Danny Salas

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

Rates On The Rise

3-Year Notes Fare So-So

The 3-Year Treasury Note Auction fared only so well, yesterday.  And the market is poised for another adequate auction of the 10-Year Note Auction, scheduled for today.  Remember, the longer the term of that note, the harder to sell it at reasonably low rates.

European News

Spain announced that they have a financial strategy to narrow their budget deficit, and Germany reported a Gross Domestic Product report that was unexpected.  This caused Stocks to rise, all over the world, at the expense of bonds, and therefore, interest rates.

John Paulson Speaks

Hedge Fund Manger, John Paulson, the man who made billions of dollars calling the collapse of the housing market, in 2007, has indicated that he sees housing prices rise 3-5% this year, and 10-12% next year.  This is huge news, as he’s called a lot of other shots, too, and even if he’s fractionally correct, and housing prices only rise 1.5%, if someone buys a home for $100,000 and puts 10% down ($10,000), in one year, they will have gained $1,500 on that $10,000.  A 15% gain on your investment, is pretty darn good these days!

Treasury Auctions Are Somewhat Disappointing

Locking Advice

We moved to a locking status, as news from Europe continues to be positive, which is taking the sails out of US Treasury Auctions and Bonds offerings.

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Chico, CA Interest Rates Market Report – Economic Influences – May 10, 2010

More Volatility Coming From Europe

European Fix

The European Central Bank (ECU) and The International Monetary Fund (IMF) announced that they will be lending 750 Billion Euro ($955 Billion) to European Countries to help stabilize the Euro and restore confidence in European countries’ debts.  They have also agreed to start purchasing the debt, as well as government Bonds, of struggling countries like Spain, Portugal, Ireland, and you guessed it…Greece.

Eerily Similar To US

This strategy sounds awfully familiar to the United States Troubled Asset Relief Program (TARP), and $1.25 Trillion Mortgage-Backed Security Purchase Program.  Seems as though these tactics have, so far, worked for the United States, and therefore, Europe is interested in their temporary relief benefits, as well.  What is alarming is that these programs can be quite inflation causing, when the government unloads this massive debt in the future.  That’s all anyone needs, is hyper-inflation, all over the world…

Treasury Auctions

Tomorrow, the Treasury will start it’s auction of $38 Billion in 3-Year Treasury Notes, followed by Wednesday’s $24 Billion in 10-Year Notes, and finally Thursday’s auction of $16 Billion in 30-Year Treasury Notes.

Europe's Influx of Cash

Locking Advice

Careful Floating, as the Stock Market and Bond Market determine what the IMF and ECB’s influx of funds will do to these markets

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Chico, CA Interest Rates Market Report – Economic Influences – May 7, 2010

What Happened Yesterday?

Too Many Market Orders

Yesterday, the Stock Market had a wild ride.  They’re still determining the reason, however, many attribute it to Market Sell Orders.  Remember, computers are set to sell stocks, when a stock gets to a certain level.  Then, these computers are programmed to sell at the next market level, to “fill” their order requirement.  So, stocks got trapped in a technical nightmare, after losing so much value already, and basically, computers started “selling” at each market level…which kept getting lower…and lower.  The volatility was impressive, to say the least.  For example:   Accenture (NYSE: ACN) went from $40 down to 14 Cents!  If that wasn’t impressive enough, the stock ended the day at $41.09. So, you can imagine the roller-coaster ride that interest took, as well.

Fat Finger Thursday

Another analogy is that there was a Fat Finger involved in yesterday’s debacle.  Again, using computers, a trader could have accidentally touched one too many zero’s, when trying to sell a certain number of Stock, causing panic in the markets.  Regardless, it’s interesting stuff.

Unemployment Figures

Unemployment moved from 9.7%, in March, to 9.9%, in April.  However, the Labor Department reported that 290,000 new jobs were created.  The market expected 187,000 new jobs, so that’s a serious increase.  Coupled with the fact that revisions to February and March’s numbers increased jobs numbers by 121,000.

More Jobs, But Less Employment?

So, how do we move to a higher unemployment rate of 9.9%, yet add 290,000 jobs?  Well, when people are laid off, they probably prefer to collect their unemployment checks for a while.  If you don’t look for a job, for four weeks, than you’re removed from the Unemployment Figures, by the Labor Department.  It’s just the way things are…So, last month, 805,000 people started looking for jobs, again.  So how those numbers can twist and turn, like the roller coaster, above?

It's Safe To Float...

Locking Advice

I’m in favor of locking in, while the gettin’s good!  Germany has decided to help bail Greece out.  So, that could have a negative effect on the flight to quality, or safe-haven of Mortgage Backed Securities.

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Freddie Mac’s Automated Engine Gets A Facelift

LP Changes

Loan Prospector has updated it’s automated underwriting engine to accept only ratios to 50.33% of a client’s income, when qualifying for a loan.  Previous to the current announcement, Freddie Mac would allow a 55% of a client’s income to pay monthly obligations.  The announcement, from Freddie Mac, is another example of the changes in the lending industry, and the more stringent guideline requirement that the industry in going through.

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