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. Last week had a lot of key economic reports; the July employment report Friday had more job growth than was thought but the unemployment rate increased 0.1% to 8.3%. The report is considered somewhat suspect due to the summer auto makers re-tolling, but the headline didn’t faze stock investors or bond traders taking the stock market to a huge rally and increasing the 10 yr note yield 9 basis points. Last week was one of increased volatility with the 10 yr on the week up only 4 basis points and mortgage prices for the week +6 bp in price. This morning the 10 yr note and MBSs are a little better after the strong selling Friday. At 9:30 the 10 yr yield down 2 bp with 30 yr MBS price +9 bp. The DJIA opened +42, NASDAQ +11, S&P +5. There are no data points today. This week Treasury has its quarterly refunding with 3 yr, 10 yr and 30 yr issues totaling $72B beginning Tuesday with the 3 yr offering. About the only data this week of real interest to traders; Monday afternoon’s June consumer credit and Thursday weekly jobless claims. The best we can say now about the bond and mortgage markets is both are in a neutral to bearish outlooks. Europe is still the elephant in the room but there is nothing that has changed for the last two weeks with any plan to deal with the debt that is drowning the euro. With little data this week the bond market will focus on the Treasury refunding beginning tomorrow. Of course Europe is still very much a factor for all global markets. Greece and its creditors agreed on the need to strengthen policy efforts to support growth. Representatives from the so-called troika of the European Commission, European Central Bank and International Monetary Fund met with Greek Finance Minister Yannis Stournaras in Athens yesterday at the conclusion of the meetings. The talks will determine whether Greece continues receiving funds from the country’s 240 billion euros ($297B) of rescue packages. Germany is still the wild card in the game for allowing the ECB to buy sovereign debt from Spain, Italy and other countries that need help. Chancellor Angela Merkel’s government today backed ECB President Mario Draghi’s proposals on bond buying to help bring down borrowing costs in Spain and Italy. The government is “not worried” by Draghi’s announcement of Aug. 2, deputy Merkel spokesman Georg Streiter told reporters at a regular press briefing in Berlin today, when asked whether the government is concerned that ECB independence might be compromised. Treasury prices rose briefly this morning, snapping a decline from last week, after Italian Prime Minister Mario Monti warned of a potential breakup of Europe without greater urgency in efforts to lower government borrowing costs. Although the bond and mortgage markets have backed up some on yields, the longer term bullish bias is still there. Reports that investor optimism and appetite for treasuries remains at some of the best psychological levels in months. There is still a lot of optimism out there that the Fed will ease again at its Sept meeting (12th and 13th) with a $600B purchases of bonds and mortgages ----$300B each. That is the belief now, and as long as there isn’t anything more than talk out to the EU region, the safety trade is likely to continue but with less enthusiasm than six months ago.