Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – November 16, 2009

Retail Sales

October Retail Sales came in at 1.4%, compared to 0.9% that was anticipated.  When you take out auto sales, the number, actually, came in at 0.2%, lower than the 0.4% expected.  Not only that, but September’s numbers were revised from a negative 1.5% reading to a dismal -2.3% reading.  These numbers are alarming because Retail Sales Taxes help give states, and the country, money to operate their government.  With lower Sales, there are lower Sales Tax Income Opportunities for governments.  Further hurting the deficits. 

Ben Bernanke Speaks Today

He’ll be talking with the Economic Club in Manhattan.  Any time Bernanke speaks it can move interest rates.  Wonder if he’ll comment regarding when and what the Fed plans on doing to hold off inflation, while trying to deal with interest rates remaing low to help with the economy.  He’s got to have the funnest job in the world, these days. 

Alarming Statement

Kansas City Fed President Thomas Hoenig said this, this weekend, “We still have significant weakness to work through in the economy, in the U.S., and coupled with a rapidly rising level or debt and enormous moral hazard issues, we have a great deal of work ahead of us.”  Statements like this, are kind of what I have been talking about.  The media continues to paint a rosy picture of our economy, and I just don’t see it.  I guess statements like this are what people need to hear, to start thinking twice about pulling out of this financial situation that we’re in, as a country. 

No Auctions This Week

However, there will be an annoucement of what next week’s Treausry Auction amounts will be. 

Related Must Reads

Rates Move on Speculation
The Real Jobs Numbers
Treasury Auction Funds Are Drying Up

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Chico, CA Interest Rates Market Report – Economic Influences – November 13, 2009

Happy Friday the 13th!

Bonds are actually trading at a signicant level.  They’re currently at the high’s of October and May.  So, another opportune time to take advantage of the market!

Consumer Sentiment

Consumer Sentiment was reported at 66, lower than the 71 mark that economists were looking for.  I’ve been writing about how the media has been hyping up the employment numbers as good signs of a recovery, however, it looks as though most consumers are taking a similar opinion as mine.

$1 Trillion Auctioned So Far

About $14 Billion in Treasuries were auctioned off this week.  Compared to past months of about $25 Billion is auctions, you can see that the number is dwindling.  As this number declines, rates will eventually move up!

Next Week…

That’s about it on the interest rate front this morning.  Next week is loaded with economic data, so pay close attention!  Have an excellent weekend!

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Chico, CA Interest Rates Market Report – Economic Influences – November 4, 2009

FOMC Statement Today

Market participants will likely spend this morning holding their breath as they await the release of the Federal Open Market Committee’s (FOMC) post-meeting statement scheduled for 11:15 a.m. PST today.  The FOMC members convened the second of a two-day monetary policy strategy session earlier this morning.  Mortgage investors will be keenly interested to see what, if anything has changed in the Fed’s thinking about the economy, government economic stimulus tactics and the appropriate level of short-term interest rates.  In each of their post-meeting statements since March, the Fed has said it plans to keep interest rates “exceptionally low” for an “extended period.”   

There is a small chance the Fed may choose to do a little mixing-up of the verbiage of their post-meeting statement this time around — by dropping the phrase “exceptionally low” and/or “extended period” — to clearly set the stage for a change in monetary policy in coming months.  If this event were to occur — holding out hope for notably lower mortgage interest rates could be quite a costly mistake, for you and or your clients.

Advice On Wild Swings

Often times, interest rates will move reactively toward The Fed’s comments, not really having an opportunity to absorb the information appropriately.  So, we’ll see interest rates move in one direction, in somewhat of a kneejerk fashion, and then, after the market has time to truly consider and weigh the Fed’s comments, will move in the opposite direction.  Knowing what the Fed says and studying the information accutely can save clients thousands of dollars, over the course of a thirty-year fixed rate loan. 

 Another Record Week For Treasuries

Treasury Auctions, this the coming week, will reach another record amount.  $40 Billion in 3-Year Notes, $25 Billion in 10-Year Notes, and $16  Billion in 30-Year Notes.  This should prove quite interesting, as longer term notes are harder to gain investors’ interest and these Treasuries compete for Mortgage-Backed Securities.  I don’t like the odds, as I think foreign appetite might be tight and The Fed’s running out of money, soon.  So, expect this to put pressure on interest rates. 

Tax Credit Extension

The House approved the extension and expansion of the First-Time Homebuyer Tax Credit.  It will be interesting to see the House version, compared to the Senate version, and what ultimately, President Obama should sign by week’s end.  Included in this Tax Credit Bill is a proposal to extend unemployment benefits an additional twenty weeks.  This will, most certainly, effect the weekly Jobless Claims numbers and unemployment rate, so expect significant increases in these numbers, if this portion of the bill is passed, which could help interest rates stay a little stable, even in the eye of the week Treasury Auctions.

Related Must Reads

2008 Article On Kneejerk Reactions
Why Be Leery? Why Long Term Treasuries Are Harder To Auction
Tax Credit Facts

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Chico, CA Interest Rates Market Report – Economic Influences – October 29, 2009

GDP is HOT, BUT...

Technical Difficulties

I was, somewhat, out of commission since Saturday Night.  My laptop crashed out, and on Tuesday Night, my cell phone froze up on me.  Made for many more hours in the office, however, that’s why the Market UPdates were delayed until today.

What’s Going On?

In the words of Marvin Gaye, here’s what’s been happening.  Treasury Auctions have, so far, fared quite well.  Tuesday’s $44 Billion auction of 2-Year Notes, and yesterday’s auction of $41 Billion in 5-Year Notes were well received by foreign markets.  This pleasant surprise helped keep interest rates stable, however, keep in mind that there is nowhere for rates to go…but up!

Don’t Be Foolish

If you think that by waiting for the “bottom” of the real estate market, that you will somehow benefit from that, a heeded warning:  Don’t be foolish!  Higher interest rates will substantially influence your buying power more than declining values.  IF the government extends the tax credit for first-time home buyers, I recommend getting off of the fence and buying, as soon as you’re able.

Important Side Notes

Durable Goods Orders were reported exactly where the market expected them to be.  Consumer Confidence is down, particularly due to the labor situation.  The government is considering an expansion of unemployment benefits.  If this occurs, expect the number of claims to SKYROCKET, as unemployment numbers only report for a certain amount of time, before you’re ineligible for benefits, and drop off the statistics automatically.  Inventory Levels for New Home Sales were reported at 7.5 months.  This is a little higher than the 7.3 Months that we saw last month, however, it’s still promising, considering inventory was at 12.4 Months in January.

“Advanced” GDP is HOT, BUT…

Gross Domestic Product numbers (so far) for the 3rd Quarter were reported at a 3.5% increase.  Much hotter than the 3.2% expected, AND the first gain in a year, coupled with the greatest gain in two years.  Now, the media has gone hog wild with this news.  Bonds are reacting negatively, the stock market is going nuts, and everyone seems to be partying and celebrating that the recession is over.  Sorry to be the bearer of bad news but is everyone forgetting the “Cash for Clunkers” government refund program?  Is everyone forgetting the $8,000 First Time Home Buyer Tax Credit?  Without these subsidized government programs the real GDP is growth of 1.9%.  Nothing to get too excited about, I think.  The market will figure this out, but in the meantime, interest rates will suffer.

Jobless Claims Are Cool, BUT…

Again, we’re looking at Initial Jobless Claims of $531,000.  And claims that “only” 5.8 Million people are out of work.  The media is spinning this as good news.  Well, I don’t see the joy and happiness regarding these numbers, but I guess I’m in the minority.

Today, $31 Billion in 7-Year Treasury Notes will be auctioned off.  Will foreign appetite gobble up these notes, or will they shy from the longer termed risk?  We’ll see, but if foreign interest is bleak, prepare for rates to plummet this afternoon, coupled with these other media hyped “lies.”

Senate Approved Tax Credit Extension

Not only did the Senate approve an extension of this credit, however, they proposed a $6,500 tax credit for any primary home purchase, not just first time home buyers.  Also, increased, was the income limits for qualification for these credits.  $75,000 for a single person was raised to $125,000 a year in income.  Also, a married couple’s income was increased from $175,000 to $250,000 per year.  You have to have a contract dated by April 30, 2010 to qualify, and the transaction MUST close by June 30, 2010.  This still has to be negotiated between the House and Senate, so expect changes, but it is encouraging news, nonetheless.

Related Must Reads

How Foreign Interest in US Bonds Helps Interest Rates
Tax Credit “FAX”

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