Mortgage Rates

Mortgage Rates Slightly weaker this morning for interest rates with stock indexes a little better. The 10 yr yield fell to 1.50% yesterday, down another 2 basis points, this morning the 10 yr at 1.51% at 9:00 ahead of the $21B 10 yr note auction at 1:00 this afternoon and the release of the FOMC minutes of the 6/21 meeting at 2:00 this afternoon. Not a lot happening this morning; May US trade deficit was -$48.7B about in line with estimates after April deficit was -$50.6B. 10:00 we got the May wholesale inventories; in line up 0.3% with sales down 0.8%. In Europe, more spending cuts and increased taxes in Spain as it tries to stay in line with the austerity requirements to get more assistance. Spanish Prime Minister Rajoy announced tax increases and spending cuts totaling 65 billion euros ($80 billion), risking a deepening recession to keep the euro financial crisis at bay. It is the fourth austerity package in seven months and will raise the sales tax to 21% from 18%; scrap a tax rebate for home buyers; scale back unemployment benefits and study pension cuts; consolidate local governments and eliminate the year-end bonus for public workers. The budget measures, covering the next two-and-a-half years, are about double those previously announced. EU officials are putting the finishing touches to a 100 billion-euro bailout for Spain’s banks. Germany held its 10 yr bund auction today; borrowing costs fell to a record-low 1.31% in today’s auction of 10-year securities, according to a statement from the Bundesbank. That’s down from 1.52% at a June 13 sale. Germany’s 2 yr note was at minus 0.013%. It slid as low as minus 0.018% last week. Investors have to pay the government to buy a 2 yr note; in the US our 2 yr note is +0.27% while the US 10 yr yield is at 1.51%. In France it’s 10-year yield slipped eight basis points to 2.32%, while its two-year rate declined as much as four basis points to 0.16%, also an all-time low. Investors continue to move to so-called safety continuing to push interest rates lower; a positive sign that US rates will likely to continue to fall. At 9:30 the DJIA opened -3, NASDAQ -5, S&P -1; the 10 ye note yield unchanged at 1.50% with mortgage prices also unchanged from yesterday’s closes. Another blow to the economic outlook this morning; the USDA released the July crop report and once again revised the corn and soybean output lower. Consumers, already dealing with gasoline prices hovering at $3.50, will see a huge increase in food prices with most all food will increase. Corn, historically around $3.00/bushel now trading above $7.40 for the crop currently planted. The increase in food prices that will come sooner than many think at the moment will add more credence for the Fed to launch another QE.