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 opened flat this morning. Friday saw a nice rally on the weak August employment data, not in treasuries but MBSs. Treasury market rallied in the morning, dropping the 10 yr rate to 1.59% frm 1.73% prior to the 8:30 employment report, but could not hold the improvement and ended unchanged on the day at 1.68%. Mortgages fell from their 9:30 levels but did hold most of the improvement on employment. MBSs a little stronger than treasuries now with the belief that a Fed easing move will focus on increasing purchases of mortgage-backed securities more than treasuries. The August employment report was weak, even though the headline saw a decline of 0.2% to 8.1% on unemployment. The decline in the rate of unemployment was due to more potential workers becoming discouraged and dropping out of even looking for a job. Non-farm jobs increased just 96K while private jobs up just 103K, both well below estimates from economists. The report has increased optimism the Fed will ease on Thursday at the conclusion of the 2 day FOMC meeting that starts Wednesday. Treasury will auction $66B of 3 yr, 10 yr and 30 yr issues Tuesday through Thursday. Economic data doesn’t hit until Thursday and Friday this week. Today the only scheduled report is at 3:00 with July consumer credit, while markets don’t pay a lot of attention to the report, we do. It is one of my favorite reports each month, measuring how consumers are actually spending and is more important than consumer sentiment or consumer confidence that are reported each month. Putting your money where your mouth is. The revolving credit component was not good in June, declining $3.7B; revolving credit is credit cards and measures underlying consumer confidence in their outlook, more use of cards increasing debt suggests consumers feel better about the outlook----or it could mean consumers are so strapped they are using cards to stay afloat. That isn’t the case now though; any increase in revolving credit should be seen as optimism. The decline in revolving in June does suggest the today’s revolving credit may be up. The stock and bond markets trading in a range, even with talk of an easing move from the Fed there is no sustained improvement in either stock indexes or the bond market. It is important to keep close this week; have the interest rate markets already discounted the easing in present price and yields? Over the weekend Greece’s political parties were unable to agree on spending cuts; stock futures declined today as Greek Prime Minister Antonis Samaras meets officials from the nation’s creditors after failing to secure agreement from coalition partners on spending cuts. The treasury market unchanged. Germany’s Federal Constitutional Court is due to rule on the country’s participation in the European Stability Mechanism, a permanent 500 billion-euro fund that offers loans to member states and may buy their bonds to lower borrowing costs; the ruling is expected on Wednesday.