Danny Salas

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

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

The Real Jobs Numbers
Senate Approved Tax Credit Extension

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

Nailed It!

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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Chico, CA Interest Rates Market Report – Economic Influences – March 4, 2010

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
Senate Approved Tax Credit Extension

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Chico, CA Interest Rates Market Report – Economic Influences – March 1, 2010

We're Sitting Above Support Lines For Low Rates

So…It’s March

What’s so significant about March?  Here’s the quick and easy…Interest Rates!  I have many people asking me where I think rates will go, and when.  Well, with the Government’s Mortgage-Backed Security Purchase Program ending this month, the easy answer is, “up.”  Whenever a large player exits the market, there are consequences, and the market reacts.  So, if the government, or a huge player, is leaving, where do we go, but into negative territory!  And even though we have had some interesting market movers, that have brought rates into a lower arena, we’re still averaging approximately 0.25% to 0.375% higher in rates, from just a few months ago.

Government’s MBS “Selling” Program

Just last month, the Fed indicated that they are going to start looking into selling Mortgage-Backed Securities.  So, The Fed will have $1.25 Trillion in Mortgage-Backed Securities, $777 Billion in Treasuries, and $166 Billion in agency debt to settle.  Let alone, they’ll still be auctioning off new Treasuries every two weeks.  So, the only way to attract buyers would be to increase their rate of return, and that translates to higher interest rates.

Temporary Fixes

As mentioned above (regarding market movers), we’ve had some surprises regarding interest rates, however, these are temporary. Greece will find some sort of solution to their financial woes, and when they do, money will pour out of American investments.  The Government Mortgage-Backed Security Purchase Program is unwinding, and the Carry Trade will, also, be coming to an end, shortly.  All signs to higher rates.

Fed’s Favorite Gauge On Inflation

The Core Personal Consumption Expenditure Index (PCI) came in at a year-over-year reading of 1.4%.  This is well within the Fed’s guide and comfort level of 1.0-2.0%.  So, another reading on inflation is good for interest rates.

I Know, We're In Safe Territory, But I'd Lock!

Locking Advice

While we sit at a comfortable level, just above all levels of support, if you don’t like risk, LOCK! However, keep in mind that we ARE sitting above these lines of support.  Especially the 100-Day Moving Average.  If we can manage to stay above this line, then floating, until we see some form of economic data to move us under this line, is risky, but potentially beneficial.  So, we have support, but if you don’t have a finger on the lock button, than don’t risk all of our more recent gains in value, and therefore, lower rates.

Related Must Reads

Why Market Movers Are Temporary
The Carry Trade Phenom

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