Danny Salas

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

Trouble In Greece Is Helping Our MBS

Daily Updates Are Back!

Internet problems have caused the daily updates to be interrupted, however, we have a temporary fix, that should keep us up and running until our new wireless system is installed.

FOMC Meeting

The Federal Open Market Committee finished their meetings, last week, and it was status quo.  The “extended period” verbiage was left alone, with only one continuing dissenter, Thomas Hoenig.  However, it will be interesting to see the minutes, from this meeting, when they’re released, at a later date.

Greece XI

It looks as though the International Monetary Fund (IMF) and the European Union (EU) have agreed to a $159 Billion, three-year rescue package, for Greece.   However, public workers began to strike, in Greece.  They feel as though this, “bailout for austerity” deal, with the IMF and EU will definitely hit their pockets, worse than others, as the cut-backs demanded by the agreement, are for more public-type programs.  The public striking has led to over 40,000 rioters, in the streets of Greece.  To make matters worse, Portugal’s financial problems continue.  Credit Rating, on Portugal’s debt, is being threatened to move lower.  This would cause more investors to move to the safe-haven of U.S. Treasuries, however, we’re hitting the highs of the year.  And, Mortgage-Backed Securities are already showing signs of being over-bought and may be due for a reversal.  So, watching this market closely, will benefit your buyers.

Locking Advice

With the world watching over the problems in Europe, and investors scrambling over the the U.S. Treasury Safe-Haven, it makes sense to float…and, with inflation reports, over this past week, keeping inflation at bay, rates have remained quite comfortably low.  However, we are due for a reversal…so registering loans for a quick change to locking status, would be prudent.

Related Must Reads

Kansas City Fed President Thomas Hoenig’s Comments Started LAST YEAR
Portugal’s Financial Troubles

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Chico, CA Interest Rates Market Report – Economic Influences – April 22, 2010

Lock, NO FLOAT, No LOCK, NO...float

Happy Earth Day!

Treasury Auction Announcement

The United States Treasury will sell $11 Billion in 5-yr TIPS on Monday.  Also, $44 Billion in 2-Year Notes on Tuesday, $42 Billion in 5-Year Notes on Wednesday, and $32 Billion in 7-Year Notes on Thursday.  This Auction could be a nice place for international investors to place their money since Moody’s downgraded Greece’s Credit Status.

Greece VIII

There is even worse news coming out of Greece, today.  Eurostat, a European Statistic Agency, is reporting that Greece’s 2009 Books were worse than previously reported.  Not only that, but that there could be further revisions to their numbers…and I don’t think it will be positive revisions.

Obama Discusses Reform

President Barack Obama will be speaking to Wall Street, in New York City, today, in regards to financial reform.  It will be interesting to see how his speech, might effect the trading day.

Economic Info

Finally, some economic reports to share with you, this week.  Initial Jobless Claims were lower than last week, however, still higher than expectations at 456,000 new claims.  On a sadder note, 5.34 Million people are claiming Emergency Unemployment Compensation (EUC).  That’s 500,000 fewer claims than previously reported, however, don’t forget the Congressman from Kansas that held up Congress for days objecting to any further unemployment claims to be paid to anyone…so now that that’s rectified, we’ll see more Emergency Unemployment Compensation Claims again.

Hot PPI – But Cool Market Reaction

The Producer Price Index roared in at a 0.7% gain for March.  The expected reading was 0.5%, however, this left the year-over-year PPI at 6.0%.  This is a gauge on inflation, at the wholesale level.  Remember, the Fed wants to see inflation levels between 1.0 & 2.0%, so 6.0% is ridiculous.  Let’s break this down, however; wholesale food prices spike to a twenty-six (yes, 26) year high of 2.5%, and the Core PPI, which removes volatile food and energy costs, remained at a cool 0.1% and the Core year-over-year PPI was 0.9%.  So even though the information seemed hot, it was actually, cool.

Existing Home Sales

5.35 Million homes sold, in March, and the inventory of unsold homes lowered to 8 months, as opposed to the 8.6 months, just one month before.  The Tax Credit, has certainly a lot to do with this, however, it will be interesting to watch the housing numbers, once the tax credit expires, in just eight days.

It's Risky But I'd Float

Locking Advice

It’s a bumpy ride out there.  However, if you can stomach the roller coaster, I still think that Greece’s troubles, coupled with a down-trend that the Stock Market is poised for, will result in lower rates, starting next week.  Keep your fingers crossed!

Related Must Reads

The Beginning of Greece’s Troubles
The REAL Jobs Numbers
Senate Approves Tax Credit Extension

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Chico, CA Interest Rates Market Report – Economic Influences – March 15, 2010

Were Currently Sitting On Some Support

FOMC Meets Tomorrow

At 11:15 a.m., tomorrow morning, we’ll hear from Good ‘Ole Ben Bernanake and his other Federal Open Market Committee members.  Will the “extended period,” comment continue to be mentioned?  There has been some concern, as of late, and some dissenting members of FOMC, regarding inflation concerns, and when to start increasing the overnight rate to curb inflation.  Most feel as though the “extended period” portion of the Fed’s statement will remain.

Economic Interests

The Empire State Manufacturing Report came in near expectations, at 22.86.  Industrial Production was 0.1% and Capacity Utilization was 72.7.  This is a low reading, and low readings of Capacity Utilization usually keeps inflationary concerns astray.  However, what’s frightening about lower levels of CU is that it could lead to the closing of factories, if they’re not being “utilized.”  We’re starting to see this in Europe.

Speaking of Europe

Greece is back at the top of concerns, as their Prime Minister, George Papandreou, stated at the Brookings Institution in Washington, this weekend, “If the European crisis metastasizes, it could create a new global financial crisis with implications as grave as the U.S.-originated crisis two years ago.”

The Domino Effect

So, Greece is in financial turmoil.  The European Union (EU) needs to rescue Greece, or experience worse financial disaster.  The EU consists of Big Wigs, like Germany, France, and the United Kingdom.  So, here’s the rough part…Moody’s, one of the world’s largest credit rating firms, is considering lowering the current AAA Rating for all of these countries, AND the United States’, too.  This would really hurt these nations, as a lower credit rating would increase risk, and therefore interest rates on debt.  Everyone’s having enough trouble, these days, let alone higher debt payments.  And, if foreign markets need to you more of their funds to pay their higher debt payments, than they won’t have funds to buy US Treasuries and Mortgage-Backed Securities…thereby, increasing interest rates.  Whoa!  We’d better figure out a “Grecian Formula,” for success, hey!?

Locking Advice

We’re sitting right above the 50-Day Moving Average.  Actually, we’ve bounced right off it if, the last three trading days.  However, the 25-Day and 40-Day Moving Averages have been a layer of resistance, as we bounce back and forth between these lines.  It’s really up to you…we could lock, and protect what’s there, or we could use the support we have, at the 50-Day, and see what economic turmoil in Europe and Moody’s can bring to Stocks and Bonds.  Support shows us to float, but you’d better do so cautiously!

Related Must Reads

Mutiny On The Policy: A Look Into How The “Extended Period” Effects The Carry-Trade
The Carry Trade Phenom
Greece’s Financial Woes
Greece Two
Greece III
Greece IV
Eenie-Meanie-Miney-Moe – Catch a Country’s Financial Woes

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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Chico, CA Interest Rates Market Report – Economic Influences – March 2, 2010

Greece's Assurance Of A Resolution Stopped The "Flight To Quality"

Greece’s Resolution

There’s no real economic data scheduled to appear, this morning.  So, the market is moving, primarily from news that their is a financial resolution to Greece’s problems. Basically, they are having to increase taxes, cut government workers’ wages, and other ideas, to help lower their huge deficit.  One suggestion, taken seriously, is requiring taxi drivers to issue receipts, so that they pay their fair share of taxes.  This has caused a nationwide strike and put a huge damper on tourism.  So, you can see how everyone understands that there are sacrifices that need to be taken to rescue and failing economy, it’s just that nobody wants to pay for them.

Locking Advice

Just as anticipated, yesterday, we hit a level that we just couldn’t do much with.  We’d reached the pinnacle of where we could go, without some sort of news that could catapult rates where we haven’t seen in quite some time.  And, actually, we got the news, from Greece, which helped take the “flight to quality” from US Treasuries, back into Stocks, causing rates to increase, slightly.

Related Must Reads

Greece’s Financial Problems

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