Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – April 27, 2010

Trouble In Greece Is Helping Our MBS

Greece X

The uncertainty, in Greece, has caused investors to park their investment funds in the safe-haven of U.S. Treasuries and Mortgage-Backed Securities.  We’re currently up 34 Basis Points and we’ve broken through the very tough ceiling of resistance, at the 50-Day Moving Average. The biggest concern is, can we remain here?  Will The European Community save the day, again, for Greece?  Will money pour back into the Euro, if a resolution results?  These are questions that continue to go unanswered, however, will have significant implications on interest rates.

Earnings Reports

For the most part, earnings have been stronger than I had anticipated.  We ran into this last year, and my calculations were a few months behind, and that might be what’s happening, currently, as well.  While I am extremely excited for the United States, and the rest of the world, to climb out of this financial nightmare, while trying to remain optimistic, the reality is that until the labor market experiences more significant growth, the economy will continue to drag its ugly tail.

Consumer Confidence

As if to slap me right in the face, for my labor comments above, Consumer Confidence sharply catapulted to 57.9.  This is the highest reading since September of 2008 and significantly higher than last month’s disappointing 52.3 reading.  Consumer Confidence is so important because it measures the willingness of the American People to spend money; boosting the economy.

Fed Meeting Starts Today

The Federal Open Market Committee opens their two day meeting today.  Their Rate Decision and Policy Statement will be released tomorrow, after the meetings, at  11:15 PST.  you can rest assured that the high Consumer Confidence Numbers will be a matter of discussion.

Treasury Auction Starts

Today, $44 Billion worth of 2-Year Treasury Notes will be auctioned off, starting the week off of 2, 5, & 7-Year Treasuries.

Greece's Troubles Are Helping Rates

Locking Advice

Now, is the time to float…however, EXTREMELY carefully!  We’ve managed to climb above some very tough resistance.  And if another resolution to Greece’s troubles is negotiated, money could fly from the U.S, and back to Europe.  However, if not, we could see even better pricing.  Register your loans for locking…but wait until the news changes, before doing so.  It sure is a bumpy ride, however, you knew it was coming.

Related Must Reads

Related Must Reads From Greece
Earnings Surprise: A Look Back At October of 2009
Why Be Leery: A Look At Short Term Treasuries Desirability Compared To Long Term Treasuries

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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 – April 16, 2010

SEC Files Fraud Charges Against Goldman Sachs

SEC Files Against Subprime Giant

We have finally broken through the 25-Day Moving Average and Bonds are benefiting as Stocks suffer, lead by the Security and Exchange Commission’s charge of Fraud, against Goldman Sachs and their involvement with the Subprime Mortgage Industry.

Housing Starts

Housing starts climbed to 626,000, in March, and have moved twenty percent higher since last year.  New Housing Permits also climbed higher than expected, to 685,000.  This is good news for housing, as it’s a pretty strong report!  I’m glad to see some optimism in the building industry, however, as I have stated over and over again, we need jobs to move that inventory.  So, I just hope that the building is responsible.

“Judas” Hoenig Speaking Today

Kansas City Fed President, Thomas Hoenig, will be speaking today.  Hoenig has been the long time dissenter of the Fed, requesting that the “extended period,” language be removed from the Fed’s Policy Statements regarding low interest rates.  He’s expected to discuss his reasons for his departure from the rest of his clan.  These statements, alone, could move markets, so we’d better be paying attention.

Thomas "Judas" Heonig Speaks Today

Locking Advice

I’d float, into the day, to see is any of Hoenig’s statements move markets.  Floating is prudent, here, because money’s pouring out of Stocks, while the market digests the results of the Fraud Charges filed against Goldman Sachs.

Related Must Reads

Read This Carefully: A Look Into “Judas” Hoenig’s Concerns
Trend Lines: Why They’re Significant To Rates
The REAL Jobs Numbers: What’s Your Point?

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Chico, CA Interest Rates Market Report – Economic Influences – April 8, 2010

Greece's Financial Problems Benefiting US Treasuries...AGAIN

Treasury Auctions “Bid” Well

The Treasury Department conducted its $21 Billion 10-Year Note Auction, yesterday, and the results were surprisingly positive.  Just like your credit risk score, think of it this way; the world is looking at the United States’ “credit risk score,” (FICO Score) and if the world thinks that the US FICO Score is below 740, than interest rates will be higher…So, that’s why it’s so surprising that the auctions have gone well this week. What’s helped?  Greece!  As the market prepares for Greece’s financial woes, again, money pours out of Stocks and back into safe-havens, like U.S. Treasuries.  I’ll take it!

Uncle Sam’s FICO Score

So, why would you expect the United States to have such a low FICO Score?  Think of this:  The US is borrowing and spending like never before.  And there is no exit strategy, or plan, to reduce this spending, or huge deficit.  So, that’s why it’s so curious, as to why the world is interested in our notes.  We’re a big risk…however, when looking at Europe, they seem more of a risk, at times…so, makes sense that money would pour into the safe-haven of U.S. Treasuries.

FHA Apps On The Rise

The Mortgage Bankers of America released the mortgage application index for the week ended April 2, 2010, earlier this morning. They said demand for home purchases squirmed out a 0.2% gain for the period while refinance applications plummeted 16.9%. According to the MBA nearly half of all applications to buy homes were for government loans – the highest share since February 1990.

Fed Minutes Results

Inflation seems to be less of a concern, recently.  According to the Federal Open Market Committee’s Minutes, from their latest meeting, “at the current juncture, the risks to an early start to policy tightening exceed those associated with a later start.”  So, keeping rates low, for the time being, is where the Fed wants to stay.  That’s great news for our current interest rate status, however, managing that risk is, well…risky…as inflation is out there somewhere…and rates will have to increase to manage those inflationary risks…when to pull that trigger, is the position that I’m glad Good ‘Ole Ben Bernanke holds, as opposed to me!

Alan Greenspan Speaks

Our former Fearless Fed Policy Chairman, Alan Greenspan, spoke with The Financial Crisis Inquiry Commission on Capital Hill, indicating that the latest credit crisis is, “the most virulent global financial crisis, ever,” and he’s suggesting that more regulation be in place, in the future, so that nothing like this ever happens again.  Smart!  Always liked Greenspan!

Jobless Claims Increase

The weekly Jobless Claims numbers rose 18,000 to 460,000.  435,000 claims were expected.  This brings me to the fact the Fed indicated, in their minutes, that, “Activity in the Housing Sector appears to have flattened out in recent months…”  My point, here, is that housing will continue to suffer, until the job sector gets better.  Continuing Claims moved lower to 4.6 Million, however, keep in mind that the Emergency Unemployment Benefactors are increasing to a current number of 5.6 Million.  So, 10.2 Million people are receiving some sort of unemployment compensation.  So, lower interest rates isn’t exactly the best solution to moving property…the employment situation is!

Up, Up and Away In My Beautiful U.S. Treasury Security

Locking Advice

Floating into the day makes total sense.  The gettin’s good, again.  While Greece and Europe suffer, our interest rates benefit.  So, we’ll float, for now.

Related Must Reads

Greece’s Financial Woes…When It Started
Type “Greece” into the “Search Site” Engine Above…to Follow What’s Been Happening in Greece

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