Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – March 26, 2010

The Big Room At Sierra Nevada Brewing Company

YOU DON’T WANT TO MISS THIS EVENT!!!

Scott St. John will be speaking at The Big Room At Sierra Nevada TODAY!!! Scott is a 3rd-Term Governing Board Member of Freddie Mac.  You’ll have an opportunity to inquire into the 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 less timely and more difficult, these days.   REGISTER AT THE CHICO OR PARADISE BOARD OFFICES.  $10 includes appetizers. $15.00 AT THE DOOR!

We’ve Settled Down A Bit

Credit market participants are shaking their heads, and trying to recover form a horrible auction week for U.S. Treasuries.  Is the writing on the wall, here, too?  Remember, that without the United States’ Government purchasing Mortgage-Backed Securities (MBS), that’s a major buyer out there, that has left the building, so to speak.  And without a major buyer, in order to attract other investors, you have to offer a greater rate of return…and therefore, greater interest rates.  We lost 88 basis points, alone, on Wednesday.  That’s .875% Points on a loan.  UGLY!  Today, however, things are looking slightly better.  We’ve managed to creep up about 30 basis points.  That equates to approximately .25% Points on a long.  What have I been saying?  Rates will increase once the government stops purchasing MBS, and I suspected anywhere from .25% to .5% in RATE, not Points.

GDP

The Commerce Department reported that Gross Domestic Product (a statistical measure of the total market value of all final goods and services produced in the country) expanded at a 5.6% annual rate, instead of the 5.9% pace estimated earlier.

Non-Farm Payroll Figures

The big news will be the March Non-Farm Payroll figures, that will be release this next Friday.  This will be a touch call.  The expected number is 180,000 new jobs, and the unemployment rate to remain close to 9.7%.  Any move in any other direction could have an effect on rates, however, if unemployment moves down, and the new job creation number moves closer to the 200,000 range…it could have a real negative impact on rates.

I'd Float Into The Day, As We Somewhat Recovered

Locking Advice

It’s probably a good idea to lock your pipeline.  Particularly since the government census workers will be considered in this Friday’s employment numbers.  So, I think the risk is too great!  With the Market settling now, I’d float until we see signs of market worsening.  That could happen any time, next week.

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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!

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

Chico, CA Interest Rates Market Report – Economic Influences – December 4th, 2007

Rates Be Nimble, Rates Be Quick

So much to report on this week!  New York Fed Vice Chairman Donald Kohn indicated, “In my view, these (financial) uncertainties require flexible and pragmatic policymaking – nimble is the adjective I used a few weeks ago.  In the conduct of monetary policy, as Chairman Bernanke has emphasized, we will act as needed to foster both price stability and full employment.”   Nimble seems to be the operative word, here.  Lowering rates?

Durable Goods Orders for October saw the biggest monthly decline in this index since February of last year.  The National Association of Realtors reported that October existing homes sales fell 1.2%.  Interesting to note; the biggest drop was in multi-family and condominium sales. 

DON’T Watch the 10-Year Treasury!!!

Again…Mortgage Backed Securities were up 16 basis points on Wednesday of last week.  The 10-Year Treasury Note was down 34 basis points. 

Preliminary Gross Domestic Product showed the US economy growing at an expected 4.9%.  This is strongly due to a weaker US Dollar.  Initial Jobless Claims were reported at 352,000.  This is the highest level since February and some see this as our economy’s inability to continue to create more new jobs, than loosing old ones.

Rates Could Get Disappointing

The Fed’s favorite gauge on inflation came in on a year-over-year basis at 1.9%.  Remember, the Fed wants to see inflationary levels between 1 and 2 percent.  Bernanke said that resurgent financial strains have really made future economic growth in our economy quite pessimistic.  If you’re looking for additional interest rate improvements, after the monetary policy decision on December 11^th, you could be quite disappointed.

If you read this article and have been considering refinancing…now is definitely the time.  This Friday November’s nonfarm payroll reported is scheduled for release.  The hype is that less than 80,000 new jobs, coupled with unemployment moving to 4.8%, from 4.7% could create a 50 basis point lowering of the overnight rate on December 11.  If that number is more in line with over 110,000 and unemployment remains at 4.7% than just a 25 basis point move might be in line.  Most of you reading this may think that a 50 basis point drop would be great for interest rates.  

Home Values AND Rates Are Down

Here’s the problem.  Ten-Year Treasury yields are paying 3.88%.  The Consumer Price Index is reading 3.5% in October.  Should inflation readings like the CPI exceed what investors are getting paid to hold Treasuries, investors then throw their funds from bonds and into stocks.  This has occurred from August of 1973 through August of 1953 and from January 1979 to October of 1980.  So, again, I cannot stress enough…now is the time.  Home values and rates are down.  5.625% with an APR of 5.733% is what was being locked in on Monday.  Also, what’s interesting to note…Rate cuts are designed to help economic growth.  This pushes up demand for goods and services, but also the cost of capital.  This is not really a good formula for lower interest rates. 

Rate Freeze on SubPrime Loans

Last, a government sponsored plan to temporarily freeze interest rates on certain adjustable, subprime loans could be right around the corner.  Basically, the low, introductory rate on these loans could be extended for a certain amount of time to help home owners.  It’s still being worked on, but it’s another example of these uncharted waters we’re in around the mortgage industry.  Until next week…