Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – April 27, 2010

Trouble In Greece Is Helping Our MBS

Greece X

The uncertainty, in Greece, has caused investors to park their investment funds in the safe-haven of U.S. Treasuries and Mortgage-Backed Securities.  We’re currently up 34 Basis Points and we’ve broken through the very tough ceiling of resistance, at the 50-Day Moving Average. The biggest concern is, can we remain here?  Will The European Community save the day, again, for Greece?  Will money pour back into the Euro, if a resolution results?  These are questions that continue to go unanswered, however, will have significant implications on interest rates.

Earnings Reports

For the most part, earnings have been stronger than I had anticipated.  We ran into this last year, and my calculations were a few months behind, and that might be what’s happening, currently, as well.  While I am extremely excited for the United States, and the rest of the world, to climb out of this financial nightmare, while trying to remain optimistic, the reality is that until the labor market experiences more significant growth, the economy will continue to drag its ugly tail.

Consumer Confidence

As if to slap me right in the face, for my labor comments above, Consumer Confidence sharply catapulted to 57.9.  This is the highest reading since September of 2008 and significantly higher than last month’s disappointing 52.3 reading.  Consumer Confidence is so important because it measures the willingness of the American People to spend money; boosting the economy.

Fed Meeting Starts Today

The Federal Open Market Committee opens their two day meeting today.  Their Rate Decision and Policy Statement will be released tomorrow, after the meetings, at  11:15 PST.  you can rest assured that the high Consumer Confidence Numbers will be a matter of discussion.

Treasury Auction Starts

Today, $44 Billion worth of 2-Year Treasury Notes will be auctioned off, starting the week off of 2, 5, & 7-Year Treasuries.

Greece's Troubles Are Helping Rates

Locking Advice

Now, is the time to float…however, EXTREMELY carefully!  We’ve managed to climb above some very tough resistance.  And if another resolution to Greece’s troubles is negotiated, money could fly from the U.S, and back to Europe.  However, if not, we could see even better pricing.  Register your loans for locking…but wait until the news changes, before doing so.  It sure is a bumpy ride, however, you knew it was coming.

Related Must Reads

Related Must Reads From Greece
Earnings Surprise: A Look Back At October of 2009
Why Be Leery: A Look At Short Term Treasuries Desirability Compared To Long Term Treasuries

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Chico, CA Interest Rates Market Report – Economic Influences – April 19, 2010

We Have Already Bounced Off The 25-Day Moving Average

One More Opportunity?

Patience will be the name of the game, as we go through April and into May.  Expect the market to continue to be very jittery and interest rates to follow.  I do believe that the Stock Market is stagged to correct itself, into a downward trajectory, in the next week or two…staging a scene to slightly lower interest rates for a small amount of time, at the end of April and into the middle of May.  It might be the last hoorah, to lock into sub-five percent interest rates!

Will Resistance Prevail?

We managed to bounce directly off the 25-Day Moving Average, this morning.  However, Mortgage-Backed Securities (MBS) are sitting just below the 40, 50, 100, & 200-Day Moving Averages…that’s an extremely tough barrier to break through, so that resistance will have to complete with the Stock Market, as mentioned in the above paragraph.

Fed’s Evans Comments On “Extended Period”

This morning, the Federal Reserve Board’s Charles L. Evans reported that he expects an accommodative monetary policy, for “quite some time.”  He also confirmed that the “Extended Period” of time, that I have been writing about for weeks now, means three to four FOMC meetings.

Float While the 25-Day Holds

Locking Advice

With the 25-Day Moving Average already pushing back against the fall of MBS, I feel it’s safe to float into the day.  Long Term Escrows should feel comfortable with the stage being set for lower interest rates, in May.  Short term clients should be happy that rates are where they are at.  It’s an excellent time to buy!

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Chico, CA Interest Rates Market Report – Economic Influences – March 16, 2010

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
Why Higher Rates?

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Chico, CA Interest Rates Market Report – Economic Influences – November 4, 2009

FOMC Statement Today

Market participants will likely spend this morning holding their breath as they await the release of the Federal Open Market Committee’s (FOMC) post-meeting statement scheduled for 11:15 a.m. PST today.  The FOMC members convened the second of a two-day monetary policy strategy session earlier this morning.  Mortgage investors will be keenly interested to see what, if anything has changed in the Fed’s thinking about the economy, government economic stimulus tactics and the appropriate level of short-term interest rates.  In each of their post-meeting statements since March, the Fed has said it plans to keep interest rates “exceptionally low” for an “extended period.”   

There is a small chance the Fed may choose to do a little mixing-up of the verbiage of their post-meeting statement this time around — by dropping the phrase “exceptionally low” and/or “extended period” — to clearly set the stage for a change in monetary policy in coming months.  If this event were to occur — holding out hope for notably lower mortgage interest rates could be quite a costly mistake, for you and or your clients.

Advice On Wild Swings

Often times, interest rates will move reactively toward The Fed’s comments, not really having an opportunity to absorb the information appropriately.  So, we’ll see interest rates move in one direction, in somewhat of a kneejerk fashion, and then, after the market has time to truly consider and weigh the Fed’s comments, will move in the opposite direction.  Knowing what the Fed says and studying the information accutely can save clients thousands of dollars, over the course of a thirty-year fixed rate loan. 

 Another Record Week For Treasuries

Treasury Auctions, this the coming week, will reach another record amount.  $40 Billion in 3-Year Notes, $25 Billion in 10-Year Notes, and $16  Billion in 30-Year Notes.  This should prove quite interesting, as longer term notes are harder to gain investors’ interest and these Treasuries compete for Mortgage-Backed Securities.  I don’t like the odds, as I think foreign appetite might be tight and The Fed’s running out of money, soon.  So, expect this to put pressure on interest rates. 

Tax Credit Extension

The House approved the extension and expansion of the First-Time Homebuyer Tax Credit.  It will be interesting to see the House version, compared to the Senate version, and what ultimately, President Obama should sign by week’s end.  Included in this Tax Credit Bill is a proposal to extend unemployment benefits an additional twenty weeks.  This will, most certainly, effect the weekly Jobless Claims numbers and unemployment rate, so expect significant increases in these numbers, if this portion of the bill is passed, which could help interest rates stay a little stable, even in the eye of the week Treasury Auctions.

Related Must Reads

2008 Article On Kneejerk Reactions
Why Be Leery? Why Long Term Treasuries Are Harder To Auction
Tax Credit Facts

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