Careful Floating Into The Morning

FOMC Day

That’s right!  At 11:15 pm PST, Good ‘Ole Ben Bernanke and The Federal Open Market Committee will be rolling out the Interest Rate Decision and Monetary Policy Statement, from their meetings over the past two days.  It’s anticipated that the Fed will leave the overnight rate at 0.0% – 0.25%.  What will be of particular interest will be if the Fed changes their stance on their “extended period” statement regarding leaving interest rates low for an “extended period of time.”  The Fed, if not now, may very shortly be, in quite a precarious position regarding juggling inflation concerns and an economy that’s not creating jobs.  When do they pull the trigger?  Some say sooner, rather than later.  However, it’s expected that the statement will remain, with inflation concerns not too prevalent, currently.  It’s important to note, that some feel as though the “extended period” language should change somewhat.  Remember, that once the language changes, the writing’s on the wall and will effect many things, including the Carry Trade that Banks have been able to capitalize on and assist in getting out of the pickle that they were in, after the mortgage credit crisis.

$1.25% Trillion Purchase Program

The world will also be interested in a solid confirmation that the government is not interested in extending that $1.25% Trillion Government Mortgage-Backed Security Program.  With this major player out of the purchase market, rates will suffer.

Housing Trajectory

Housing Starts were 575,000 for February.  Building Permits were reported at 611,000.  The government said that the overall housing starts were down 5.9% and permits were down 1.6%.  This is somewhat confusing, because housing starts are up 39%, on a year-over-year basis.  Building permits are up 32% on a year-over-year basis.  So, the housing trend trajectory is moving in the right direction, it just might be gradual.

This Afternoon, Things Could Change To A Lock Mode

Locking Advice

I would feel comfortable locking, however, it’s okay to float into the Fed Policy Statement.  We have support at the 50-Day Moving Average, but pricing is already built into a near certain decision to leave the fed-funds rate at 0.0% – 0.25%.  So, there would have to be a huge surprise to have any significant movement to lower interest rates.   Either way, it’s a good time to buy!

YOU DON’T WANT TO MISS THIS EVENT!!!

Scott St. John will be speaking at The Big Room At Sierra Nevada, Friday, March 26, 2010.  Scott is a 3rd-Term Governing Board Member of Freddie Mac.  You’ll have an opportunity to inquire into expected economic future of the United States, Real Estate and its REO future, and what’s happening behind the scenes that is making closing loans to more timely and difficult, these days.   REGISTER AT THE CHICO OR PARADISE BOARD OFFICES.  $10 includes appetizers.  $15.00 AT THE DOOR!

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Related Must Reads

Extended Period
Carry Trade: The Investment Opportunity of a Lifetime
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Were Currently Sitting On Some Support

FOMC Meets Tomorrow

At 11:15 a.m., tomorrow morning, we’ll hear from Good ‘Ole Ben Bernanake and his other Federal Open Market Committee members.  Will the “extended period,” comment continue to be mentioned?  There has been some concern, as of late, and some dissenting members of FOMC, regarding inflation concerns, and when to start increasing the overnight rate to curb inflation.  Most feel as though the “extended period” portion of the Fed’s statement will remain.

Economic Interests

The Empire State Manufacturing Report came in near expectations, at 22.86.  Industrial Production was 0.1% and Capacity Utilization was 72.7.  This is a low reading, and low readings of Capacity Utilization usually keeps inflationary concerns astray.  However, what’s frightening about lower levels of CU is that it could lead to the closing of factories, if they’re not being “utilized.”  We’re starting to see this in Europe.

Speaking of Europe

Greece is back at the top of concerns, as their Prime Minister, George Papandreou, stated at the Brookings Institution in Washington, this weekend, “If the European crisis metastasizes, it could create a new global financial crisis with implications as grave as the U.S.-originated crisis two years ago.”

The Domino Effect

So, Greece is in financial turmoil.  The European Union (EU) needs to rescue Greece, or experience worse financial disaster.  The EU consists of Big Wigs, like Germany, France, and the United Kingdom.  So, here’s the rough part…Moody’s, one of the world’s largest credit rating firms, is considering lowering the current AAA Rating for all of these countries, AND the United States’, too.  This would really hurt these nations, as a lower credit rating would increase risk, and therefore interest rates on debt.  Everyone’s having enough trouble, these days, let alone higher debt payments.  And, if foreign markets need to you more of their funds to pay their higher debt payments, than they won’t have funds to buy US Treasuries and Mortgage-Backed Securities…thereby, increasing interest rates.  Whoa!  We’d better figure out a “Grecian Formula,” for success, hey!?

Locking Advice

We’re sitting right above the 50-Day Moving Average.  Actually, we’ve bounced right off it if, the last three trading days.  However, the 25-Day and 40-Day Moving Averages have been a layer of resistance, as we bounce back and forth between these lines.  It’s really up to you…we could lock, and protect what’s there, or we could use the support we have, at the 50-Day, and see what economic turmoil in Europe and Moody’s can bring to Stocks and Bonds.  Support shows us to float, but you’d better do so cautiously!

Related Must Reads

Mutiny On The Policy: A Look Into How The “Extended Period” Effects The Carry-Trade
The Carry Trade Phenom
Greece’s Financial Woes
Greece Two
Greece III
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Eenie-Meanie-Miney-Moe – Catch a Country’s Financial Woes

YOU DON’T WANT TO MISS THIS EVENT!!!

Scott St. John will be speaking at The Big Room At Sierra Nevada, Friday, March 26, 2010.  Scott is a 3rd-Term Governing Board Member of Freddie Mac.  You’ll have an opportunity to inquire into expected economic future of the United States, Real Estate and its REO future, and what’s happening behind the scenes that is making closing loans to more timely and difficult, these days.   REGISTER AT THE CHICO OR PARADISE BOARD OFFICES.  $10 includes appetizers.  $15.00 AT THE DOOR!

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

YOU DON’T WANT TO MISS THIS EVENT!!!

Scott St. John will be speaking at The Big Room At Sierra Nevada, Friday, March 26, 2010.  Scott is a 3rd-Term Governing Board Member of Freddie Mac.  You’ll have an opportunity to inquire into expected economic future of the United States, Real Estate and its REO future, and what’s happening behind the scenes that is making closing loans to more timely and difficult, these days.   REGISTER AT THE CHICO OR PARADISE BOARD OFFICES.  $10 includes appetizers.  $15.00 AT THE DOOR!

We're All Over The Place, This Morning

Stocks Battling Resistance

Just like Bonds have Trend Lines that are tough to crack, so do stocks.  The S & P 500 had a difficult time breaking through a tough line of resistance at the 1,150 level.  This helped Mortgage-Backed Securities push back up after tail-spinning down 28 Basis Points, early in the morning.  Then, the Consumer Sentiment report came out weaker than expected.  However, as you dissect the particulars of Consumer Sentiment, it shows that One-year inflation expectations rose to 2.8% in March from 2.7% in February.  So, Bonds are now struggling and Stocks are taking more of a bullish attitude.

What The Appointment of Janet Yellen Means

This is, of course, speculation, however, history shows us that Janet Yellen favors lower rates, even at the risk of higher inflation.  President Obama has slated her for the Vice-Chairman position.  The concern, here, is that the world is watching.  With inflation risks looming in the air, investors will tread lightly about investing in fixed mortgage security instruments, and this could cause rates to climb, quickly.

Retail Sales Surprise

That’s right.  Even in light of the horrible, icy storms all over the country, Retail Sales rose 0.3% in February.  Yesterday, we commented on how this would effect rates, particularly when we expected a -0.2% drop.  When stripping out automobile sales we climbed a remarkable 0.8%, while only expecting a modest 0.1% increase.  This is truly news.

Consumer Sentiment

As mentioned above, Consumer Sentiment was a dismal figure, however, when breaking down the particulars, the market noted that inflation expectations are steadily increasing.  Coupled with today’s other inflation concerns, and knowing from reading this article that inflation is the nemesis of interest rates…you see the writing on the wall?

We've Bounced Off of The 200-Day 2 X's Already

Locking Advice

If you haven’t taken advantage of locking, you may as well float, today, to see how the market plays out.  Knowing when to lock is key to financial security when purchasing a home.  I have some of the lowest interest rates on the planet, with over 65 banks to choose from, including Access Real Estate Lending’s own Bank with plenty of lenders in my warehouse line.  Call me for sound real estate financing advice.  Have a great weekend!

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1.75% Financed Premuim Is Going Away

Per HUD Mortgagee Letter 2010-02, the upfront mortgage insurance premium for FHA loans will increase to 2.25% on all loans for which the case number is assigned on or after April 5, 2010.

We Have Some Support

30-Year Treasury Note Auction

Investors are lost, not knowing what to do with their funds, until the results of the 30-Year Treasury Note Auction is in, which will be at about 10:00 a.m. PST.  The two earlier auctions, this week, went quite well.  However, as I write, we’re currently down 16 basis points.  Most banks will have a re-price for the worse for about .125% Point in cost.

Jobless Claims Better, But…

The number of people filing new unemployment claims, fell 6,000, this week, to a seasonally adjusted 462,000.  We won’t see the labor market correcting itself until we see less than 400,000 claims on a week-over-week basis.  However, there is some positiveness in these numbers, as a 159,000 decrease in Unemployment Compensation Claims and a 15,000 decrease in extended benefits programs, can hopefully set a pace for a labor recovery, somewhere down the line, however, we still have a long way to go.

China’s Impact On US

“My little China Girl, you should mess with me.  I’ll ruin everything you are!”  David Bowie’s famous line from “China Girl.”  Words to reflect on…China’s inflation numbers are getting close to scary.  China reported that their Consumer Prices rose 2.7%.  They had anticipated a 2.5% increase and feel as though 3.0% is quite inflationary.  Keep in mind that the United States comfort level, with their own inflation measures, is closer to 2.0%.  The problem, here, is that if China starts to feel their own inflationary concerns, they could curb that by not participating in purchasing US Bonds and Mortgage-Backed Securities.  This, of course, would cause interest rates to increase, as there wouldn’t be another large player in the Bond Market.

Retail Sales Released Tomorrow

With today’s Jobless Claims Numbers not really effecting rates too much, the auctions, China’s news, and tomorrow’s Retail Sales Numbers are what have moved rates, up and down, this week.  We’re expecting a 0.2% decrease in Retail Sales, for last month.  It could be a rate mover.

We've Broken Through Two Lines Of Support

Locking Advice

Since we have broken through the 100-Day Moving Average, and opened up the day, so far, below the 25-Day and 40-Day Moving Average, there seems to be a little support at the 50-Day Moving Average.  We may want to see if the 50-Day holds a little support, into tomorrow’s Retail Sales numbers.  So, I’d float, into the day, if we break below the 50-Day, Lock…if not…we may have an opportunity, first thing tomorrow.

Related Must Reads

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Trend Lines / Moving Averages…What Do They Mean?

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We've Broken Through Support

Treasury Auction Does Well

Yesterday’s Auction of 3-Year Treasuries Notes started off precariously.  By the end of the auction, though, it was quite well received and interest rates benefited, but only slightly.  Today, we have a huge $21 Billion in 10-Year Treasury Notes to be auctioned, and longer terms are harder to sell, as inflation factors can whittle down the value of that bond, over a longer 10-Year duration. 

Mutiny On The Policy

The List of Federal Reserve Board “Dissenters” is growing.  Remember Bernanke’s statements, last month, to keep interest rates low “for an extended period of time!”  Dallas Fed President Richard  Fisher, St. Louis Fed President James Bullard, Philadelphia Fed President Charles Plosser and Chicago Fed President Charles Evans have all expressed their concern regarding the “extended period” of time.  Why?  Inflation!  The nemeses of interest rates!  This is alarming and could have an influence on the Carry-Trade.  You do NOT want to get caught up in a change in the carry trade.  It could cost an investment, millions!  The Fed’s in a tough position, right now, regarding when to move rates, so that we don’t experience too much inflation, too quickly.  Or moving them too quickly, and jeopardizing the economy and all the stimulus funds just submitted to Congress and The Senate, for approval.  I hope they don’t hold out too long…

Without Much Support...It's Time To Lock

Locking Advice

We’ve been in a lock mode for some time.  Even though yesterday’s auction fared well, we just don’t have much support to hold lower rates.  We’ve broken below the 100-Day Moving Average, so to climb back above it would take a lot of economic information that’s just not slated for release, this week.

Related Must Reads

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Careful Floating Into The Morning

Greece IV

It looks like the European Union (EU) will reluctantly bail out Greece.  The uncertainty, in Greece, has helped Mortgage-Backed Securities, as of late, however, the recent developments will definitely change the playing field, and put pressure on interest rates.  With no real economic reports, being released, until Thursday, we’ll have to watch the Stock Market and other technical factors to get a glimpse of where rates will head.

This Week’s Auctions

Tomorrow, $40 Billion in 3-Year Notes will be auctioned.  $21 Billion in 10-Year Notes followed by $13 Billion in 30-Year Notes will finish the week.

Careful Floating Into The Morning

Locking Advice

I like the idea of floating into the day and watching bonds, closely.  We may have to switch to a lock mode.  Earlier this morning, we were down 12 Basis Points, however, currently, we’re down 3.  Not too much movement, but enough to hold steady and see if rates and bond values can remain above the 100-Day Moving Average.

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Right on the Button!  We watched rates, yesterday, until the afternoon.  Gained 19 basis points…had a re-price for the better two times, for a total of .25% and Locked!  On a $200,000 loan that would save a client $500 in fees, to get into a loan.  Not to mention that it transitioned us into a lower interest rate, by .125%.  So, again, saving clients over $5,400 in monthly payments, through the life of a 30 year fixed rate loan.  That’s why we watch the market, so closely.  I LOVE saving clients money!

Unemployment Rate Holds Steady

The Labor Department reported that the U.S. Economy only lost 36,000 jobs, last month.  They expected well over 50,000 loses, however, the bigger surprise was that the unemployment rate held at 9.7%.  That was surprising, as there are so many claims for Emergency Unemployment Benefits.  So, we’ve dropped over 50 basis points, this morning.  That’s $1,000, on a $200,000 loan.  A lot of money, for a first time home buyer!

Turning To A Lock Mode

Locking Advice

I’d Lock

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We've Already Been Down This Morning...

Jobless Claims

The numbers rolled in at 469,000 new claims.  Wow!  But, that’s what the market was prepared for, go figure!  Continuing Claims were 146,000 lower than last month, but 5.7 Million people are claiming Emergency Unemployment Compensation, so, their numbers aren’t even calculated into the “government numbers,” being reported to monitor how the economy is truly doing…so, it sort of fakes out the market and media, into a false sense of security.  Maybe faking out Senator Bunning, too!

< 60 Days To Get Into Contract

Pending Home Sales were reported at a -7.6% reading for January.  That’s a little disapp0inting, considering we were expecting a 1.0% increase.  The National Association of Realtors contributed this loss to the horribly bad weather. Remember that 49 of the 50 States had snow one day, in January.  You’d think more buyers would be jumping off the fence, to receive the tax credit for home purchasing.  Remember, there’s more than one opportunity!  Think of it…you have less than 60 days to be get qualified for a loan, find an agent you’re comfortable with, look for houses, if you find the one you love…what if it’s a short sale, or a bank owned property that could take more than four weeks to get an answer from, go through the loan process and close by June 30, 2010, in order to receive your tax credit!  Fence sitters…get off your fence!

Good News on Job Front

Well, sort of good news.  Productivity rose by 6.9%, the fourth quarter of 2009.  This, compared to 6.2% the previous quarter.  For the  2009 year, Productivity rose by 3.8%.  Unit Labor Costs were slashed by 5.9%, the fourth quarter and 1.7% for the 2009 year.  So, with productiviy increasing, and labor costs decreasing, it’s generally a sign that businesses will start hiring.  However, be patient, as we’ve written before, businesses are getting a lot more out of the employee than they used to.  So, they’ll squeeze what they can, out of the employee, before adding on more costs and hiring.

Take Advantage Of Where We Are...Today

Locking Advice

So, Unemployment Numbers will be released tomorrow.  It should be depressing!  However, as I have been stating, there’s not much further bond values can rise (and therefore, lower interest rates).  We have the temporary hiring of the census bureau, we already have a market that expects an ugly number, so anything better than expectations can have a temporary effect on rates.  I think that the risks are too great, to not take advantage of today’s rates.  I’d wait for today’s best pricing, then I’d lock!

Related Must Reads

The Real Jobs Numbers
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We're Above Support Currently

ADP Reports Losses

American Data Processing, which is America’s largest payroll company, reported that we lost 20,000 jobs, in February.  That’s in the Private Sector alone.  The government, generally, hires workers, so that number could be skewed a bit, however, keep in mind that we’re currently having the census bureau hire many Americans to help take statistics all over the country.  That will have an effect on the jobs numbers, too. The revised jobs numbers, for January, were even more alarming.  They revised the 22,000 jobs lost, to a 60,000 jobs lost number.

Yesterday’s Losses

We were in a lock pattern, the last couple of days, and yesterday was a wild roller coaster ride.  We maneuvered below the 100-Day Moving Average, bounced off of the 25-Day Moving Average and ended the day, right where we started.  So, to avoid a heart-attack, locking was more relaxing.  Today, we’ve moved right back down to the 100-Day Moving Average, but so far, we’ve avoided piercing that level of support.

Obama’s Health Care Statement

President Obama is scheduled to talk, today, about the stale-mate that’s currently occurring with Senator Bunning’s consistent objections to the $10 Billion Obama Health Care Plan.  He may indicate that he will file to move ahead with a reconciliation plan that only needs 51 votes, as opposed to 60 votes, in the Senate, for approval.  Bonds may not like these statements, as the United States deficit will have to increase, in order to financial support a bill, like this one.

Signs Point To Floating...However...

Locking Advice

With the Jobs Numbers slated for Friday, this is a tough call.  We have support, at the 100-Day Moving Average, and it’s going to be tough to break through the highs (or lows, for interest rates) of the last six months, so, I would lock.  Even though things could get better, it’s only a chance, and if they do get better, I think it will be for a short time, as investors will realize this, and cash in on their earnings.

Related Must Reads

ADP is O-F-F: A History of Non-Reliable Information
How Moving Averages Effect Interest Rates

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