Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – January 21, 2010

States Didn’t Turn In Their Homework

Initial Jobless Claims came in at 482,000.  This is much worse than the 440,000 expected, but also up 36,000 from last week’s January 16th’s numbers.  Normally this would really benefit interest rates, however, these numbers have been sort of, artificially produced.  Couple of reasons why…some states send in their numbers, in time, because of the Martin Luther King, Jr. holiday.  Also, some of the claims that were not calculated in the Christmas and New Years weeks’ data is coming in now.  So, the bond market took this information with a grain of salt.

Locking Advice

We have managed to move above the 200-Day Moving Average and are tinkering just above the 100-Day Moving Average.  The 50-Day Moving Average is just above current levels.  Here’s the scoop.  It may be quite difficult to break above the 50-Day Moving Average.  So, since we’re currently headed up, with levels up 25 Basis Points, very, very cautiously floating might be beneficial.  I think we’ll probably sit right under the 50-Day Moving Average, but if we play around with the 100-Day Moving Average, converting to a lock bias will be prompt.

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Chico, CA Interest Rates Market Report – Economic Influences – December 10, 2009

Rates Moving With Employment Numbers

Auctions Not Doing Well

Yesterday saw rates nervously move up and down, as investors waited for the results of the 10-Year Treasury Auction before committing to where to move their funds.  In the end, it wasn’t a rosy picture for Mortgage-Backed Securities (MBS) and the day ended in negative territory.  This morning is shaping out to be the same story, with MBS in negative territory and we’ve moved below the 25-Day Moving Average.  The next layer of support is about 20 points lower than we currently are…the 50-Day Moving Average.  With the 30-Year Treasury Auction occurring today…I’m nervous as well. 

Jobless Claims Higher Than Expected

Initial Jobless Claims came in at 474,000, however 455,000 losses were expected.  Normally, this would be good for interest rates, however, since the Continuing Claims fell to 5.16 Million, and that being the lowest Continuing Claims numbers since February, the market actually took that as a positive, as opposed to a negative…and therefore, rates are reacting negatively.  Careful to assess, though.  Keep in mind that this time of year there are numerous part-time or temporary positions that are filled, somewhat skewing these figures. 

30 Day Prognostication

Over the course of the next thirty days, expect the market to be very choppy.  Let’s give one example.  These Unemployment Numbers, reported Friday, were healthier than expected.  Today’s claims were higher than expected, but averaging the last four weeks together shows increases in employment.  Don’t be surprised that if, after the holidays, these numbers start to dissapate, somewhat.  This information will lead to a bumpy ride, probably into the second quarter of 2010.  So, you’ll have ups and downs, and when you have a slight dip, you’ll have advantages on when to lock.  Working with a banker that understands these rides is imperative to happy buyers.  Make sure your banker is prepared, or if you’d like to work with my office, I am available always, and have some of the lowest rates in the Western United States. 

Locking

May as well ride out the day and see if we’ll have to lock, if MBS move below the 50-Day Average.  Since we opened 22 Points below yesterday’s close, and only have 20 points to go to the 50-Day Moving Average…let’s be nervous together…

 Related Must Reads

Bonds, Moving Averages, And Trends Lines
$1.25 Trillion Question: Where Will Rates Go AFTER March of 2010?

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Chico, CA Interest Rates Market Report – Economic Influences – November 5, 2009

The Media Is Painting A Rosy Picture

Fed Keeps Initial Investment

Many traders were hoping that the Fed would increase their buying power to new levels.  The Fed kept their stance, however, and remained diligient regarding the $1.25 Trillion Mortgage-Backed Security Purchase Program.  This will end in March of 2010.  When this program ends, money will be tight.  In order to lure investors, yields will have to be higher. And, as you may know, higher yields translates to higher interest rates.   But that’s in March.  What might happen before then?…

Stocks AND Bonds Up

The Labor Department reported 512,000 new Jobless Claims today.  They expected 522,000 Claims, so lower than expected.  Does that give us a hint into what tomorrow’s unemployment figures will be?  Perhaps…  It’s the lowest number since the first week of 2009.  Now, the market might like that statement.  “It’s the lowest number since the first week of 2009.”  But, again, over a half a million people filing for unemployment each week?  I don’t see how that’s good news.  3rd Quarter Productivity Rose by 9.5%.  So, as companies ask their employees to work less hours, or take furlough days three days a month, or take fewer breaks and work harder, productivity will rise.  So, on that note Stocks are rallying.  Generally, Bonds would suffer, however, in those same Labor Department figures, unit labor costs plunged 5.2%, bringing an interest to bonds.  So, it’s one of those rare instances that both the Stock Market and Bond Market (and therefore Mortgage-Backed Securities, and interest rates) are benefiting. Unit labor costs measure inflation at the production level.  Lower inflation means lower interest rates.  Remember, inflation is interest rates’ worst enemy.  When the Fed runs out of their $1.25 Trillion MBS Purchasing money, it will cause inflation.  Another reason rates will increase after March of 2010. 

Interesting Side Note on Unemployment

During the week of October 17^th (my birthday), enrollment in extended benefits programs increased by 24,600 while the Emergency Unemployment Compensation program enrollment rose by over 90,000.  So the 20,000 in Unemployment Claims, that were less than what was expected, have all had to move to emergency type state, or other government-type funding to make it by.   So, depending on how the market interprets that information, I don’t see tomorrow’s figures pointing to a surprise improvement  in the Labor Market.  So, floating into tomorrow’s numbers might be a prudent strategy, if you can stomach the anticipation!  So, don’t listen to the media, listen to me!  Of course, I’ve been wrong before, but I just don’t see the Labor Market improving.  We just may see unemployment at 10% or more.  Most economists are expecting a 9.9% number, but I’m not so sure. 

Locking Advice

As mentioned above, I’d float.  We have two lines of support at the 50-Day and 200-Day Moving Average.  However, the 25-Day Moving Average is not to far of a ceiling from where current Bond Values are.  So, in order to break through the 25-Day ceiling Labor Statistics would really have to be surprising, however, there is room to have a small interest rate decrease, first thing in the morning.  Some clients have chosen to lock…others are heeding my advice to, what I think will pan out to be, about a .25% Point savings on their loan costs.  Until tomorrow…it will be fun to see the results… 

 

Related Must Reads

How Bonds Change Interest Rates
A History of What Happened
$1.25 Trillion MBS Purchase Program

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Chico, CA Interest Rates Market Report – Economic Influences – August 12th, 2008

Consistent Inconsistency

Here’s what’s consistent about this market…inconsistency!  Capping on the five day work week, we were down 53 basis points, up 9 basis points, up 16 basis points, down 22 basis points, and then up 19 basis points!  Like I said, this sort of volatile inconsistency is, at least, what has been consistent about the market and interest rates.

Work With A Knowledable Mortgage Banker

So, what do you do in a market like this?  Work with someone who follows the market closely and has your best interest in mind!  Why the sharp 53 point move, early in this last week?  Primarily due to the fact that the market didn’t like the tone set by the Fed at their meeting.  They didn’t really indicate whether they would hike rates at their next meeting or not.  This sent good ‘ole inflation fears rumbling through the markets.

5-Year High For Jobless Claims

Initial Jobless Claims for the week reported at 455,000.  Higher than the 420,000 the market was prepared for and moving the four-week moving average to 419,500.  A five-year high!  Wal-Mart reported poor earnings, and the European Central Bank and Bank of England left their benchmark interest rates unchanged.

Who Do You Trust When To Lock A Loan

As mentioned in other articles I have touched base on the fact that interest rates follow mortgage-backed securities other than the 10-year Treasury Note.  Many of my fellow loan originators will comment on where the yield of the 10-year Treasury is and it makes me smirk a little.  On August 6, FreddieMac reported very poor earnings.  This caused rumors to start that the Treasury may have to save FreddieMac.  So, Mortgage Bonds moved up, causing their yields and interest rates to move lower, however Treasury notes moved down, causing their yields to move higher. Who would you rather have your loan with, if it came time to make a decision on whether to lock or not…someone following the 10-year Treasury Note or Mortgage-Backed Securities?

Productivity Up

Non-farm 2nd Quarter Productivity rose at 2.2% annually.  Basically, companies are obtaining more work out of fewer workers.  This is good because it helps move the economy along even though we’re experiencing job losses.  This also helps with wage-based inflation, and as we know, inflation is interest rates worst enemy.

So, while we end this week up 19 basis points, it’s a nice opportunity to float interest rates and see what happens into the week.  With Retail Sales numbers, Consumer Price Index and Producer Price Index figures rolling out next week, you’d better have a trigger on the interest rate lock button!  We’re also dealing with a tough layer of residence at the 25-day moving average.  We’ve bounced off of it a lot this past week and trying to budge above it is tough…so an itchy trigger finger is highly recommended.  While we’re up though…float.

So, to be consistent, I’ll end my article appropriately…Until next week…