Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – Aug 21, 2009

Homes are a’sellin’!

What a nice surprise!  Existing Home Sales were at 5.25 Million, while only 5 Million were expected.  That’s great news, but bitter sweet, when you realize that statistics like that cause higher interest rates.  As I have been noting for three days, it would be prudent to lock. 

Bonds For Sale…Get Your Treasury Notes, Here!

I have also been talking about the Treasury Auction Announcement from the Federal Reserve, lately.  Well, yesterday was the day, and the Fed indicated that they were auctioning off $110 Billion in Treasury Notes next week.  We may be surprised, however, I don’t think those auctions will faire very well.  On Tuesday, the Fed will acution $43 Billion in Two-Year Notes.  Wednesday, we’ll see $39 Billion in Five-Year Notes.  And, finally, on Thursday, $28 Billion in Seven-Year Notes.  With no real foregin appetite for our Bonds, I expect that this will hurt interest rates and that effect may last about two to three weeks.  Maybe even longer. 

Feelin’ It At The Pump

Oil is trading higher than we’ve seen all year.  At $74 a barrel, it might be time to start taking the bus to work.  Or, after my knee surgery, a bike might be a smart move. 

Good ‘Ole Ben Bernanke

Ben Bernanke is speaking in Jackson Hole, Wyoming today.  He mentioned that our economy is “on the cusp” of a recovery.  On the cusp?  How big is a cusp, anyway?  I’m not so optomistic about being on a recovery.  You just wait and see…come October, Third-Quarter economic reports from corporations are going to paint an ugly picture!  Then we should see rates lowering…but who knows for sure!

Chico, CA Interest Rates Market Report – Economic Influences – July 31st, 2007

Inflation Slowing Its Pace

We should thank Good ‘Ole Ben for watching his comments appropriately and helping interest rates by stating, “Core inflation should edge a bit lower, on net, over the remainder of this year and next year.  If energy prices level off as currently anticipated, overall inflation should slow to a pace close to that of core inflation in coming quarters.” 

Rates are bouncing between the 25-Day and 40 & 50-Day Moving Averages

Bonds have been basically taking a ride on the 25-day moving average and fortunately just hanging out just above this trend line.  Remember, when Bond prices go up (their yields move down), home loan rates improve, and when Bond prices go down (their yields move up), home loan rates worsen.  A good mortgage b roker will follow these movements and know when a good time to lock in an interest rate is.  Also, there are “trends” that bonds (mortgage backed securities) follow.  For example, as mention above, the 25-day moving average, however, there are also 40-Day, 50-Day, 100, 200, etc.  This past week we have been bouncing in-between the 25-Day and the 40 and 50-Day moving averages.  So, the current “trend” is just above the 25-Day moving average…so since we’re above that, it acts as a level of support for interest rates.  If we can get enough economic information to catapult us above the 40 and 50-day moving averages, then we could see lower rates.  If you don’t understand what I just wrote, go back and read it again.  It’s an excellent explanation as to how this stuff works, I don’t mind saying so, myself! 

Median Priced Home Moving Up

Existing Home Sales for June were at 5.75 Million Units.  Less than the 5.90 Million expected.  However (and this is a big however), the median home sales price increased 0.3% to $230,100.  This is the first year over year price increase in 11 months.  Also, the monthly sales inventory dropped from 8.9 months to 8.8 months.  Further evidence that the housing market is stabilizing and not as bad as the media is portraying. 

Obviously, the stock market has been of some interest lately.  Generally, stocks and bonds move in opposite directions, as if stocks are moving down, then people pull money out of stocks and move them into bonds.  With stocks at some all-time highs, as of late, and with oil giant Exxon reporting weak earnings, you can just imagine how volatile the stock and bond markets have been recently.  To add to the turmoil, the Gross Domestic Product numbers are showing hotter than expected at 3.4% (causing rates to increase), but Tuesday’s release of the Fed’s favorite gauge on inflation, the Core Personal Consumption Expenditure (PCE) Price Index was reported at a cool 0.1% for June.  This also shows the year-over-year Core PCE at 1.9%.  Remember from last articles that the Fed wants to see inflation between 1-2%.  Consumer Confidence is way up, so people are still ready to spend their money. 

It looks as though the real estate market is stabilizing, and we should be set for a nice bond and interest rate rebound.  So, get ready…but keep in mind…how quickly markets change…

Chico, CA Interest Rates Market Report – Economic Influences – April 30th, 2007

Existing Home Sales came in weaker than expected. 

March showed 6.12 Million Units, below expectations of 6.45 Million.  The number of existing homes for sale fell by 1.6%.  Keep in mind, however, that February was extremely cold all over the nation.  March homes sales would have been affected by people out looking for homes in February.  Not the warmest climate or best time to be home-shopping. 

Last week, we saw bonds move above the 25 day moving average, but just couldn’t get over the 50 or 100-day averages.  Durable Goods Orders moved up 3.4% when we thought they would only move upwardly by 2.5%.  Corporations spent an increased 4.7% in core capital equipment spending, which was the largest movement since September of 2004.  

The Treasury Auctioned 2-year Notes on Wednesday, and 5-Year Notes on Thursday.  Foreign interest in Treasury Notes have really helped keep interest rates low over the past years, however, foreign investment has been lacking lately.  This could really hurt rates, in the future, so we’re watching foreign interest very closely.  

The auctions didn’t go so well, coupled with the Dow moving over the 13,000 level.  So on Thursday, we broke below the 25 day moving average again.  Friday’s 1^st Quarter Gross Domestic Product Report was weaker than expected.  However, the Employment Cost Index (ECI) which measures the affect of wage and benefit cost growth in relation to inflation, showed some hints of inflation, erasing the GDP’s results. 

After Friday’s economic information, bonds were getting awfully close to moving below the strong level of support of the 200-day moving average.  If we broke below that trend line, we could have been seeing much higher rates for a long period of time.  I have mentioned the importance of this trend-level in the past few articles.  We have been above this level for eight months and the last time we went below this trend-line, it acted the opposite of how it acts now.  So, instead of being a level of support for lower rates, it was a level of residence for higher rates…for one and one-half years!  Scary!!! 

Thank goodness for the ‘ole Core Personal Consumption Expenditure Index (PCE). 

It was reported unchanged for March.  You may remember that in last month’s article, this really helped interest rates.  It did again this month with the year-over-year core inflation level down to 2.1%.  Remember that the Fed wants this level between 1 to 2% for approximately three consecutive months before lowering the overnight rate.  Interest rates reacted very positively regarding this report.  It truly should be the most watched report that mortgage brokers, banks, and realtors should keep an eye on, bus most don’t pay much attention to it.  That’s why working with a professional that knows the industry can be so beneficial.  

Next week is truly back-end oriented!  By the time you read this, Friday’s monthly Jobs Report.  If the news is good news for jobs, expect that we’ll be trading below the 200 day moving average with higher rates to come.  If the news is not so good for jobs, we could see an improvement for rates. 

Stay tuned for next weeks report on what happened in the job market and where rates went.  If my article feels upbeat and motivational, than the jobs report was poor, if I come across depressed and sad, then a lot of people are stoked that they’ve gotten a new job.

See ya next week…