Forwarded exclusively by:

Tim Kleyla

The Mortgage House

Office: 616-392-2290

Email: tkleyla@mortgagehouse.org

website: www.mortgagehouse.org

Helping the client make a thoughtful and informed choice.

Monday, February 27, 2012

A very nice start to the week; the 10 yr note yield early this morning down to 1.93% -5 bp frm Friday’s close and breaking some technical barriers. Stock indexes weaker is driving the bond market as has been the case for many months; at 9:00 the DJIA index -50 after unable to break above 13K last week. All key equity markets in Europe also soft this morning. Crude and gold weaker following the stock market.

The Group of 20 nations met over the weekend and nixed calls from the euro area to boost international lending resources. A major reason for weakness in equity markets this morning. The G-20 told Europe to come up with more financial firepower before they will consider lending outside support. The world economy is “not out of the danger zone” amid fragile financial systems, high public and private debt and rising oil prices, International Monetary Fund Managing Director Christine Lagarde said. The decision by G-20 finance ministers to deny more assistance pending an increase in the euro-area backstop puts the monkey on Germany, the biggest contributor to bailouts, to overcome its resistance to doing more. A parliamentary vote on a second Greek aid package looming in Berlin today, and there is a EU summit on Thursday and Friday.

This week has a number of key economic releases; durable goods orders for Jan, the second look at Q1 GDP (expected unchanged frm the advance report last month at +2.8%), the Chicago and ISM manufacturing index, Jan personal income and spending including the Fed’s favorite inflation reading, the personal consumption expenditures included in the income and spending data, the Fed beige Book, and weekly claims are all headliners that can move sentiment quickly in this uncertain climate.

The DJIA opened -55, the 10 yr note yield at 1.92% -6 bp and MBS prices +9/32 (.28 bp) for 30 yr mortgages.

At 10:00, the only data today, Jan pending home sales from NAR, expected up 1.5%, as reported up 2.0%, the highest index since April 2010; Dec sales revised to -1.9% frm -3.5% originally reported. Yr/yr pending sales +8.0%. Pending home sales are contracts signed but not closed,. There wasn’t much reaction to the report.

Mortgage interest rates and US treasuries continue to trade in narrow ranges; the improvement this morning in the 10 yr treasury note has its yield now under its 40 day average and the relative strength slightly under 50 (47.5). We have resistance on the 10 yr at 1.90%.

Forwarded exclusively by:

Tim Kleyla

The Mortgage House

Office: 616-392-2290

Email: tkleyla@mortgagehouse.org

website: www.mortgagehouse.org

Helping the client make a thoughtful and informed choice.

Sunday, February 26, 2012

This week; a number of economic releases that will dominate markets. The Europe debt mess is presently dormant in the sense of nothing in the way of market-driving news, the same as last week. Greece will get its money the will eventually default but for now markets have generally discounted Greece and Europe’s problems. The focus now in the bond and equity markets is the status and outlook for the US economy. Interest rate markets are wound tight as a spring. Based on the 10 yr treasury, driver for mortgage markets, not much change in rates last week. Technically the 10 yr is presently losing its support at these levels but still holds well so far.

This week’s economic releases are significant for the outlook on the economy, thus the bond market. There are a number of key releases this week, most expected to have improved from last month.(see economic calendar). Ben Bernanke will be speaking on Wednesday, other Fed officials have been talking about potential of another easing move from the Fed. There is little appetite for another round of MBS purchases or any other easing moves as long as the economic outlook continues to be strong; the Fed doesn’t need to add more to its balance sheet as long as the economy doesn’t roll over. Although the Friday is March 2^nd the employment report won’t be released until March 9^th. There is the potential for wider market movements this week compared to last week. Interest rates are vulnerable to selling if equity markets rally this week.

Forwarded exclusively by:

Tim Kleyla

The Mortgage House

Office: 616-392-2290

Email: tkleyla@mortgagehouse.org

website: www.mortgagehouse.org

Helping the client make a thoughtful and informed choice.

Friday, November 18, 2011

Interest rates started a little higher this morning but are holding well after the 10 yr closed at 1.97% yesterday. Early this morning the 10 yr traded at 2.03% at 7:30, but by 9:00 it fell back to 1.99%. Mortgage prices a little lower in line with the 10 yr price decline; stock indexes were pointing to a better open at 9:30 (at 9:30 the DJIA opened +40). There was no economic data today until 10:00 when Oct leading economic indicators, expected up 0.6%, increased 0.9%; Sept revised to +0.1% frm 0.2%. The LEI suggests the economy is holding and improving a little. There was no noticeable reaction to the better report. At 10:05 the 10- yr at 2.00% +3 bp and mortgage prices -.12 bp. Although LEI is better the outlook for employment still is dismal.

In Europe the ECB was in again buying Italian and Spanish bonds keeping their rates under what is considered a key rate at 7.00%. A rate over 7.00% for Italian bonds is being considered as the level that has to hold if Italy and Spain have any chance of avoiding defaults because the austerity cuts at higher rates would be impossible to achieve. European officials may start talks with the International Monetary Fund on a mechanism for the ECB to lend to the IMF for sovereign bailouts in the region, Dow Jones Newswires reported. Agreement on the proposal between ECB and IMF may result in an announcement at a European Union summit on Dec. 9, Dow Jones said, citing two unidentified people with direct knowledge of the matter. Sounds nice but we won't hold our breath that a workable plan will emerge; it hasn't happened in the last 2 yrs.

The ECB is continuing to buy Italian and Spanish debt, how that is being justified is unsure since the EU treaty precludes the central bank from buying individual country bonds. Nevertheless it is doing it and it seems the only actual activity in the region. With the EU teetering on the edge of potential breakup all the rules are subject to change. Germany continues to resist the intervention by the ECB, and Germany is at increasing odds with France over how to deal with the debt crisis. The longer the crisis drags on the more EU countries will turn inward toward their own interests above those of the EU as a group. Germany is already thinking outside the box of the EU.

A little better to start today in the equity markets but no assurance the key indexes can improve. A stronger equity market today would work against the rate markets; not something new though, that has been the trade fro months----higher indexes equals lower prices in rate markets.

Yesterday the 10 yr closed under 2.00% and increased the bullish technical outlook. The 10 remains slightly below 2.00% this morning, the longer it holds the better the outlook fro mortgage rates. The relative strength in the bond market is increasing and more of our studies are turning more positive. That said, even with Europe and safe haven moves, if US equity markets rally it will take a toll on rates.

Forwarded exclusively by:

Tim Kleyla

The Mortgage House

Office: 616-392-2290

Email: tkleyla@mortgagehouse.org

website: www.mortgagehouse.org

Helping the client make a thoughtful and informed choice.

Wednesday, November 16, 2011

Prior to 8:30 this morning the 10 yr note quiet but down 4/32 to 2.05%, mortgages down 4/32 (.12 bp). At 8:30 Oct CPI was -0.1% against forecasts of unch; the core (ex food and energy) +0.1% in line with estimates. Yr/yr overall CPI +3.5%, ex food and energy +2/1%. The slightly better inflation report turned the 10 to +6/32 to 2.03% -1 bp on the day, and mortgage prices up 1/32 (.03 bp). Early trade in stock indexes were weaker, the DJIA down 88 points. U.S. index futures and the euro fell after the Bank of England said failure to resolve Europe’s debt crisis may have “significant adverse effects” on the economy.

Europe continues to dictate to markets; about any sneeze from anyone in the region has some kind of reaction in global markets. Italian Prime Minister-designate Mario Monti will announce his new government today. Two days of consultations with parties, unions and employers left him “convinced” that Italy can overcome the crisis, he said yesterday. Italian bonds gained for the first day in three, with the 10-year yield falling 15 basis points to 6.92%. Italy’s deficit, at 4.6 percent of gross domestic product last year, is about the same as Germany’s, lower than that of France and less than half the U.K.’s, at 10.3 percent. Still, its debt load is bigger than that of Spain, Greece, Ireland and Portugal combined. German Chancellor Angela Merkel said Germany is prepared to cede some national sovereignty to the European Union to achieve closer economic and political ties.

Treasuries are on hold the last couple of weeks with little change in interest rates; the 10 yr note between 2.10% and 2.00% while mortgage prices equally flat. News out of Europe at the moment is generally constructive, at least no more shocks in the last few days. Still have a safe haven trade in US treasuries however, there is really no end in sight for Europe's debt problems. French banks troubled, Germans resisting additional support although Merkel sounded somewhat conciliatory but we have heard plenty of that over the last year.

Oct industrial production at 9:15 was better than estimates, up 0.7% with estimates at +0.4%, however Sept production was revised to -0.1% frm +0.2%. Oct factory usage increased to 77.8% frm 77.3% in Sept also better than expected. There was little reaction to the better data in stock and bond markets. Europe still trading with weaker markets, US is like the faithful dog that never leaves the master's side and these days Europe is the master and the US the faithful pup.

Crude oil this morning breached $100.00/barrel; at 9:15 $100.91 +$1.54 (see below for 9:50 level). Gold prices falling, down to $1760.00 -$22.00.

At 9:30 the DJIA opened very weak, down 130; the 10 yr at 2.02% -2 bp and mortgage prices +5/32 (.15 bp) on 30s.

At 10:00, a few minutes ago the Nov NAHB housing market index, expected at 18 increased to 21 the highest in a very long time; Oct index revised from 18 to 17.

As long as the 10 yr fails to break 2.00% the opportunity for lower mortgage rates is absent. MBS markets have been flat for over two weeks as has the 10 yr. Investors still hold somewhat of a bullish bias as a safe haven against the ever changing situation in Europe but for the last week or so there have been no additional shoes to drop. No shocks but no actual progress that is aimed at the banks in Europe that are in as bad if not worse shape than US bans found themselves in 2008 when Lehman failed and the sub prime bubble exploded. US banks were extremely leveraged just as Europe's banks are now.

Forwarded exclusively by:

Tim Kleyla

The Mortgage House

Office: 616-392-2290

Email: tkleyla@mortgagehouse.org

website: www.mortgagehouse.org

Helping the client make a thoughtful and informed choice.

Monday, November 14, 2011

Treasuries and mortgage markets were closed last Friday for Veteran's Day; the stock market and most other bourses were open. The DJIA rallied 259 points, NASDAQ +54 and the S&P +24. Likely had the bond market traded prices would have been lower. This morning the indexes prior to 9:30 were generally flat from Friday's closes. US interest rates are faltering at present levels; mortgage prices trading in a narrow range with the 10 yr note losing any momentum when it approaches 2.00%.

This week; still all about what comes from Europe as it continues to tilt at windmills unable financially to step up and cover the troubled countries that hang on the cliff of default. Italy made a positive step last week with Berlusconi agreeing to step down and a new leader in place (Monti), a financial guy, to form a technocratic government ( no politicians) to work out a budget that will save the country from defaulting. Italy is so big and carries more debt than the EU and ECB can handle. The bellwether 10 yr note still is unable to break below 2.00% with any momentum (2.09% early Monday morning). Mortgage prices and rates are stuck in a very tight range with very little change in rates for the last couple of weeks.

Italian bonds and stocks erased early gains and declined as Monti met with leaders of the country’s political parties to discuss Cabinet nominees. The yield on Italy’s benchmark 10-year bond rose 19 basis points to 6.64% this morning. The professor, as Monti is known, already faces resistance to appointing some politicians to his so-called technical Cabinet. Europe is a dead man walking when it comes to dealing with the debt crisis; even if the ECB wanted to pump funds to Italy, it doesn't have enough to make a dent in the debt. Germany and France will not pony up anymore funds as their citizens resist the financial stress it would out on each country.The inability to contain a regional debt crisis that started in Greece more than two years ago led to a surge in Italian bond yields as investors bet on which nation may need aid next. Monti, an economist and former adviser to Goldman Sachs Group Inc., will try to reassure investors that Italy can cut a 1.9 trillion-euro ($2.6 trillion) debt load and spur economic growth that has lagged behind the euro-region average for more than a decade.

Italy’s bond sale today highlighted investor skepticism that euro area’s leaders will struggle to push through reforms needed to end the debt crisis. Italian bonds today fell for the first time in three days, after the government sold 3 billion euros ($4.1 billion) of five-year notes, the maximum target, at the highest yield in more than 14 years. Rising yields highlighted the challenge facing the new government.

This week, no economic releases on Monday but we have a lot of key data through the rest of the week. Inflation reads, retail sales, reports on factory usage and output, housing starts and permits and the key Philly Fed business index. Economic releases recently have been secondary to the constant and confusing news that seeps out daily from Europe. This week leads into next week's short week with Thanksgiving holiday taking 2 days out of play and likely thin volume as investors wind down. The rate markets are stumbling at present levels, the longer the 10 yr fails to break 2.00% the more tedious the outlook becomes.

This Week's Economic Calendar:

Tuesday;

8:30 am Oct PPI (-0.2%, ex food and energy +0.1%)

Oct retail sales (+0.4%; ex auto sales +0.2%)

Nov Empire State manufacturing index (-0.8 frm -8.48 in Oct)

10:00 am Sept business inventories (+0.2%)

Wednesday;

7:00 am weekly MBA mortgage applications

8:30 am Oct CPI (0.0%, ex food and energy +0.1%)

9:15 Oct industrial production (+0.4%)

Oct capacity utilization (77.6% frm 77.4% in Sept)

10:00 am NAHB Nov housing mkt index (18 unch)

Thursday;

8:30 am weekly jobless claims (+10K to 400K; con't claims 3.648 mil frm 3.615 mil)

Oct housing starts and permits (starts -8.0%, permits +7.7%)

10:00 am Nov Philly Fed business index (6.8 frm 8.7)

Friday;

10:00 am Leading economic indicators (Oct +0.6%)

There has been little movement in mortgage or 10 yr note rates for the last two weeks; regardless of the momentary and constantly conflicting news from Europe US long term rates are hitting key resistance levels (2.00%) on the 10 yr note and mortgage rates hanging in a 10 basis point yield range. The longer the rate markets find resistance at current levels the more concerned we are that rates may have found a bottom. Traders and those that seek safety against turmoil in Europe appear to resist buying when the bellwether 10 yr falls to 2.00%; although the rate has dipped below 2.00%, when it occurs it lasts no longer than a few hours before bouncing back.

Monday, November 14, 2011

This Week; still all about what comes from Europe as it continues to tilt at windmills unable financially to step up and cover the troubled countries that hang on the cliff of default. Italy made a positive step last week with Berlusconi agreeing to step down and a new leader in place (Monti), a financial guy, to form a technocratic government ( no politicians) to work out a budget that will save the country from defaulting. Italy is so big and carries more debt than the EU and ECB can handle. The bellwether 10 yr note still is unable to break below 2.00% with any momentum (2.09% early Monday morning). Mortgage prices and rates are stuck in a very tight range with very little change in rates for the last couple of weeks.

This week, no economic releases on Monday but we have a lot of key data through the rest of the week. Inflation reads, retail sales, reports on factory usage and output, housing starts and permits and the key Philly Fed business index. Economic releases recently have been secondary to the constant and confusing news that seeps out daily from Europe. This week leads into next week's short week with Thanksgiving holiday taking 2 days out of play and likely thin volume as investors wind down. The rate markets are stumbling at present levels, the longer the 10 yr fails to break 2.00% the more tedious the outlook becomes.

Forwarded exclusively by:

Tim Kleyla

The Mortgage House

Office: 616-392-2290

Email: tkleyla@mortgagehouse.org

website: www.mortgagehouse.org

Helping the client make a thoughtful and informed choice.

Thursday, October 20, 2011

Treasuries and mortgages opened a little weaker this morning. At 8:30 more selling after weekly jobless claims that fell 6K to 403K frm 409K last week (revised frm 404K); continuing claims were 3.719 mil up frm 3.694 mil last week.

Also there is that ever present belief Europe will get a plan worked out prior to this weekend's G-20 meeting. Germany and France still in disagreement over the role to be played by the ECB in the bank re-capitalization after the banks take huge losses over the bad debt of Greece and then the other troubled counties in the EU. a day before a finance ministers’ meeting in Brussels intended to set a common strategy on dealing with the turmoil there is nothing concrete. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt last night failed to resolve differences. French Prime Minister Francois Fillon stepped up calls for the 440 billion-euro ($608B) European Financial Stability Facility to be turned into a bank and given leverage by the ECB which, along with Germany, has rejected using its balance sheet to bolster the fund. Germany has endorsed enabling the EFSF to insure a portion of cash-strapped nations’ bond sales. Given the news reports over the differences it is a huge step of faith to believe a workable plan can be done prior to the G-20 meeting this weekend. Meanwhile in Greece riots are continuing over the deep austerity that must be in place to get more cash; Greece will run out of money in a few weeks.

Greece will default; I don't think anyone in the EU believes it won't. What seems to be happening in the negotiations is a plan to contain the defaults of Spain, Italy and Portugal. The EU cannot afford to let those countries to fall otherwise it is the end of the EU experiment that began 12 years ago when 17 countries agreed to join together with a common currency and common economic goals.

At 9:00 this morning treasuries and mortgages had come off their lowest prices earlier; the 10 -2/32 and mortgages -4/32 (.12 bp). The DJIA at 8:30 was +45, at 9:00 +2. US interest rate markets still welded to the action in equities. Likely that will be the way it goes the rest of today.

At 9:30 the DJIA +5, 10 yr note -7/32 at 2.18% +2 bp. Mortgage prices at 9:30 -7/32 (.22 bp).

Three key data points hit at 10:00. Sept existing home sales were expected to decline 1.8%, as reported sales fell 3.0% to 4.91 mil annualized; August sales revised to +8.8% frm +7.7%, inventories of unsold homes down 2.0% leaving an 8.5 month supply. Leading economic indicators for Sept was up 0.2% in line with forecasts. The giant in the room; the Oct Philly fed business index was expect -9.6 frm -17.5 in Sept; as reported it increased to +8.7. The components were mixed, new orders at 7.8 frm -11.3, prices pd at 20.0 frm 23.3 and employment at 1.4 frm 5.8. The initial reaction to the three reports didn't do much to stocks or bonds.