March 23rd, 2011 7:58 AM by Lehel S.
Treasuries and mortgages opened better this morning after a quiet day yesterday. The stock indexes early on were pointing to a slightly weaker open the reason for a little better trade in the bond and mortgage markets.
In Japan officials said city tap water may be unsafe for infants while Japan’s government sought to assure people that radiation levels detected in the food chain following a nuclear accident don’t pose a health threat. The Health Ministry earlier today advised against eating leafy vegetables, broccoli and cauliflower produced near the stricken Dai-Ichi power plant, located 220 kilometers (135 miles) from Tokyo. Radioactive iodine levels taken yesterday at a treatment facility in Katsushika ward were double the recommended limit for babies, a city official said in a televised briefing today. Some progress in containing one of the reactors but still no end to the concerns. The maximum reading reported so far at the site is 500 millisieverts per hour, meaning a worker in the vicinity would receive the maximum recommended lifetime dose in 30 minutes.
Investors are making moves in Japan; Monday Warren Buffett said he is making investments in Japan, today PIMCO is reported to be purchasing Toyota Motor Credit debt. Increasingly the outlook for the global economy is improving after the panic that ensued after the earthquakes and nuclear reactor problems in Japan were thought to bring the world economies down.
In Europe estimates for growth in Britain were lowered. U.K. government bonds stayed higher after Chancellor of the Exchequer George Osborne said growth this year will be 1.7%, lower than a previous forecast for a 2.1% expansion.
Earlier this morning the weekly MBA mortgage applications increased 2.7% from one week earlier. The Refinance Index increased 2.7% from the previous week. The seasonally adjusted Purchase Index increased 2.7% from one week earlier and was 15.3% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 2.5%. The four week moving average is up 1.0% for the seasonally adjusted Purchase Index, while this average is up 3.3% for the Refinance Index. The refinance share of mortgage activity remained constant at 66.4% of total applications. The adjustable-rate mortgage (ARM) share of activity increased to 5.9% from 5.6% of total applications. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.80% from 4.79%, with points decreasing to 0.96 from 1.07 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.02% from 4.03%, with points increasing to 0.90 from 0.85 (including the origination fee) for 80% loans.
So far this morning markets are quiet with not much trading. After two weeks of very high market volatility time to sit back and evaluate what is actually occurring and the impact near and longer term.
The only data today; Feb new home sales at 10:00 were expected up 1.0%, another shocking number, down 16.9% to 250K units annualized. The median sales price $202,100.00 down 8.9% frm Feb last year; at the present sales pace there is a an 8.9 month supply. The decline to 250K annualized is the lowest since 1962 and the median sales price the lowest since Dec 2003. The initial reaction boosted mortgage prices as the 10 yr price gained, the equity markets were already lower but fell more on the very weak sales report On Monday Feb existing home sales fell 9.6%; both reports were way below what analysts had expected.
We have been talking about the outlook for US interest rates in the last couple of days; that in our view rates will begin to increase soon. As we noted it is a moving target based primarily on the economic outlook, kind of rattles that outlook a little when we see sales of homes, both existing and new, in Feb plunge much more deeply than what had been thought. The weakness in housing is nothing new but the magnitude of the Feb declines is worrisome to say the least. It might have been somewhat weather related as Feb was not good for most of the country, nevertheless the declines are shocking.