Mortgage Rates

Mortgage Rates Treasuries and mortgages opened better this morning; at 7:00 the 10 yr note price was up 15/32 from Tuesday’s close with its yield at 1.59% -4 bp; mortgage prices not doing much in early activity. Overnight the ECB cut its base rate by 0.25% to 0.75%, it was generally expected but really doesn’t matter much in terms of the euro debt crisis. China also cut its rates for the second time in a month. Early activity had the US stock indexes about unchanged from Tuesday. China cut interest rates and allowed banks to offer bigger discounts on their lending costs, intensifying its efforts to reverse a slowdown. China’s one-year lending rate will fall by 31 basis points and the one-year deposit rate will drop by 25 basis points with effect from tomorrow, the People’s Bank of China said. Banks can offer loans of as much as 30% less than benchmark rates. The Bank of England restarted bond purchases two months after halting its expansion of stimulus as the deteriorating outlook spurred policy makers to ramp up efforts to kick start a recovery. The Monetary Policy Committee raised its asset-purchase target by 50 billion pounds ($78B) to 375 billion pounds and said the purchases will take four months to complete. China, the ECB and the BOE all made rate moves today; almost looks like a coordinated move but that’s not likely. Given the deteriorating global economy rate cuts were generally expected, the timing was the uncertainty. Weekly mortgage applications fell last week according to the MBA. The overall index declined 6.7%. The purchase index for the June 29 week is up 1.0% vs. two prior weeks of small declines. The refinance index is down 8.0 % reflecting a significant drop in applications for government loans. The 30-year rate, at 3.86% for conforming loans ($417,500 or less), is down 2 basis points in the week for a new record low. At 8:15 ADP, the payroll people, reported their view of non-farm private jobs in June. It was expected to show an increase of 105K private jobs; as reported ADP is saying private job growth was +176K, much higher than traders were thinking. After a stronger open in treasures prices declined frm +15/32 to +9/32 ahead of the next data point, weekly jobless claims. Interesting that the stock indexes didn’t jump much on the jobs data. Weekly claims at 8:30 expected -1K to 385K, was another better report than thought. Claims dropped 14K to 374K the lowest claims in a month. Last week’s claims followed the recent trend of revisions upward, from 386K to 388K---not much. Continuing claims increased to 3.306 mil frm 3.302 mil. The 4 week smoothing average on claims fell 1500 to 387,750. On that report treasuries gave up more of the early gains, up just 8/32 at 1.62% frm the low early at 1.59%. Keeping up the running activity this morning; at 9:30 the DJIA opened -60, NASDAQ -9; the 10 yr note +3/32 at 1.62% -1 bp, MBS 30 yr price unchanged at 105.09 (105.28 bp). So far this morning there has been a lot of price volatility in all markets; crude oil higher earlier, lower at 9:30, stock indexes lower early then higher then opening lower. The rate markets were strong at 8:00 with the 10 yr yield at 1.59% down 4 bp, mortgage prices higher early then back to unchanged at 9:30. The last data today; the June ISM services sector index; expected at 53.0 frm 53.7. The index declined to 52.1 the lowest reading this year. The figures follow July 2 data that showed manufacturing shrank for the first time in almost three years as the global economy weakened. The ISM manufacturing index fell to 49.7 in June from 53.5 a month earlier. Trade volume is light this morning with many taking the day off and ahead of tomorrow’s employment data. Prior to the ADP this morning the estimate was an increase of 100K jobs, 105K private jobs with the unemployment rate unchanged at 8.2%. For over a month now long term rates, including mortgage rates have been tied in a narrow range with no trend movement. The benchmark 10 yr has strong resistance at 1.56% and equally strong support at 1.68%; when the range is broken we would expect a swift move in the direction of the breakout.

Mortgage Rates

Mortgage Rates Treasuries and mortgages opened a little weaker this morning after the 10 yr and the MBS markets both tested their best levels in the last month yesterday. The very tight trading range that has been holding markets in check for the past month continues. The early trading in stock index futures was a little better but not much. Not a lot of fresh news to be concerned with today. Europe is still in the headlights but after the summit meeting last week there has been some quiet out of the region. Europe’s leaders bought a little bit of time in staving off a euro-area breakup after last week’s summit even as the region remains a long way from stabilization. At the summit there was agreement to loosen bailout rules, lay the foundations for a banking union and break the link between sovereign and banking debt through the direct recapitalization of lenders. After the meeting the US bond market saw less buying as a safety trade that has been a key reason US long term rates are so low. It is likely that the current pause in the crisis won’t last long though; Germany was pushed into the position of going along with other leaders in the euro region but it isn’t likely this will end well and without continued disagreements over austerity and possible stimulus incentives. The purchasing managers’ index in China rose to a three-month high of 56.7 in June from 55.2 in May. The result may be a sign that growth in the world’s second-largest economy may steady after leaders stepped up stimulus to counter a slowdown and maintained property curbs aimed at lowering home prices. The government cut interest rates last month for the first time since 2008 and has reduced banks’ reserve requirements three times since November. On Sunday China’s official manufacturing PMI in June was 50.2, signaling a slower expansion for a second month, according to a separate report. In the US the June ISM services sector index will be released on Thursday. At 9:30 the DJIA opened -12, NASDAQ +0.16; the 10 yr note 1.60% +1 bp and mortgage prices unchanged from yesterday’s closes. Thursday the ECB meets with some thinking the bank will lower interest rates. Crude oil is headed higher today as supplies decline with the Iran embargo. At 10:00 May factory orders, the only data today, was better than expected; +0.7% with markets looking for +0.4%. The stock indexes gained a little on the better orders but trade is slow and will likely remain thatr way. The stock market will close at 1:00 this afternoon and the bond and mortgage markets close at 2:00 pm. Both the 10 yr note and 30 yr MBSs continue to find support at their 20 day averages and remain in their tight ranges. We don’t want to call this a bull market in the bond market anymore; the reality is it is neutral. Unable to establish any trend over the last month; traders are taking advantage of buying on dips on prices, selling on rallies as long as the tight range continues. Friday the June employment report is due with general expectations that it will be a weak one; when it comes to employment reports talk is just that, the report is usually a surprise one way or the other. Given the recent data confirming a slowdown the report shouldn’t be a surprise on more jobs,

Mortgage Rates

Mortgage Rates Treasuries and mortgages doing a little better to start this week’s action. The 10 yr note +6/32 at 1.62% and at 9:30 30 yr mortgages +3/32 (.09 bp) frm Friday’s closes. The DJIA opened -16, NASDAQ -3. The 4th falls in the middle of the week. Trading volumes should be thinner than usual with many taking a few days off. There are a number of key measurements this week; both June ISM reports (manufacturing today (see below) and services on Thursday), weekly claims on Thursday and the June employment data on Friday. The early forecast for the employment report, non-farm payrolls +100K and non-farm private jobs +105K with the unemployment rate unchanged at 8.2%. At 10:00 two reports; the June ISM manufacturing data main index was expected at 52.2; as reported manufacturing in the U.S. unexpectedly contracted in June for the first time in almost three years, indicating a mainstay of the U.S. expansion may be faltering. The Institute for Supply Management’s manufacturing index fell to 49.7, worse than the most-pessimistic forecast in a Bloomberg News survey, from 53.5 in May. The ISM’s U.S. production index decreased to 51 from 55.6. The new orders measure dropped to 47.8, the lowest since April 2009, from 60.1, and the gauge of export orders declined to 47.5, also the lowest in three years, from 53.5. The employment gauge decreased to 56.6 from 56.9 in the prior month. The unexpected decline sent interest rates lower and stock indexes down frm pre 10:00 levels. May construction spending also at 10:00 was stronger than the 0.2% expected, increasing 0.9%. Europe’s economy is showing increasing signs of weakness after stalling in the first quarter as the worsening fiscal crisis erodes the confidence of executives and consumers. The gauge of euro-region manufacturing held at 45.1 in May, London-based Markit Economics said today in a final estimate. That compares with an initial estimate of 44.8. A reading below 50 indicates contraction. The European Central Bank’s governing council gathers in Frankfurt on Thursday with speculation officials will lower their benchmark interest rate by at least 25 points to a record low of 0.75% as the economy hovers near recession. A purchasing managers’ index for China fell to 48.2 in June from 48.4 in May, HSBC Holdings Plc and Markit said today. A similar measure released by the government yesterday also slid. The purchasing managers’ index released yesterday by the Beijing-based statistics bureau and China Federation of Logistics and Purchasing fell to 50.2 in June from 50.4 in May. The data showed inflation pressures waning, a slump in export orders, a lack of domestic demand and a “modest” decline in the size of the manufacturing workforce. The gauge of export orders in the federation’s index contracted for the first time since January. The US 10 yr note and 30 yr mortgage rates continue to trade in their respective narrow ranges; both are holding within five week ranges but there is an increasing belief Europe won’t drive safety moves into US treasuries as strongly as the last eight months. One of key reasons US rates have stayed low is due to investors parking money in the safest places as Europe wrestles with how to save banks and cut spending.

Mortgage Rates

Mortgage Rates Stocks strong this morning with the bond and mortgage markets trading lower in price and higher in yield. French President Francois Hollande led a revolt against Germany’s austerity-first doctrine for combating the financial crisis, winning easier aid terms for Spain and Italy in an effort to reshape the balance of power in Europe. At the 19th European summit since the crisis broke out, Hollande pushed through the concessions by threatening to delay endorsement of a deficit-reduction treaty that German Chancellor Angela Merkel touted as one of her signature achievements. Euro leaders agreed to let the permanent bailout fund pour money into Spanish banks directly, instead of channeling it via the Spanish government. Direct recapitalizations will be possible once Europe sets up a single banking supervisor, possibly as early as 2013. Spanish and Italian bonds surged after euro-area leaders expanded steps to stem the debt crisis by easing repayment rules for emergency loans to Spain’s banks and relaxing conditions on potential help for Italy. Given past non-performances when EU summits were held, this one is being considered some kind of success. May personal income increased 0.2% while spending was unchanged, income was on target but spending was weaker than +0.1% expected. At 9:30 the DJIA opened +120, NASDAQ +58; the 10 yr note at 9:30 -22/32 1.66% +8 bp, 30 yr MBS price -7/32 (.22 bp) frm yesterday’s close. At 9:45 the June Chicago purchasing mgrs. index, expected at 52.4, came at 52.9 frm 52.4 in May. The employment index at 60.4 frm 57.0, new orders at 51.9 frm 52.9 and prices pd at 54.0 frm 60.4. The data slightly better than expected but no noticeable reaction to it as the stock market was already up over 170 points and the 10 yr -19/32 at 1.65% +7 bp. At 9:55 the U. of Michigan consumer sentiment index was expected at 74.1, it fell to 73.2; the current conditions index at 81.5 frm82.1, the expectations index at 67.8 frm 68.9. All the indexes are the lowest since last Dec. There was no selling on the data as markets are totally consumed with what is presently seen as significant progress at the EU summit. More likely, a relief since there was little belief that anything would come from the 19th summit since the first 18 didn’t lead to anything of substance. Although there was better news out of the EU summit that was widely expected to be anther summit with nothing emerging, the US interest rate markets continue to drift in their trendless and sideways moves. The 10 yr note support remains at 1.70% and strong resistance at 1.56%. The bullish bias on the US rate markets is still intact but is losing momentum over the last three weeks; we will hold for now but a move on the 10 yr above 1.70% will set off additional selling and rates will inch up. ON the downside for yields, there isn’t any momentum or reason now to add more bond buying.

Mortgage Rates

Mortgage Rates The equity markets opened weaker this morning boosting the rate markets. Still no directional trend though as the bond and mortgage markets continue in their tight ranges. At 8:30 weekly jobless claims were expected down 2K but fell 6K to 386K; however not a good report. Last week’s claims were revised higher to 392K from 387K continuing the trend of upward revisions on claims. Continuing claims did fall, to 3.296 mil frm 3.311.mil and the 4 wk average also declined a little, to 386,750 from 387,500 last week. There wasn’t much reaction in the markets to the data. The final report on Q1 GDP was right on, +1.9% unchanged from last month’s preliminary report. Unemployment remains elevated on concerns about the fallout from the European debt crisis and the so-called fiscal cliff that will face the U.S. at the end of this year may prompt employers to keep payrolls lean. The Bush tax cuts set to expire at the end of this year and the reduced SS payments also set to end. Given the elections and the inability of Congress to do anything along with declining economic outlooks for most of the global markets are not building blocks to recovery and lower unemployment. Payrolls in May expanded by 69,000 workers, the slowest pace in a year, and have cooled each month since January. The jobless rate, which climbed to 8.2% in May, has been stuck above 8 percent since February 2009, the longest stretch of such elevated levels in the post-World War II era. JP Morgan Chase’s losses on that hedge trade that went wrong are now seen to be as high as $9B, up from the $2 to $4B that Janie Dimon had talked about. The increased loss estimates are sending the bank’s stock down and dragging the rest of the big banks with it. Yesterday Britain’s Barclay Bank was fined $431 mil for ostensively manipulating LIBOR rates. Its shares dropped as much as 18% as U.K. Chancellor of the Exchequer called for a criminal probe amid speculation that lenders could face billions of dollars in lawsuits. Traders at the U.K.’s second-biggest bank by assets routinely coordinated with counterparts from at least four other banks in an attempt to move interest rate benchmarks, according to documents released yesterday by the U.S. Commodity Futures Trading Commission, the U.S. Justice Department and the U.K. Financial Services Authority. Nearly a day goes by without some kind of scandal or negative news with big banks; a trend that is now 5 years old and with no end of it in sight. An index of executive and consumer sentiment in the 17-nation euro area dropped to 89.9 from a revised 90.5 in May, the European Commission in Brussels said today. That’s the lowest since October 2009. In Germany, the number of people out of work rose a seasonally adjusted 7,000 to 2.88 million. Germany’s adjusted jobless rate held at 6.8% in June, but with no agreement on how to deal with debts in a number of EU countries the economy of the euro region is going to fall further. A gauge of sentiment among European manufacturers fell to minus 12.7 from minus 11.4 in May, the commission’s report showed. That’s the lowest since February 2010. An indicator of services confidence dropped to minus 7.4 from minus 5.2, while a gauge of consumer sentiment slipped to minus 19.8 from minus 19.3. The EU summit is underway now in Brussels however Germany put a bucket of water on creating euro bonds earlier this week, now there isn’t much expected when the summit concludes tomorrow. The DJIA opened -85, NASDAQ +23; the 10 yr note at 1.58% down 5 bp and up 12/32; 30 yr mortgage prices up 5/32 (.15 bp) frm yesterday’s closes. Markets are waiting for the Supreme Court’s decision on Obamacare that will be released today. Talk that in the next hour. The ruling will have a number of potential impacts depending on what the Court says. I the meantime videos of people in front of the Court resembles a circus atmosphere with one sign being carried saying, “you can’t make this kind of thing up”. Just as we send this Reuters is reporting the individual mandate has been upheld. Treasury will auction $29B of 7 yr note this afternoon at 1:00.

Mortgage Rates

Mortgage Rates The bond and mortgage markets continue to trade quietly with little change this week ahead of the EU summit beginning tomorrow. The stock indexes a little better early on as May durable goods orders were better than thought. Durables up 1.1% with forecasts of +0.5%; ex the volatile transportation orders up 0.4%, less than 0.7% expected. April ex transportation orders were revised from -0.9% to -0.6%. Growth is cooling as a slowdown in global markets emanating from Europe harms exports and curtails equipment spending, hurting sales at manufacturers. At 9:30 the DJIA opened +45, NASDAQ +12; the 10 yr note at 9:30 +1/32 at 1.62% while mortgage prices were down 1/32 (.03 bp) frm yesterday’s close. Italy’s 10-year bond yield fell three basis points, or 0.03 percentage point, to 6.15%, after rising to 6.20%, the highest level since June 14. Spain’s 10-year yield declined two basis points to 6.85%, after jumping 49 basis points over the past two days. Spain and other countries are going to push for measures to bring down borrowing costs when European Union leaders meet for a two-day summit starting tomorrow in Brussels. German Chancellor Angela Merkel said today issuing common bonds is the “wrong way” to achieve the greater integration needed to resolve the debt crisis. She said Spain was right to request for help for its banks and Italy was on path to growth. Merkel has caused tension among EU members by resisting calls for joint euro bonds. Germany’s 10-year bund yield climbed four basis points to 1.55% after dropping to 1.46% two days ago, the lowest level since June 19. It wasn’t too long ago that the German 10 yr traded 30 basis points lower in yield than US 10s, now just 7 bps lower. Merkel said that euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically “wrong and counterproductive.” The EU summit appears to be an attempt to get euro bonds to take the heat off Spain and Italy as well as other debt ladened countries in the region. “I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures,” she said. “Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured;” Germany isn’t about to tie itself to poorly managed countries. “The sovereign debt crisis shows us daily that deficiencies in one euro-zone country can cause difficulties in the entire euro zone,” Merkel commented. “It also shows us that national answers aren’t enough to secure the euro area’s stability.” The summit isn’t going anywhere as long as Germany doesn’t get its way. The NAR reported May pending home sales up 5.9% with forecasts of an increase of 1.0%. Much stronger with strength coming from the West where prices are increasing in places like Phoenix and Las Vegas. Yr/yr pending home sales up 13.3%. On the news the stock market increased a little but the bond and mortgage markets showed no reaction. This afternoon Treasury will auction $35B of 5 yr notes; yesterday’s 2 yr was OK but not unusually strong; the 5 yr may also have a little less bidding today. Mortgage applications decreased 7.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 22, 2012. The Refinance Index decreased 8.0% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The refinance share of mortgage activity decreased to 79 percent of total applications from over 80 percent the previous week. The adjustable-rate mortgage (ARM) share of activity is about 4.0% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.88% from 3.87%, with points decreasing to 0.40 from 0.49 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.12% from 4.06%, with points decreasing to 0.35 from 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.71% from 3.72%, with points decreasing to 0.46 from 0.47 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.24% from 3.25%, with points decreasing to 0.44 from 0.45 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.81% from 2.75%, with points increasing to 0.41 from 0.33 (including the origination fee) for 80% loans.

Mortgage Rates

Mortgage Rates Treasuries and mortgages improved yesterday as the stock market declined; today, as has been the case recently, after a day of improvement in the bond markets prices are weaker. The stock indexes are better this morning, both markets are in tight narrow ranges for the last three weeks. The Case/Shiller April price index declined in April but was the best in months. Property values in 20 cities dropped 1.9% in April from the same month in 2011, the smallest decline since November 2010, after decreasing 2.6% in the year ended March. Phoenix showed the biggest adjusted monthly increase, with prices rising 2.5% from March. Detroit showed the biggest decrease at 2.1%. Ten of the 20 cities in the index showed a year-over-year decline, led by a 17% drop in Atlanta, the only city to show a double-digit decrease. Phoenix showed the biggest year-over-year increase, with prices rising 8.6% in the 12 months to April. At 9:30 the DJIA opened +24, NASDAQ +10; the 10 yr note -9/32 at 1.64% +3 bp and 30 yr mortgage prices down 4/32 (.12 bp) frm yesterday’s close. At 10:00 June consumer confidence index, expected at 64.0 frm 64.9, fell to 62.0 and May revised to 64.4 The present situation index at 46.6 frm 44.9 (revised frm 45.9); the expectations index at 72.3 frm 77.3 (revised frm 77.6). The confidence index is the lowest since last January and the expectations index the lowest since last November. No reaction to the weaker data, yet it is another weak report as most reports have been the last six weeks. At 1:00 Treasury will auction $35B of 2 yr notes; demand is expected to be OK but not stellar. Europe still is the centerpiece for global market outlooks as the region is completely unable to solve the debt issues in the EU. Thursday begins the 19th summit meeting since 2010 when the crisis began; no progress so far in attacking the problems head on and there isn’t likely to any progress this time around. Four officials led by European Union President Herman Van Rompuy today released a road map to a fiscal and banking union that ran into immediate criticism from Germany for placing too little emphasis on controlling national budgets. The “map” centered on common banking supervision and deposit insurance and a “criteria-based and phased” move toward joint debt issuance. It also suggests that the EU could impose upper limits on annual budgets and debt levels of nations that use the euro. Germany’s instant opposition lessened the chances that the summit will end with any plan once again. Nero was said to have sat and played his lute while Rome burned down, today Europe is burning while all the leaders play their fiddles. US interest rates remain essentially unchanged now for the last three weeks; improving yesterday and this morning falling back. There is little chance the bond and mortgage markets will change much until the end of the circus known as the EU summit meeting that concludes on Friday. Based on news reports this morning it appears it will be another summit that fails to accomplish much and in turn should keep US interest rates from increasing. We still hold that as long as the bellwether 10 yr note can hold under 1.70% the outlook will remain positive for the bond markets.