 Real Estate and Mortgage Market Update for Wednesday 02-22-2012Wednesday, February 22, 2012 - Article by: Crestico Funding -
Interest rate markets started a little better this morning with stock indexes in the US weaker and selling in the Europe stock markets. Europe's purchasing managers. Data out in Europe was weaker than estimates and still concerns that Greece's austerity agreement is so severe its economy will continue to decline and in time the country will not be able to achieve the goals set out in the agreement with the IMF, the EU and the ECB. European stocks retreated for a second day after a report showed services and manufacturing output in the euro area unexpectedly contracted in February. The composite index based on a survey of purchasing managers in both industries dropped to 49.7 from 50.4 in January; estimates were for the index to come at 50.5. A separate report showed German services and manufacturing expansion unexpectedly slowed in February amid declining orders at factories. Fitch lowered the rating of Greek debt to C from CCC, saying Greece is highly likely to default on its debt. U.S. treasuries are also betting that Greece will default, as a reaction the U.S. bond market will continue to be well supported on sell-offs. Pulling the other direction, investors are increasing concerns on inflation to six-month highs in trading of Treasury Inflation Protected securities. Inflation fears won't dissipate with interest rates at these low levels, however we see little pricing pressure in labor costs or commodities like crude oil. Crude has jumped over $6.00/barrel in the last couple of weeks, mostly on Iranian fears. When global equity markets increase crude follows but higher energy prices will very likely curb discretionary consumer spending and dampen the optimistic economic outlook. A couple of technical levels were tested and held yesterday;the 10-Year Note yield increased to 2.06% where we have support at 2.08% area, the DJIA tested 13K yet backed away into the close (12,996). Prior to 930am the DJIA traded down just 4 points while the 10-Year Note traded at 2.05%; not much change from yesterday's closes (MBS prices at 9:00 +1/32 (.03 bps). At 930am the DJIA opened down -11, 10-Yer Note up +6/32 at 2.04% (-2 bps) and MBS prices up +5/32 (.15 bps). MBS prices were generally unchanged until 920am so early pricing doesn't likely reflect the better levels at 930am. At 1000am January Existing Home Sales increased 4.3% from December against forecasts of up +1.6%. December sales however were revised to -0.5% from +5.0%. According to NAR there is a 6.1 month supply of homes; -0.4% to 2.31 million, the lowest level since March 2005. Distressed sales accounted for 35% of all sales compared to 32% in December. There was little initial reaction to the report. |
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