Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – March 11, 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

China’s Credit Tightening
The Real Unemployment Numbers
Trend Lines / Moving Averages…What Do They Mean?

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Chico, CA Interest Rates Market Report – Economic Influences – November 13th, 2007

Foreign Investment Leaving?

Start Getting Ready To Buy!

If you haven’t figured out that now is a great time to buy, than you haven’t been paying much attention to where interest rates are, and where home values are.  Foreclosures are starting to rear their ugly head, and this will cause opportunity for low purchase prices.  I am currently in escrow on two investment properties (shortsales) because I believe that it doesn’t get much better than now, to buy and build.  Let’s look at what’s happening in the market today…and what the future may hold in store. 

Earlier in the week, the stock market took a nose dive.  General Motors reported a $39 Billion loss for the third quarter.  Keep in mind that GM formerly held GMAC which was their financing company who did a lot of loans these past few years. 

China Moving $$$ OUT of the US

Remember that I have mentioned numerous times in my article that foreign investment in our mortgage-backed securities is what has kept our long term (30 year fixed) interest rates so low the past decade or so?  Well, this last week China indicated that they would be moving their investments away from the US Dollar.  “We will favor stronger currencies over weaker ones, and will readjust accordingly.  The US Dollar is losing its status as the world currency.”  So, China will start to sell off their US holdings including Mortgage Bonds.  Also, their participation in purchasing new Mortgage Bonds will continue to hurt Bonds, pressuring their yield (and therefore interest rates) higher.  A good time to buy? 

Oil Is Just Too Expensive

Oil is touching on $100 per barrel.  This is inflationary and remember that inflation is interest rate’s worst enemy.  What really saved us last week was that we bounced off of the 50-day moving average.  Remember that these averages cause trends in bond values and therefore interest rates…so the 50-day moving average (or that trend) was a level of support for interest rates because markets don’t like to shy away from trends…they follow them!  

10-Year Treasury Yield Throws Off Unprepared Mortgage Professionals

Interesting to note this week that the yield on the 10-year Treasury Note and the yield on Mortgage-Backed Securities were moving in opposite directions…so if you were working with someone that really didn’t understand how interest rates worked, you could have ended up paying for it in your interest rate. 

Initial Jobless Claims were reported at 317,000, however, the market anticipated 325,000.  Of importance was the fact that the Bank of England (BOE) and the European Central Bank (ECB) announced their monetary policy this week.  They both decided to leave their overnight rates where they were.  This is important because foreign yields on bonds have a direct impact on investments in our bonds. 

Foreign Investors Shying from US

The first test of auctioning our Treasury Bonds didn’t fair so well this week.  This is something that we’ll continue to keep our eyes on. 

Wachovia Corp. announced a $1.1 Billion loss on CDO’s.  Collarteralized Debt Obligations are the fancy-shnancy critically calculated investment bundles that included included mortgage backed securities that are losing value with each passing mini-second.

Retail Sales numbers will be coming out soon, however, the markets are moving on speculation because WalMart reported strong earnings.  WalMart is always watched by the market, just because as the nation’s largest retail chain, it would make sense that if they had strong earnings, than the nation should follow suit.  Remember, also, that when Retail Sales come in strongly, than the stock market would do well, taking money out of bonds, or mortgage backed securities.  So, buy, buy, buy!  Values are down and rates are low…but with all of this information in your pocket, how long will rates remain low?  Until next week…