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. In trading overnight the bellwether 10 yr note yield climbed to 1.855% after ending yesterday in the US at 1.81%. This morning the 10 yr has backed down to 1.81% in early trading. At 8:30 weekly jobless claims were rather benign, up 2K to 366K; claims have been stable now for the last month hanging around 360K to 370K. That claims are flat (not falling or increasing) implies businesses are no long firing but equally not hiring. The four-week moving average, a less volatile measure, dropped to 363,750, the fewest since the week ended March 31. July housing starts were expected to decline 1.4%, as reported -1.1% after increasing 6.8% in June. July building permits were expected up 1.4%, as reported up 6.8%. Building permits, a proxy for future construction, rose to an 812,000 pace, the most since August 2008. Early activity in the stock market futures trading had the DJIA up 28 at 9:00, NASDAQ +7 and S&P +2. The 10 yr note unchanged at 1.81%. Interest rates have increased on two fronts; less fear over Europe’s debt and economic crisis waning at the moment and less belief now that the Fed will ease in Sept. Better economic reports recently have taken the QE off the front burner. At the last FOMC meeting the Fed said it would closely monitor economic activity to determine whether the economy needs more easing, given the improving data markets are now less certain the Fed will act. The two issues have combined to send interest rates on long dated treasuries up 40 basis points in rate (10 yr note) and mortgage rates higher in turn. Yesterday Goldman Sachs was out arguing that the fed won’t ease in Sept, Goldman carries weight in markets. At 9:30 the DJIA opened +19, NASDAQ +8, S&P +2; 10 yr note 1.79% -2 bp and down 7 bp frm overnight highs. At 10:00 the August Philadelphia Fed business index, a key data point, the index was at -7.1 frm -12.9 in July. The report is weaker than forecasts that expected the index at -5.0. A reading under zero is considered contraction. The DJIA went from a slight gain to a slight loss on the data. The 10 yr note and mortgage markets got a small bounce on the weaker news. Today’s report is in line with figures from The Federal Reserve Bank of New York earlier this week that showed manufacturing contracting for the first time in 10 months. Slowing demand from Europe to China and cutbacks in business investment in new equipment may be hurting U.S. factories Both the treasury and mortgage markets are approaching oversold technical levels. The potential for some retracement is high although any price improvements are not likely to sufficient enough to change the current trend. To reverse the present negative outlook for interest rates the market will need a few weak economic reports to bring back the Fed easing idea that has faded recently, or more fear over what is happening in the debt crisis in Europe. Without either interest rates won’t fall back much. We still don’t believe interest rates will increase a lot more, however, as noted yesterday, we don’t trade on beliefs but on how markets are performing and presently the outlook isn’t good.