Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – September 23, 2009

Mortgage-Backed Securities Are A Stool Pigeon

$8,000 Tax Credit Ending?

November 30, 2009 is the scheduled end of the $8,000 Tax Credit Incentive that the Federal Government is offering to first time home buyers.  Will the program be extended?  Will it get an overhaul?  Or will the U.S. Government let it expire?  Applications are up, nation wide, as people scamper to find their dream home at record lows, and interest rates, too.

2-Year Treasury Note Auction Bids Well

Again, there was nice interest in the Treasury Department’s record auction of $43 Billion in 2-Year Bonds.  That helped rates stay steady, late yesterday afternoon.  Currently, Mortgage-Backed Securities are like a stool pigeon, sitting on the 25-Day moving average, afraid to do anything, or go anywhere, until the Federal Open Market Committee Meeting ends, and Good ‘Ole Ben Bernanke comes out and talks about what’s happening in the U.S. Economy. 

Movin’ On Up

Looks like the economy is doing fairly well.  We’ll know more, today, after Bernanke speaks.   However, even with all of the good news that we’ve been reading about lately, we still have to keep in mind that, until unemployment figures start to look more healthy, we’re not going to move forward very quickly.

Lock Advice

Again, we’re going to float today, however, things could change, drastically, if The Fed’s Comments hint at The Government Mortgage Backed Securities Purchase Program Ending, hints of inflation, comments that the housing market crash has ended, or anything else the media can pick up on, even in an inflection of Good ‘Ole Ben’s voice, to stir things up a bit.  So, it’s important to have your finger on the lock button…just in case…

Chico, CA Interest Rates Market Report – Economic Influences – July 2nd, 2007

Businesses Are NOT purchasing…a sign???

Last week had very little economic information until after the News & Review went to print…then things got pretty cool.  Wednesday’s weaker than expected Durable Goods Orders Report fell by 2.8% in May.  This was the lowest level since January and shows us that businesses are not making as many purchases for machinery, equipment, and particularly airplanes. 

May showed 313,000 Initial Jobless Claims, which was right where experts expected the number to be and continued to show that we’re in a labor market that remains tight. 

Inflation Levels Looking Good

Finally, we hit below 2% on some inflation levels.  Friday’s highly anticipated Core Personal Consumption Expenditure Report came in at a cool 1.9% for the year-over-year rate.  Remember that the Fed’s desire has been to have the Core consumer inflation rate between 1% and 2%.  This really helped mortgage backed securities move upwardly (remember, when bonds move up, their yields -and interest rates- move down).  Unfortunately though, we still hit a very hard line of resistance.  This trend line has been falling downwardly for quite some time.  Since early May, actually.  So while we had had good news for interest rates lately, we still have not had enough information to help us break through this tough line…and it keeps falling. 

Fed Comments:  Very Cautious

Coupled with a very cautious statement from the Fed meeting, where the Federal Reserve Open Market Committee left the Fed Funds Rate untouched, at 5.25%  They did indicate that inflation is moderating somewhat, but that they are not convinced that it is completely under control.  Again, using fun phrases like this help to keep the Fed out of trouble.  Regardless as to how the market reacts to their comments…they are somewhat ambiguous, and therefore…never wrong…I guess.  Makes my statements a little more easy to write, too.  The Fed also mentioned that they expect an increase in economic activity, which would probably mean that they don’t expect to decrease the overnight rate any time in the near future.   So, the Core PCE Report was a truly welcome sight to see the very next morning after the Fed’s statement.  Apparently, the Fed is now watching the Headline Inflation Numbers.  These include food and energy…so you may be reading more about this in the near future. 

Bonds continue to trade in a tight area with that Falling Resistance Line at $98.79 and a level of support at $98.28.  With the Fourth of July Holiday coming and with Friday’s Jobs Report, we could see some volatility before next week’s issue.  Generally and holiday creates low trading volumes and leads to more volatility in the marketplace.    Monday’s close left bonds just above that $98.79 level.  Whether or not we’ll be able to stay above it will be fun to wait and see.  Bonds are trying to move higher…let’s hope that the sparks fly, the rockets glare, and the fireworks thrill with Friday’s Job Report and Independence week.  Happy Fourth everyone!  Until next week…