Mortgage Rates

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. Treasuries and mortgages starting a little weaker this morning after the drop in prices yesterday afternoon when the stock indexes rallied off the lows seen yesterday morning. The DJIA traded down 200+ points yesterday morning, but cut the loss by half at the close to -101. The rate markets do what they do, when stock indexes improve it takes yields a little higher. This morning in pre-market trade the stock indexes were fractionally better with the bond and mortgage markets weaker. Yesterday mortgage prices drifted lower in the afternoon as the stock market cut losses. Late yesterday Moody’s lowered the outlooks on the Aaa credit ratings of Germany, the Netherlands and Luxembourg, citing the “rising uncertainty” about Europe’s debt crisis. This morning the German 10 yr bund is trading about 7 bp higher at 1.25% contributing to the higher yield on the US 10 yr note. Moody’s didn’t downgrade the Aaa rating on German debt but said the outlook has weakened as Europe’s debt crisis continues to grow. The ratings company cited the risk that Greece will leave the 17-nation euro currency and the “increasing likelihood” of collective support for European countries such as Spain and Italy, according to a statement. German manufacturing and services output contracted in July more than economists had forecast. An index based on a survey of purchasing managers in the manufacturing industry declined to 43.3 this month from 45 in June, London-based Markit Economics said in a report. Economists had predicted a reading of 45.1. The measure of Germany’s services industries slipped to 49.7 from 49.9. Economists had projected 50. At 9:30 the DJIA opened +3, NASDAQ +5, S&P +1. The 10 yr note -8/32 at 1.45% +1 bp; mortgage prices -3/32 (.09 bp) frm yesterday’s close. The only data today; the May FHFA housing price index expected +0.3% The Federal Reserve plans to buy as much as $2B of Treasuries due from February 2036 to May 2042 today as part of a program known as Operation Twist. This afternoon at 1:00 Treasury starts the monthly auctions of 2s, 5s and 7s. The total unchanged from previous months, $99B; 2 yr and 5 yr $35B each, the 7 yr note $29B. Demand for the 2 yr should be strong. The market is expecting good demand for the auctions, if it is weak look for the rate markets to edge higher in yield. The 10 yr note fell to 1.41% early yesterday morning with mortgage prices nicely higher, by the end of the session however the 10 yr moved back up to 1.44% and mortgage prices while still higher on the session were lower than at 9:30. This morning the negative outlook Moody’s did on Germany yesterday put some pressure on German rate markets, the move higher on German 10 yr bunds is forcing US interest rates higher even with the stock market, after opening a little better by 10:00 trading weaker. The 10 yr note is back to 1.46%, what was resistance is now a minor support level.