Very early this morning the US stock indexes were weak following Europe’s equity markets; the 10 yr note at 7:00 am -2/32. By 8:30 however the 10 yr note fell further, down 11/32 at 1.94% +4 bp, MBS prices -2/32 (.06 bp). This is another day with no economic data until 3:00 this afternoon when Dec consumer credit is reported (+$8.5B). At 1:00 Treasury will auction $32B of 3 yr notes, last month’s 3 yr auction drew the largest demand on record for a 3 yr note.
A little volatility early this morning when a story hit that Greece was close to a deal to avoid default, it didn’t last long though as there were no follow-up details. No one will jump the gun on Greece’s ability to get a deal with creditors resolved given that Greek officials have constantly said a deal was close and would be completed in “a few days”.
German Chancellor Angela Merkel said time was running out for Greece to accept conditions for a bailout. Meanwhile Greek Prime Minister Lucas Papademos meets political leaders today to discuss more cuts needed to get a rescue package. They have already agreed to make further cuts this year equal to 1.5% of gross domestic product, they have yet to decide how to recapitalize banks, ensure the viability of pension funds and reduce wages to increase the economy’s competitiveness. Yesterday the Prime Minister was reported to have asked for a detailed analysis from his staff on how Greece will fair if it decides to simply default.
In this global economy, markets pay a lot of attention to what is occurring in Europe and China; China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today. “The global economy is slowing down, Europe’s sovereign-debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said. German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9% from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged.
I guess it is obvious that Europe’s debt crisis is so extreme that coming up with any solution is elusive at best. Banks won’t be able to take the haircut necessary, the ECB doesn’t have the funds to absorb much of the massive debt and the IMF won’t do much until there is some kind of assurance the EU countries can manage their budgets with huge spending cuts. In the meantime the economy in Europe is teetering on the edge and holding back what might be a solid global economic rebound. In the case of Greece, if it does default the repercussions in US markets may not be as serious as investors now believe. Estimates we hear are that the US equity market might lose 3.0% to 5.0% if Greece defaults; not good but if that were all there is likely it would be recovered quickly. Where the serious implications occur is a Greek default would likely leads to other sovereigns tossing in the towel unwinding the EU.
The DJIA opened -20 at 9:30, the 10 yr note -14/32 the weakest so far at 1.95% +5 bp. MBS prices holding but likely lenders will price defensively, at 9:30 -2/32 (.06 bp).
Fed chair Bernanke will testify on the economy at 10:00 at the Senate Budget Committee.
Technically the 10 yr note is presently testing its 40 day MA at 1.95%, a close above 1.95% would support a move to 2.00%. The relative strength index is at neutral 50. Although the note looks a little soft so far today, it is unlikely that interest rates will increase much; equally as we have commented a few times, we do not believe there is a lot left in the present rally. The 10 yr has a wall at 1.80%; it is in a range between 2.00% and 1.80% and likely will stay there. Mortgage rates also confined to a 15 to 20 basis point range in rates.
Tuesday, February 7, 2012
Sunday, November 13, 2011
Mortgage Rates This Week
Rate Lock Advisory - Sunday Nov. 13th
This week brings us the release of six monthly economic reports for the markets to digest. With very important data scheduled for release two different days and relevant data four of the five days, we will likely see a fair amount of volatility in the markets and mortgage pricing this week.
There is nothing scheduled for release tomorrow, leaving the bond market to movement in stocks and overseas news. As of this evening, it appears that bonds are going to react negatively to news from Europe, meaning stocks may start the week off in positive ground. That can change between now and the opening bell tomorrow morning, but as of now it appears we may see some pressure in bonds and a possible increase to mortgage rates tomorrow.
The first data is one of the most important reports of the week. The Commerce Department will give us October's Retail Sales figures early Tuesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up two-thirds of the U.S. economy. It is expected to show a 0.4% rise in spending, meaning consumers spent much less last month than they did in September. A larger increase would be considered negative news for bonds because large increases in spending fuels an economic recovery and raises inflation concerns in the marketplace. If Tuesday's report reveals a smaller than expected increase in spending, bonds should react favorably, pushing mortgage rates lower. If it shows a larger than expected increase, mortgage rates will likely move higher.
Also Tuesday is the release of October's Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.2% decline in the overall reading and a 0.1% increase in the core data.
Wednesday also has two reports scheduled that will likely influence mortgage rates. The first is October's Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Tuesday's PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider this report as one of the most important reports we get each month. The overall reading is expected to show no change from September’s level while the core data is expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates Wednesday.
October’s Industrial Production data will be posted mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production, indicating moderate strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the CPI readings are. A significant surprise in the CPI would likely make this data a non-factor in Wednesday's mortgage pricing.
Thursday’s only monthly data is October's Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don't expect this month's version to be any different unless it varies greatly from analysts' forecasts. It is expected to show a sizable decline in starts of new homes.
The final report of the week will come from the Conference Board late Friday morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.
Overall, look for Tuesday or Wednesday to be the most important with very important reports scheduled those days. It is difficult to label any particular day as the quietest day, but Thursday is a good candidate. The key releases will be Tuesday's Retail Sales and Wednesday's CPI reports. They will probably determine whether rates close the week higher or lower than tomorrow's opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
This week brings us the release of six monthly economic reports for the markets to digest. With very important data scheduled for release two different days and relevant data four of the five days, we will likely see a fair amount of volatility in the markets and mortgage pricing this week.
There is nothing scheduled for release tomorrow, leaving the bond market to movement in stocks and overseas news. As of this evening, it appears that bonds are going to react negatively to news from Europe, meaning stocks may start the week off in positive ground. That can change between now and the opening bell tomorrow morning, but as of now it appears we may see some pressure in bonds and a possible increase to mortgage rates tomorrow.
The first data is one of the most important reports of the week. The Commerce Department will give us October's Retail Sales figures early Tuesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up two-thirds of the U.S. economy. It is expected to show a 0.4% rise in spending, meaning consumers spent much less last month than they did in September. A larger increase would be considered negative news for bonds because large increases in spending fuels an economic recovery and raises inflation concerns in the marketplace. If Tuesday's report reveals a smaller than expected increase in spending, bonds should react favorably, pushing mortgage rates lower. If it shows a larger than expected increase, mortgage rates will likely move higher.
Also Tuesday is the release of October's Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.2% decline in the overall reading and a 0.1% increase in the core data.
Wednesday also has two reports scheduled that will likely influence mortgage rates. The first is October's Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Tuesday's PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider this report as one of the most important reports we get each month. The overall reading is expected to show no change from September’s level while the core data is expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates Wednesday.
October’s Industrial Production data will be posted mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production, indicating moderate strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the CPI readings are. A significant surprise in the CPI would likely make this data a non-factor in Wednesday's mortgage pricing.
Thursday’s only monthly data is October's Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don't expect this month's version to be any different unless it varies greatly from analysts' forecasts. It is expected to show a sizable decline in starts of new homes.
The final report of the week will come from the Conference Board late Friday morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.
Overall, look for Tuesday or Wednesday to be the most important with very important reports scheduled those days. It is difficult to label any particular day as the quietest day, but Thursday is a good candidate. The key releases will be Tuesday's Retail Sales and Wednesday's CPI reports. They will probably determine whether rates close the week higher or lower than tomorrow's opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Friday, November 4, 2011
Mortgage Market
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.
Friday, November 04, 2011
October employment report at 8:30. The overall unemployment rate declined to 9.0% frm 9.1%----somewhat a surprise. Oct non-farm jobs up 80K against estimates at 100K, non-farm private jobs +104K against +120K expected. Average hourly earnings on target at +0.2%. The U-6 unemployment rate at 16.2% (those underemployed and those that have stopped looking). Sept NFP revised from +103K to +158K, August NFP frm 57K to +104K a total of 102K additional jobs. Manufacturing jobs +5K, service producing +90K, government jobs -24K. The 80K headline still holds most of the interest and didn't meet forecasts, nevertheless the data is better overall than expectations.
The initial reaction to the employment report was rather mute in the rate sector, the 10 yr prior to 8:30 sat unchanged, 15 minutes after the release (8:45) the 10 traded down just 8?32 to 2.10% +3 bp; mortgage prices at 8:45 off just 3/32 (.09 bp). Stock indexes at 8:45 weaker, DJIA down 31 points. Curious that equities were not reacting better to the report and the higher revisions in Aug and Sept. Overall the reaction to the report has been tame, not much reaction initially and trading thin.
The G-20 meeting in France where leaders met seems like a waste of time and expense. Two things agreed upon; that Italy agreed to IMF and EU monitoring its progress on reforms; secondly the IMF said it will increase from $300B to $350B in special drawing rights. It took a lot of twisting to get the IMF to increase drawings rights by a measly $50B. Leaders of the 20 countries are refusing to put any money in the pot; reflecting frustration with Europe’s failure to end a crisis with Greece’s government edging towards collapse and Italy facing intensifying pressure to restore fiscal order.
Greece abandoned a referendum on the euro area’s latest bailout plan, reducing the risk of a disorderly default. Greek Prime Minister Papandreou faces a confidence vote in parliament today that will determine whether he stays on or calls an election. Papandreou yesterday abandoned his planned referendum on the country’s bailout after a warning from German Chancellor Angela Merkel that a no vote would cost Greece its membership of the 17-nation currency.
At 9:30 the stock market opened weaker, not taking the employment report as a positive, or after 386 points in the DJIA in the last two days investors are not willing to add to the gains. The headline that non-farm jobs were 20K lower than forecasts is being held at a higher level than the 102K increases in revisions to Aug and Sept. The decline in the unemployment rates to 9.0% appears to be ignored as a positive. Focus this morning appears to be on Europe and comments from the region's leaders that the region may fall back into recession. The DJIA opened -88 at 9:30, mortgage prices up 2/32 (.06 bp) and the 10 yr note unchanged at 2.07%.
While the day has a long way to go, so far the financial markets are very quiet. The 10 yr and mortgages are generally unchanged from yesterday; the stock indexes are lower but so far have not moved much in either direction from opening levels. There isn't anymore scheduled news today; Europe of course is still open and there is always the chance some news will appear. In the absence of anything out of the region US markets may be in for one of the few quiet sessions we have had for awhile. That said, as this is being sent MBS prices have improved to +6/32 (.18 bp) and up 4/32 (.12 bp) frm 9:30.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, November 04, 2011
October employment report at 8:30. The overall unemployment rate declined to 9.0% frm 9.1%----somewhat a surprise. Oct non-farm jobs up 80K against estimates at 100K, non-farm private jobs +104K against +120K expected. Average hourly earnings on target at +0.2%. The U-6 unemployment rate at 16.2% (those underemployed and those that have stopped looking). Sept NFP revised from +103K to +158K, August NFP frm 57K to +104K a total of 102K additional jobs. Manufacturing jobs +5K, service producing +90K, government jobs -24K. The 80K headline still holds most of the interest and didn't meet forecasts, nevertheless the data is better overall than expectations.
The initial reaction to the employment report was rather mute in the rate sector, the 10 yr prior to 8:30 sat unchanged, 15 minutes after the release (8:45) the 10 traded down just 8?32 to 2.10% +3 bp; mortgage prices at 8:45 off just 3/32 (.09 bp). Stock indexes at 8:45 weaker, DJIA down 31 points. Curious that equities were not reacting better to the report and the higher revisions in Aug and Sept. Overall the reaction to the report has been tame, not much reaction initially and trading thin.
The G-20 meeting in France where leaders met seems like a waste of time and expense. Two things agreed upon; that Italy agreed to IMF and EU monitoring its progress on reforms; secondly the IMF said it will increase from $300B to $350B in special drawing rights. It took a lot of twisting to get the IMF to increase drawings rights by a measly $50B. Leaders of the 20 countries are refusing to put any money in the pot; reflecting frustration with Europe’s failure to end a crisis with Greece’s government edging towards collapse and Italy facing intensifying pressure to restore fiscal order.
Greece abandoned a referendum on the euro area’s latest bailout plan, reducing the risk of a disorderly default. Greek Prime Minister Papandreou faces a confidence vote in parliament today that will determine whether he stays on or calls an election. Papandreou yesterday abandoned his planned referendum on the country’s bailout after a warning from German Chancellor Angela Merkel that a no vote would cost Greece its membership of the 17-nation currency.
At 9:30 the stock market opened weaker, not taking the employment report as a positive, or after 386 points in the DJIA in the last two days investors are not willing to add to the gains. The headline that non-farm jobs were 20K lower than forecasts is being held at a higher level than the 102K increases in revisions to Aug and Sept. The decline in the unemployment rates to 9.0% appears to be ignored as a positive. Focus this morning appears to be on Europe and comments from the region's leaders that the region may fall back into recession. The DJIA opened -88 at 9:30, mortgage prices up 2/32 (.06 bp) and the 10 yr note unchanged at 2.07%.
While the day has a long way to go, so far the financial markets are very quiet. The 10 yr and mortgages are generally unchanged from yesterday; the stock indexes are lower but so far have not moved much in either direction from opening levels. There isn't anymore scheduled news today; Europe of course is still open and there is always the chance some news will appear. In the absence of anything out of the region US markets may be in for one of the few quiet sessions we have had for awhile. That said, as this is being sent MBS prices have improved to +6/32 (.18 bp) and up 4/32 (.12 bp) frm 9:30.
Thursday, November 3, 2011
Mortgage Market
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.
Thursday, November 03, 2011
Early trade this morning, treasuries and mortgages weaker; at 9:00 the 10 yr -20/32 to 2.06% +6 bp and mortgage prices down 11/32 (.34 bp), the DJIA futures traded +153.
News out of Europe; rumors that Greece Prime Minister Papandreou is about to resign but no one is taking it seriously as most of the rumors are coming from "anonymous sources". Greece has about as many cabinet members as we have senators (70), everyone there has an agenda; markets are becoming de-sensitized over rumors after two years of no progress in the debt issues dragging Europe down. Papandreou shocked officials yesterday when he called for a referendum vote from Greeks on whether or not to accept the austerity provisions demanded from the ECB, EU, and IMF in order to get the funds to avoid defaulting on their debt.
More news from Europe; the ECB cut its base lending rate by 25 bp to 1.25% after increasing rates 50 basis points earlier this year. The unexpected cut added to the increase in stock index futures and in turn pushed the 10 yr higher in rate. The move was unexpected but Spain and Italy saw their interest rates rise yesterday as some Euro officials are now speculating that Greece will default and leave the EU. France and Germany saying they would treat Greece’s surprise referendum on a second bailout as a vote on its euro membership. Greece's potential defaults and exit from the EU shouldn't be a complete surprise; it is a huge hill to climb for Europe to avoid more turmoil, next up will be Spain and Italy whose sovereign debts make Greece look like small potatoes.
Economic data at 8:30 this morning; weekly jobless claims were down 9K to 397K, last week's claims revised from 402K to 406K; it has been since 9/21 that claims are below the 400K level that economists see as pivotal. The estimate was for claims to be at 402K so not much of a differential. Q3 worker productivity, expected +2.5%, came at +3.1%; Q3 unit labor costs were expected -0.7% but fell 2.4%.
At 9:30 the DJIA opened +126, the 10 yr note -24/32 to 2.07% +7 bp and mortgage prices at 9:30 -13/32 (.41 bp).
Next up in this morning's time line; at 10:00 Oct ISM services sector index expected at 53.5 frm 53.0; it declined to 52.9. The components; new orders index 52.4 frm 56.5, employment at 53.3 frm 48.7 and prices at 57.1 frm 62.9. The report put pressure on stock indexes, after opening up 126 and increasing to +160 the DJIA dropped back to unchanged (see below).
Also at 10:00, Sept factory orders were thought to be -0.2%; as reported orders increased 0/1%.
Tomorrow morning its the ever volatile employment report from the BLS, the present estimate is for non-farm jobs to have increased 90K and non-farm private jobs +120K, the unemployment rate unchanged at 9.1%. The increases in non-farm jobs and private jobs is lower than in Sept (103K and 137K respectively). The norm for the employment data each month is that the data usually comes in well off the estimates sending markets into wild volatility.
The bellwether 10 yr note continues to find resistance when it falls to 2.00%, as we have noted numerous times, under 2.00% is difficult to maintain. The 10 has been as low as 1.70% twice, each time it didn't hold long. Mortgage interest rates also facing resistance at present levels. That said, these are very unusual times and anything is possible. Europe is going to lower its economic forecasts as the debt issues continue unresolved; so far the US equity markets are not reacting to the weaker euro outlook. The US rate markets continue to be driven by equity markets; stocks rally and it outs pressure on the bond and mortgage markets; equities decline and the bond and mortgage markets find support.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, November 03, 2011
Early trade this morning, treasuries and mortgages weaker; at 9:00 the 10 yr -20/32 to 2.06% +6 bp and mortgage prices down 11/32 (.34 bp), the DJIA futures traded +153.
News out of Europe; rumors that Greece Prime Minister Papandreou is about to resign but no one is taking it seriously as most of the rumors are coming from "anonymous sources". Greece has about as many cabinet members as we have senators (70), everyone there has an agenda; markets are becoming de-sensitized over rumors after two years of no progress in the debt issues dragging Europe down. Papandreou shocked officials yesterday when he called for a referendum vote from Greeks on whether or not to accept the austerity provisions demanded from the ECB, EU, and IMF in order to get the funds to avoid defaulting on their debt.
More news from Europe; the ECB cut its base lending rate by 25 bp to 1.25% after increasing rates 50 basis points earlier this year. The unexpected cut added to the increase in stock index futures and in turn pushed the 10 yr higher in rate. The move was unexpected but Spain and Italy saw their interest rates rise yesterday as some Euro officials are now speculating that Greece will default and leave the EU. France and Germany saying they would treat Greece’s surprise referendum on a second bailout as a vote on its euro membership. Greece's potential defaults and exit from the EU shouldn't be a complete surprise; it is a huge hill to climb for Europe to avoid more turmoil, next up will be Spain and Italy whose sovereign debts make Greece look like small potatoes.
Economic data at 8:30 this morning; weekly jobless claims were down 9K to 397K, last week's claims revised from 402K to 406K; it has been since 9/21 that claims are below the 400K level that economists see as pivotal. The estimate was for claims to be at 402K so not much of a differential. Q3 worker productivity, expected +2.5%, came at +3.1%; Q3 unit labor costs were expected -0.7% but fell 2.4%.
At 9:30 the DJIA opened +126, the 10 yr note -24/32 to 2.07% +7 bp and mortgage prices at 9:30 -13/32 (.41 bp).
Next up in this morning's time line; at 10:00 Oct ISM services sector index expected at 53.5 frm 53.0; it declined to 52.9. The components; new orders index 52.4 frm 56.5, employment at 53.3 frm 48.7 and prices at 57.1 frm 62.9. The report put pressure on stock indexes, after opening up 126 and increasing to +160 the DJIA dropped back to unchanged (see below).
Also at 10:00, Sept factory orders were thought to be -0.2%; as reported orders increased 0/1%.
Tomorrow morning its the ever volatile employment report from the BLS, the present estimate is for non-farm jobs to have increased 90K and non-farm private jobs +120K, the unemployment rate unchanged at 9.1%. The increases in non-farm jobs and private jobs is lower than in Sept (103K and 137K respectively). The norm for the employment data each month is that the data usually comes in well off the estimates sending markets into wild volatility.
The bellwether 10 yr note continues to find resistance when it falls to 2.00%, as we have noted numerous times, under 2.00% is difficult to maintain. The 10 has been as low as 1.70% twice, each time it didn't hold long. Mortgage interest rates also facing resistance at present levels. That said, these are very unusual times and anything is possible. Europe is going to lower its economic forecasts as the debt issues continue unresolved; so far the US equity markets are not reacting to the weaker euro outlook. The US rate markets continue to be driven by equity markets; stocks rally and it outs pressure on the bond and mortgage markets; equities decline and the bond and mortgage markets find support.
Wednesday, November 2, 2011
Mortgage Market
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.
Wednesday, November 02, 2011
Treasuries and mortgages after three days of improvement are weaker this morning, volatility in US markets continues to be excessive; most of it is what isn't happening in Europe. Europe pushing on a string, there isn't enough capital in the region to come close to keeping the sovereign debt under control, there is going to be failures beginning with Greece. Greece in the EU is on borrowed time, in the end Greece will likely default and exit the EU. Next up n the line of problems, Italy and Spain. For all the summit meetings and all the press conferences there has been no real effective solution. Europe's banks can't take 50% haircuts on the bonds they hold from a number of EU countries, the IMF isn't likely to get too deep into the problem without bringing massive criticism from G-20 countries. China last week indicated it may be interested in EU debt but only if the bonds its purchases have a valid Guarantee from the EFSF and that hasn't happen. In the meantime what happens in Europe is unsettling all of the industrial world, sending mixed messages daily that produces wild and unexpected moves as was clearly evident yesterday and Monday.
Europe’s bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou’s request for a referendum on the rescue pact for his country roiled markets. An EFSF official said in a conference call with investors today that it may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes, France before selling the bonds, according to a person with knowledge of the matter. On Friday there will be a confidence vote in the Greece Parliament, if he doesn't retain his majority he may be out of office by Saturday morning.
This morning at 8:15 the ADP October non-farm payrolls increased 110K a little better than estimates, Sept jobs were revised higher 25K more than reported last month to +116K. Treasuries and mortgages, already weaker didn't show any reaction to the better jobs. The stock indexes after falling 576 points yesterday and Monday on the DJIA are better this morning but not much.
At 12:30 this afternoon the FOMC policy statement will be released, likely markets will be relatively quiet until then. At 2:15 even more important than the policy statement, Bernanke will hold a press conference. What is Bernanke thinking about what isn't happening in Europe? Will he signal the possibility of more easing with a QE 3? Operation Twist didn't work, why? A lot of questions.
The driver for mortgage interest rates, the 10 yr treasury note, even after the strong improvement in the past couple of days, is still unable to hold under 2.00%. Every time the 10 falls below 2.00% it hasn't lasted more than a few days.
At 9:30 the DJIA opened +90, the 10 yr note -19/32 2.06% +6 bp and mortgage prices -8/32 (.25 bp).
Purchase applications for home mortgages rose for a second week, up 1.8% in the October 28 week on top of the 6.4% gain in the October 21 week to nearly reverse the prior week's 8.8% drop. The refinance index is down 0.2% in the latest week. Rates in the week were little changed with 30-year conforming loans ($417,500 or less) down two basis points to 4.31% and 30-year jumbo loans (greater than $417,500) up one basis point to 4.69%.
At 10:00 the bond and mortgage markets have come off their lows; mtgs -3/32 (.09 bp).
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Wednesday, November 02, 2011
Treasuries and mortgages after three days of improvement are weaker this morning, volatility in US markets continues to be excessive; most of it is what isn't happening in Europe. Europe pushing on a string, there isn't enough capital in the region to come close to keeping the sovereign debt under control, there is going to be failures beginning with Greece. Greece in the EU is on borrowed time, in the end Greece will likely default and exit the EU. Next up n the line of problems, Italy and Spain. For all the summit meetings and all the press conferences there has been no real effective solution. Europe's banks can't take 50% haircuts on the bonds they hold from a number of EU countries, the IMF isn't likely to get too deep into the problem without bringing massive criticism from G-20 countries. China last week indicated it may be interested in EU debt but only if the bonds its purchases have a valid Guarantee from the EFSF and that hasn't happen. In the meantime what happens in Europe is unsettling all of the industrial world, sending mixed messages daily that produces wild and unexpected moves as was clearly evident yesterday and Monday.
Europe’s bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou’s request for a referendum on the rescue pact for his country roiled markets. An EFSF official said in a conference call with investors today that it may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes, France before selling the bonds, according to a person with knowledge of the matter. On Friday there will be a confidence vote in the Greece Parliament, if he doesn't retain his majority he may be out of office by Saturday morning.
This morning at 8:15 the ADP October non-farm payrolls increased 110K a little better than estimates, Sept jobs were revised higher 25K more than reported last month to +116K. Treasuries and mortgages, already weaker didn't show any reaction to the better jobs. The stock indexes after falling 576 points yesterday and Monday on the DJIA are better this morning but not much.
At 12:30 this afternoon the FOMC policy statement will be released, likely markets will be relatively quiet until then. At 2:15 even more important than the policy statement, Bernanke will hold a press conference. What is Bernanke thinking about what isn't happening in Europe? Will he signal the possibility of more easing with a QE 3? Operation Twist didn't work, why? A lot of questions.
The driver for mortgage interest rates, the 10 yr treasury note, even after the strong improvement in the past couple of days, is still unable to hold under 2.00%. Every time the 10 falls below 2.00% it hasn't lasted more than a few days.
At 9:30 the DJIA opened +90, the 10 yr note -19/32 2.06% +6 bp and mortgage prices -8/32 (.25 bp).
Purchase applications for home mortgages rose for a second week, up 1.8% in the October 28 week on top of the 6.4% gain in the October 21 week to nearly reverse the prior week's 8.8% drop. The refinance index is down 0.2% in the latest week. Rates in the week were little changed with 30-year conforming loans ($417,500 or less) down two basis points to 4.31% and 30-year jumbo loans (greater than $417,500) up one basis point to 4.69%.
At 10:00 the bond and mortgage markets have come off their lows; mtgs -3/32 (.09 bp).
Friday, October 28, 2011
Mortgage Market
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.
Friday, October 28, 2011
Wednesday and Thursday hit hard on the bond and mortgage markets; the 10 yr note in the two days increased 25 bp in yield, mortgage rates up about 18 bp. The 10 yr price drop was 75/32, mortgage prices fell 34/32. The stock market measured by the DJIA increased 500 points in two days. This morning the 10 yr at 9:00 +12/32 at 2.34% -3 bp, mortgages at 9:00 +11/32 (.34 bp). It is not unusual that markets are trading a little better early this morning after the huge moves since Wednesday. Of course the moves were triggered by what on the surface has been taken as a fix for Europe's debt problems----at least for the time being; That China is saying it may be interested in buying some of the debt from the EFSF has been greeted with optimism (maybe too much), and the increase in the EFSF fund to 1T euros announced yesterday and get banks to take a 50% haircut on Greek debt was likely overdone but it was a little step forward.
In the meantime European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute. China will want a lot from the EU, ECB and IMF before it actually commits; that country is in the driver's seat and will likely extract a lot of guarantees to step into the swamp of debt.
The last couple of months were marked with doom and gloom, savvy investors were heavily short equity markets expecting the US and Europe would fall back into recession. The current news out of Europe that sent US stock markets up yesterday was in part fueled by shorts having to cover as the computers were screaming to get out. Putting some perspective on all of it; Europe's problems are far from being under control, the US stock market has moved to anticipate the end of Europe's problems is at hand; the bond market is simply tracking moves in equities with no confidence on the Fed or economic outlook-----letting stock traders set the tone.
Next week the FOMC will meet, after the meeting and the policy statement Bernanke will hold a press conference, given recent events in Europe and the increase in US interest rates, especially mortgage rates his press conference will be one of the more critical ones he has held in months.
At 9:30 the DJIA opened down 14 points, the 10 yr note -12/32 at 2.34% -3 bp and mortgage prices up 10/32 (.31 bp).
At 8:30 Sept personal income was weaker than expected, up 0.1% against estimates of +0.3%; spending was on the mark, up 0.6%. Q3 employment cost index, expected up 0.6% was better in a sense up 0.3% and +2.0% yr/yr. There was no noticeable reaction to the two releases. At 9:55 the U. of Michigan consumer sentiment index was expected unchanged at 57.5, as reported the index was 60.9; current conditions index 75.1 frm 73.8, expectations index 51.8 frm 47.0 and the 12 month outlook at 45 frm 37. A better read than the consumer confidence report on Tuesday but there was no reaction to it in equities or the bond market.
For three weeks we set 2.30% on the 10 yr as support that must hold; yesterday the note ran through it to a high of 2.41% before closing at 2.37%. Now we look at 2.30% as a resistance level. Yesterday's breakout over 2.30% can't be confirmed yet, we want to see a day or two over that level; short covering yesterday may have exaggerated the move higher. That said, the bond and mortgage markets have been technically bearish for weeks and will not likely change unless there is a major change in sentiment over Europe OR what Bernanke might do at next week's FOMC meeting to drive long rates lower. So far the Fed's moves have failed to keep rates low as the fed had expected.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Friday, October 28, 2011
Wednesday and Thursday hit hard on the bond and mortgage markets; the 10 yr note in the two days increased 25 bp in yield, mortgage rates up about 18 bp. The 10 yr price drop was 75/32, mortgage prices fell 34/32. The stock market measured by the DJIA increased 500 points in two days. This morning the 10 yr at 9:00 +12/32 at 2.34% -3 bp, mortgages at 9:00 +11/32 (.34 bp). It is not unusual that markets are trading a little better early this morning after the huge moves since Wednesday. Of course the moves were triggered by what on the surface has been taken as a fix for Europe's debt problems----at least for the time being; That China is saying it may be interested in buying some of the debt from the EFSF has been greeted with optimism (maybe too much), and the increase in the EFSF fund to 1T euros announced yesterday and get banks to take a 50% haircut on Greek debt was likely overdone but it was a little step forward.
In the meantime European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute. China will want a lot from the EU, ECB and IMF before it actually commits; that country is in the driver's seat and will likely extract a lot of guarantees to step into the swamp of debt.
The last couple of months were marked with doom and gloom, savvy investors were heavily short equity markets expecting the US and Europe would fall back into recession. The current news out of Europe that sent US stock markets up yesterday was in part fueled by shorts having to cover as the computers were screaming to get out. Putting some perspective on all of it; Europe's problems are far from being under control, the US stock market has moved to anticipate the end of Europe's problems is at hand; the bond market is simply tracking moves in equities with no confidence on the Fed or economic outlook-----letting stock traders set the tone.
Next week the FOMC will meet, after the meeting and the policy statement Bernanke will hold a press conference, given recent events in Europe and the increase in US interest rates, especially mortgage rates his press conference will be one of the more critical ones he has held in months.
At 9:30 the DJIA opened down 14 points, the 10 yr note -12/32 at 2.34% -3 bp and mortgage prices up 10/32 (.31 bp).
At 8:30 Sept personal income was weaker than expected, up 0.1% against estimates of +0.3%; spending was on the mark, up 0.6%. Q3 employment cost index, expected up 0.6% was better in a sense up 0.3% and +2.0% yr/yr. There was no noticeable reaction to the two releases. At 9:55 the U. of Michigan consumer sentiment index was expected unchanged at 57.5, as reported the index was 60.9; current conditions index 75.1 frm 73.8, expectations index 51.8 frm 47.0 and the 12 month outlook at 45 frm 37. A better read than the consumer confidence report on Tuesday but there was no reaction to it in equities or the bond market.
For three weeks we set 2.30% on the 10 yr as support that must hold; yesterday the note ran through it to a high of 2.41% before closing at 2.37%. Now we look at 2.30% as a resistance level. Yesterday's breakout over 2.30% can't be confirmed yet, we want to see a day or two over that level; short covering yesterday may have exaggerated the move higher. That said, the bond and mortgage markets have been technically bearish for weeks and will not likely change unless there is a major change in sentiment over Europe OR what Bernanke might do at next week's FOMC meeting to drive long rates lower. So far the Fed's moves have failed to keep rates low as the fed had expected.
Thursday, October 27, 2011
Mortgage Market
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.
Thursday, October 27, 2011
The summit in Brussels yesterday is being considered a success this morning; US stock indexes rallying and US interest rates increasing on news that Europe's leaders have actually come with a plan that is supposed to isolate Greece from defaulting and taking some pressure off for the moment. Last-ditch talks with bank representatives led to the debt-relief accord,
bondholders will take 50% losses on Greek debt and boosted the firepower of the rescue fund. Measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market. The rescue fund (EFSF) is to be increased to 1 trillion euros ($1.4T). There are a lot of details yet to be worked out so while this is a breakthrough the problems are still not completely out of the woods; expect Europe to continue to drive global markets as more details must be resolved. It helped yesterday when China said it may be interested in buying some of the debt through the EFSF.
The reaction to European developments this morning is a huge rally in Europe's equity markets and in the US; at 9:00 this morning the DJIA was trading up 246 points, the 10 yr note testing important technical support level at 2.30% and mortgage prices at 9:00 -14/32 (.44 bp).
This morning weekly jobless claims were about as expected, down 2K to 402K, last week claims were revised to 404K frm 403K. Continuing claims were 3.645 mil down from 3.741 mil last week. Q3 GDP expected at +2.2% to +2.5% was on target at +2.5% after Q1 growth grew at 1.3%; final sales in Q3 were up 3.6%. The combination of Europe and Q3 GDP drove the DJIA to open +145 points, NASDAQ +72 and the S&P +23; by 9:35 the DJIA traded up 260 points.
Treasury rates increasing this morning driving mortgage prices lower and rates up. The 10 yr note is sitting right on what we consider key support at 2.30%, it hasn't been above 2.30% since mid-August. Strong GDP, strong auto sales, a slightly better new home sales in Sept and a better outlook in Europe are increasing optimism momentarily. The Europe relief rally began yesterday and is running hot again in early activity. Investors sighing relief but Europe still has a huge problem with Italy and Spain; Italy's debt is well over 1T euros more than the EFSF has in the present fund.
At 10:00 NAR reported August pending home sales were expected to be down 1.0%, sales fell 4.6%; yr/yr up 6.4%. Contracts signed not yet closed, the third month in a row pending sales have declined from the previous month. There has been no immediate reaction to the report.
At 1:00 Treasury will auction $29B of 7 yr notes; yesterday the 5 yr went off well but y the end of the day and this morning those notes are already underwater.
Today is critical for the bond market; the 10 yr note is at 2.28% at 10:00, it has tested 2.30% where we have support that must hold, a move above 2.30% would add additional technical weakness for the bond and mortgage markets.
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
Building Strong, Lasting Relationships; One Client at a Time.
Thursday, October 27, 2011
The summit in Brussels yesterday is being considered a success this morning; US stock indexes rallying and US interest rates increasing on news that Europe's leaders have actually come with a plan that is supposed to isolate Greece from defaulting and taking some pressure off for the moment. Last-ditch talks with bank representatives led to the debt-relief accord,
bondholders will take 50% losses on Greek debt and boosted the firepower of the rescue fund. Measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market. The rescue fund (EFSF) is to be increased to 1 trillion euros ($1.4T). There are a lot of details yet to be worked out so while this is a breakthrough the problems are still not completely out of the woods; expect Europe to continue to drive global markets as more details must be resolved. It helped yesterday when China said it may be interested in buying some of the debt through the EFSF.
The reaction to European developments this morning is a huge rally in Europe's equity markets and in the US; at 9:00 this morning the DJIA was trading up 246 points, the 10 yr note testing important technical support level at 2.30% and mortgage prices at 9:00 -14/32 (.44 bp).
This morning weekly jobless claims were about as expected, down 2K to 402K, last week claims were revised to 404K frm 403K. Continuing claims were 3.645 mil down from 3.741 mil last week. Q3 GDP expected at +2.2% to +2.5% was on target at +2.5% after Q1 growth grew at 1.3%; final sales in Q3 were up 3.6%. The combination of Europe and Q3 GDP drove the DJIA to open +145 points, NASDAQ +72 and the S&P +23; by 9:35 the DJIA traded up 260 points.
Treasury rates increasing this morning driving mortgage prices lower and rates up. The 10 yr note is sitting right on what we consider key support at 2.30%, it hasn't been above 2.30% since mid-August. Strong GDP, strong auto sales, a slightly better new home sales in Sept and a better outlook in Europe are increasing optimism momentarily. The Europe relief rally began yesterday and is running hot again in early activity. Investors sighing relief but Europe still has a huge problem with Italy and Spain; Italy's debt is well over 1T euros more than the EFSF has in the present fund.
At 10:00 NAR reported August pending home sales were expected to be down 1.0%, sales fell 4.6%; yr/yr up 6.4%. Contracts signed not yet closed, the third month in a row pending sales have declined from the previous month. There has been no immediate reaction to the report.
At 1:00 Treasury will auction $29B of 7 yr notes; yesterday the 5 yr went off well but y the end of the day and this morning those notes are already underwater.
Today is critical for the bond market; the 10 yr note is at 2.28% at 10:00, it has tested 2.30% where we have support that must hold, a move above 2.30% would add additional technical weakness for the bond and mortgage markets.
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