Phoenix Mortgage Broker Warns......LOCK Your INTEREST RATE
We warned of increased volatility this week, the rate markets are near term bearish but with not much enthusiasm for massive selling. Yesterday mortgage prices started better, this morning starting lower. We suggest floating to start the day, but remind to stay close for our updates. Not willing to press the markets but with the pricing this morning lower we hang in there for a pop. Unless prices improve frm morning levels we will lock at the end of the session if not sooner based on market movements.
Treasuries were weak from the get-go this morning with the stock indexes roaring higher; the DJIA at 8:00 was trading +90. The 10 down 13/32 and mortgages off 7/32. At 8:30 the 10 -21/32 at 3.42% +7 bp, and mortgages -13/32. At 9:00 the 10 yr -16/32 3.41% +6 BP, mtg prices -15/32 and the DJIA +109. JP Morgan profits were well above forecasts (about 7 times better), and is driving all bank and financial stocks higher this morning, taking the entire market up with it. Most all earnings in Q3 are beating the Street estimates although only a few are out so far. Intel is saying sales will to $1B and earnings from Alcoa and others have been better. In China their exports were down 15%, but that is the best in a year. At 9:30 the DJIA opened +90, 10 yr note -14/32 3.40% +5 BP and mortgages at 9:30 -11/32 on 30s, -9/32 on FHAs and -7/32 on 15s.
Sept retail sales hit at 8:30, better than expected; -1.5% overall but when auto sales are extracted +0.5%, expectations were for a 0.2% increase. August retail revised to +2.2% frm +2.7% overall and ex autos +1.0% frm +1.1%. The initial reaction to the better ex auto sales sent treasuries and mortgages lower but both managed to recover a little from the knee jerk. The DJIA and the other key indexes are on fire this morning on better Q3 earnings being reported. No signs of any weakness in the equity markets as the DJIA is now seen headed to 10K.
Earlier this morning at 7:00 the weekly MBA mortgage applications index fell 1.8%; purchases declined 5.0% while re-finance applications were down 0.1%. 64.7% of all apps were for re-finances. The four week moving average for the seasonally adjusted Market Index is up 5.6%. The four week moving average is up 1.6% for the seasonally adjusted Purchase Index, while this average is up 8.0% for the Refinance Index. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.02% from 4.89%, with points decreasing to 1.11 from 1.13 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.44% from 4.32%, with points remaining unchanged at 1.04 (including the origination fee) for 80% LTV loans. The decline in apps on an increase of 13 basis points in rates tells a big story. With interest rates headed higher the volume is likely to continue to fall until buyers and re-financers believe the best has likely passed for rates.
August business inventories were out at 10:00, expected to be down 0.9%, inventories were down 1.5%; sales were up 1.0%. The inventory to sales ratio at 1.33 month frm 1.36 months in July.
At 2:00 the FOMC minutes are the day's biggest known-unknown, with the market sniffing for hints of dissention on rate hike timing among the ranks and inflation concern. We know what the statement said, what markets will look for in the minutes is the debate that focuses on when the Fed will decide to wind down the easing. Most Fed watchers are expecting the Fed will start by doing re-pos to drain money from banks before it actually starts raising the FF rate. No matter, the bond market will as usual be ahead of what the Fed actually does, so we don't wait to see the whites of the eyes before markets discount any tightening. While no one is expecting a tightening move from the Fed for many more months until unemployment bottoms, markets will be way out front in driving rates higher----slowly, but moving higher.
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