Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – December 24, 2009

Merry Christmas Friends

Merry X-mas!  Enjoy Your Families and The Holiday Season!!!

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

Rates Holding Firm With Poor Economic Data

Economic Reports SHOULD Cool Rates…But…

The Fed’s Favorite Gauge on Inflation, The Core Personal Consumption Expenditure Index (PCE) came in at a year-over-year reading of a calm, cool, 1.4%.  Estimates were set for a 1.5% reading, and remember, inflation is interest rates worst enemy.  The PCE, for the month of November, came in at 0.0%.  Now that’s cool!  Personal Spending was down to a 0.5% reading, when experts expected a 0.7% figure.  Personal Income increased, but at 0.4%, when they expected a 0.5% increase.  Personal Savings remained at a steady 4.7%.  So, what all this points to is that people are making less, spending less, and saving more.  All signs of a cool economy and generally this information would significantly benefit interest rates, however, other things are brewing, in the background.

Treasury Auction Announcement Pausing Markets

The Next Treasury Auction Announcement is due for release today.  Here’s the concern:  With a HUGE auction announcement expected, and people all around the world taking time for the holidays, making it another short week, next week, the auction is expected to disappoint.  So, the speculation is that there will not be much interest for the Treasuries, and therefore, rates will need to be increased to lure interest.  With this instability, if you don’t lock, and watch the market, you’re risking another downward trend.  I might count my blessings and just protect myself, during these nervous moments.

Chico, CA Interest Rates Market Report – Economic Influences – December 22, 2009

Only $163 Billion Left in the MBS Purchase Program

What In The World Happened To Interest Rates?

Well, I’ve been talking about this for quite some time…preparing everyone for the inevitable plunge in bond values and increase in interest rates.  And while I’ve also mentioned the it’s going to be a bumpy road causing rates to bounce up and down, we’ve lost over 150 basis points since Friday, alone.  That’s a 1.5% Point cost on a real estate loan, people!  $1,500 per $100,000 borrowed.  That’s significant!

Short Week

With Christmas right around the corner, stocks have been reacting quite excitedly.  This has taken the sails out of Mortgage-Backed Securities (MBS) and Bonds, causing rates to increase this week.  We had another “Quadruple Witching Effect” this last week, with Nike, Oracle, and some other Stocks taking off and moving investors away from Bonds.

$163 Billion Left

There is only $163 Billion left in the Government Purchase Program for Mortgage-Backed Securities.  With the program ending in March, and with another short week, next week, when the Government will auction off 2-Year, 5-year, and 7-Year Treasuries, expect interest to be slight, and therefore cause rates to jump, potentially, even higher.

Locking Advice

We’re now sitting on the lowest levels seen in MBS values throughout the year.  Since September 23, we haven’t seen rates this high…and with a short week this week, a short week next week, and The Government Purchase Program, that helps keep rates low, running out of funds, it just might be time to start taking your opportunities to lock…seriously.

Related Must Reads

Quadruple Witching…What It Is, and When It Occurs

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Chico, CA Interest Rates Market Report – Economic Influences – December 16, 2009

CPI Shows Inflation In Check

When Bernanke Speaks…

The Federal Reserve Board will wrap up their meeting today, and depending on the comments that they make, markets may move accordingly.  The Fed’s in somewhat of a precarious position, as they try to weigh the benefit of keeping the overnight rate at .25%, or raise it to stem off inflation.  If they raise it too early, it could have a negative effect on economic growth.  So, we wait…

Core CPI In At < Expectations

Virtually unchanged!  The Core Consumer Price Index was expected to rise 0.1%, but stayed at last month’s levels.  So, it shows that our concern regarding inflation at the production level, is not really a threat, at the consumer level.  So, rates are remaining low with this information, however, depending upon the Fed’s Statements, later today, rates may move in one direction, or another, quite reactively.

Housing Outlook

Building Permits increased 6.0% this past month.  Another good sign of a recovering Housing Market.

Locking Advice

Carefully float into the Fed’s Comments today.  We have uploaded clients’ applications and saved them on our banks’ locking website.  We can lock at the click of a button…

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