Danny Salas

Archive for December, 2009

Chico, CA Interest Rates Market Report – Economic Influences – December 24, 2009

Merry Christmas Friends

Merry X-mas!  Enjoy Your Families and The Holiday Season!!!

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Chico, CA Interest Rates Market Report – Economic Influences – December 23, 2009

Rates Holding Firm With Poor Economic Data

Economic Reports SHOULD Cool Rates…But…

The Fed’s Favorite Gauge on Inflation, The Core Personal Consumption Expenditure Index (PCE) came in at a year-over-year reading of a calm, cool, 1.4%.  Estimates were set for a 1.5% reading, and remember, inflation is interest rates worst enemy.  The PCE, for the month of November, came in at 0.0%.  Now that’s cool!  Personal Spending was down to a 0.5% reading, when experts expected a 0.7% figure.  Personal Income increased, but at 0.4%, when they expected a 0.5% increase.  Personal Savings remained at a steady 4.7%.  So, what all this points to is that people are making less, spending less, and saving more.  All signs of a cool economy and generally this information would significantly benefit interest rates, however, other things are brewing, in the background.

Treasury Auction Announcement Pausing Markets

The Next Treasury Auction Announcement is due for release today.  Here’s the concern:  With a HUGE auction announcement expected, and people all around the world taking time for the holidays, making it another short week, next week, the auction is expected to disappoint.  So, the speculation is that there will not be much interest for the Treasuries, and therefore, rates will need to be increased to lure interest.  With this instability, if you don’t lock, and watch the market, you’re risking another downward trend.  I might count my blessings and just protect myself, during these nervous moments.

Chico, CA Interest Rates Market Report – Economic Influences – December 22, 2009

Only $163 Billion Left in the MBS Purchase Program

What In The World Happened To Interest Rates?

Well, I’ve been talking about this for quite some time…preparing everyone for the inevitable plunge in bond values and increase in interest rates.  And while I’ve also mentioned the it’s going to be a bumpy road causing rates to bounce up and down, we’ve lost over 150 basis points since Friday, alone.  That’s a 1.5% Point cost on a real estate loan, people!  $1,500 per $100,000 borrowed.  That’s significant!

Short Week

With Christmas right around the corner, stocks have been reacting quite excitedly.  This has taken the sails out of Mortgage-Backed Securities (MBS) and Bonds, causing rates to increase this week.  We had another “Quadruple Witching Effect” this last week, with Nike, Oracle, and some other Stocks taking off and moving investors away from Bonds.

$163 Billion Left

There is only $163 Billion left in the Government Purchase Program for Mortgage-Backed Securities.  With the program ending in March, and with another short week, next week, when the Government will auction off 2-Year, 5-year, and 7-Year Treasuries, expect interest to be slight, and therefore cause rates to jump, potentially, even higher.

Locking Advice

We’re now sitting on the lowest levels seen in MBS values throughout the year.  Since September 23, we haven’t seen rates this high…and with a short week this week, a short week next week, and The Government Purchase Program, that helps keep rates low, running out of funds, it just might be time to start taking your opportunities to lock…seriously.

Related Must Reads

Quadruple Witching…What It Is, and When It Occurs

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Chico, CA Interest Rates Market Report – Economic Influences – December 17, 2009

Yesterday's Advice, "Float Into The Fed Comments, Today."

Initial Jobless Claims Disappoint

But, it’s good for interest rates!  480,000 new claims compared to the 465,000 that experts expected.  Also, of interest, was that continuing claims increased by 5,000 to 5.19 Million.  This information was a real blow to Stocks, as they expected the lower claims number trend to continue, and since they did not, Bonds, Mortgage-Backed Securities (MBS), and Interest Rates, are benefiting.

Citigroup Selloff

Interesting stuff here; the government indicated that it’s going to sell a significant portion of its ownership interest in Citigroup.  Citigroup recently lowered their stock value and is holding a discounted sale.  So, it’s causing another decline in overall Stocks and, again, interest rates are benefiting.  There is talk that Goldman Sachs and Morgan Stanley’s earnings will fall short, into 2011.  This is hurting Stocks, too.

Fed Says, “Extended Period”

Told you!  When Bernanke Speaks…Markets Listen.  ”Extended Period,” was the quote used by the Fed, when explaining that they were interested in keeping the overnight rate low.  This helped keep bonds under control, and it signaled a reversal in the current trend of higher rates.  Yesterday’s advice to, “carefully float into the Fed’s comments, today,” proved to be perfect advice!  Our Clients are happy…are yours?

Ben Bernanke For Four More Years

The Senate Banking Committee is voting, today, regarding another four year term for our current Federal Open Market Committee Chairman, Ben Bernanke.  I think he’ll be confirmed!  Also, mentioned in yesterday’s comments, The Fed reiterated that the MBS Government Purchase Program is going away on March 31, 2010.  At this point, they hinted that the program will not be extended beyond this end date.  So, beware, rates will increase if these facts hold true.

Locking Advice

Floating advice yesterday, proved positive.  We are now hitting resistance at the 40 and 50-Day Moving Averages.  It may be tough to break through these lines, so we will probably be locking today…unless we stay at these levels…If we stay at these levels, it could show that another trend has been set and we’ll continue to see lower rates.  However, keep in mind that if we break away, locking, immediately, would be prudent.

Related Must Reads

November 28, 2008 – When The Government Took A Piece of Citi
When Bernanke Speaks, June 2004
When Bernanke Speaks, July 2007
When Bernanke Speaks, September 2007
When Bernanke Speaks, September 18, 2007
When Bernanke Speaks, December, 2008
When Bernanke Speaks, September, 2009
When Bernanke Speaks, November, 2009
When Bernanke Speaks, December 8, 2009
When Bernanke Speaks, December 16, 2009
$1.25 Trillion Government MBS Purchase Program

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