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Great Day To Lock

Fed Minutes Released Today

Later today, the minutes from the last Federal Open Market Committee meeting will be released.  There are two areas of concern that will be listened to particularly. One, will be the reading, or interpretation, regarding the “extended period of time” language that the Fed has been using, to take advantage of the large spread between the Fed Funds Borrowing Rate, and the rate that investment coupons are carrying (like the 4.5% Coupon).  The other area of concern will be the timeline regarding when the Fed will start to consider unloading the $1.25 Trillion in Bonds that they have been buying up, to keep rates down, over the past year and a half.  So, if the Fed was buying, to keep rates low, once they start selling, what do you think will happen with rates?

141 Basis Points Lost

Since the Fed stopped buying Mortgage-Backed Securities, we’ve lost 141 Basis points.  This is a HUGE number!  There’s not much support, from where we are, currently, so expect rates to continue to move lower, however, in a more sporadic fashion.  This morning, for instance, rates “bounced” off of an extreme low.  Traders call this a “Dead Cat Bounce.”  It’s, basically, investors cashing in on their bets, on an extreme low, in the market.  Don’t expect it to last, however.

Treasury Auctions

Today, we have $40 Billion in 3-Year Notes being auctioned.  Remember, with the US Government, not on the sidelines, anymore, things could get interesting.  Tomorrow, $21 Billion in 10-Year Notes will be auctioned, and Thursday, $13 Billion in 30-Year Notes.  Remember that we must take longer term investments seriously, when considering inflation pressures over the course of that longer investment.

Fed Minutes Released Today

Locking Advice

Today is, particularly, a nice day to lock.  I’d take advantage of the “Dead Cat Bounce,” and lock in before the rest of the week’s Treasury Auctions.  Note to be aware of, though…Greece is already requesting that their promissory note (financial aid package) get reassessed, on concerns that interest rates will rise, faster than they though, about a month ago…go figure…

Related Must Reads

What “Extended Period” Means To Banks
Why Longer Term Investments Create Higher Interest Rates

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Currently Lower Rates, But CAREFULLY Watch This Market

Retail Sales

October Retail Sales came in at 1.4%, compared to 0.9% that was anticipated.  When you take out auto sales, the number, actually, came in at 0.2%, lower than the 0.4% expected.  Not only that, but September’s numbers were revised from a negative 1.5% reading to a dismal -2.3% reading.  These numbers are alarming because Retail Sales Taxes help give states, and the country, money to operate their government.  With lower Sales, there are lower Sales Tax Income Opportunities for governments.  Further hurting the deficits. 

Ben Bernanke Speaks Today

He’ll be talking with the Economic Club in Manhattan.  Any time Bernanke speaks it can move interest rates.  Wonder if he’ll comment regarding when and what the Fed plans on doing to hold off inflation, while trying to deal with interest rates remaing low to help with the economy.  He’s got to have the funnest job in the world, these days. 

Alarming Statement

Kansas City Fed President Thomas Hoenig said this, this weekend, “We still have significant weakness to work through in the economy, in the U.S., and coupled with a rapidly rising level or debt and enormous moral hazard issues, we have a great deal of work ahead of us.”  Statements like this, are kind of what I have been talking about.  The media continues to paint a rosy picture of our economy, and I just don’t see it.  I guess statements like this are what people need to hear, to start thinking twice about pulling out of this financial situation that we’re in, as a country. 

No Auctions This Week

However, there will be an annoucement of what next week’s Treausry Auction amounts will be. 

Related Must Reads

Rates Move on Speculation
The Real Jobs Numbers
Treasury Auction Funds Are Drying Up

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As I write, Mortgage-Backed Securities (MBS) are sitting directly on the 25, 40, & 50-Day Moving Averages.  All three averages are sitting almost at exactly the same place.  We, actually, dipped below those lines, however, have rebounded and are awaiting the 30-Year Treasury Auction report. 

Auction Results Will Effect Rates

The 30-Year Treasury Auction should not fare too well.  At the cost of sounding pessimistic, it’s just difficult to have foreign investors like a longer term, when investing in these bonds.  However, to be fair, the 3-Year and 10-Year Treasury Auctions have fared well this week.  This is a somewhat encouraging sign. 

Jobless Claims Getting Better…BUT…

The other news pushing bonds and MBS down is the fact the government reported the number of workers filing new claims for jobless benefits dropped by 12,000 last week.  The four-week moving average of new claims, considered a better gauge of underlying trends, fell by 4,500 for the period.  During the latest week for which data is available (week ended October 24^th) enrollment in extended benefits programs decreased by 28,240 while the Emergency Unemployment Compensation program enrollment rose by 22,400 (somewhat offsetting the decrease).  So, while the media continues to paint a brighter picture of the labor market, I don’t see it.  Particularly coupled with the fact that the new legislation signed by Obama will extend unemployment benefits for the people not working full time.  This will definitely change the outlook of the continuing claims numbers.  We’ll keep an eye on this…

Locking

I think its prudent to lock.  Even with the level of support we have directly under us…I don’t see the 30-Year Treasury Auction surprising us, and the Labor Statistics are being received as joyous information by the media.  Stocks will benefit at the expense of bonds. 

Related Must Reads

Get Questions answered on FHA, VA, Tax Extension Facts…just place your question in the Search box and hit enter

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Rates Following Stocks

Rates Will Follow Stocks

Personal Income and Spending, for the month of September, was right where they were expected to be.  And these figures are weightless.  Personal Income was absolutely unchanged and Consumer Spending fell 0.5%.

Stimulus Package Findings

The government is scheduled to release its $787 Billion Stimulus Package results and how it has saved or created 650,000 jobs.  What I don’t understand is how we can have over a half-a-million jobs lost every week, yet report that these funds have created or saved jobs.  I guess it could be worse, without the funds, however, I will research a little more, regarding the positive aspects of these funds.  The best place to start is www.recovery.gov

The Week Ahead

Next Wednesday, The Fed will speak to the public about their Federal Open Market Committee meeting.  They are expected to comment on when they might start raising the overnight rate.  Even the Fed’s comments can be create market movement.  Particularly regarding the inflationary action of increasing the overnight rate.  So, whatever words the Fed chooses, Good ‘Ole Ben Bernanke may want to chose wisely!  On Friday, we have non-farm Payroll Numbers will be released.

Related Must Reads

Read When the 1st Economic Stimulus Package Was Signed By President Bush
2008 A Review Of What Happened
Read, “Drum Roll Please” paragraph regarding hints on good times to lock in an interest rate

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GDP is HOT, BUT...

Technical Difficulties

I was, somewhat, out of commission since Saturday Night.  My laptop crashed out, and on Tuesday Night, my cell phone froze up on me.  Made for many more hours in the office, however, that’s why the Market UPdates were delayed until today.

What’s Going On?

In the words of Marvin Gaye, here’s what’s been happening.  Treasury Auctions have, so far, fared quite well.  Tuesday’s $44 Billion auction of 2-Year Notes, and yesterday’s auction of $41 Billion in 5-Year Notes were well received by foreign markets.  This pleasant surprise helped keep interest rates stable, however, keep in mind that there is nowhere for rates to go…but up!

Don’t Be Foolish

If you think that by waiting for the “bottom” of the real estate market, that you will somehow benefit from that, a heeded warning:  Don’t be foolish!  Higher interest rates will substantially influence your buying power more than declining values.  IF the government extends the tax credit for first-time home buyers, I recommend getting off of the fence and buying, as soon as you’re able.

Important Side Notes

Durable Goods Orders were reported exactly where the market expected them to be.  Consumer Confidence is down, particularly due to the labor situation.  The government is considering an expansion of unemployment benefits.  If this occurs, expect the number of claims to SKYROCKET, as unemployment numbers only report for a certain amount of time, before you’re ineligible for benefits, and drop off the statistics automatically.  Inventory Levels for New Home Sales were reported at 7.5 months.  This is a little higher than the 7.3 Months that we saw last month, however, it’s still promising, considering inventory was at 12.4 Months in January.

“Advanced” GDP is HOT, BUT…

Gross Domestic Product numbers (so far) for the 3rd Quarter were reported at a 3.5% increase.  Much hotter than the 3.2% expected, AND the first gain in a year, coupled with the greatest gain in two years.  Now, the media has gone hog wild with this news.  Bonds are reacting negatively, the stock market is going nuts, and everyone seems to be partying and celebrating that the recession is over.  Sorry to be the bearer of bad news but is everyone forgetting the “Cash for Clunkers” government refund program?  Is everyone forgetting the $8,000 First Time Home Buyer Tax Credit?  Without these subsidized government programs the real GDP is growth of 1.9%.  Nothing to get too excited about, I think.  The market will figure this out, but in the meantime, interest rates will suffer.

Jobless Claims Are Cool, BUT…

Again, we’re looking at Initial Jobless Claims of $531,000.  And claims that “only” 5.8 Million people are out of work.  The media is spinning this as good news.  Well, I don’t see the joy and happiness regarding these numbers, but I guess I’m in the minority.

Today, $31 Billion in 7-Year Treasury Notes will be auctioned off.  Will foreign appetite gobble up these notes, or will they shy from the longer termed risk?  We’ll see, but if foreign interest is bleak, prepare for rates to plummet this afternoon, coupled with these other media hyped “lies.”

Senate Approved Tax Credit Extension

Not only did the Senate approve an extension of this credit, however, they proposed a $6,500 tax credit for any primary home purchase, not just first time home buyers.  Also, increased, was the income limits for qualification for these credits.  $75,000 for a single person was raised to $125,000 a year in income.  Also, a married couple’s income was increased from $175,000 to $250,000 per year.  You have to have a contract dated by April 30, 2010 to qualify, and the transaction MUST close by June 30, 2010.  This still has to be negotiated between the House and Senate, so expect changes, but it is encouraging news, nonetheless.

Related Must Reads

How Foreign Interest in US Bonds Helps Interest Rates
Tax Credit “FAX”

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