Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – September 18th, 2007

“A Perfect Time To Lock”

Well, the news is out!  After an interesting week of relatively calm economic information coming out of the markets, the long awaited anticipation of the release of the Federal Open Market Committee’s (FOMC) Monetary Policy is here…but you’ll have to wait.  Let’s go over this past week’s calendar.  First of all, last week I told you about the Jobs Numbers coming in at a net loss of 4,000 jobs.  That started speculation that the Fed might lower the overnight rate 0.5% point as opposed to the 0.25% reduction anticipated, before these jobs numbers.  So remember when I said, “A perfect time to lock!?” Let me pat myself on the back!  I also received a wonderful bottle of wine from some extremely pleased clients who follow this article, and understand why I chose to lock their loan in when I did. 

Lock OR Float?  When AND Why?

Throughout the rest of the week, we saw noticeable price erosions as investors lost their feeling that a 0.5% cut was likely.  We did decide to float new loans, however, from applications taken after the window of opportunity late last week.  Here’s why: 

Remember the stubborn 200-day moving average that acted as such a heavy line of resistance for so long?  Well, since those jobs numbers, mortgage backed securities have been able to stay above that trend line, hence, making it a heavy level of support.  So, with the release of economic data having little effect on rates, and the stock market not moving too much in any one direction this past week, rates have remained relatively stable.  All in anticipation of the FOMC meeting!  Even Retail Sales were lower than expected.  Particularly taking out auto sales numbers they fell by an astonishing 0.4% below expectations.  The largest decline in a year!  But investors favored waiting on Bernanke’s report. 

Michigan!  What Do They Know?

The University of Michigan’s Consumer Confidence Index was surprisingly higher than expected.  This pushed investors to believe that as long as consumer confidence remains healthy and the Fed kept liquidity in the markets, an economic slowdown would only be temporary and long term interest rates would continue to move higher.  Now, I don’t know what consumers you’re out their talking to, but what’s going on in Michigan?

When Greenspan Speaks…

Did you see Alan Greenspan on 60 Minutes Sunday Night?  He’s out pushing his new book “The Age of Turbulence:  Adventure in a New World.”  Our old fearless FOMC leader stated, that the greatest problem facing our economy is “the re-emergence of inflation.”  Not a very good comment for interest rates, as inflation is its worst enemy

Drum roll, please! 

Here’s the announcement!  A surprise move of 50 basis points!  Now, while the market reacted quite nicely, initially, the fed also commented that, “inflation remains a concern.”  Our advice here would be to see how far the initial reaction will go…lock when traders realize that this is not really good for bonds…as money will go into the stock market and away from bonds and mortgage-backed securities.  So watching the market closely and locking into an interest rate just before bond values start declining would be prudent and you will have beaten the system, so to speak…Until next week…

This entry was posted on Tuesday, September 18th, 2007 at 4:09 pm and is filed under Interest Rates, Weekly Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Name (required)

Email (will not be published) (required)

Website