Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – May 13, 2010

Political Chess Game Could Damn Financially Troubled Europe

Will ECB Package Rescue?

Is the $1 Trillion European Central Bank (ECB) Rescue Package too little, too late?  The world is trying to figure that out.  It’s election time in Europe, and many feel as though the funds were held up, until after the election in Germany.  So, this political strategy may have damned Greece, and other European Countries, by the stalling too long.  Investors are trying to figure out the consequences of the delay, and how, or even if, the financial band-aid will fix the problem.  As investors ponder, money flows in and out of world economies widely effecting Stocks and Bonds.

$16 Billion 30-Year Note Auction

The uncertainty in Europe may benefit today’s Note Auction.  We’ll have to wait and see.  If the feeling is that the rescue package is too little, too late, than interest rates, in America, will benefit.  So much uncertainty!

Initial Jobless Claims

The number of Americans filing for unemployment benefits moved to 444,000.  Just slightly higher than the 440,000 expected, bringing the total unemployment recipients to 4.63 Million, not taking into consideration the 5.13 Million people receiving Emergency Unemployment Compensation.  I’m sorry folks, but until these numbers start looking better, expect housing to grow at a more modest pace.  Low rates are great, however, jobs will benefit real estate, more than lower rates.

Initial Jobless Claims Higher Than Expected

Locking Advice

We’re back in CAREFUL float mode!  It, again, doesn’t get much better than this, however, we’ll have to watch the Auction Results, closely, and carefully!

Related Must Reads

European Fix
Why Be Leery Of Yesterday’s Auction Success: A Look Into Why 30-Year Notes Are Harder To Auction
Interesting Side Note On Unemployment: How The Numbers Are Squewed

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Chico, CA Interest Rates Market Report – Economic Influences – May 12, 2010

Rates On The Rise

3-Year Notes Fare So-So

The 3-Year Treasury Note Auction fared only so well, yesterday.  And the market is poised for another adequate auction of the 10-Year Note Auction, scheduled for today.  Remember, the longer the term of that note, the harder to sell it at reasonably low rates.

European News

Spain announced that they have a financial strategy to narrow their budget deficit, and Germany reported a Gross Domestic Product report that was unexpected.  This caused Stocks to rise, all over the world, at the expense of bonds, and therefore, interest rates.

John Paulson Speaks

Hedge Fund Manger, John Paulson, the man who made billions of dollars calling the collapse of the housing market, in 2007, has indicated that he sees housing prices rise 3-5% this year, and 10-12% next year.  This is huge news, as he’s called a lot of other shots, too, and even if he’s fractionally correct, and housing prices only rise 1.5%, if someone buys a home for $100,000 and puts 10% down ($10,000), in one year, they will have gained $1,500 on that $10,000.  A 15% gain on your investment, is pretty darn good these days!

Treasury Auctions Are Somewhat Disappointing

Locking Advice

We moved to a locking status, as news from Europe continues to be positive, which is taking the sails out of US Treasury Auctions and Bonds offerings.

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Chico, CA Interest Rates Market Report – Economic Influences – January 29, 2010

Stocks Rallying On Hot GDP

Hot GDP Numbers

America’s Gross Domestic Product numbers rolled in at a hot 5.7%, when only a reading of 4.7% was expected.  This is the best reading since the third quarter of 2003.  This is the Advanced Fourth Quarter GDP figure.  We still have the Preliminary Reading, and then the Final Reading.  Often, these numbers get substantially revised, so we’ll have to wait and see what the true figures are, after some time.  An interesting component of this reading was that Consumer Spending, the largest component of the GDP, came in quite low.  This could have something to do with the end of the “Cash for Clunkers” Program that was abandoned the previous month.

So…Why The Hot GDP Numbers?

So, remember when I was talking about inventory levels at corporations?  The media was all giddy about Manufacturing numbers being so high…well…those manufacturing numbers are what has caused the GDP to elevate, this past quarter.  So, even though nobody’s buying, the media is going nuts over the GDP numbers.  But, they’ll get revised…believe me.  Sorry to sound so pesimistic, I’m just tellin’ it like I see it!

Fed’s Dissenting Vote

Fed comments from Vice Chairman Donald Kohn have bonds watching markets closely.  He simply stated that he sees rates moving higher, and that it could be swift.  Also, there was one Kansas City Fed President that was a dissenting vote regarding keeping “rates low for an extended period of time.”  It’s the first dissenting vote in over a year.  So, with these comments from the Vice Chair and the dissenting vote, are we, perhaps, looking for a rate-hike sometime this year?

Locking Advice

We’re still above the 200-Day Moving Average, so cautiously float into the day.

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