Danny Salas

Archive for February 12th, 2010

Chico, CA Interest Rates Market Report – Economic Influences – February 12, 2010

China Is Tightening Up

What Goes Up…

We’re back to float mode, this morning, as volatility has taken the helm to set the pace for the day.  But, you’d better keep your finger on the lock button, as volatility has been a recent theme, and should remain a huge part of the market, throughout 2010 and 2011.

Chinese Inflation

The People’s Bank of China is raising its bank reserve requirement by 50 basis points to 16.5% of their deposits.  This is to stave off rapid growth and inflation. By holding on to more of these reserves, they’re unable to lend as much money.  This has caused rates, in the U.S.,  to dip down, a bit, and move back above the 25, 40, 50, and 200-Day Moving Averages, but still below the 100-Day Moving Average.  It’s a nice break, from the negative territory we’ve been experiencing, but don’t expect it to last too long.  Rates are only about .25% Point in cost better than late yesterday.

Retail Sales

January Retail Sales were up 0.5%, and only expected to be 0.3%.  This is good news, however, generally, we like to see three consecutive months of growth in sales, before believing that the American Spender is back to their wasteful ways.

Turn Out The Lights

The party is almost over.  $11 Billion in Treasuries were auctioned, this week.  That only leaves $66 Billion left, in the Government Mortgage-Backed Securities Purchase Program.

What MIGHT Happen After The $1.25 Trillion

There is rumblings that Fannie Mae and Freddie Mac might purchase delinquent assets from investors.  Thereby, enabling these investors to re-enter the market unscathed, and buy more Mortgage-Backed Securities.  There is some concern, here, though.  If you’re able to sell a home, that you purchased three years ago, and be lucky enough to break even, would you buy another home?  Some say that human nature would be prevalent and would dictate that the investor had learned their lesson, got out unscathed, and would look for somewhere else to put their money.  Others might feel that if you bought three years ago, now you realize that now is the time to buy.

Related Must Reads

Why Moving Averages Are Important
Japan And China: What Credit Tightening Means

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