Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – October 7, 2009

More Volatility Expected

Mortgage-Backed Securities (MBS) bounced right off of their highs, from yesterday, as investors cashed in on the poor 3-Year Treasury Auction results.  So, as values topped, yields were, again, quite low this morning.  However, started heading in negative territory.  So, by the time interest rates rolled out on the west coast, they were about the same as yesterday’s.  Expect more volatility, as the market tries to prepare for a global economic recovery, the end of the Government Sponsored Purchasing Program, 3rd Quarter Earnings Reports, and today’s 10-Year Treasury Auction.

Treasury Auction Bids…Not So Well

If we take a clue from yesterday’s 3-Year T-Bill Auction, than be prepared for an ugly day today.  The 10-Year T-Bill has, obviously, a longer investment time period, so it’s harder to obtain your return on that investment without gauging for inflation.  We know inflation is around the corner, but how much?  That’s what investors will be wondering today, and therefore, will desire a higher yield on their investment.  Therefore, higher interest rates.

Another NEW Purchase Plan In The Makes

Here’s something of interest!  Fannie Mae and Freddie Mac announced a new plan to make small credit lines available to Mortgage Banks.  This commitment to purchase certain loans that meet certain criteria, is designed to relieve some of the risk involved with these loans.  Not much is known about these particulars, but stay tuned as more information is released. 

Locking Advice

It doesn’t get much better than this.  Without a surprise fabulous 10-Year Treasury Auction, and without 3rd Quarter Earnings from Corporations showing horrible statistics, if you’re not locking now, you’d better have an itchy finger on that lock button! 

Related Must Reads

How Interest Rates Are Priced
Why Be Leery of Yesterday’s Auction
October 7, 2008 Article about Term Auction Facilities

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 – September 25, 2009

Probably A Good Day To Lock

Here’s what we’re looking at, today.  We have managed to climb above the 200-Day Moving Average.  This is good for interest rates.  I do think, however, that to get any better, would prove difficult.  There are two levels, just above our current level of pricing, that kind of act like a signal to the markets.  What I mean is once we hit a certain level of pricing, investors see that level and realize that it might be a good time to cash in on their investment.  Just like stocks, when it reaches a certain price, there is always a good time to sell.  That’s what I see here.

Signs Of A Not So Good Recovery

Durable Goods Orders, for August, well…sucked.  Much worse than expectations at a 2.4% loss, when they estimated a 0.4% gain.  When stripping out transportation, they were unchanged, however, they expected a 0.1% increase.  Durable Goods Orders are household items that the consumer is expected to hold onto for more than three years.  Dishwashers, television sets, etc.  This is an important figure because, as we’ve been reading, things have been looking fairly rosy, however, this report shows that possibly, businesses have been re-ordering items recently, because they haven’t this past year, because of the recession.  So, are they just re-stalking their shelves becasue they’re out of supplies?  Hmm?

Another Sign Of Higher Rates

This is very important to talk with your buyers about.  Or, Buyers…this is why it’s so important to start being very serious about buying now.  I expect rates to be O.K. through the rest of the year.  However, they will start to climb, into 2010, maybe a little sooner.  The New York Federal Reserve purchased about $23 Billion of Mortgage-Backed Securities this week.  Of interest…they bought at around the 5.5% Coupon (Rate).  So, when those rates “hit the street,” so to speak, to the consumer, there is a cost.  To service the loan, to pool it or bundle it up for sale to Fannie Mae or Freddie Mac, even Wall Street wants a piece of the action.  That cost is approxmiately .75% on top of the 5.5%.  So, when those funds are sold “on the street,” the rate equates to 6.25%.  Hence, higher rates!

Other Economic Stuff

Consumer Sentiment was higher than expected.  This may come down after third quarter earnings reports are realeased from corporations.  I’ve been talking about this, and its effects on intrest rates, in other articles.  New Homes Sales were lower than expected.  Interestly enough, homes only sat an average of 7.3 months, on the market, as opposed to 7.5 months, last month.  This is the best reading since January of 2007.  Good news for housing, however, is it the tax credit, or the lack of construction, causing this?  We’ll have to wait and see

Locking In

So, the graph shows a sliding down of rates, however, I think we have an opportunity here.  Once we get into October, things may change, a little, but I like today’s feeling.  See ya next week!

Chico, CA Interest Rates Market Report – Economic Influences – September 14, 2009

We've Moved Below the 200-Day Moving Average...Be Cautious

Who’s Bickering?

“We shouldn’t be arguing and bickering about who killed who!”  A famous line from Monte Python.  The “killed” reference is regarding interest rates!  And who’s arguing and bickering?  China!

Obama’s Move

President Barrack Obama, in an effort to keep American Jobs, put a new tax on Chinese Tires.  Many Americans are purchasing cheaper Chinese Tires to help with their costs, and it’s putting many American Workers out of a job.  So, China is upset with this new tax, and they’ve filed a grievance with The World Trade Organization and threatening to quit purchasing and perhaps sell off their existing Bonds.  Specifically Mortgage-Backed Securities (MBS), or Mortgage Bonds. 

Higher Rates?

If China starts to move toward a Trade War with the United States and not purchase our MBS, coupled with the fact of selling their existing MBS holdings;  Interest Rates, could be vulnerable.

Locking?

Again, a short term escrow may want to lock.  Particularly regarding disclosure periods due to new MDIA rules.  If you can stomach it, you may want to wait, the rest of the week, to see how everything plays out.

Chico, CA Interest Rates Market Report – Economic Influences – Aug 19 & 20, 2009

Do You Have A Tough Stomach?

As anticipated, Stocks continued to wriggle their way upwardly, yesterday, while Mortgage-Backed Securities (and therefore interest rates) struggled.  Then, right before the closing bell, MBS shot upwardly and ended the day on a positive note.  We started the day up 38 basis points.  That’s about .375% of a point, on the cost of a loan.  When Bond Values, or Mortgage-Backed Security Values, are up, their yields (and therefore interest rates) move down.  When they’re values are down, yields and rates move up.  By 7:00 a.m. PST, we were only up 25 basis points.  That equals .25% point on the cost of a loan.  By about 9:30 a.m. PST, we we only up about 9 basis points.  That’s almost 30 basis points less than when pricing open and that’s certainly enough to makes re-price their interest rates costs. 

Sup in China?

It will be interesting to see the effects that China’s Stock Market continues to have on the United States.  They’ve lost about 20% of their value over the course of just a couple of weeks.  Stay tuned for Asian Updates in this artcile.

Treasury Auction Is Today

The last time the Treasury Annouced their auction schedule (August 5th), Stock Traders starting shifting money around, nervously, the day before.  That seems to have happened, yesterday, however the surprise was the up swing, at the very end of the day.  Up 25!  So, it will be interesting to see what occurs throughout today.  Be ready for an interesting ride…

Knee Surgery

I’ll be out of the office until Wednesday, August 26.  I have a torn Medial Meniscus that needs repairing, due to too much basketball and turning 41.  I hope to be bloggin’ though, so tell you friends to sign up!