Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – February 11, 2010

Treasury Auction And MBS Purchase Program Increasing Rates

Greece’s Financial Woes

So, Greece is afraid that they won’t be able to make their financial obligations, this month.  The European Community has indicated that they may extend a loan, to Greece, to keep them from financial ruin.  Initially, this helped interest rates, in the United States, because the $25 Billion Auction of 10-Year Treasuries, went relatively well, for such a long term (10 years), until the European Countries united to help keep Greece from financial disaster.   Investors, therefore, started moving away from Treasuries.  So, we ended the day in negative territory, and below ALL levels of support, but it could have been much worse.

An Interesting Contradiction

So, I heard on Mark and Brian, this morning, that the White House Predicts 95,000 jobs through 2011.  This may sound like great news, and don’t get me wrong, it’s better than we’ve seen, however, check out these statistics.  The Federal Budget estimates unemployment to move to under 6.0% by the year 2015.  So, first of all, in order to keep employment steady, due to population growth and people working longer into their lives, we need to add 125,000 jobs a month.  Also, in order to move unemployment to under 6.0%, by 2015, with these growth calculations, we need to add 225,000 jobs per month.  Hello!

$16 Billion in 30-Year Treasury Notes

Auctioned today!  As mentioned earlier, the 10-Year Auction showed promise, but in order to help Greece out, Europe stepped in and money poured out of U.S. Treasuries…those dang Europeans…(sarcasm).  If these 30-Year auction bodes poorly, due to the enormous debt obligations the U.S. is currently printing, then yields (and therefore interest rates) will have to increase to entice investors to tie their money up for such a long period of time.

Locking Advice

It may be wise to lock, before the 10:00 a.m. announcement of the Treasury Auction.

Related Must Reads

Why Be Leery of Longer Term Auctions
How Breaking Below Levels of Support Can Effect Rates

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Chico, CA Interest Rates Market Report – Economic Influences – December 8, 2009

When Bernanke Speaks...

When Bernanke Speaks…

As I mentioned, yesterday, Fed Chairman Ben Bernanke, spoke to The Economic Club of Washington, and his comments helped interest rates plummet by about .75% point to 1.0% point, in cost, in the matter of two days.  Bernanke spoke about a few things:  He mentioned that inflation should remain subdued, the economic recovery will face a tough challenge, or “formidable headwinds,” he mentioned where the economy was headed, how it should get there, and what should happen to avoid another financial meltdown in the future.  Click here to read The Fed’s Full Statement. 

Loose Lips Fisher Speaking

Dallas Fed President Richard Fisher will be speaking today.  He’s currently not a voting member of The Federal Reserve Board, however, he has a reputation of saying things that spur the market.  Often times he’ll state, almost the opposite of other Fed Members.  He has a nickname, in the industry, of “Loose Lips.”

$40 Billion 3-Year Treasury Auction

Stocks are lower due to 3M and McDonald’s showing less than expected numbers, helping the Bond market, and therefore, interest rates.  But, remember, there is a $40 Billion 3-Year Treasury Auction today.  If that performs poorly, rates will suffer.  Again, we have our finger on the lock button, but floating into the morning, would be prudent.

Related Must Reads

Read The Fed’s Full Statement

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Chico, CA Interest Rates Market Report – Economic Influences – November 19, 2009

Buyer’s WAKE UP!

Last week the borrowing costs on 30-year fixed rate mortgages, excluding fees, averaged, down 0.07% from the previous week and the lowest since mid-May. Mortgage interest rates are hovering within shouting distance of the all-time record low, set during the week ended March 27th — yet according to data provided by the Mortgage Bankers of America — the demand for home purchases dropped to a 12-year low last week!  Follow interest rates on my blog-site at www.accessloans.net .  Half-way down, on the left hand side you’ll see the national average of interest rates.

Jobless Claims

This morning’s Initial Jobless Claims came in at 505,000.  The media will think this is good news because that number has been dropping for weeks, however, let’s look at the bigger picture.  Continuing Claims numbers have dropped; from 6.82 Million to 5.81 Million.  However, why do you think that is?  You think people are being hired?  Or do you think that people have had to have Unemployment Claims for so long, that they are running out of benefits?  I think it’s the latter...as Obama had to sign a 20 week extension to benefits as Unemployment hit 10.2%.

Higher Rates…Period!

The Fed will announce the size of the Treasury Auctions scheduled for next week.  Keep in mind that the Fed’s $1.25 Trillion Mortgage-Backed Security Purchase Program is winding down.  Yet, applications, in the past few months, have been pretty high as rates have hovered around 5.0%.  So the supply of these loans will hit the market at a time when demand, or buying power of the Fed, will be going away.  You know the answer to that equation.  Higher Rates…period!

Stocks Taking A Hit

I’ve been mentioning that the Stock Market has been overbought, for some time now.  Well, it’s taking a hit today.  That’s helping bonds, momentarily, however, we should bounce right off the highs of 2009.  So, again, it’s an excellent time to lock!

Related Must Reads

Read, “Interesting Side Note On Unemployment”
Another Reason For Higher Rates
Stocks Overbought…A Look Into September 1, 2009

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Chico, CA Interest Rates Market Report – Economic Influences – November 12, 2009

25-40-50-Day Moving Averages

As I write, Mortgage-Backed Securities (MBS) are sitting directly on the 25, 40, & 50-Day Moving Averages.  All three averages are sitting almost at exactly the same place.  We, actually, dipped below those lines, however, have rebounded and are awaiting the 30-Year Treasury Auction report. 

Auction Results Will Effect Rates

The 30-Year Treasury Auction should not fare too well.  At the cost of sounding pessimistic, it’s just difficult to have foreign investors like a longer term, when investing in these bonds.  However, to be fair, the 3-Year and 10-Year Treasury Auctions have fared well this week.  This is a somewhat encouraging sign. 

Jobless Claims Getting Better…BUT…

The other news pushing bonds and MBS down is the fact the government reported the number of workers filing new claims for jobless benefits dropped by 12,000 last week.  The four-week moving average of new claims, considered a better gauge of underlying trends, fell by 4,500 for the period.  During the latest week for which data is available (week ended October 24^th) enrollment in extended benefits programs decreased by 28,240 while the Emergency Unemployment Compensation program enrollment rose by 22,400 (somewhat offsetting the decrease).  So, while the media continues to paint a brighter picture of the labor market, I don’t see it.  Particularly coupled with the fact that the new legislation signed by Obama will extend unemployment benefits for the people not working full time.  This will definitely change the outlook of the continuing claims numbers.  We’ll keep an eye on this…

Locking

I think its prudent to lock.  Even with the level of support we have directly under us…I don’t see the 30-Year Treasury Auction surprising us, and the Labor Statistics are being received as joyous information by the media.  Stocks will benefit at the expense of bonds. 

 

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