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Monday, 28 April 2008
Not a good week; the second in a row as interest rates are moving higher rather rapidly. This week followed last week with big increases in interest rates across the yield curve, The 10 yr note yield jumped 17 basis points this week.
What happened? The safe haven moves into treasuries as the financial markets came close to total meltdown in the past four months has run its course and all that money that was parked in treasuries is moving out to find better returns; corporate bonds and in the equity markets. Mix in inflation fears, the reality that the Fed is done cutting its Fed Funds rate, or about to be, and a global increase in rates and huge increases in inflation rates in the Asian countries. The credit markets remain locked up but the counter-party fears that lead to the Bear Stearns collapse seem to be over; now what the world needs is not love but credit markets willing to lend.
With the FOMC meeting on Wednesday there is a toss up now as to whether the Fed will cut again; we hold to our forecast that the Fed will not cut at the meeting and that the easy monetary policy has ended. Does that mean interest rates will continue to climb? We do not expect rates to continue to climb as they have in the past two weeks; look for a choppy consolidation pattern to begin next week and likely last for a few weeks as financial markets will have to assess a lot of data and the $150B of checks going out to all citizens that paid taxes and didn't make a lot of money. The currency markets are also in play; watching to see whether the dollar can get a toe hold and recover some of the recent decline. If so commodity prices from crude to grains and industrial metals will work lower.
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Wednesday, 23 April 2008
Don't miss Davidson's annual spring "Town Day" festival on the Village Green Saturday May 3rd. A full day of carnival games, food, arts and live entertainment the whole family will enjoy.
Wednesday, 23 April 2008
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For the week of Apr 21, 2008 --- Vol. 6, Issue 17 |
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 The Bank of America puts an additional $6 billion aside for losses and National City gets commitment of $7.1 billion from Coarsair to increase liquidity. With a dropping dollar and the next Fed meeting over a week away rates reacted bringing the 30yr fixed to 6%, 15yr to 5.5%, FHA/VA 30yr to 6.125%. The 3yr at sits at 5.125% and the 5yr at 5.625%. Jumbo ARMS are still the loan of choice at 6.25 %. |
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"THERE IS NOTHING WRONG WITH CHANGE, AS LONG AS IT IS IN THE RIGHT DIRECTION." ~ Winston Churchill. And there were some big changes indeed for Bonds and home loan rates last week - but not necessarily all in the "right direction". For most of the week, Bond prices were pummeled lower, causing home loan rates to rise - and even after a Friday afternoon rally, home loan rates worsened by about .375% for the week overall.
One silver lining...some of the abuse that Bonds took was at the hands of somewhat positive economic news. Remember that positive or strong economic news tends to benefit Stocks, which in turn can pull money out of Bonds - which causes Bond prices to worsen and home loan rates to rise. So when news hit of a far better than forecast Retail Sales Report and much better than expected earnings reports from giants like Google, the financial markets responded by flowing money over into Stocks, and right out of Bonds, causing home loan rates to rise.
Also hurting Bonds was inflation chatter during speeches made by several Federal Reserve Presidents, who vocalized their concerns over the persistence of inflation in the current economy. Additionally, the Producer Price Index showed wholesale inflation to be climbing higher, thanks to record high oil prices and a seventeen-year high on food prices. Because inflation erodes the value of the fixed return provided by a Bond, the scent of inflation in the air always causes Bond prices to decline, and as a result, home loan rates will rise.
Even though Bond prices ended the week lower than they began, it is still a good time to take advantage of historically lower home loan rates before rising inflation continues to push rates higher. If you, or a friend, family member, neighbor or coworker needs advice on the latest changes in the market, please feel free to get in touch. |
Tuesday, 08 April 2008
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For the week of Apr 07, 2008 --- Vol. 6, Issue 15 |
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 Mortgage rates on the 30 yr fixed started the week at 5.75% and ended at 5.625% on Friday, but edged slightly back to 5.75% today. The 15yr still around 5.25% while the Jumbo arm's are still the preferred product for loans over $417,000 in the high 5-low 6%. FHA and VA follow right behind the 30yr Fixed at 5.875% to 6%. |
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"I KNEW THE RECORD WOULD STAND UNTIL IT WAS BROKEN." ~ Yogi Berra A record was broken on the job front last Friday as the Labor Department reported a much worse than expected loss of 80,000 jobs in March - the greatest jobs loss reported in five years. In addition, revisions to both January and February's Jobs Report delivered an additional loss of 67,000 jobs - that's on top of the previously reported loss of 85,000 jobs for that two-month period.
And...the story might be even a bit gloomier than it already appears. The Labor Department uses a lot of averaging to help it come up with its numbers more quickly, but this practice can skew the current picture significantly. Think of it this way - and because it's now baseball season, here's a Baseball analogy - let's say that mid-way through the season, a red-hot hitter with a batting average of 340 declines into a bad slump for several weeks. While he now can't even hit a basketball thrown underhand to him, his average - while lower to 300 - is still very strong due to his previous hot performance. So someone looking at just the statistics may think that this batter is still absolutely terrific, but he is really someone the fans are booing as he approaches the plate. This is not very different from current numbers being reported by the Labor Department - previous averaging is likely causing an understating of the ACTUAL number of job losses...which somewhat masks how b ad the job market really is.
This bleak Jobs Report greatly boosts the odds of not only a first-quarter recession, but perhaps a worse economic downturn than many economists fear. The Federal Reserve may respond to this increasing trend in job losses with additional interest rate cuts when they next meet to determine monetary policy on April 30 and June 25. As we've seen in the past though, such rate cuts do not translate into lower long-term rates for mortgages, so there is no better time than right now to refinance an existing mortgage or to structure a new one. Let's work together to make sure your current financing is a home run! |
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