Danny Salas

Archive for February, 2010

Chico, CA Interest Rates Market Report – Economic Influences – February 5, 2010

We Managed To Break Above All Lines Of Resistance

Unemployment Drops to 9.7%

YooHoo!  That’s the Headline on the News Channels and Websites.  So, why haven’t rates skyrocketed?  Check this out…The Headline Number for Jobs Creations, for the month of January, was a -20,000 figure.  Yes, that’s a negative twenty thousand.  We were expecting 15,000 jobs gained.  This number was reported to us by the Business Survey.  Quite frankly, it’s generally a very unreliable Survey.  So unreliable that it has three names.  Business Survey, Current Employment Statistics Survey (CES), and The Establishment Survey.

So, Why Is The CES Used?

The CES can be more accurate, when there is less volatility in the market and numerous jobs numbers are either being lost, or gained.  So, it can be a helpful tool.  By interviewing approximately 140,000 business, nationwide, the survey gets its information from these businesses.  It also takes into account the birth/death ratio, when calculating their jobs numbers, and this can be very innacurrate in volatile times, as well.

Revisions To The CES

Here’s how accurate the CES has been (sarcasm).    December’s numbers were revised to 150,000 jobs lost.  Almost double what was originally reported.  November showed 60,000 additional gains, and October showed an additional 100,000 jobs lost.  Then, the big Benchmark Revision I discussed on Wednesday.  As I stated, the revised numbers were an additional 900,000 jobs lost from March of 2008, to March of 2009.

The Household Survey

This month, the media chose The Household Survey, in which to report the labor statistics.  This Survey, formally known as Current Population Survey (CPS), calls about 60,000 actual households.  The household survey showed that the U.S. gained 540,000 new jobs, in January.  The Unemployment Rate is reported by The Household Survey and jobs numbers are reported by both the Business Survey and The Household Survey.  So, the media can take information from either of these Surveys.

The Fed Is Watching

“I always feel that, (The Fed) is WATCHING ME.”  Falco (I think), but more recently made popular by Geico commercials.  If the Fed feels as though the media is portraying a move toward more healthy labor statistics, they may remove their “extended period,” comments from their next FOMC meeting.  That wouldn’t be good for interest rates.

Quick Sidenote

$1.173 Trillion, of the Fed’s designated $1.25 Trillion, has been spent on the Mortgage-Backed Security Government Purchase Program.  We’re gettin’ close folks!  Rates will increase when this occurs!

Locking Advice

Rates are similar to yesterday, but I feel that the market it just digesting the labor statistics.  I’d lock, today.  But, we have managed to stay well above the 50 and 100-Day Moving Average, so floating would be risky, but could be beneficial.  With rates at, or below, the 5.0% area, how can you go wrong?  I also feel as though investors will take this new lower unemployment figure and take their funds from bonds and put them into stocks, as stocks generally do well with better than expected unemployment statistics…

Related Must Reads

The Benchmark Revision Numbers
Fed’s “Extended Period” Comments…What It Means
Why Rates Will Increase Once The $1.25 Trillion Is Spent

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Chico, CA Interest Rates Market Report – Economic Influences – February 3, 2010

Jobs Numbers Will Move Markets

Jobs, Jobs, Jobs

American Data Processing (ADP) has reported their version of the employment sector.  They reported only 22,000 jobs lost, for the month of December, 2009.  The market was expecting a 30,000 lost job number.  So, better than expected news can weigh on interest rates, and they have, slightly.  We’re currently down 12 basis points, which is about a cost of .125% from yesterday’s pricing.  The official jobs numbers are scheduled for release on Friday.  Together, with the public sector and private sector, we’re expected to gain approximately 13,000 jobs for the month of December, with the Unemployment Rate holding steady at 10%.

The “Benchmark Revision”

Friday will give us a very important figure.  The Benchmark Revision to the Jobs Report will give us a revision to the revised numbers that we’ve already seen, from March to March.  So, when we see jobs numbers, they, generally get revised, from one month, to the next month, for two months in a row.  So, the reason for the revisions, is to get more accurate figures so we can see a more true economic picture.  What’s the problem?  Well, even though we expect these revisions to be a more accurate taste of what’s occurring, it’s old news.  And, old news is not really news.  So, even though the revised numbers could paint an ugly picture of what truly happened from March of 2008 through March of 2009, the current numbers (with a gain of 13,000 new jobs) could be absorbed as good news for our economy, and therefore, bad news for interest rates.

Looking Into The Crystal Ball

So, the Administration expects a 6.0% Unemployment Rate in five years.  Well, read this past article about these numbers and see for yourself where you think interest rates may be in five years.  If we cannot realistically reach these numbers, then we could have further deficit problems, which would lead to higher interest rates.

Locking Advice

We’re still under the 50-Day and 100-Day Moving Averages.  It would be very difficult to maneuver above these two lines of resistance, so locking it, might be prudent, before the Jobs Numbers turn rates ugly, before you have a chance to lock in, Friday Morning.

Related Must Reads

The Real Jobs Numbers
ADP is O-F-F  A Look At Their Sometimes Interesting Numbers
What Is A Moving Average?

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Chico, CA Interest Rates Market Report – Economic Influences – February 2, 2010

This Is Almost Exactly What Bond Charts Look LikeDayJobs Numbers Will Direct Rates

Friday is going to be the big day, this week.  And by Big, it could be BIG!  Here’s the “sitch:”  Mortgage-Backed Securities have been shifting back and forth between a tight area between two heavy lines of resistance, and one strong line of support.  The 50-Day and 100-Day Moving Averages have been keeping interest rates down, and the 200-Day has really help support lower rates (with a little help from the 25-Day and 40-Day Moving Averages).  With Friday’s employment numbers, rates could take off in either direction.  However, there is currently a feeling of bias toward higher rates…particularly with the dual layer of resistance.

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