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. At 8:45 this morning the 10 yr yield was up 6 bp frm yesterday’s close at 1.65%; 30 yr MBS price down 23 bp frm yesterday’s close. 8:15 the ADP August private jobs were expected up 149K, as reported ADP said job growth was 201K. At 8:30 weekly jobless claims were expected down 4K to 370K, as reported claims fell to 365K -12K frm revised claims last week from 374K to 377K. The ADP data; the 201,000 increase in employment, the biggest gain in five months. Estimates in the Bloomberg survey ranged from 90,000 to 170,000. Since April 2010, ADP’s initial estimate has either overstated or understated the Labor Department’s initial reading on private payrolls by 69,000 on average. Goods-producing industries, which include manufacturers and construction companies, increased payrolls by 16,000, today’s figures showed. Employment in construction rose 10,000, while factories added 3,000 jobs. Service providers added 185,000 workers, up from 156,000 a month earlier. Companies employing more than 499 workers added 16,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 86,000 and small companies increased payrolls by 99,000, according to ADP. Weekly jobless claims are the lowest in 4 weeks but still in a range that has kept claims between 360K and 375K. The claims data shouldn’t be taken as a huge turn in employment given the recent range. A Labor Department spokesman said there was nothing unusual in the data last week, and that there was no indication Hurricane Isaac had any effect on filings. The level of claims in Louisiana has been fairly stable, he said, and only one state - Colorado - was estimated last week. While claims are better than thought, and initial comments have been optimistic; the best we can say is that firings and lay-offs appear to have leveled off over the last month. The number of people continuing to receive jobless benefits fell by 6,000 in the week ended Aug. 25 to 3.32 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 11,800 to 2.27 million in the week ended Aug. 18. Overall, a baby step but very welcome. Europe’s stock markets rallying today; US stock indexes also better. At 9:30 the DJIA opened +95, NASDAQ +25, S&P +10. At 9:30 the 10 yr note at 1.65% +6 bp; 30 yr mortgage price down -33 bp. Within 5 minutes of the opening of the stock market the DJIA was up 132 points. The ECB left its benchmark interest rate at a record low of 0.75% today, as expected. The Bank of England kept its key rate at 0.5 percent and held its bond-purchase target at 375 billion pounds ($590B) today. the European Central Bank cut its economic forecast for the region and detailed plans to buy bonds. The ECB outlined what its bond buying program would do; buy bonds from countries struggling, the terms would be bonds with one to three maturities. Countries asking for the assistance to keep their interest rates from increasing would have to agree with terms sat out by ECB that will force more austerity and spending cuts. There will be no limit to how much countries can sell to the ECB; each month the ECB will publish which countries sold to the ECB. The German 10 yr bund yield has increased 10 bp this morning to 1.50%. The last data point today; at 10:00 the August ISM services sector index, expected to be at 53.0 frm 52.6 in July, increased to 53.7, the best since May. Another data point that is better than forecasts. Tomorrow the BLS releases its August employment data. The unemployment rate expected unchanged at 8.3%, non-farm jobs +125K and non-farm private jobs +134K. The ADP data this morning may cause traders to increase their outlook after the payroll people said 201K private jobs. The bond and mortgage markets have been weakening since last Friday and now at crucial technical levels. With today’s data markets now questioning the expectations that the Fed will ease in Sept. Since Tuesday the 10 yr note has been increasing, up 4 bp on Tuesday and Wed, add another 7 bp this morning. Mortgage prices held well until this morning. If the August employment report is better than expected tomorrow the easing idea will likely fade.