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. Friday, July 27, 2012 Global markets continue to focus on the comments yesterday from the President of the ECB; Draghi’s remark that the ECB is ready to use its firepower to print money to underpin the euro currency by re-starting purchases of EU member debt. He signaled central bank officials are prepared to do whatever is needed to ensure the euro’s survival and act on surging bond yields. ‘‘Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,’’ Draghi said during a speech in London yesterday, adding the comment ‘‘And believe me, it will be enough.’’ That very forceful quote is presently increasing optimism that next week at the ECB meeting the bank will re-start its Securities Markets Program, buying sovereign debt from the troubled countries in the Union (Spain and Italy along with Greece. Draghi’s speech yesterday was the most direct and psychological remark from anyone in the EU in recent weeks. Now he has to deliver, the risk in doing so is alienating key policy makers on the ECB council, such as Bundesbank President Jens Weidmann. The Bundesbank reiterated its opposition to bond purchases today. The US and Europe equity markets rallied yesterday and are continuing to gain this morning. The US 10 yr note yield closed at 1.40% Wednesday, this morning at 1.48%. Mortgage rates also edging higher the last three days. Markets were extremely negative about the impact on global growth, for weeks there was nothing coming from any official Europe as the euro currency fell and interest rates in Spain and Italy increased to levels that the two countries couldn’t meet future payments. Q2 advance gross domestic product, the value of all goods and services produced, rose at a 1.5% annual rate after a revised 2% gain in the prior quarter (previously +1.9%). Forecasts were for Q2 GDP at +1.2% to +1.4%. The GDP estimate is the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available. The Commerce Debt also revised GDP data going back to 2009; GDP grew 2.5% in the 12 months after the contraction ended in June 2009, compared with the 3.3% gain previously reported, the final quarter of last year was revised up to a 4.1% gain the fourth quarter gain was previously reported as 3%. At 9:30 the DJIA opened +24, NADSAQ +14, S&P +5. The 10 yr note at 9:30 at 1.48% +4 bp, 30 yr MBSs -24 bp frm yesterday’s close; 15 yr MBSs -12 bp. The U. of Michigan consumer sentiment index, expected at 72.0, increased to 72.3. The index based on the month end final reading is the lowest since last Dec when compared to the end of the month index. Next week is shaping up to be one of key weeks in months. The ECB meeting, the Bank of England meeting and the Fed’s FOMC meeting. Three key banks talking of potential easing moves. The Fed is expected to launch another easing move purchasing treasuries and mortgage-backed securities. The ECB meeting will focus on Draghi’s comments and either reject it or confirm with stimulus of bond buying. The US rate markets are seeing unwinding of some of the safety moves into treasuries sending the 10 yr down to 1.39%, now at 1.48%. Mortgage rates moving in tandem with the note as rates are increasing. The 10 yr, driver for mortgage rates, is testing its 20 day moving average; there have been only two days since early last April that the 10 yr yield traded above it, each time the yield fell back under the 20 the following day. The various technical studies we use are still holding but have weakened this week on the optimism about Europe. The surprise statement from Draghi has taken a lot of wind out of the bond and mortgage markets at the moment.