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. Markets started flat this morning after a quiet and generally unchanged trade yesterday. It is all about what Bernanke will say in his speech Friday at Jackson Hole, in the meantime investors and traders are unlikely to move markets much. A week ago there was a wide belief the Fed will ease at the Sept FOMC meeting and that Bernanke would signal the ease in his speech. Today that conviction has lost some momentum as the clock ticks on. An easing isn’t completely off the table but the timing may be. Yesterday Mohammad El Erian at PIMCO suggested Bernanke will hold off saying the Fed will ease at the Sept meeting and continue to imply the Fed is ready to move when necessary as the FOMC minutes clearly stated. A week ago Bernanke sent a letter to Congress reiterating he is prepared to do more if the economy falters. It depends on the data whether the Fed will ease again in Sept, recent data brings that into focus. Yesterday’s June Case/Shiller home price data was better than expected, home prices appear to have bottomed according the report; the 20 city home price index, expected unch frm May, increased 0.9%. and increased 0.5% from June 2011, the first gain since September 2010. This morning at 8:30 Q2 GDP revision increased the growth from +1.5% reported last month on the advance report to +1.7%. July new and existing home sales increased----data that was not in evidence when the FOMC met on Aug 1st. July retail sales were better than thought, also coming after the FOMC meeting. Based on improving data the Fed may hold off any easing. Yesterday Mario Draghi, Pres. Of the ECB cancelled his appearance at eh Jackson Hole conference, saying he was too busy to take the time out. Not sure what to make of it if anything but there is speculation the bank is moving closer to a resolution to the debt crisis in Greece, Spain and Italy. That said, there can’t be any significant plan until the German high court rules on the legal issues in the EU charter relating to what the ECB has the power to implement. Draghi shot back at German resistance for his plan to buy debt from Spain and other countries to cap interest rate levels. The ECB “will always act within the limits of its mandate,” Draghi wrote in a commentary for a German newspaper. Angela Merkel has signaled broad support for ECB bond buying, but is finding resistance among some politicians in Germany. Three years of talk and no real solutions so far, dragging global economies down. The weekly MBA mortgage applications out this morning. The purchase index rose 1.0% in the August 24 week for a second straight sizable increase. The refinancing index, which had been very strong earlier in the summer, fell 6.0% for a second straight weekly decline. Rates moved lower in the week with the average 30-year mortgage for conforming loans ($417,500 or less) down 6 basis points to 3.80%. At 9:30 the DJIA opened +5, NASDAQ +4, S&P +2. The 10 yr note at 9:30 1.65% +1 bp; 30 yr MBS price -6 bp. At 10:00 July pending home sales from NAR were expected up 1.0% after declining 1.4% in June. Pending sales, contracts signed but not closed increased 2.4% from June and yr/yr +12.4%. The overall index is at its highest level since April 2010. The increase in pending sales implies August new and existing home sales will be strong. Another better than expected data point that may keep the Fed from easing again soon. The initial reaction to the strong report sent the 10 yr note yield up another basis point to 1.66% up 2 bp frm yesterday. At 1:00 Treasury will auction $35B of 5 yr notes. Yesterday’s 2 yr auction was OK, in line with the average demand over the last 12 months. Finally today, at 2:00 the Fed Beige Book will be released; the Fed staff’s detailed report for all 12 districts.