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Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com

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Saturday, February 12, 2011

This Week; after last week with little in the way of economic releases, the calendar has a number of key data points. Nothing on Monday or Friday but mid-week is loaded. Jan retail sales, both PPI and CPI for Jan, two regional Fed reports on the economy, two reports on the status of the manufacturing sector, and the minutes from the Fed's FOMC meeting on 1/26. Last week, after another swift spike in rates for mortgages and treasuries, the bond and mortgage markets improved a little; the 10 yr note yield fell to 3.64% frm 3.66% at the end of the previous week. Mortgages didn't show any improvement however, the 30 yr MBS price fell 12/32 (.37 basis points) on the week.
 
Interest rate markets continue their bearish trend and outlook. The economy is improving, as long as it continues and with the threat of inflation still high, rates will not show much improvement. We remain with our longer outlook that mortgage rates will continue to edge slowly higher but we still are not expecting a serious increase in rates. 5.5% on 30 yr mortgages by the end of the second quarter or early third quarter, then possibly a slow decline as the economic outlook stalls.
 
Ben Bernanke still holding to his QE 2 plan, $600B of treasury buying through the end of the 2nd quarter. Debate now is whether the Fed will try another easing move with QE 3, unlikely in our opinion, nevertheless if the economy were to falter and unemployment increases Bernanke will not hesitate. Bernanke is scheduled to speak again on Friday this week  on global imbalances and financial stability at Banque de France Financial Stability Review in Paris.