduled for release two different days and relevant data four of the five days, we will likely see a fair amount of volatility in the markets and mortgage pricing this week.
There is nothing scheduled for release tomorrow, leaving the bond market to movement in stocks and overseas news. As of this evening, it appears that bonds are going to react negatively to news from Europe, meaning stocks may start the week off in positive ground. That can change between now and the opening bell tomorrow morning, but as of now it appears we may see some pressure in bonds and a possible increase to mortgage rates tomorrow.
The first data is one of the most important reports of the week. The Commerce Department will give us October's Retail Sales figures early Tuesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up two-thirds of the U.S. economy. It is expected to show a 0.4% rise in spending, meaning consumers spent much less last month than they did in September. A larger increase would be considered negative news for bonds because large increases in spending fuels an economic recovery and raises inflation concerns in the marketplace. If Tuesday's report reveals a smaller than expected increase in spending, bonds should react favorably, pushing mortgage rates lower. If it shows a larger than expected increase, mortgage rates will likely move higher.
Also Tuesday is the release of October's Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.2% decline in the overall reading and a 0.1% increase in the core data.
Wednesday also has two reports scheduled that will likely influence mortgage rates. The first is October's Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Tuesday's PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider this report as one of the most important reports we get each month. The overall reading is expected to show no change from September’s level while the core data is expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates Wednesday.
October’s Industrial Production data will be posted mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production, indicating moderate strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the CPI readings are. A significant surprise in the CPI would likely make this data a non-factor in Wednesday's mortgage pricing.
Thursday’s only monthly data is October's Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don't expect this month's version to be any different unless it varies greatly from analysts' forecasts. It is expected to show a sizable decline in starts of new homes.
The final report of the week will come from the Conference Board late Friday morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.
Overall, look for Tuesday or Wednesday to be the most important with very important reports scheduled those days. It is difficult to label any particular day as the quietest day, but Thursday is a good candidate. The key releases will be Tuesday's Retail Sales and Wednesday's CPI reports. They will probably determine whether rates close the week higher or lower than tomorrow's opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Sunday, November 13, 2011
Friday, November 4, 2011
Mortgage Market
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.
Friday, November 04, 2011
October employment report at 8:30. The overall unemployment rate declined to 9.0% frm 9.1%----somewhat a surprise. Oct non-farm jobs up 80K against estimates at 100K, non-farm private jobs +104K against +120K expected. Average hourly earnings on target at +0.2%. The U-6 unemployment rate at 16.2% (those underemployed and those that have stopped looking). Sept NFP revised from +103K to +158K, August NFP frm 57K to +104K a total of 102K additional jobs. Manufacturing jobs +5K, service producing +90K, government jobs -24K. The 80K headline still holds most of the interest and didn't meet forecasts, nevertheless the data is better overall than expectations.
The initial reaction to the employment report was rather mute in the rate sector, the 10 yr prior to 8:30 sat unchanged, 15 minutes after the release (8:45) the 10 traded down just 8?32 to 2.10% +3 bp; mortgage prices at 8:45 off just 3/32 (.09 bp). Stock indexes at 8:45 weaker, DJIA down 31 points. Curious that equities were not reacting better to the report and the higher revisions in Aug and Sept. Overall the reaction to the report has been tame, not much reaction initially and trading thin.
The G-20 meeting in France where leaders met seems like a waste of time and expense. Two things agreed upon; that Italy agreed to IMF and EU monitoring its progress on reforms; secondly the IMF said it will increase from $300B to $350B in special drawing rights. It took a lot of twisting to get the IMF to increase drawings rights by a measly $50B. Leaders of the 20 countries are refusing to put any money in the pot; reflecting frustration with Europe’s failure to end a crisis with Greece’s government edging towards collapse and Italy facing intensifying pressure to restore fiscal order.
Greece abandoned a referendum on the euro area’s latest bailout plan, reducing the risk of a disorderly default. Greek Prime Minister Papandreou faces a confidence vote in parliament today that will determine whether he stays on or calls an election. Papandreou yesterday abandoned his planned referendum on the country’s bailout after a warning from German Chancellor Angela Merkel that a no vote would cost Greece its membership of the 17-nation currency.
At 9:30 the stock market opened weaker, not taking the employment report as a positive, or after 386 points in the DJIA in the last two days investors are not willing to add to the gains. The headline that non-farm jobs were 20K lower than forecasts is being held at a higher level than the 102K increases in revisions to Aug and Sept. The decline in the unemployment rates to 9.0% appears to be ignored as a positive. Focus this morning appears to be on Europe and comments from the region's leaders that the region may fall back into recession. The DJIA opened -88 at 9:30, mortgage prices up 2/32 (.06 bp) and the 10 yr note unchanged at 2.07%.
While the day has a long way to go, so far the financial markets are very quiet. The 10 yr and mortgages are generally unchanged from yesterday; the stock indexes are lower but so far have not moved much in either direction from opening levels. There isn't anymore scheduled news today; Europe of course is still open and there is always the chance some news will appear. In the absence of anything out of the region US markets may be in for one of the few quiet sessions we have had for awhile. That said, as this is being sent MBS prices have improved to +6/32 (.18 bp) and up 4/32 (.12 bp) frm 9:30.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, November 04, 2011
October employment report at 8:30. The overall unemployment rate declined to 9.0% frm 9.1%----somewhat a surprise. Oct non-farm jobs up 80K against estimates at 100K, non-farm private jobs +104K against +120K expected. Average hourly earnings on target at +0.2%. The U-6 unemployment rate at 16.2% (those underemployed and those that have stopped looking). Sept NFP revised from +103K to +158K, August NFP frm 57K to +104K a total of 102K additional jobs. Manufacturing jobs +5K, service producing +90K, government jobs -24K. The 80K headline still holds most of the interest and didn't meet forecasts, nevertheless the data is better overall than expectations.
The initial reaction to the employment report was rather mute in the rate sector, the 10 yr prior to 8:30 sat unchanged, 15 minutes after the release (8:45) the 10 traded down just 8?32 to 2.10% +3 bp; mortgage prices at 8:45 off just 3/32 (.09 bp). Stock indexes at 8:45 weaker, DJIA down 31 points. Curious that equities were not reacting better to the report and the higher revisions in Aug and Sept. Overall the reaction to the report has been tame, not much reaction initially and trading thin.
The G-20 meeting in France where leaders met seems like a waste of time and expense. Two things agreed upon; that Italy agreed to IMF and EU monitoring its progress on reforms; secondly the IMF said it will increase from $300B to $350B in special drawing rights. It took a lot of twisting to get the IMF to increase drawings rights by a measly $50B. Leaders of the 20 countries are refusing to put any money in the pot; reflecting frustration with Europe’s failure to end a crisis with Greece’s government edging towards collapse and Italy facing intensifying pressure to restore fiscal order.
Greece abandoned a referendum on the euro area’s latest bailout plan, reducing the risk of a disorderly default. Greek Prime Minister Papandreou faces a confidence vote in parliament today that will determine whether he stays on or calls an election. Papandreou yesterday abandoned his planned referendum on the country’s bailout after a warning from German Chancellor Angela Merkel that a no vote would cost Greece its membership of the 17-nation currency.
At 9:30 the stock market opened weaker, not taking the employment report as a positive, or after 386 points in the DJIA in the last two days investors are not willing to add to the gains. The headline that non-farm jobs were 20K lower than forecasts is being held at a higher level than the 102K increases in revisions to Aug and Sept. The decline in the unemployment rates to 9.0% appears to be ignored as a positive. Focus this morning appears to be on Europe and comments from the region's leaders that the region may fall back into recession. The DJIA opened -88 at 9:30, mortgage prices up 2/32 (.06 bp) and the 10 yr note unchanged at 2.07%.
While the day has a long way to go, so far the financial markets are very quiet. The 10 yr and mortgages are generally unchanged from yesterday; the stock indexes are lower but so far have not moved much in either direction from opening levels. There isn't anymore scheduled news today; Europe of course is still open and there is always the chance some news will appear. In the absence of anything out of the region US markets may be in for one of the few quiet sessions we have had for awhile. That said, as this is being sent MBS prices have improved to +6/32 (.18 bp) and up 4/32 (.12 bp) frm 9:30.
Thursday, November 3, 2011
Mortgage Market
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.
Thursday, November 03, 2011
Early trade this morning, treasuries and mortgages weaker; at 9:00 the 10 yr -20/32 to 2.06% +6 bp and mortgage prices down 11/32 (.34 bp), the DJIA futures traded +153.
News out of Europe; rumors that Greece Prime Minister Papandreou is about to resign but no one is taking it seriously as most of the rumors are coming from "anonymous sources". Greece has about as many cabinet members as we have senators (70), everyone there has an agenda; markets are becoming de-sensitized over rumors after two years of no progress in the debt issues dragging Europe down. Papandreou shocked officials yesterday when he called for a referendum vote from Greeks on whether or not to accept the austerity provisions demanded from the ECB, EU, and IMF in order to get the funds to avoid defaulting on their debt.
More news from Europe; the ECB cut its base lending rate by 25 bp to 1.25% after increasing rates 50 basis points earlier this year. The unexpected cut added to the increase in stock index futures and in turn pushed the 10 yr higher in rate. The move was unexpected but Spain and Italy saw their interest rates rise yesterday as some Euro officials are now speculating that Greece will default and leave the EU. France and Germany saying they would treat Greece’s surprise referendum on a second bailout as a vote on its euro membership. Greece's potential defaults and exit from the EU shouldn't be a complete surprise; it is a huge hill to climb for Europe to avoid more turmoil, next up will be Spain and Italy whose sovereign debts make Greece look like small potatoes.
Economic data at 8:30 this morning; weekly jobless claims were down 9K to 397K, last week's claims revised from 402K to 406K; it has been since 9/21 that claims are below the 400K level that economists see as pivotal. The estimate was for claims to be at 402K so not much of a differential. Q3 worker productivity, expected +2.5%, came at +3.1%; Q3 unit labor costs were expected -0.7% but fell 2.4%.
At 9:30 the DJIA opened +126, the 10 yr note -24/32 to 2.07% +7 bp and mortgage prices at 9:30 -13/32 (.41 bp).
Next up in this morning's time line; at 10:00 Oct ISM services sector index expected at 53.5 frm 53.0; it declined to 52.9. The components; new orders index 52.4 frm 56.5, employment at 53.3 frm 48.7 and prices at 57.1 frm 62.9. The report put pressure on stock indexes, after opening up 126 and increasing to +160 the DJIA dropped back to unchanged (see below).
Also at 10:00, Sept factory orders were thought to be -0.2%; as reported orders increased 0/1%.
Tomorrow morning its the ever volatile employment report from the BLS, the present estimate is for non-farm jobs to have increased 90K and non-farm private jobs +120K, the unemployment rate unchanged at 9.1%. The increases in non-farm jobs and private jobs is lower than in Sept (103K and 137K respectively). The norm for the employment data each month is that the data usually comes in well off the estimates sending markets into wild volatility.
The bellwether 10 yr note continues to find resistance when it falls to 2.00%, as we have noted numerous times, under 2.00% is difficult to maintain. The 10 has been as low as 1.70% twice, each time it didn't hold long. Mortgage interest rates also facing resistance at present levels. That said, these are very unusual times and anything is possible. Europe is going to lower its economic forecasts as the debt issues continue unresolved; so far the US equity markets are not reacting to the weaker euro outlook. The US rate markets continue to be driven by equity markets; stocks rally and it outs pressure on the bond and mortgage markets; equities decline and the bond and mortgage markets find support.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, November 03, 2011
Early trade this morning, treasuries and mortgages weaker; at 9:00 the 10 yr -20/32 to 2.06% +6 bp and mortgage prices down 11/32 (.34 bp), the DJIA futures traded +153.
News out of Europe; rumors that Greece Prime Minister Papandreou is about to resign but no one is taking it seriously as most of the rumors are coming from "anonymous sources". Greece has about as many cabinet members as we have senators (70), everyone there has an agenda; markets are becoming de-sensitized over rumors after two years of no progress in the debt issues dragging Europe down. Papandreou shocked officials yesterday when he called for a referendum vote from Greeks on whether or not to accept the austerity provisions demanded from the ECB, EU, and IMF in order to get the funds to avoid defaulting on their debt.
More news from Europe; the ECB cut its base lending rate by 25 bp to 1.25% after increasing rates 50 basis points earlier this year. The unexpected cut added to the increase in stock index futures and in turn pushed the 10 yr higher in rate. The move was unexpected but Spain and Italy saw their interest rates rise yesterday as some Euro officials are now speculating that Greece will default and leave the EU. France and Germany saying they would treat Greece’s surprise referendum on a second bailout as a vote on its euro membership. Greece's potential defaults and exit from the EU shouldn't be a complete surprise; it is a huge hill to climb for Europe to avoid more turmoil, next up will be Spain and Italy whose sovereign debts make Greece look like small potatoes.
Economic data at 8:30 this morning; weekly jobless claims were down 9K to 397K, last week's claims revised from 402K to 406K; it has been since 9/21 that claims are below the 400K level that economists see as pivotal. The estimate was for claims to be at 402K so not much of a differential. Q3 worker productivity, expected +2.5%, came at +3.1%; Q3 unit labor costs were expected -0.7% but fell 2.4%.
At 9:30 the DJIA opened +126, the 10 yr note -24/32 to 2.07% +7 bp and mortgage prices at 9:30 -13/32 (.41 bp).
Next up in this morning's time line; at 10:00 Oct ISM services sector index expected at 53.5 frm 53.0; it declined to 52.9. The components; new orders index 52.4 frm 56.5, employment at 53.3 frm 48.7 and prices at 57.1 frm 62.9. The report put pressure on stock indexes, after opening up 126 and increasing to +160 the DJIA dropped back to unchanged (see below).
Also at 10:00, Sept factory orders were thought to be -0.2%; as reported orders increased 0/1%.
Tomorrow morning its the ever volatile employment report from the BLS, the present estimate is for non-farm jobs to have increased 90K and non-farm private jobs +120K, the unemployment rate unchanged at 9.1%. The increases in non-farm jobs and private jobs is lower than in Sept (103K and 137K respectively). The norm for the employment data each month is that the data usually comes in well off the estimates sending markets into wild volatility.
The bellwether 10 yr note continues to find resistance when it falls to 2.00%, as we have noted numerous times, under 2.00% is difficult to maintain. The 10 has been as low as 1.70% twice, each time it didn't hold long. Mortgage interest rates also facing resistance at present levels. That said, these are very unusual times and anything is possible. Europe is going to lower its economic forecasts as the debt issues continue unresolved; so far the US equity markets are not reacting to the weaker euro outlook. The US rate markets continue to be driven by equity markets; stocks rally and it outs pressure on the bond and mortgage markets; equities decline and the bond and mortgage markets find support.
Wednesday, November 2, 2011
Mortgage Market
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, November 02, 2011
Treasuries and mortgages after three days of improvement are weaker this morning, volatility in US markets continues to be excessive; most of it is what isn't happening in Europe. Europe pushing on a string, there isn't enough capital in the region to come close to keeping the sovereign debt under control, there is going to be failures beginning with Greece. Greece in the EU is on borrowed time, in the end Greece will likely default and exit the EU. Next up n the line of problems, Italy and Spain. For all the summit meetings and all the press conferences there has been no real effective solution. Europe's banks can't take 50% haircuts on the bonds they hold from a number of EU countries, the IMF isn't likely to get too deep into the problem without bringing massive criticism from G-20 countries. China last week indicated it may be interested in EU debt but only if the bonds its purchases have a valid Guarantee from the EFSF and that hasn't happen. In the meantime what happens in Europe is unsettling all of the industrial world, sending mixed messages daily that produces wild and unexpected moves as was clearly evident yesterday and Monday.
Europe’s bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou’s request for a referendum on the rescue pact for his country roiled markets. An EFSF official said in a conference call with investors today that it may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes, France before selling the bonds, according to a person with knowledge of the matter. On Friday there will be a confidence vote in the Greece Parliament, if he doesn't retain his majority he may be out of office by Saturday morning.
This morning at 8:15 the ADP October non-farm payrolls increased 110K a little better than estimates, Sept jobs were revised higher 25K more than reported last month to +116K. Treasuries and mortgages, already weaker didn't show any reaction to the better jobs. The stock indexes after falling 576 points yesterday and Monday on the DJIA are better this morning but not much.
At 12:30 this afternoon the FOMC policy statement will be released, likely markets will be relatively quiet until then. At 2:15 even more important than the policy statement, Bernanke will hold a press conference. What is Bernanke thinking about what isn't happening in Europe? Will he signal the possibility of more easing with a QE 3? Operation Twist didn't work, why? A lot of questions.
The driver for mortgage interest rates, the 10 yr treasury note, even after the strong improvement in the past couple of days, is still unable to hold under 2.00%. Every time the 10 falls below 2.00% it hasn't lasted more than a few days.
At 9:30 the DJIA opened +90, the 10 yr note -19/32 2.06% +6 bp and mortgage prices -8/32 (.25 bp).
Purchase applications for home mortgages rose for a second week, up 1.8% in the October 28 week on top of the 6.4% gain in the October 21 week to nearly reverse the prior week's 8.8% drop. The refinance index is down 0.2% in the latest week. Rates in the week were little changed with 30-year conforming loans ($417,500 or less) down two basis points to 4.31% and 30-year jumbo loans (greater than $417,500) up one basis point to 4.69%.
At 10:00 the bond and mortgage markets have come off their lows; mtgs -3/32 (.09 bp).
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, November 02, 2011
Treasuries and mortgages after three days of improvement are weaker this morning, volatility in US markets continues to be excessive; most of it is what isn't happening in Europe. Europe pushing on a string, there isn't enough capital in the region to come close to keeping the sovereign debt under control, there is going to be failures beginning with Greece. Greece in the EU is on borrowed time, in the end Greece will likely default and exit the EU. Next up n the line of problems, Italy and Spain. For all the summit meetings and all the press conferences there has been no real effective solution. Europe's banks can't take 50% haircuts on the bonds they hold from a number of EU countries, the IMF isn't likely to get too deep into the problem without bringing massive criticism from G-20 countries. China last week indicated it may be interested in EU debt but only if the bonds its purchases have a valid Guarantee from the EFSF and that hasn't happen. In the meantime what happens in Europe is unsettling all of the industrial world, sending mixed messages daily that produces wild and unexpected moves as was clearly evident yesterday and Monday.
Europe’s bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou’s request for a referendum on the rescue pact for his country roiled markets. An EFSF official said in a conference call with investors today that it may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes, France before selling the bonds, according to a person with knowledge of the matter. On Friday there will be a confidence vote in the Greece Parliament, if he doesn't retain his majority he may be out of office by Saturday morning.
This morning at 8:15 the ADP October non-farm payrolls increased 110K a little better than estimates, Sept jobs were revised higher 25K more than reported last month to +116K. Treasuries and mortgages, already weaker didn't show any reaction to the better jobs. The stock indexes after falling 576 points yesterday and Monday on the DJIA are better this morning but not much.
At 12:30 this afternoon the FOMC policy statement will be released, likely markets will be relatively quiet until then. At 2:15 even more important than the policy statement, Bernanke will hold a press conference. What is Bernanke thinking about what isn't happening in Europe? Will he signal the possibility of more easing with a QE 3? Operation Twist didn't work, why? A lot of questions.
The driver for mortgage interest rates, the 10 yr treasury note, even after the strong improvement in the past couple of days, is still unable to hold under 2.00%. Every time the 10 falls below 2.00% it hasn't lasted more than a few days.
At 9:30 the DJIA opened +90, the 10 yr note -19/32 2.06% +6 bp and mortgage prices -8/32 (.25 bp).
Purchase applications for home mortgages rose for a second week, up 1.8% in the October 28 week on top of the 6.4% gain in the October 21 week to nearly reverse the prior week's 8.8% drop. The refinance index is down 0.2% in the latest week. Rates in the week were little changed with 30-year conforming loans ($417,500 or less) down two basis points to 4.31% and 30-year jumbo loans (greater than $417,500) up one basis point to 4.69%.
At 10:00 the bond and mortgage markets have come off their lows; mtgs -3/32 (.09 bp).
Friday, October 28, 2011
Mortgage Market
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.
Friday, October 28, 2011
Wednesday and Thursday hit hard on the bond and mortgage markets; the 10 yr note in the two days increased 25 bp in yield, mortgage rates up about 18 bp. The 10 yr price drop was 75/32, mortgage prices fell 34/32. The stock market measured by the DJIA increased 500 points in two days. This morning the 10 yr at 9:00 +12/32 at 2.34% -3 bp, mortgages at 9:00 +11/32 (.34 bp). It is not unusual that markets are trading a little better early this morning after the huge moves since Wednesday. Of course the moves were triggered by what on the surface has been taken as a fix for Europe's debt problems----at least for the time being; That China is saying it may be interested in buying some of the debt from the EFSF has been greeted with optimism (maybe too much), and the increase in the EFSF fund to 1T euros announced yesterday and get banks to take a 50% haircut on Greek debt was likely overdone but it was a little step forward.
In the meantime European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute. China will want a lot from the EU, ECB and IMF before it actually commits; that country is in the driver's seat and will likely extract a lot of guarantees to step into the swamp of debt.
The last couple of months were marked with doom and gloom, savvy investors were heavily short equity markets expecting the US and Europe would fall back into recession. The current news out of Europe that sent US stock markets up yesterday was in part fueled by shorts having to cover as the computers were screaming to get out. Putting some perspective on all of it; Europe's problems are far from being under control, the US stock market has moved to anticipate the end of Europe's problems is at hand; the bond market is simply tracking moves in equities with no confidence on the Fed or economic outlook-----letting stock traders set the tone.
Next week the FOMC will meet, after the meeting and the policy statement Bernanke will hold a press conference, given recent events in Europe and the increase in US interest rates, especially mortgage rates his press conference will be one of the more critical ones he has held in months.
At 9:30 the DJIA opened down 14 points, the 10 yr note -12/32 at 2.34% -3 bp and mortgage prices up 10/32 (.31 bp).
At 8:30 Sept personal income was weaker than expected, up 0.1% against estimates of +0.3%; spending was on the mark, up 0.6%. Q3 employment cost index, expected up 0.6% was better in a sense up 0.3% and +2.0% yr/yr. There was no noticeable reaction to the two releases. At 9:55 the U. of Michigan consumer sentiment index was expected unchanged at 57.5, as reported the index was 60.9; current conditions index 75.1 frm 73.8, expectations index 51.8 frm 47.0 and the 12 month outlook at 45 frm 37. A better read than the consumer confidence report on Tuesday but there was no reaction to it in equities or the bond market.
For three weeks we set 2.30% on the 10 yr as support that must hold; yesterday the note ran through it to a high of 2.41% before closing at 2.37%. Now we look at 2.30% as a resistance level. Yesterday's breakout over 2.30% can't be confirmed yet, we want to see a day or two over that level; short covering yesterday may have exaggerated the move higher. That said, the bond and mortgage markets have been technically bearish for weeks and will not likely change unless there is a major change in sentiment over Europe OR what Bernanke might do at next week's FOMC meeting to drive long rates lower. So far the Fed's moves have failed to keep rates low as the fed had expected.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, October 28, 2011
Wednesday and Thursday hit hard on the bond and mortgage markets; the 10 yr note in the two days increased 25 bp in yield, mortgage rates up about 18 bp. The 10 yr price drop was 75/32, mortgage prices fell 34/32. The stock market measured by the DJIA increased 500 points in two days. This morning the 10 yr at 9:00 +12/32 at 2.34% -3 bp, mortgages at 9:00 +11/32 (.34 bp). It is not unusual that markets are trading a little better early this morning after the huge moves since Wednesday. Of course the moves were triggered by what on the surface has been taken as a fix for Europe's debt problems----at least for the time being; That China is saying it may be interested in buying some of the debt from the EFSF has been greeted with optimism (maybe too much), and the increase in the EFSF fund to 1T euros announced yesterday and get banks to take a 50% haircut on Greek debt was likely overdone but it was a little step forward.
In the meantime European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute. China will want a lot from the EU, ECB and IMF before it actually commits; that country is in the driver's seat and will likely extract a lot of guarantees to step into the swamp of debt.
The last couple of months were marked with doom and gloom, savvy investors were heavily short equity markets expecting the US and Europe would fall back into recession. The current news out of Europe that sent US stock markets up yesterday was in part fueled by shorts having to cover as the computers were screaming to get out. Putting some perspective on all of it; Europe's problems are far from being under control, the US stock market has moved to anticipate the end of Europe's problems is at hand; the bond market is simply tracking moves in equities with no confidence on the Fed or economic outlook-----letting stock traders set the tone.
Next week the FOMC will meet, after the meeting and the policy statement Bernanke will hold a press conference, given recent events in Europe and the increase in US interest rates, especially mortgage rates his press conference will be one of the more critical ones he has held in months.
At 9:30 the DJIA opened down 14 points, the 10 yr note -12/32 at 2.34% -3 bp and mortgage prices up 10/32 (.31 bp).
At 8:30 Sept personal income was weaker than expected, up 0.1% against estimates of +0.3%; spending was on the mark, up 0.6%. Q3 employment cost index, expected up 0.6% was better in a sense up 0.3% and +2.0% yr/yr. There was no noticeable reaction to the two releases. At 9:55 the U. of Michigan consumer sentiment index was expected unchanged at 57.5, as reported the index was 60.9; current conditions index 75.1 frm 73.8, expectations index 51.8 frm 47.0 and the 12 month outlook at 45 frm 37. A better read than the consumer confidence report on Tuesday but there was no reaction to it in equities or the bond market.
For three weeks we set 2.30% on the 10 yr as support that must hold; yesterday the note ran through it to a high of 2.41% before closing at 2.37%. Now we look at 2.30% as a resistance level. Yesterday's breakout over 2.30% can't be confirmed yet, we want to see a day or two over that level; short covering yesterday may have exaggerated the move higher. That said, the bond and mortgage markets have been technically bearish for weeks and will not likely change unless there is a major change in sentiment over Europe OR what Bernanke might do at next week's FOMC meeting to drive long rates lower. So far the Fed's moves have failed to keep rates low as the fed had expected.
Thursday, October 27, 2011
Mortgage Market
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.
Thursday, October 27, 2011
The summit in Brussels yesterday is being considered a success this morning; US stock indexes rallying and US interest rates increasing on news that Europe's leaders have actually come with a plan that is supposed to isolate Greece from defaulting and taking some pressure off for the moment. Last-ditch talks with bank representatives led to the debt-relief accord,
bondholders will take 50% losses on Greek debt and boosted the firepower of the rescue fund. Measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market. The rescue fund (EFSF) is to be increased to 1 trillion euros ($1.4T). There are a lot of details yet to be worked out so while this is a breakthrough the problems are still not completely out of the woods; expect Europe to continue to drive global markets as more details must be resolved. It helped yesterday when China said it may be interested in buying some of the debt through the EFSF.
The reaction to European developments this morning is a huge rally in Europe's equity markets and in the US; at 9:00 this morning the DJIA was trading up 246 points, the 10 yr note testing important technical support level at 2.30% and mortgage prices at 9:00 -14/32 (.44 bp).
This morning weekly jobless claims were about as expected, down 2K to 402K, last week claims were revised to 404K frm 403K. Continuing claims were 3.645 mil down from 3.741 mil last week. Q3 GDP expected at +2.2% to +2.5% was on target at +2.5% after Q1 growth grew at 1.3%; final sales in Q3 were up 3.6%. The combination of Europe and Q3 GDP drove the DJIA to open +145 points, NASDAQ +72 and the S&P +23; by 9:35 the DJIA traded up 260 points.
Treasury rates increasing this morning driving mortgage prices lower and rates up. The 10 yr note is sitting right on what we consider key support at 2.30%, it hasn't been above 2.30% since mid-August. Strong GDP, strong auto sales, a slightly better new home sales in Sept and a better outlook in Europe are increasing optimism momentarily. The Europe relief rally began yesterday and is running hot again in early activity. Investors sighing relief but Europe still has a huge problem with Italy and Spain; Italy's debt is well over 1T euros more than the EFSF has in the present fund.
At 10:00 NAR reported August pending home sales were expected to be down 1.0%, sales fell 4.6%; yr/yr up 6.4%. Contracts signed not yet closed, the third month in a row pending sales have declined from the previous month. There has been no immediate reaction to the report.
At 1:00 Treasury will auction $29B of 7 yr notes; yesterday the 5 yr went off well but y the end of the day and this morning those notes are already underwater.
Today is critical for the bond market; the 10 yr note is at 2.28% at 10:00, it has tested 2.30% where we have support that must hold, a move above 2.30% would add additional technical weakness for the bond and mortgage markets.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 27, 2011
The summit in Brussels yesterday is being considered a success this morning; US stock indexes rallying and US interest rates increasing on news that Europe's leaders have actually come with a plan that is supposed to isolate Greece from defaulting and taking some pressure off for the moment. Last-ditch talks with bank representatives led to the debt-relief accord,
bondholders will take 50% losses on Greek debt and boosted the firepower of the rescue fund. Measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market. The rescue fund (EFSF) is to be increased to 1 trillion euros ($1.4T). There are a lot of details yet to be worked out so while this is a breakthrough the problems are still not completely out of the woods; expect Europe to continue to drive global markets as more details must be resolved. It helped yesterday when China said it may be interested in buying some of the debt through the EFSF.
The reaction to European developments this morning is a huge rally in Europe's equity markets and in the US; at 9:00 this morning the DJIA was trading up 246 points, the 10 yr note testing important technical support level at 2.30% and mortgage prices at 9:00 -14/32 (.44 bp).
This morning weekly jobless claims were about as expected, down 2K to 402K, last week claims were revised to 404K frm 403K. Continuing claims were 3.645 mil down from 3.741 mil last week. Q3 GDP expected at +2.2% to +2.5% was on target at +2.5% after Q1 growth grew at 1.3%; final sales in Q3 were up 3.6%. The combination of Europe and Q3 GDP drove the DJIA to open +145 points, NASDAQ +72 and the S&P +23; by 9:35 the DJIA traded up 260 points.
Treasury rates increasing this morning driving mortgage prices lower and rates up. The 10 yr note is sitting right on what we consider key support at 2.30%, it hasn't been above 2.30% since mid-August. Strong GDP, strong auto sales, a slightly better new home sales in Sept and a better outlook in Europe are increasing optimism momentarily. The Europe relief rally began yesterday and is running hot again in early activity. Investors sighing relief but Europe still has a huge problem with Italy and Spain; Italy's debt is well over 1T euros more than the EFSF has in the present fund.
At 10:00 NAR reported August pending home sales were expected to be down 1.0%, sales fell 4.6%; yr/yr up 6.4%. Contracts signed not yet closed, the third month in a row pending sales have declined from the previous month. There has been no immediate reaction to the report.
At 1:00 Treasury will auction $29B of 7 yr notes; yesterday the 5 yr went off well but y the end of the day and this morning those notes are already underwater.
Today is critical for the bond market; the 10 yr note is at 2.28% at 10:00, it has tested 2.30% where we have support that must hold, a move above 2.30% would add additional technical weakness for the bond and mortgage markets.
Wednesday, October 26, 2011
Mortgage Market
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, October 26, 2011
A nice rally yesterday in the bond and mortgage markets; this morning no follow-through. The 10 yr note at 7:00 was off 9/32 with stock indexes showing a better opening at 9:30 after the DJIA fell 207 points yesterday. Rate markets continue to move in tandem with equity indexes; better indexes equals weaker rate markets. The 10 yr note has a well defined range over the last two weeks, frm 2.27% to 2.10% unable to break in either direction. MBS markets also trading in a tight near term trendless range. Note the 10 yr note yield chart above, not only is the range clearly evident, the 10 is still above its key 20 and 40 day averages.
At 8:30 Sept durable goods orders were mixed; the overall down 0.8% with forecasts of 1.0%, ex-transportation orders were expected up 0.5% but increased 1.7%. Stock indexes improved on the data, its a very volatile series and today markets are fixated on the so-called summit meeting of Euro leaders later today. Europe's finance ministers cancelled their scheduled meeting yesterday implying there isn't a plan in place yet to save Greece, Italy and Spain. The issue now is what hits Europe's banks can accept on the worthless debt from those countries. The amount needed to save Italy and Spain is more than can be scraped together. Chancellor Angela Merkel invoked Germany’s “historic obligation” to defend the euro and Europe as she urged lawmakers to back a planned increase in the euro- area rescue fund’s capacity to staunch the debt crisis. The German parliament voted 503 to 89 to increase funding of the European Financial Stability Facility.
At 10:00 Sept new home sales, expected up 1.8% increased 5.7% to 313K annualized; at present pace there is a 6.2 months supply down from 6.6 months in August, the lowest since Apr 2010. The median sales price $204,400, down 10.4% yr/yr. No initial reaction to the better report, all attention is focused on Europe and not so much on US economic reports.
Treasuries being dragged lower on this afternoon's $35B 5 yr note auction, the whip-saw thinking about Europe's debt crisis (today some optimism) and the continually changing economic outlook. Yesterday there was concern that Europe would not get a deal done and some quarterly earnings not meeting expectations sending rates lower and stock indexes down; this morning traders easily selling treasuries as the stock market is better and the 10 yr didn't break down below 2.10%, the low in the last two weeks, that has kept recent rallies in check. The bond and mortgage markets are essentially trading in a narrow flat range as little conviction as to the outlook remains murky.
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, October 26, 2011
A nice rally yesterday in the bond and mortgage markets; this morning no follow-through. The 10 yr note at 7:00 was off 9/32 with stock indexes showing a better opening at 9:30 after the DJIA fell 207 points yesterday. Rate markets continue to move in tandem with equity indexes; better indexes equals weaker rate markets. The 10 yr note has a well defined range over the last two weeks, frm 2.27% to 2.10% unable to break in either direction. MBS markets also trading in a tight near term trendless range. Note the 10 yr note yield chart above, not only is the range clearly evident, the 10 is still above its key 20 and 40 day averages.
At 8:30 Sept durable goods orders were mixed; the overall down 0.8% with forecasts of 1.0%, ex-transportation orders were expected up 0.5% but increased 1.7%. Stock indexes improved on the data, its a very volatile series and today markets are fixated on the so-called summit meeting of Euro leaders later today. Europe's finance ministers cancelled their scheduled meeting yesterday implying there isn't a plan in place yet to save Greece, Italy and Spain. The issue now is what hits Europe's banks can accept on the worthless debt from those countries. The amount needed to save Italy and Spain is more than can be scraped together. Chancellor Angela Merkel invoked Germany’s “historic obligation” to defend the euro and Europe as she urged lawmakers to back a planned increase in the euro- area rescue fund’s capacity to staunch the debt crisis. The German parliament voted 503 to 89 to increase funding of the European Financial Stability Facility.
At 10:00 Sept new home sales, expected up 1.8% increased 5.7% to 313K annualized; at present pace there is a 6.2 months supply down from 6.6 months in August, the lowest since Apr 2010. The median sales price $204,400, down 10.4% yr/yr. No initial reaction to the better report, all attention is focused on Europe and not so much on US economic reports.
Treasuries being dragged lower on this afternoon's $35B 5 yr note auction, the whip-saw thinking about Europe's debt crisis (today some optimism) and the continually changing economic outlook. Yesterday there was concern that Europe would not get a deal done and some quarterly earnings not meeting expectations sending rates lower and stock indexes down; this morning traders easily selling treasuries as the stock market is better and the 10 yr didn't break down below 2.10%, the low in the last two weeks, that has kept recent rallies in check. The bond and mortgage markets are essentially trading in a narrow flat range as little conviction as to the outlook remains murky.
Friday, October 21, 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.
Friday, October 21, 2011
Treasuries opened flat this morning, mortgages however are doing better with talk that the Fed will possibly increase its purchases of MBSs. Federal Reserve Governor Daniel Tarullo said the central bank should consider resuming purchases of mortgage bonds to boost U.S. growth. At 9:00 the 10 yr -2/32 while 30 yr mtgs +6/32 (.18 bp). Stock indexes prior to the open were better indicating a strong opening at 9:30.
Trade today will focus primarily on the equity markets, the stock market is strong early but that is no indication that at the end of the day the indexes won't end up lower. Likely to be choppy as has been the case, with not much change in the bond and mortgage markets. Technically the bond and mortgage markets remain bearish but there is room to improve without changing the wider outlook. If equities reverse from morning improvement rate markets will find support. Mortgages doing much better this morning on Fed comments.
News from Europe; there won't be anything coming this weekend but by Wednesday German officials are saying a deal will be resolved by next Wednesday. Still a lot of uncertainty from the region but at the moment markets are believing an end is in sight for the near term. Yesterday Greece parliament voted for additional austerity (lower spending), the vote was close and there was rioting but at the end of the day Greece appears to have met the demands of the ECB, IMF and the EU. European stocks advanced as policy makers discussed deploying $1.3 trillion in funds to help contain the euro area’s debt crisis as they sought to break a deadlock between Germany and France.
At 9:30 the DJIA opened +140, the 10 yr note -6/32 at 2.21% +3 bp; mortgage prices doing better on Fed official comment +4/32 (.12 bp).
The comment from Fed governor Tarullo that the Fed should increase MBS purchases to aid economic recovery comes as a surprise, as do most comments that hit from various Fed officials. A positive for mortgage rates of course, and for the economy if in fact the Fed actually takes his comment and implements it. Keeping mortgage rates low is a plus, however unless there is some relaxation of underwriting and appraisals many that could re-finance are being hampered by requirements that impede many from getting a lower rate even if they are current on their present payments.
There is no data today, investors and traders setting positions for the weekend and next week's meeting in Europe. Mortgage rates doing better today on Tarullo comments but if rates increase in treasuries so too will mortgage rates increase although if the Fed were to actually increase MBS purchases the spread between mortgage rates and the 10 yr note yield will narrow from present levels. Washington regulators and the lending community don't get it, we have harped on it for years with no avail.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, October 21, 2011
Treasuries opened flat this morning, mortgages however are doing better with talk that the Fed will possibly increase its purchases of MBSs. Federal Reserve Governor Daniel Tarullo said the central bank should consider resuming purchases of mortgage bonds to boost U.S. growth. At 9:00 the 10 yr -2/32 while 30 yr mtgs +6/32 (.18 bp). Stock indexes prior to the open were better indicating a strong opening at 9:30.
Trade today will focus primarily on the equity markets, the stock market is strong early but that is no indication that at the end of the day the indexes won't end up lower. Likely to be choppy as has been the case, with not much change in the bond and mortgage markets. Technically the bond and mortgage markets remain bearish but there is room to improve without changing the wider outlook. If equities reverse from morning improvement rate markets will find support. Mortgages doing much better this morning on Fed comments.
News from Europe; there won't be anything coming this weekend but by Wednesday German officials are saying a deal will be resolved by next Wednesday. Still a lot of uncertainty from the region but at the moment markets are believing an end is in sight for the near term. Yesterday Greece parliament voted for additional austerity (lower spending), the vote was close and there was rioting but at the end of the day Greece appears to have met the demands of the ECB, IMF and the EU. European stocks advanced as policy makers discussed deploying $1.3 trillion in funds to help contain the euro area’s debt crisis as they sought to break a deadlock between Germany and France.
At 9:30 the DJIA opened +140, the 10 yr note -6/32 at 2.21% +3 bp; mortgage prices doing better on Fed official comment +4/32 (.12 bp).
The comment from Fed governor Tarullo that the Fed should increase MBS purchases to aid economic recovery comes as a surprise, as do most comments that hit from various Fed officials. A positive for mortgage rates of course, and for the economy if in fact the Fed actually takes his comment and implements it. Keeping mortgage rates low is a plus, however unless there is some relaxation of underwriting and appraisals many that could re-finance are being hampered by requirements that impede many from getting a lower rate even if they are current on their present payments.
There is no data today, investors and traders setting positions for the weekend and next week's meeting in Europe. Mortgage rates doing better today on Tarullo comments but if rates increase in treasuries so too will mortgage rates increase although if the Fed were to actually increase MBS purchases the spread between mortgage rates and the 10 yr note yield will narrow from present levels. Washington regulators and the lending community don't get it, we have harped on it for years with no avail.
Thursday, October 20, 2011
Mortgage Market
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.
Thursday, October 20, 2011
Treasuries and mortgages opened a little weaker this morning. At 8:30 more selling after weekly jobless claims that fell 6K to 403K frm 409K last week (revised frm 404K); continuing claims were 3.719 mil up frm 3.694 mil last week.
Claims didn't generate selling, there are early reports unconfirmed so far, that Kaddafi has been killed.
Also there is that ever present belief Europe will get a plan worked out prior to this weekend's G-20 meeting. Germany and France still in disagreement over the role to be played by the ECB in the bank re-capitalization after the banks take huge losses over the bad debt of Greece and then the other troubled counties in the EU. a day before a finance ministers’ meeting in Brussels intended to set a common strategy on dealing with the turmoil there is nothing concrete. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt last night failed to resolve differences. French Prime Minister Francois Fillon stepped up calls for the 440 billion-euro ($608B) European Financial Stability Facility to be turned into a bank and given leverage by the ECB which, along with Germany, has rejected using its balance sheet to bolster the fund. Germany has endorsed enabling the EFSF to insure a portion of cash-strapped nations’ bond sales. Given the news reports over the differences it is a huge step of faith to believe a workable plan can be done prior to the G-20 meeting this weekend. Meanwhile in Greece riots are continuing over the deep austerity that must be in place to get more cash; Greece will run out of money in a few weeks.
Greece will default; I don't think anyone in the EU believes it won't. What seems to be happening in the negotiations is a plan to contain the defaults of Spain, Italy and Portugal. The EU cannot afford to let those countries to fall otherwise it is the end of the EU experiment that began 12 years ago when 17 countries agreed to join together with a common currency and common economic goals.
At 9:00 this morning treasuries and mortgages had come off their lowest prices earlier; the 10 -2/32 and mortgages -4/32 (.12 bp). The DJIA at 8:30 was +45, at 9:00 +2. US interest rate markets still welded to the action in equities. Likely that will be the way it goes the rest of today.
At 9:30 the DJIA +5, 10 yr note -7/32 at 2.18% +2 bp. Mortgage prices at 9:30 -7/32 (.22 bp).
Three key data points hit at 10:00. Sept existing home sales were expected to decline 1.8%, as reported sales fell 3.0% to 4.91 mil annualized; August sales revised to +8.8% frm +7.7%, inventories of unsold homes down 2.0% leaving an 8.5 month supply. Leading economic indicators for Sept was up 0.2% in line with forecasts. The giant in the room; the Oct Philly fed business index was expect -9.6 frm -17.5 in Sept; as reported it increased to +8.7. The components were mixed, new orders at 7.8 frm -11.3, prices pd at 20.0 frm 23.3 and employment at 1.4 frm 5.8. The initial reaction to the three reports didn't do much to stocks or bonds.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 20, 2011
Treasuries and mortgages opened a little weaker this morning. At 8:30 more selling after weekly jobless claims that fell 6K to 403K frm 409K last week (revised frm 404K); continuing claims were 3.719 mil up frm 3.694 mil last week.
Claims didn't generate selling, there are early reports unconfirmed so far, that Kaddafi has been killed.
Also there is that ever present belief Europe will get a plan worked out prior to this weekend's G-20 meeting. Germany and France still in disagreement over the role to be played by the ECB in the bank re-capitalization after the banks take huge losses over the bad debt of Greece and then the other troubled counties in the EU. a day before a finance ministers’ meeting in Brussels intended to set a common strategy on dealing with the turmoil there is nothing concrete. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt last night failed to resolve differences. French Prime Minister Francois Fillon stepped up calls for the 440 billion-euro ($608B) European Financial Stability Facility to be turned into a bank and given leverage by the ECB which, along with Germany, has rejected using its balance sheet to bolster the fund. Germany has endorsed enabling the EFSF to insure a portion of cash-strapped nations’ bond sales. Given the news reports over the differences it is a huge step of faith to believe a workable plan can be done prior to the G-20 meeting this weekend. Meanwhile in Greece riots are continuing over the deep austerity that must be in place to get more cash; Greece will run out of money in a few weeks.
Greece will default; I don't think anyone in the EU believes it won't. What seems to be happening in the negotiations is a plan to contain the defaults of Spain, Italy and Portugal. The EU cannot afford to let those countries to fall otherwise it is the end of the EU experiment that began 12 years ago when 17 countries agreed to join together with a common currency and common economic goals.
At 9:00 this morning treasuries and mortgages had come off their lowest prices earlier; the 10 -2/32 and mortgages -4/32 (.12 bp). The DJIA at 8:30 was +45, at 9:00 +2. US interest rate markets still welded to the action in equities. Likely that will be the way it goes the rest of today.
At 9:30 the DJIA +5, 10 yr note -7/32 at 2.18% +2 bp. Mortgage prices at 9:30 -7/32 (.22 bp).
Three key data points hit at 10:00. Sept existing home sales were expected to decline 1.8%, as reported sales fell 3.0% to 4.91 mil annualized; August sales revised to +8.8% frm +7.7%, inventories of unsold homes down 2.0% leaving an 8.5 month supply. Leading economic indicators for Sept was up 0.2% in line with forecasts. The giant in the room; the Oct Philly fed business index was expect -9.6 frm -17.5 in Sept; as reported it increased to +8.7. The components were mixed, new orders at 7.8 frm -11.3, prices pd at 20.0 frm 23.3 and employment at 1.4 frm 5.8. The initial reaction to the three reports didn't do much to stocks or bonds.
Wednesday, October 19, 2011
Mortgage Market
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, October 19, 2011
Prior to 8:30 mortgage prices traded down 6/32 (.18 bp) and the 10 yr -8/32 to 2.20%. At 8:30 Sept CPI increased 0.3% overall and when food and energy are removed up 0.1%; yr/yr CPI +3.9%, the core yr/yr up 2.0%. Yesterday's PPI was stronger than expected increasing concerns that inflation may be increasing, today the CPI takes a little worry away but not totally. Also at 8:30 Sept housing starts and permits; starts were expected up 4.0% as reported starts increased 15.0%; permits were expected down 1.5% but declined 5.0%. Starts are a surprise, so much so that we question the data. Starts totaled 658K annually frm 572K in August; permits at 594K down from 625K in August. Single family starts were up 1.7% the rest was in multi-family starts (+50%). The initial reaction the the 8:30 data took the 10 yr down in price a little, mortgage prices at 8:45 -5/32 (.15 bp).
In Europe this morning, riots in Greece; protestors being gassed as it escalates. Yesterday's maniacal reaction to a headline in a British newspaper that a deal was in the offing to increase the EFSF to re-capitalize the banks in the region sent markets into another round of excessive volatility. One hour after the news it became apparent that the news was woefully lacking in fact and substance. There is no plan that has been resolved. Markets, as noted yesterday, don't wait for facts these days; it is all about headlines and in turn creates huge volatile swings.
Europe continues to drive global markets, every word out of the region is taken as the last word. There is still nothing of substance after over a year of discussions; Europe's banks do not want to take the haircut that will likely be necessary. Most of the sovereign debt has to be taken as losses at least by 50% or more, banks will continue to fight it. Politicians here and there remain convinced a plan will be worked out that will stabilize Italy, Spain and Portugal as well as keeping Greece from default. The problem with that is, so far after all this time there is nothing. On Oct 23rd finance ministers from the G-20 countries will meet in a summit, at the moment its in the hands of Germany and France, the only two EU countries that are not in some way impaired. German Finance Minister Schaeuble hasn’t specified how much additional strength the European bailout fund may have and negotiators are still in “intensive discussions.” What's new about that?
Early this morning the weekly MBA mortgage applications; the composite index declined 14.9%, purchase applications down 8.8% while re-finances declined 16.6%. Higher interest rates dropped the re-finance markets, purchases remain soft. There is an anomaly though, the week included Columbus Day, the few that are optimistic about the housing sector are making a lot out of the holiday, we don't hold much to that. Any even small increase in mortgage rates shuts of the flow, mortgage rates and treasuries were higher last week.
At 9:30 this morning the DJIA opened -22, NASDAQ-12, S&P -3; the 10 yr note -6/32 to 2.19% +2 bp and mortgages unchanged. Until 9:30 mtg prices were generally off 4/32 (.12 bp).
The only other scheduled information today is at 2:00 when the Fed releases its Beige Book, the Fed's detailed report on the economy in the 12 Fed districts. Always some meat in it but generally nothing shocking and new markets are not already thinking about-----that of course is if anyone is actually thinking these days rather than reacting.
Treasury and mortgage markets remain bearish; until the 10 yr can decline below 2.0% the bearish technicals will continue. That said, we remain confident that the 10 yr will find support at 2.30%, the recent high was 2.27% five sessions ago. The Fed's Operation Twist is still out there and the Fed has increased MBS purchases. Interday and intraday volatility will continue following the paranoid equity markets. Already this morning 30 yr MBSs have traded in a .34 basis point range. The treasury market is being stretched between better equity markets and the need for safety as Europe is still in play; equity markets a little weaker early today keeping rate markets generally unchanged so far.
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, October 19, 2011
Prior to 8:30 mortgage prices traded down 6/32 (.18 bp) and the 10 yr -8/32 to 2.20%. At 8:30 Sept CPI increased 0.3% overall and when food and energy are removed up 0.1%; yr/yr CPI +3.9%, the core yr/yr up 2.0%. Yesterday's PPI was stronger than expected increasing concerns that inflation may be increasing, today the CPI takes a little worry away but not totally. Also at 8:30 Sept housing starts and permits; starts were expected up 4.0% as reported starts increased 15.0%; permits were expected down 1.5% but declined 5.0%. Starts are a surprise, so much so that we question the data. Starts totaled 658K annually frm 572K in August; permits at 594K down from 625K in August. Single family starts were up 1.7% the rest was in multi-family starts (+50%). The initial reaction the the 8:30 data took the 10 yr down in price a little, mortgage prices at 8:45 -5/32 (.15 bp).
In Europe this morning, riots in Greece; protestors being gassed as it escalates. Yesterday's maniacal reaction to a headline in a British newspaper that a deal was in the offing to increase the EFSF to re-capitalize the banks in the region sent markets into another round of excessive volatility. One hour after the news it became apparent that the news was woefully lacking in fact and substance. There is no plan that has been resolved. Markets, as noted yesterday, don't wait for facts these days; it is all about headlines and in turn creates huge volatile swings.
Europe continues to drive global markets, every word out of the region is taken as the last word. There is still nothing of substance after over a year of discussions; Europe's banks do not want to take the haircut that will likely be necessary. Most of the sovereign debt has to be taken as losses at least by 50% or more, banks will continue to fight it. Politicians here and there remain convinced a plan will be worked out that will stabilize Italy, Spain and Portugal as well as keeping Greece from default. The problem with that is, so far after all this time there is nothing. On Oct 23rd finance ministers from the G-20 countries will meet in a summit, at the moment its in the hands of Germany and France, the only two EU countries that are not in some way impaired. German Finance Minister Schaeuble hasn’t specified how much additional strength the European bailout fund may have and negotiators are still in “intensive discussions.” What's new about that?
Early this morning the weekly MBA mortgage applications; the composite index declined 14.9%, purchase applications down 8.8% while re-finances declined 16.6%. Higher interest rates dropped the re-finance markets, purchases remain soft. There is an anomaly though, the week included Columbus Day, the few that are optimistic about the housing sector are making a lot out of the holiday, we don't hold much to that. Any even small increase in mortgage rates shuts of the flow, mortgage rates and treasuries were higher last week.
At 9:30 this morning the DJIA opened -22, NASDAQ-12, S&P -3; the 10 yr note -6/32 to 2.19% +2 bp and mortgages unchanged. Until 9:30 mtg prices were generally off 4/32 (.12 bp).
The only other scheduled information today is at 2:00 when the Fed releases its Beige Book, the Fed's detailed report on the economy in the 12 Fed districts. Always some meat in it but generally nothing shocking and new markets are not already thinking about-----that of course is if anyone is actually thinking these days rather than reacting.
Treasury and mortgage markets remain bearish; until the 10 yr can decline below 2.0% the bearish technicals will continue. That said, we remain confident that the 10 yr will find support at 2.30%, the recent high was 2.27% five sessions ago. The Fed's Operation Twist is still out there and the Fed has increased MBS purchases. Interday and intraday volatility will continue following the paranoid equity markets. Already this morning 30 yr MBSs have traded in a .34 basis point range. The treasury market is being stretched between better equity markets and the need for safety as Europe is still in play; equity markets a little weaker early today keeping rate markets generally unchanged so far.
Tuesday, October 18, 2011
Mortgage Market
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, October 18, 2011
Prior to 8:30 this morning the 10 yr note traded up 12/32 to 2.11% -5 bp frm yesterday's close; the MBS market up 4/32 (.12 bp). At 8:30 Sept PPI took some wind away, the overall PPI increased by 0.8%, markets were expecting an increase of 0.2%. The core rate however was in line up 0.2%. Yr/yr data is where the cheese binds; up 6.9% on the overall, up frm +6.5% in August, yr/yr on the core was +2.5% unchanged from August. While inflation isn't on the radar now, with the increase in the overall PPI and the core at what the Fed considers neutral (not too hot but not too tame either) inflation concerns notched up fractionally in the backs of the minds of traders. Inflation in Britain is at a three year high and may translate into the trading of US treasuries at the long end particularly. At 8:45, 15 minutes after the PPI mortgage prices traded unchanged on the day.
By 9:00 the early strong rally in the bond and mortgage markets had vanished; the 10 yr unchanged and mortgage prices down 3/32 (.09 bp). In early trading in stock indexes were lower (DJIA -50), at 9:00 the key indexes had improved to point to a firmer open at 9:30. Treasury and mortgage markets are completely controlled by how stock markets trade; with the huge volatile swings in the indexes trading bonds and MBSs keeps the rate markets volatile.
At 9:30 the DJIA opened -27, but the NASDAQ and S&P did open a little better. Mtg prices at 9:30 +1/32 (.03 bp) and the 10 yr note up 4/32 at 2.14% -2 bp.
At 10:00 the Oct NAHB housing mkt index, expected at 14, jumped to 18, the highest index reading in months. Last month the index was 14. Any improvement is good news; the line between positive and negative is 50. There has been no initial reaction to the improvement.
Europe still carries heavy weight on global markets as it can't step up and get some kind of resolution resolved. Eventually it will but as has been the case for over a year now, it won't solve the longer term problems. The on again off again travails are the prime drivers in the global markets. In China the economy grew 9.1% in the third quarter from a year earlier, the slowest pace since 2009, driving stocks lower on concern that Europe’s debt crisis is dragging on the global recovery. China, an export economy, saw shipments to the European Union tumbled to 9.8% in September from 22% in the previous month. U.S. corporate credit risk rose on concern that Europe’s debt crisis may spread after Moody’s Investors Service signaled that France’s Aaa credit rating is under pressure.
Regardless of all other fundamentals the bond and mortgage markets are tied to stock indexes tighter than a hangman's knot. Moody's saying today it may downgrade France credit rating aided the early morning improvement but with the US equity markets opening better at 9:30, it trumped any safety moves to bonds. It didn't help this morning when over PPI increase by a huge 0.8% and news that Britain's inflation rate the highest in 3 years.
At 1:15 this afternoon Bernanke will speak at a conference at the Boston Fed. With the current increase in rates after Operation Twist that was supposed to keep rates down, traders will focus on any remarks that address inflation and what Bernanke says regarding interest rates. Speculation on remarks about Europe, the economy, and comments on what the Fed is thinking about the mess in Congress and this Administration. He has made it clear the next major steps on reviving the economy must be fiscal, not monetary.
We remind that the bond and mortgage markets are still technically bearish, any improvement on the 10 yr note down to 2.05% area won't change the near term outlook. That said, we continue to expect any selling in the 120 yr note will hold at 2.30%, the recent interday high hit 2.27% last Wednesday and Friday.
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, October 18, 2011
Prior to 8:30 this morning the 10 yr note traded up 12/32 to 2.11% -5 bp frm yesterday's close; the MBS market up 4/32 (.12 bp). At 8:30 Sept PPI took some wind away, the overall PPI increased by 0.8%, markets were expecting an increase of 0.2%. The core rate however was in line up 0.2%. Yr/yr data is where the cheese binds; up 6.9% on the overall, up frm +6.5% in August, yr/yr on the core was +2.5% unchanged from August. While inflation isn't on the radar now, with the increase in the overall PPI and the core at what the Fed considers neutral (not too hot but not too tame either) inflation concerns notched up fractionally in the backs of the minds of traders. Inflation in Britain is at a three year high and may translate into the trading of US treasuries at the long end particularly. At 8:45, 15 minutes after the PPI mortgage prices traded unchanged on the day.
By 9:00 the early strong rally in the bond and mortgage markets had vanished; the 10 yr unchanged and mortgage prices down 3/32 (.09 bp). In early trading in stock indexes were lower (DJIA -50), at 9:00 the key indexes had improved to point to a firmer open at 9:30. Treasury and mortgage markets are completely controlled by how stock markets trade; with the huge volatile swings in the indexes trading bonds and MBSs keeps the rate markets volatile.
At 9:30 the DJIA opened -27, but the NASDAQ and S&P did open a little better. Mtg prices at 9:30 +1/32 (.03 bp) and the 10 yr note up 4/32 at 2.14% -2 bp.
At 10:00 the Oct NAHB housing mkt index, expected at 14, jumped to 18, the highest index reading in months. Last month the index was 14. Any improvement is good news; the line between positive and negative is 50. There has been no initial reaction to the improvement.
Europe still carries heavy weight on global markets as it can't step up and get some kind of resolution resolved. Eventually it will but as has been the case for over a year now, it won't solve the longer term problems. The on again off again travails are the prime drivers in the global markets. In China the economy grew 9.1% in the third quarter from a year earlier, the slowest pace since 2009, driving stocks lower on concern that Europe’s debt crisis is dragging on the global recovery. China, an export economy, saw shipments to the European Union tumbled to 9.8% in September from 22% in the previous month. U.S. corporate credit risk rose on concern that Europe’s debt crisis may spread after Moody’s Investors Service signaled that France’s Aaa credit rating is under pressure.
Regardless of all other fundamentals the bond and mortgage markets are tied to stock indexes tighter than a hangman's knot. Moody's saying today it may downgrade France credit rating aided the early morning improvement but with the US equity markets opening better at 9:30, it trumped any safety moves to bonds. It didn't help this morning when over PPI increase by a huge 0.8% and news that Britain's inflation rate the highest in 3 years.
At 1:15 this afternoon Bernanke will speak at a conference at the Boston Fed. With the current increase in rates after Operation Twist that was supposed to keep rates down, traders will focus on any remarks that address inflation and what Bernanke says regarding interest rates. Speculation on remarks about Europe, the economy, and comments on what the Fed is thinking about the mess in Congress and this Administration. He has made it clear the next major steps on reviving the economy must be fiscal, not monetary.
We remind that the bond and mortgage markets are still technically bearish, any improvement on the 10 yr note down to 2.05% area won't change the near term outlook. That said, we continue to expect any selling in the 120 yr note will hold at 2.30%, the recent interday high hit 2.27% last Wednesday and Friday.
Monday, October 17, 2011
Mortgage Market
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, October 17, 2011
Treasuries and MBS markets opened flat early this morning but got some support at 9:00 as stock indexes softened a little. Helping the bond market some this morning, the Oct NY Empire State manufacturing index expected -4.4 frm -8.82% in Sept was -8.48; the sub components were a little better but still very weak. At 9:15 Sept industrial production reported +0.2% right on the forecasts. Sept capacity utilization also in line, at 77.4% frm 77.3% in August. No initial reaction to the reports.
Europe will continue to draw attention this week, it may not be obvious but under the radar and other driving events Europe is still unsettled. Last week markets were enthused on comments that the EU has com up with a plan that includes banks taking huge hits. Over the weekend the has been some push-back from Europe's banks. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French President Nicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency. In the end the situation is still unresolved and is unlikely to be resolved by Oct 23, the so-called date to have it all worked out. The significance is that as long as there is no actual resolution the US interest rate markets and the US equity markets will continue with their volatility.
At 9:30 the DJIA opened -50, the 10 yr +9/32 at 2.22% -3 bps; mortgage prices at 9:30 +4/32 (.12 bp).
This Week's Economic Calendar:
Today;
8:30 am NY Empire State index -8.48 frm -8.82
9:15 am Sept Capacity Utilization 77.4% frm 77.3%
Sept industrial production +0.2%
Tuesday;
8:30 am Sept PPI (+0.2%, ex food and energy +0.1%)
10:00 am Oct NAHB housing mkt index (14, unchanged from Sept)
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Sept CPI (+0.3%, ex food and energy +0.2%)
Sept housing starts and permits( starts +4.0%, permits -1.5%)
2:00 pm Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (unch at 404K)
10:00 am Sept existing home sales (-1.8%)
Oct Philly Feed business index (-9.6 frm -17.5)
Sept leading economic indicators (+0.3%)
Treasury 10-year notes better, pushing yields down from the highest level in seven weeks, as concern Europe may take longer to contain sovereign debt turmoil boosted demand for the safest assets. We still believe the 10 yr note yield won't increase past 2.30%; the high in the recent increase has been 2.27%. With continued concerns over how, or if, Europe can solve its debt issues US markets will continue to trade in swings on each comment out of the region. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
Although there is no way Europe can meet the Oct 23rd target that had been thought, markets still believe some kind of resolution, foreign investors in US bond markets are selling on that belief. The Federal Reserve reported its holdings of U.S. government debt on behalf of central bankers and institutional investors outside America has plunged $76.5B in the last seven weeks, the most since August 2007. At the same time, bond mutual funds are adding Treasuries, banks have increased their holdings 45% in the past five years and the Fed has added $656B to its balance sheet this year.
Technically the 10 yr note and MBSs are bearish at the moment.
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, October 17, 2011
Treasuries and MBS markets opened flat early this morning but got some support at 9:00 as stock indexes softened a little. Helping the bond market some this morning, the Oct NY Empire State manufacturing index expected -4.4 frm -8.82% in Sept was -8.48; the sub components were a little better but still very weak. At 9:15 Sept industrial production reported +0.2% right on the forecasts. Sept capacity utilization also in line, at 77.4% frm 77.3% in August. No initial reaction to the reports.
Europe will continue to draw attention this week, it may not be obvious but under the radar and other driving events Europe is still unsettled. Last week markets were enthused on comments that the EU has com up with a plan that includes banks taking huge hits. Over the weekend the has been some push-back from Europe's banks. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French President Nicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency. In the end the situation is still unresolved and is unlikely to be resolved by Oct 23, the so-called date to have it all worked out. The significance is that as long as there is no actual resolution the US interest rate markets and the US equity markets will continue with their volatility.
At 9:30 the DJIA opened -50, the 10 yr +9/32 at 2.22% -3 bps; mortgage prices at 9:30 +4/32 (.12 bp).
This Week's Economic Calendar:
Today;
8:30 am NY Empire State index -8.48 frm -8.82
9:15 am Sept Capacity Utilization 77.4% frm 77.3%
Sept industrial production +0.2%
Tuesday;
8:30 am Sept PPI (+0.2%, ex food and energy +0.1%)
10:00 am Oct NAHB housing mkt index (14, unchanged from Sept)
Wednesday;
7:00 am weekly MBA mortgage applications
8:30 am Sept CPI (+0.3%, ex food and energy +0.2%)
Sept housing starts and permits( starts +4.0%, permits -1.5%)
2:00 pm Fed's Beige Book
Thursday;
8:30 am weekly jobless claims (unch at 404K)
10:00 am Sept existing home sales (-1.8%)
Oct Philly Feed business index (-9.6 frm -17.5)
Sept leading economic indicators (+0.3%)
Treasury 10-year notes better, pushing yields down from the highest level in seven weeks, as concern Europe may take longer to contain sovereign debt turmoil boosted demand for the safest assets. We still believe the 10 yr note yield won't increase past 2.30%; the high in the recent increase has been 2.27%. With continued concerns over how, or if, Europe can solve its debt issues US markets will continue to trade in swings on each comment out of the region. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
Although there is no way Europe can meet the Oct 23rd target that had been thought, markets still believe some kind of resolution, foreign investors in US bond markets are selling on that belief. The Federal Reserve reported its holdings of U.S. government debt on behalf of central bankers and institutional investors outside America has plunged $76.5B in the last seven weeks, the most since August 2007. At the same time, bond mutual funds are adding Treasuries, banks have increased their holdings 45% in the past five years and the Fed has added $656B to its balance sheet this year.
Technically the 10 yr note and MBSs are bearish at the moment.
Monday, October 3, 2011
Mortgage Market
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, October 03, 2011
The bond and mortgage markets started nicely this morning with early trading in stock index futures were pointing to a weaker open at 9:30. Friday the bond market held its key supports then rallied as the stock market basis the DJIA dropped 240 points. Stock indexes still quite volatile and likely will remain that way for a long time as investors and traders try to make a buck with high frequency trading.
The economy is declining yet there are those that believe these are buying opportunities for that "in the long run" investments----most that espouse that view are Wall Street firms that make money on investor buying. Greece failed its austerity tests the the EU, IMF and the ECB demanded but the EU isn't ready to let Greece fail yet, only a matter of time though it will. Its time to cut the country loose and let it fail. For months global markets and economies have been focusing on Greece and what European leaders will do. Europe's banks don't want to take loses, unfortunately for them there isn't any choice in the end.
This week has a lot of economic releases but the key is Friday's employment report. Euro-area finance chiefs will meet today in Luxembourg to weigh the threat of a Greek default, grapple with how to shield banks from the fallout and consider a further boost to the rescue fund. A much-needed “liquidity backstop” for the region must come from governments because the European Central Bank’s mandate requires it to keep purchases of sovereign debt extremely limited.
At 9:30 the DJIA opened -30, NASDAQ -12, S&P -4; the 10 yr note +15/32 to 1.87% -5 bp, mortgage prices on 30s +13/32 (.41 bp).
At 10:00 this morning Sept ISM manufacturing index expected at 50.5 frm 50.6, increased to 51.6; new orders component unchanged at 49.6, prices pd at 56.0 frm 55.5 and employment at 53.8 frm 51.8. The initial reaction to the better data turned stock indexes from -89 on the DJIA to -25, the 10 yr note traded +198/32 prior to 10:00 but generally held as safety trades being put back on with Greece unable to meet the goals for more funds.
Also at 10:00 August construction spending expected own -0.5%, as reported spending increased 1.4%.
This Week's Economic Calendar:
Monday;
10:00 am Sept ISM manufacturing index (as reported 51.6)
August construction spending (as reported +1.4%)
3:00 pm Sept auto and truck sales (autos 4.1 mil, trucks +5.5 mil)
Tuesday;
10:00 am August factory orders (-0.1%)
Wednesday;
7:00 am MBA weekly mortgage applications
8:15 am ADP private jobs for Sept (+45K)
10:00 am ISM Sept services sector index (52.8 frm 53.3)
Thursday;
8:30 weekly jobless claims (+11K to 402K)
Friday;
8:30 Sept employment data (non-farm jobs +60K, non-farm private jobs +83K, unemployment rate unch at 9.1%)
10:00 am August wholesale inventories +0.5%)
3:00 pm August consumer credit (+$7.0B)
10:00 ISM took some of the bullishness away from early activity in the bond market and stopped selling in equity markets. Still not much investing in equities, just traders moving the indexes in huge wide ranges. Technically the 10 yr and mortgages held key technical bullish levels last week. The rest of the day will be, as usual these days, will be watching stock indexes and any news out of Europe.
At 10:15 the bond and mortgage markets were -6/32 (.18 bp) frm 9:30.
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, October 03, 2011
The bond and mortgage markets started nicely this morning with early trading in stock index futures were pointing to a weaker open at 9:30. Friday the bond market held its key supports then rallied as the stock market basis the DJIA dropped 240 points. Stock indexes still quite volatile and likely will remain that way for a long time as investors and traders try to make a buck with high frequency trading.
The economy is declining yet there are those that believe these are buying opportunities for that "in the long run" investments----most that espouse that view are Wall Street firms that make money on investor buying. Greece failed its austerity tests the the EU, IMF and the ECB demanded but the EU isn't ready to let Greece fail yet, only a matter of time though it will. Its time to cut the country loose and let it fail. For months global markets and economies have been focusing on Greece and what European leaders will do. Europe's banks don't want to take loses, unfortunately for them there isn't any choice in the end.
This week has a lot of economic releases but the key is Friday's employment report. Euro-area finance chiefs will meet today in Luxembourg to weigh the threat of a Greek default, grapple with how to shield banks from the fallout and consider a further boost to the rescue fund. A much-needed “liquidity backstop” for the region must come from governments because the European Central Bank’s mandate requires it to keep purchases of sovereign debt extremely limited.
At 9:30 the DJIA opened -30, NASDAQ -12, S&P -4; the 10 yr note +15/32 to 1.87% -5 bp, mortgage prices on 30s +13/32 (.41 bp).
At 10:00 this morning Sept ISM manufacturing index expected at 50.5 frm 50.6, increased to 51.6; new orders component unchanged at 49.6, prices pd at 56.0 frm 55.5 and employment at 53.8 frm 51.8. The initial reaction to the better data turned stock indexes from -89 on the DJIA to -25, the 10 yr note traded +198/32 prior to 10:00 but generally held as safety trades being put back on with Greece unable to meet the goals for more funds.
Also at 10:00 August construction spending expected own -0.5%, as reported spending increased 1.4%.
This Week's Economic Calendar:
Monday;
10:00 am Sept ISM manufacturing index (as reported 51.6)
August construction spending (as reported +1.4%)
3:00 pm Sept auto and truck sales (autos 4.1 mil, trucks +5.5 mil)
Tuesday;
10:00 am August factory orders (-0.1%)
Wednesday;
7:00 am MBA weekly mortgage applications
8:15 am ADP private jobs for Sept (+45K)
10:00 am ISM Sept services sector index (52.8 frm 53.3)
Thursday;
8:30 weekly jobless claims (+11K to 402K)
Friday;
8:30 Sept employment data (non-farm jobs +60K, non-farm private jobs +83K, unemployment rate unch at 9.1%)
10:00 am August wholesale inventories +0.5%)
3:00 pm August consumer credit (+$7.0B)
10:00 ISM took some of the bullishness away from early activity in the bond market and stopped selling in equity markets. Still not much investing in equities, just traders moving the indexes in huge wide ranges. Technically the 10 yr and mortgages held key technical bullish levels last week. The rest of the day will be, as usual these days, will be watching stock indexes and any news out of Europe.
At 10:15 the bond and mortgage markets were -6/32 (.18 bp) frm 9:30.
Sunday, October 2, 2011
Friday, September 30, 2011
Mortgage Market
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.
Friday, September 30, 2011
In this world of uncertainty and confusion we have been subject to wild gyrations in equity markets that have influenced daily trading in the bond and mortgage markets. Yesterday the DJIA closed up 143, this morning in futures trading the index at 9:00 was down 130. Yesterday mortgages closed better by .12 bp and up .25 bp frm 9:30; the 10 yr traded slightly over 2.00% most of the day but managed to fall back and close at 2.00% a very key level. This morning at 9:00 the 10 yield traded at 1.94% with mortgage prices +.31 bp frm yesterday's close. Rate markets have been tied into a very narrow range this week; conflicting news out of Europe and choppy stock markets keeping interest rates generally higher from last Friday's closes.
At 8:30 August personal income expected up 0.1% fell 0.1%, spending was expected 0.2%, it hit at 0.2%. July income revised to +0.1% frm 0.3% originally reported, spending in July revised from +0.8% to +0.7%. Treasuries and mortgages got a further bounce on the weaker income levels while the stock indexes declined further.
Most recent data on the US and global economies is declining and looking like the US and the world will fall back into recession, or for those like us that have never believed we came out of recession, a double dip. Even though data is confirming the decline there are more optimists that believe these are buying opportunities with good bargains. On the Street the mantra is never admit pessimism even in the face of reality, that was evident in 2008 and the sub-prime bubble. Chinese manufacturing shrank for a third month, the longest contraction since 2009. German sales fell the most in more than four years, while European inflation unexpectedly quickened to the fastest in almost three years this month. Industrial production in Japan grew less than economists had forecast. Concern that Europe’s sovereign-debt crisis will spread and the U.S. economic recovery is faltering has wiped out more than $9 trillion of value from global equities this quarter.
In Germany the upper house of parliament approved the enhanced fund today after the lower house voted 523 in favor and 85 against. Lawmakers approved giving the EFSF powers to buy bonds in secondary markets, enable bank recapitalizations and offer precautionary credit lines. At the moment it looks increasingly like Greece will dodge the inevitable bullet on Oct 13th and avoid what will eventually end in default and restructuring Greece's banks. In less than 2 weeks (Oct 13th) Greece will default unless it gets the funds to get by; it will get the money it needs but it won't change much for Greece and the EU sovereign debt problems.
At 9:30 the DJIA opened -92, the 10 yr note +27/32 to 1.91% -9 bp. Mortgage prices +16/32 (.50 bp) frm yesterday's close.
At 9:45 Sept Chicago purchasing managers' index, expected at 54.0 jumped to 60.4 frm 56.5 in August. New orders component at 65.3 frm 56.9, employment at 606 frm 52.1 and prices pd at 62.3 frm 68.6. The data much better but there was no improvement in the stock market and the rate markets held their gains prior to the report. Any index over 50 is considered expansion, the higher the stronger.
Finally today, at 9:55 the U. of Michigan consumer sentiment index, expected at 57.5 was better at 59.4; current conditions 74.9 frm 74.5, expectations at 49.4 frm 47.0 and the 12 month outlook at 39 frm 38. Treasuries and mortgages slipped slighty on the better data and a stronger Chicago PM index.
The volatility in the equity markets show little chance it will decline any time soon. Many reasons and extruded rational explanations; Europe's debt mess, US fiscal stand-off with our political system, and a housing sector still in deep depression----and the list goes on. For all of the talk and ink on what is happening, the reality is investors and consumers get it more than any other entity, politician or Wall Street gurus. There is no end in sight for this choppy highly volatile condition.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, September 30, 2011
In this world of uncertainty and confusion we have been subject to wild gyrations in equity markets that have influenced daily trading in the bond and mortgage markets. Yesterday the DJIA closed up 143, this morning in futures trading the index at 9:00 was down 130. Yesterday mortgages closed better by .12 bp and up .25 bp frm 9:30; the 10 yr traded slightly over 2.00% most of the day but managed to fall back and close at 2.00% a very key level. This morning at 9:00 the 10 yield traded at 1.94% with mortgage prices +.31 bp frm yesterday's close. Rate markets have been tied into a very narrow range this week; conflicting news out of Europe and choppy stock markets keeping interest rates generally higher from last Friday's closes.
At 8:30 August personal income expected up 0.1% fell 0.1%, spending was expected 0.2%, it hit at 0.2%. July income revised to +0.1% frm 0.3% originally reported, spending in July revised from +0.8% to +0.7%. Treasuries and mortgages got a further bounce on the weaker income levels while the stock indexes declined further.
Most recent data on the US and global economies is declining and looking like the US and the world will fall back into recession, or for those like us that have never believed we came out of recession, a double dip. Even though data is confirming the decline there are more optimists that believe these are buying opportunities with good bargains. On the Street the mantra is never admit pessimism even in the face of reality, that was evident in 2008 and the sub-prime bubble. Chinese manufacturing shrank for a third month, the longest contraction since 2009. German sales fell the most in more than four years, while European inflation unexpectedly quickened to the fastest in almost three years this month. Industrial production in Japan grew less than economists had forecast. Concern that Europe’s sovereign-debt crisis will spread and the U.S. economic recovery is faltering has wiped out more than $9 trillion of value from global equities this quarter.
In Germany the upper house of parliament approved the enhanced fund today after the lower house voted 523 in favor and 85 against. Lawmakers approved giving the EFSF powers to buy bonds in secondary markets, enable bank recapitalizations and offer precautionary credit lines. At the moment it looks increasingly like Greece will dodge the inevitable bullet on Oct 13th and avoid what will eventually end in default and restructuring Greece's banks. In less than 2 weeks (Oct 13th) Greece will default unless it gets the funds to get by; it will get the money it needs but it won't change much for Greece and the EU sovereign debt problems.
At 9:30 the DJIA opened -92, the 10 yr note +27/32 to 1.91% -9 bp. Mortgage prices +16/32 (.50 bp) frm yesterday's close.
At 9:45 Sept Chicago purchasing managers' index, expected at 54.0 jumped to 60.4 frm 56.5 in August. New orders component at 65.3 frm 56.9, employment at 606 frm 52.1 and prices pd at 62.3 frm 68.6. The data much better but there was no improvement in the stock market and the rate markets held their gains prior to the report. Any index over 50 is considered expansion, the higher the stronger.
Finally today, at 9:55 the U. of Michigan consumer sentiment index, expected at 57.5 was better at 59.4; current conditions 74.9 frm 74.5, expectations at 49.4 frm 47.0 and the 12 month outlook at 39 frm 38. Treasuries and mortgages slipped slighty on the better data and a stronger Chicago PM index.
The volatility in the equity markets show little chance it will decline any time soon. Many reasons and extruded rational explanations; Europe's debt mess, US fiscal stand-off with our political system, and a housing sector still in deep depression----and the list goes on. For all of the talk and ink on what is happening, the reality is investors and consumers get it more than any other entity, politician or Wall Street gurus. There is no end in sight for this choppy highly volatile condition.
Thursday, September 29, 2011
Mortgage Market
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.
Thursday, September 29, 2011
Treasuries and mortgages prior to 8:30 were a little better but data at 8:30 turned rate markets slightly weaker. Weekly jobless claims were expected to decline 4K, as reported claims were down 37K to 391K the lowest claims since the beginning of April. Continuing claims at 3.729 mil frm 3.75 mil. Q2 final GDP was expected to increase to 1.2% frm 1.0% on the prelim report last month; as reported Q2 GDP grew 1.3%. Both reports pushed the rate markets down a little and added more gains in the stock indexes; at 9:00 the DJIA +149, the 10 yr note at 2.01% +2 bp and mortgage prices -4/32 (.12 bp).
On the European scene; some positive movement from Germany. Germany’s lower house of parliament approved the expansion of a bailout fund for debt-stricken euro- area nations to help contain the sovereign-debt crisis. The lower house voted 523 in favor of legislation aimed at expanding the powers of the 440 billion- euro ($599B) European Financial Stability Facility, while 85 voted against the measures and three abstained. The legislation is set to be debated and put to a non-binding vote in the upper house tomorrow. Greece will run out of money on Oct 13th, which of course is the drop dead deadline for Europe's leaders to act or Europe's house of debt cards will come tumbling down.
While the German vote is a big step, the consensus from investors is still negative. Bloomberg ran a survey recently, the results were overwhelming that at least one country in the EU would be dropped in the next year. About 93% of investors expect Greece to eventually default, according to the quarterly Global Poll of 1,031 Bloomberg subscribers. Forty percent see the currency bloc losing at least one member in the next year.
At 9:30 the DJIA opened +191, the 10 yr note -7/32 at 2.01% with mortgage prices -4/32 (.12 bp).
At 10:00 NAR's July pending home sales (contracts signed but not yet closed) were expected down 1.5%; sales were a little better down 1.2%; yr/yr sales up 7.7%. Not much reaction initially. The three data points today all better than expected. The 10 yr note at 10:00 at 2.02%.
At 1:00 this afternoon Treasury will auction $29B of 7 yr notes. The 2 yr and 5 yr auctions met solid demand. Today's 7 yr should also get solid bidding.
The 10 yr note continues to hang close to 2.00%, so far unable to climb over it on a close but equally the momentum to lower rates has stalled. As we noted in yesterday afternoon the 10 yr note yield is now higher than it was prior to the Fed announcement of "Operation Twist". US treasuries at the moment are losing the safe haven trade as Europe gets closer to feed Greece more money. Moves into and out of treasuries will not completely erode; the situation in Europe and with its banks is far from resolved and in turn volatility will continue.
Technically; the 10 yr note is testing and holding its 20 day moving average at 2.03%. The 10 yr yield hasn't traded above its 20 day average since early July, then it was over its 20 day for just five sessions---take those away and the 10 hasn't been above it since the first of April. It is the same with the 3.5 FNMA coupon; its 20 day at 101.83 is just 22 basis points below the present price. The relative strength indexes for the 10 and FNMA 3.5 are also at pivotal levels. We still do not believe rates will increase much but based on price action it is becoming less bullish.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, September 29, 2011
Treasuries and mortgages prior to 8:30 were a little better but data at 8:30 turned rate markets slightly weaker. Weekly jobless claims were expected to decline 4K, as reported claims were down 37K to 391K the lowest claims since the beginning of April. Continuing claims at 3.729 mil frm 3.75 mil. Q2 final GDP was expected to increase to 1.2% frm 1.0% on the prelim report last month; as reported Q2 GDP grew 1.3%. Both reports pushed the rate markets down a little and added more gains in the stock indexes; at 9:00 the DJIA +149, the 10 yr note at 2.01% +2 bp and mortgage prices -4/32 (.12 bp).
On the European scene; some positive movement from Germany. Germany’s lower house of parliament approved the expansion of a bailout fund for debt-stricken euro- area nations to help contain the sovereign-debt crisis. The lower house voted 523 in favor of legislation aimed at expanding the powers of the 440 billion- euro ($599B) European Financial Stability Facility, while 85 voted against the measures and three abstained. The legislation is set to be debated and put to a non-binding vote in the upper house tomorrow. Greece will run out of money on Oct 13th, which of course is the drop dead deadline for Europe's leaders to act or Europe's house of debt cards will come tumbling down.
While the German vote is a big step, the consensus from investors is still negative. Bloomberg ran a survey recently, the results were overwhelming that at least one country in the EU would be dropped in the next year. About 93% of investors expect Greece to eventually default, according to the quarterly Global Poll of 1,031 Bloomberg subscribers. Forty percent see the currency bloc losing at least one member in the next year.
At 9:30 the DJIA opened +191, the 10 yr note -7/32 at 2.01% with mortgage prices -4/32 (.12 bp).
At 10:00 NAR's July pending home sales (contracts signed but not yet closed) were expected down 1.5%; sales were a little better down 1.2%; yr/yr sales up 7.7%. Not much reaction initially. The three data points today all better than expected. The 10 yr note at 10:00 at 2.02%.
At 1:00 this afternoon Treasury will auction $29B of 7 yr notes. The 2 yr and 5 yr auctions met solid demand. Today's 7 yr should also get solid bidding.
The 10 yr note continues to hang close to 2.00%, so far unable to climb over it on a close but equally the momentum to lower rates has stalled. As we noted in yesterday afternoon the 10 yr note yield is now higher than it was prior to the Fed announcement of "Operation Twist". US treasuries at the moment are losing the safe haven trade as Europe gets closer to feed Greece more money. Moves into and out of treasuries will not completely erode; the situation in Europe and with its banks is far from resolved and in turn volatility will continue.
Technically; the 10 yr note is testing and holding its 20 day moving average at 2.03%. The 10 yr yield hasn't traded above its 20 day average since early July, then it was over its 20 day for just five sessions---take those away and the 10 hasn't been above it since the first of April. It is the same with the 3.5 FNMA coupon; its 20 day at 101.83 is just 22 basis points below the present price. The relative strength indexes for the 10 and FNMA 3.5 are also at pivotal levels. We still do not believe rates will increase much but based on price action it is becoming less bullish.
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