Danny Salas

Archive for January, 2010

Chico, CA Interest Rates Market Report – Economic Influences – January 29, 2010

Stocks Rallying On Hot GDP

Hot GDP Numbers

America’s Gross Domestic Product numbers rolled in at a hot 5.7%, when only a reading of 4.7% was expected.  This is the best reading since the third quarter of 2003.  This is the Advanced Fourth Quarter GDP figure.  We still have the Preliminary Reading, and then the Final Reading.  Often, these numbers get substantially revised, so we’ll have to wait and see what the true figures are, after some time.  An interesting component of this reading was that Consumer Spending, the largest component of the GDP, came in quite low.  This could have something to do with the end of the “Cash for Clunkers” Program that was abandoned the previous month.

So…Why The Hot GDP Numbers?

So, remember when I was talking about inventory levels at corporations?  The media was all giddy about Manufacturing numbers being so high…well…those manufacturing numbers are what has caused the GDP to elevate, this past quarter.  So, even though nobody’s buying, the media is going nuts over the GDP numbers.  But, they’ll get revised…believe me.  Sorry to sound so pesimistic, I’m just tellin’ it like I see it!

Fed’s Dissenting Vote

Fed comments from Vice Chairman Donald Kohn have bonds watching markets closely.  He simply stated that he sees rates moving higher, and that it could be swift.  Also, there was one Kansas City Fed President that was a dissenting vote regarding keeping “rates low for an extended period of time.”  It’s the first dissenting vote in over a year.  So, with these comments from the Vice Chair and the dissenting vote, are we, perhaps, looking for a rate-hike sometime this year?

Locking Advice

We’re still above the 200-Day Moving Average, so cautiously float into the day.

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Chico, CA Interest Rates Market Report – Economic Influences – January 28, 2010

Obama's Speech Was Promising

What The Fed…Said…

First, the Fed ended up saying, “rates will remain low for an extended period.”  This was good news for Bonds and interest rates.  However, the Fed also indicated that the $1.25 Trillion Mortgage-Backed Securities Government Purchase Program will, in fact, end on March 31, 2010.  After taking a moment to digest all of the information released, Bonds ended up not liking the news, and the market reacted negatively, with interest rates increasing approximately .25% Points in cost.

Barack Did The Talk…

Last night President Barack Obama gave his State of the Union Address to America.  One of his main theme’s was jobs creation.  This would be the driving force behind real estate and a much more healthy economy.  Jobs is the true answer…not just low interest rates.  So, it will be interesting what the Senate can agree to to move the country forward.  Regarding his comments on more regulation regarding the Big Banks.  There is a lot of controversy into how this will effect the economy.  The arguments stem from more regulations mean less jobs and less investment opportunity and growth.  Cow Dung (to put it nicely)!  Less regulation is what led us to the financial meltdown of almost the entire world.  The Big Banks can afford to pay Billion of dollars bonuses…they can afford to refund tax payers!  I agree…and if you don’t…tell me…what DID lead to the Mortgage Credit Crises?  I’m listening!

Treasury Auctions Are Kinda Rockin’

So far, this week, the Treasury Auctions have panned out fairly well.  This is good news.  There is a $32 Billion Auction of 7-Year Treasury Notes, today.  This is a longer term, and therefore, harder to sell at today’s yields, however, let’s see how it lays out.

Initial Claims Is To Blame

470,000 new claims were reported for last week.  450,000 were expected.  So, this is higher than we thought, however, it’s a little worse than just that.  Extended Benefits can continue for 99 weeks.  The Extended Benefits numbers are not included in the Continuing Claims numbers, that are currently reported at 4,602,000.  The estimated for people obtaining Continuing Claims Benefits plus people obtaining Extended Benefits are 5,600,000.  And that’s what’s being reported…but not by the media…so some estimates have the unemployed at nearly 10,000,000 people.  We better do something about jobs!

Durable Goods Are In The Hood

Durable Goods Items are things like T.V.s…or things that are anticipated to last the consumer over three years.  So, when jobs are bad, usually Durable Goods Numbers are too.  They came in at 0.2% as opposed to the 2.0% expected.  Not a great sign for a robust economy.

Locking Advice

We did a lot of locking yesterday, before banks had a chance to change their rates…after the Fed Announcement.  Now we’re sitting above the 200-Day Support level…so float again, if you didn’t take advantage of yesterday morning’s pricing.

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Chico, CA Interest Rates Market Report – Economic Influences – January 27, 2010

Auctions, Fed Meetings, Swearing In...Oh My!

Strange Things Are Afoot At The Circle K

Famous line from Bill and Ted’s Excellent Adventure.  What’s so strange?  A lot! First, we have a huge Treasury Auction.  Second, we have the Fed Speaking After their two-day meeting, and finally, we still have no confirmation of Ben Bernanke continuing into his second term as Federal Reserve Chairman.

Treasury Auction

$42 Billion of 5-Year Treasury Notes will be auctioned off today.  Again, if foreign interest is evident, rates should remain stable.  If not, expect higher rates.  There is a twist though.  The Fed releases its Policy Statement after the auction.  So, markets don’t appreciate unknowns, and without knowing if the Fed will change their stance on keeping rates low, “for an extended period,” things could get ugly.

Swearing Ben Bernanke

Relax!  Not as in expletives!  As in he’s not sworn it for a second term.  Now, what if Bernanke’s feeling the pressure of not being sworn in yet, and it blurs his vision regarding the right thing to do, for the economy and the United States?  Just a thought…and, again…markets don’t appreciate unknowns.  What will he comment on regarding the $1.25 Trillion Mortgage-Backed Security Government Purchase Program?  So there’s a lot to be nervous about this morning, and the day will play itself out, interestingly, for certain.

Locking Advice

We’re sitting just below  the 100-Day and 50-Day Moving Averages.  They’re acting as a heavy layer of resistance, that will be difficult to break through, however, we’re also sitting above the 200-Day Moving Average, directly on top of the 40-Day Moving Average.   So, it would be prudent to float into the Fed’s comments and watch the auction results, carefully!  Either way, it’s going to be interesting!

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Chico, CA Interest Rates Market Report – Economic Influences – January 26, 2010

Japan's Woes Are America's Gains

Japan’s FICO…Below 620?

Seems as though the world is concerned with Japan’s credit rating and investors are dumping their Japanese Bonds and moving to the safe-haven of US Bonds and Mortgage-Backed Securities.  This is currently helping interest rates.  Standard and Poor’s warned that Japan’s rating would move to negative.  How did Japan get there?  By creating huge stimulus programs and spending programs to try and help stimulate the economy.  This has created massive debt, for them, and they’ll have to re-pay this debt at high interest rates.  Uh…sound familiar? 

China’s Tightening Credit

So China is tightening their capital reserve requirements, making it more difficult to obtain credit.  This is alarming because China is a HUGE purchaser of US exports, and if their credit standards restrict companies from buying our exports, it could hurt the US economy even more. 

$44 Billion in 2-Year Notes

That’s right. 2-Year Treasury Notes are being auctioned today.  If the auction fares well, with a lot of foreign appetite, we could see rates move slightly lower.  With the problems in Japan, we might see a healthy auction all week.  We will see 2-Year, 5-Year, and 7-Year Note Auctions this week.  With the shorter terms, we may see more of an appetite for these investments. 

Consumer Confidence

Well, this reading came in higher than expected.  This reading kinda cracks me up, because who’s setting that level of where the consumer should be confident or not?  I think we have a long way to go, but I guess that things are looking a little better. 

Locking Advice

With the Fed Meeting coming to fruition tomorrow and the Treasury Auctions occurring this week, we’d better have a finger on that lock button.  But it’s safe to float, into the day.  We may see a lot of volatility this week.  So, buckle up! 

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