Danny Salas

Poor Treasury Auctions = Higher Rates

Treasury Has To “Sweeten The Pot”

$13 Billion in 30-Year Treasury Notes and $21 Billion worth of 10-Year Treasury Notes had to have increased yields in order to spur demand, this week.  It was the only way to auction the notes…to “sweeten-the-pot,” so to speak to lure investors.  Remember, increased yields = increased interest rates.  Keep in mind, that without the government Mortgage Backed Security (MBS) Program, these “deals” will have to look even more sweet…so expect higher interest rates after March of 2010. With only $179 Billion left in the program, better be prepared!

Retail Sales

Even excluding Auto Sales, Retail Sales surprised us, coming in at a solid 1.2%.  Experts were expecting a 0.4% reading, so this information is very good for the economy, yet hurts interest rates by putting pressure on bonds when investment funds move to stocks. However, keep in mind that I’ve written before; there are a lot of deals and incentives out there, to spur interest in goods, so the bottom line might come back and haunt retailers.  Time will tell!

Consumer Sentiment Surprises

A higher reading from Consumer Sentiment caused the stock market to smile, putting even more pressure on MBS and interest rates.  You can see the increasing rate trend on the face of the blog…click on the interest rate trend box…notice November 30, 2009, when we triggered our clients to lock.  Ah, thank you very much.

Locking Advice (click on little birdie to get our twitter lock updates)

We’ve broken through the 25-Day and 50-Day Moving Averages.  The next layer of support is 100 and 200-Day Moving Averages. I think the new trend is continued higher rates, but we’ve already lost so much in value, that we may as well watch and see what the market gives us.  There is a lot of information is coming out, next week…

Economic news week scheduled for next week:

• Tuesday December 15th – Producer Price Index
• Wednesday December 16th – Consumer Price Index
• Wednesday December 16th – FOMC Announcement
• Wednesday December 16^th – Housing Starts
• Thursday December 17^th – Jobless Claims