Ball park rates for the start of the day. May be an exciting roller coaster ride so, I'll try to keep you posted on any significant ups or downs in the rates...
Have a great Wednesday
30-year conventional: Loan $130,000-$175,000---5.125-5.50%
Loan $175,000-$230,000---5.00-5.375%
Loan $230,000 to max ($417,000) --- 4.875-5.25%
30-year FHA: Loan $90,000-130,000 --- 4.75-5.125%
Loan $130,000-170,000 -- 4.75-5.125%
Loan $170,000 to max -- 4.75-5.125%
15-year conventional: Loan $130,000-175,000 -- 4.875-5.25%
Loan $175,000-230,000 -- 4.75-5.125%
Loan $230,000 to max -- 4.75-5.125%
40-year conventional: Loan $130,000-175,000 -- 5.50-5.875%
Loan $175,000-230,000 -- 5.375-5.75%
Loan $230,000 to max -- 5.25-5.625%
30-year conventional jumbo: $417,000-$650,000 -- 5.75-6.125%
15-year conventional jumbo: $417,000-650,000 -- 5.875-6.25%
5/1 Arm cap 5/2/5: $130,000-175,000 -- 6.125-6.5%
$175,000-230,000 -- 4.625-5.00%
$230,000 to max -- 4.625-5.00%
3/1 Arm cap 2&6: 417,000-$650,000 -- 5.75-6.125%
5/1 Jumbo Arm - cap 5/2/5: $417,000 -- 5.875-6.25% (same as last week)
801-649-5883
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Marina Vialtsina
Showing posts with label Fed Chair. Show all posts
Showing posts with label Fed Chair. Show all posts
Wednesday, December 17, 2008
Friday, November 21, 2008
Mortgage Market Update for this week
MMG Update - Thursday, November 20, 2008 9:35am ET
Current Trend Direction: Sideways along 200-Day Moving Average for 13th consecutive session
Risks favor: Carefully Floating
Current Price of FNMA 6% Bond: $101.41, +16bp
Over the years, MMG has continued to help the mortgage community discover and understand the disconnect between the 10-year Note and Mortgage Bonds. In recent times that disconnect has been very clear to anyone in our world - but in the past 24 hours, the disconnect has been dramatic. Since yesterday the 10-year Note has risen by 285bp, while Mortgage Bonds have risen 12bp!!! Do you think the media knows this? NO. Use this to inform your relationship partners and clients of what really drives fixed rate mortgages.
So what happened? Yesterday the Fed Minutes from the October Fed Meeting were released. The Minutes expressed concern over the health of the economy and their future targets for employment and growth were lowered. But the big news was the "D" word. The Fed, after years of being concerned with inflation, now say they are concerned about deflation. This news shocked the financial markets, pushing Stocks sharply lower while directing enormous money flow into ultra-safe Treasury Notes.
(the story continues tomorrow...)
Current Trend Direction: Sideways along 200-Day Moving Average for 13th consecutive session
Risks favor: Carefully Floating
Current Price of FNMA 6% Bond: $101.41, +16bp
Over the years, MMG has continued to help the mortgage community discover and understand the disconnect between the 10-year Note and Mortgage Bonds. In recent times that disconnect has been very clear to anyone in our world - but in the past 24 hours, the disconnect has been dramatic. Since yesterday the 10-year Note has risen by 285bp, while Mortgage Bonds have risen 12bp!!! Do you think the media knows this? NO. Use this to inform your relationship partners and clients of what really drives fixed rate mortgages.
So what happened? Yesterday the Fed Minutes from the October Fed Meeting were released. The Minutes expressed concern over the health of the economy and their future targets for employment and growth were lowered. But the big news was the "D" word. The Fed, after years of being concerned with inflation, now say they are concerned about deflation. This news shocked the financial markets, pushing Stocks sharply lower while directing enormous money flow into ultra-safe Treasury Notes.
(the story continues tomorrow...)
Tuesday, November 18, 2008
Market Overcast
What do you need a fancy suit for Charlie, you got no job to wear it to". From the 1984 movie, The Pope of Greenwich Village . And there are a lot of fancy suits not being used, due to the massive job losses of late.
The Labor Department reported that 240,000 jobs were lost in October, which was worse than the expected loss of 200,000 jobs. In addition, the Unemployment Rate jumped to 6.5%, up from last month's read of 6.1% and reaching the highest unemployment rate since 1994. And if the current numbers weren't bad enough, there were heavy downward revisions to August and September numbers, which erased an additional 179,000 jobs. So far in 2008, a total of 1.18 million jobs have been lost, with 651,000 job losses coming in just the past three months. Look for things to get worse before they get better, as the unemployment rate will likely top 7% soon.
Friday's Jobs Report was brutal and would typically nudge the Fed to cut their benchmark rates in an effort to spur on the economy. But with the Fed Funds Rate already at 1%, the Fed doesn't have much more room to cut. This means that Stocks, which worsen on poor economic news, will likely continue to struggle as a result.
Speaking of rate cuts, the Bank of England, the European Central Bank and a few other countries central banks all lowered interest rates last week to help their economies. The good news is that these cuts should have a positive effect on the US Dollar - and therefore will also help Dollar denominated oil prices stay near present levels.
With some of the negative economic news, Bonds did manage a huge, three-day 160bp rally in the middle part of last week, and Bonds and home loan rates were able to hang on to much of this improvement on Friday. As a result, Bonds and home loan rates ended the week nearly .25% better than where they began.
THE WEEKEND IS THE PERFECT TIME TO ENJOY SPENDING SOME OF YOUR HARD EARNED MONEY, BUT DID YOU KNOW THAT A SAFE DEPOSIT BOX MAY NOT BE THE BEST PLACE TO STASH YOUR TREASURES AND VALUABLES? CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW TO LEARN MORE.
The Labor Department reported that 240,000 jobs were lost in October, which was worse than the expected loss of 200,000 jobs. In addition, the Unemployment Rate jumped to 6.5%, up from last month's read of 6.1% and reaching the highest unemployment rate since 1994. And if the current numbers weren't bad enough, there were heavy downward revisions to August and September numbers, which erased an additional 179,000 jobs. So far in 2008, a total of 1.18 million jobs have been lost, with 651,000 job losses coming in just the past three months. Look for things to get worse before they get better, as the unemployment rate will likely top 7% soon.
Friday's Jobs Report was brutal and would typically nudge the Fed to cut their benchmark rates in an effort to spur on the economy. But with the Fed Funds Rate already at 1%, the Fed doesn't have much more room to cut. This means that Stocks, which worsen on poor economic news, will likely continue to struggle as a result.
Speaking of rate cuts, the Bank of England, the European Central Bank and a few other countries central banks all lowered interest rates last week to help their economies. The good news is that these cuts should have a positive effect on the US Dollar - and therefore will also help Dollar denominated oil prices stay near present levels.
With some of the negative economic news, Bonds did manage a huge, three-day 160bp rally in the middle part of last week, and Bonds and home loan rates were able to hang on to much of this improvement on Friday. As a result, Bonds and home loan rates ended the week nearly .25% better than where they began.
THE WEEKEND IS THE PERFECT TIME TO ENJOY SPENDING SOME OF YOUR HARD EARNED MONEY, BUT DID YOU KNOW THAT A SAFE DEPOSIT BOX MAY NOT BE THE BEST PLACE TO STASH YOUR TREASURES AND VALUABLES? CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW TO LEARN MORE.
Thursday, July 24, 2008
Fed Issues New Lending Rules
Daily Real Estate News | July 15, 2008
Fed Issues New Lending Rules
The Federal Reserve on Monday adopted rules designed to protect homebuyers from the kind of loans that drove many into foreclosure.
The new rules apply to all lenders and not just to banks supervised by the Fed. Most are expected to take effect Oct.1, 2009. Escrow requirements won’t go into effect until April 1, 2010.
Here are the new requirements:
1.Prevent loans made without documenting borrower’s income.
2. Require lenders to escrow money to pay taxes and insurance for risky borrowers.
3. Limit and in some cases ban prepayment penalties.
4. Prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value.
5. Require mortgage advertising to contain information about rates, monthly payments and other features of the loan.
6. Insist lenders credit a mortgage payment to a home owner’s account on the day it is received.
7. Brokers and others are forbidden from "coercing or encouraging" an appraiser to misrepresent the value of a home.
Source: The Associated Press, Jeannine Aversa (07/14/08)
Fed Issues New Lending Rules
The Federal Reserve on Monday adopted rules designed to protect homebuyers from the kind of loans that drove many into foreclosure.
The new rules apply to all lenders and not just to banks supervised by the Fed. Most are expected to take effect Oct.1, 2009. Escrow requirements won’t go into effect until April 1, 2010.
Here are the new requirements:
1.Prevent loans made without documenting borrower’s income.
2. Require lenders to escrow money to pay taxes and insurance for risky borrowers.
3. Limit and in some cases ban prepayment penalties.
4. Prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value.
5. Require mortgage advertising to contain information about rates, monthly payments and other features of the loan.
6. Insist lenders credit a mortgage payment to a home owner’s account on the day it is received.
7. Brokers and others are forbidden from "coercing or encouraging" an appraiser to misrepresent the value of a home.
Source: The Associated Press, Jeannine Aversa (07/14/08)
Sunday, July 20, 2008
Fed Chair Says Fannie, Freddie Are OK
Fed Chair Says Fannie, Freddie Are OK
Federal Reserve Chairman Ben Bernanke reassured Congress on Wednesday that Fannie Mae and Freddie Mac are in “no danger of failing.”
The two mortgage giants are "adequately capitalized," Bernanke said. However, "weakness of market confidence is having an effect" on the companies, making it difficult for them to raise capital.
"We will work our way through these financial storms," Bernanke said.
He called the depressed housing market the central economic issue and urged Congress to approve legislation helping consumers refinance out of troubled mortgages, set a stronger regulator for mortgage giants Fannie Mae and Freddie Mac, and approve a new Treasury Department plan to bolster the two firms, which back half of U.S. mortgages.
Federal Reserve Chairman Ben Bernanke reassured Congress on Wednesday that Fannie Mae and Freddie Mac are in “no danger of failing.”
The two mortgage giants are "adequately capitalized," Bernanke said. However, "weakness of market confidence is having an effect" on the companies, making it difficult for them to raise capital.
"We will work our way through these financial storms," Bernanke said.
He called the depressed housing market the central economic issue and urged Congress to approve legislation helping consumers refinance out of troubled mortgages, set a stronger regulator for mortgage giants Fannie Mae and Freddie Mac, and approve a new Treasury Department plan to bolster the two firms, which back half of U.S. mortgages.
Wednesday, July 9, 2008
Fed plans new rules to protect future homebuyers (part II)
Bear Stearns was eventually taken over by JPMorgan Chase & Co., with the Fed providing $28.82 billion in financial backing.
Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk.
Bernanke, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.
In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.
"Allowing Bear Stearns to fail so abruptly at a time when the financial markets were already under considerable stress would likely have had extremely adverse implications for the financial system and for the broader economy," Bernanke said to the mortgage forum, organized by the Federal Deposit Insurance Corp.
The Fed's consideration of giving Wall Street firms more time to tap the Fed's emergency loan program is part of an ongoing effort by the central bank to bring back stability to fragile financial markets and help to bolster shaky confidence on the part of investors.
Policymakers — in the White House, in Congress and other federal agencies — will need to work together to come up with ways to make the U.S. financial system more resilient and stable and to prevent a repeat of the types of problems that brought about the end of Bear Stearns, an 85-year-old institution, Bernanke said.
Although those efforts are already under way, it will fall to the next president and next Congress to settle them.
The Bush administration has proposed revamping the nation's financial regulatory structure. That plan would make the Fed an ubercop in charge of financial market stability. But the Fed would lose daily supervision of big banks. Bernanke said the Fed must maintain this power if it is to be an effective overseer of financial stability.
The Fed, which regulates banks, and the Securities and Exchange Commission, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system.
Over the longer term, though, Congress may need to adopt legislation to bolster supervision of investment banks and other large securities dealers, Bernanke said.
Bernanke recommended that Congress give a regulator in the future the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the SEC's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.
"Strong holding company oversight is essential," he said.
Bernanke also said that a growing number of central banks in recent years have been given the statutory authority to oversee systems for processing financial transactions by securities firms as well as overseeing traditional banking transactions. "A strong case can be made for granting the Federal Reserve explicit oversight for systemically important payment and settlement systems," he said.
And, the Fed chief favors looking into an idea — raised by Treasury Secretary Henry Paulson — to create formal procedures to make sure that if an investment firm fails it won't wreak havoc on the broader economy. Such procedures, which allow for a more orderly liquidation, are in place for banks.
The housing, credit and financial crises have bruised the economy. Growth has slowed and employers have cut jobs every month so far this year.
Bernanke said that "it is unrealistic to hope" that financial crises can be entirely eliminated, while maintaining an innovative financial system. "Nonetheless, recent experience has illustrated once again that financial instability can have serious economic costs," he said.
Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk.
Bernanke, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.
In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.
"Allowing Bear Stearns to fail so abruptly at a time when the financial markets were already under considerable stress would likely have had extremely adverse implications for the financial system and for the broader economy," Bernanke said to the mortgage forum, organized by the Federal Deposit Insurance Corp.
The Fed's consideration of giving Wall Street firms more time to tap the Fed's emergency loan program is part of an ongoing effort by the central bank to bring back stability to fragile financial markets and help to bolster shaky confidence on the part of investors.
Policymakers — in the White House, in Congress and other federal agencies — will need to work together to come up with ways to make the U.S. financial system more resilient and stable and to prevent a repeat of the types of problems that brought about the end of Bear Stearns, an 85-year-old institution, Bernanke said.
Although those efforts are already under way, it will fall to the next president and next Congress to settle them.
The Bush administration has proposed revamping the nation's financial regulatory structure. That plan would make the Fed an ubercop in charge of financial market stability. But the Fed would lose daily supervision of big banks. Bernanke said the Fed must maintain this power if it is to be an effective overseer of financial stability.
The Fed, which regulates banks, and the Securities and Exchange Commission, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system.
Over the longer term, though, Congress may need to adopt legislation to bolster supervision of investment banks and other large securities dealers, Bernanke said.
Bernanke recommended that Congress give a regulator in the future the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the SEC's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.
"Strong holding company oversight is essential," he said.
Bernanke also said that a growing number of central banks in recent years have been given the statutory authority to oversee systems for processing financial transactions by securities firms as well as overseeing traditional banking transactions. "A strong case can be made for granting the Federal Reserve explicit oversight for systemically important payment and settlement systems," he said.
And, the Fed chief favors looking into an idea — raised by Treasury Secretary Henry Paulson — to create formal procedures to make sure that if an investment firm fails it won't wreak havoc on the broader economy. Such procedures, which allow for a more orderly liquidation, are in place for banks.
The housing, credit and financial crises have bruised the economy. Growth has slowed and employers have cut jobs every month so far this year.
Bernanke said that "it is unrealistic to hope" that financial crises can be entirely eliminated, while maintaining an innovative financial system. "Nonetheless, recent experience has illustrated once again that financial instability can have serious economic costs," he said.
Tuesday, July 8, 2008
Fed plans new rules to protect future homebuyers (part I)
WASHINGTON - The Federal Reserve, trying to stabilize a shaky U.S. financial system, may give squeezed Wall Street firms more time to tap the central bank's emergency loan program, chairman Ben Bernanke said Tuesday.
And, in an effort to prevent a repeat of the current mortgage mess, Bernanke said the Fed next week will issue new rules aimed at protecting future homebuyers from dubious lending practices.
The rules will crack down on a range of shady lending practices that has burned many of the nation's riskiest "subprime" borrowers — those with spotty credit or low incomes — who were hardest hit by the housing and credit debacles. The plan would apply to new loans made by thousands of lenders of all types, including banks and brokers.
It would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.
In an extraordinary action, the Fed in March agreed to let investment houses go to the Fed — on a temporary basis — for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.
"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.
The Fed's decision to act — temporarily at least — as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.
And, in an effort to prevent a repeat of the current mortgage mess, Bernanke said the Fed next week will issue new rules aimed at protecting future homebuyers from dubious lending practices.
The rules will crack down on a range of shady lending practices that has burned many of the nation's riskiest "subprime" borrowers — those with spotty credit or low incomes — who were hardest hit by the housing and credit debacles. The plan would apply to new loans made by thousands of lenders of all types, including banks and brokers.
It would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.
In an extraordinary action, the Fed in March agreed to let investment houses go to the Fed — on a temporary basis — for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.
"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.
The Fed's decision to act — temporarily at least — as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.
Friday, May 2, 2008
Why the Fed's not done cutting rates---What is happening with a market?
The market is past its panic phase, but a grinding slowdown may soon put Bernanke back into easing mode.
By Colin Barr, senior writer
The market is eager to see Ben Bernanke heading for the sidelines. But with the U.S. economy softening, he may not stay there for long.
The Federal Open Market Committee is due to conclude a two-day policy meeting Wednesday afternoon. Trading in futures markets predicts the Fed will cut its key fed funds overnight lending target by a quarter-point, to 2%, and hold the line there in coming months. If the markets are right, the Fed is ready to go on hold for the first time since it began cutting rates last summer in response to troubles in the credit markets. The shift wouldn't come a moment too soon for some observers.
"Lower fed funds?" wrote Bill Gross, managing director at bond investor Pimco in Newport Beach, Calif., in his May investment outlook. "They would, in Pimco's opinion, likely do more damage than good from this point forward." Gross wrote Tuesday it's imperative that the Fed hold rates steady because "foreign and domestic investors are being fleeced with negative real interest rates, and the weak dollar, stratospheric commodity prices and steadily rising import inflation are the result."
But while surging food and energy prices have stolen the headlines this month, some observers believe falling house prices will force a substantial consumer retrenchment that could turn the Fed's attention back to economic growth. So while the Fed will surely be eager to show Wednesday that it hasn't forgotten that inflation is a concern, it could find itself cutting rates again later this year.
"The Fed is very likely going to find a way to signal a wait-and-see approach," Merrill Lynch economist David Rosenberg wrote this week. "That should not, by the way, be confused with an end-of-the-cycle approach."
For now, a pause in Fed action would be a welcome development after months of unrest. In addition to cutting the fed funds rate from 5.25% back in September, the Fed has expanded the scope of emergency loan programs to keep financial institutions lending to consumers and businesses. Since last month's Fed-brokered rescue of Bear Stearns (BSC, Fortune 500), fears of a default at rival brokerages such as Merrill Lynch (MER, Fortune 500) and Lehman Brothers (LEH, Fortune 500) have fallen sharply, judging by trading in the firms' credit default swaps.
But if Bernanke's policies have succeeded in easing the market's liquidity problems, signs of a slowdown in the United States economy have only become more pronounced. Rosenberg points to steep declines in home sales, retail sales and consumer confidence over the past three months. Merrill Lynch now expects second-quarter gross domestic product to fall 2.3% from a year ago, in the first quarterly contraction of U.S. economic output since the 1990 recession.
Rosenberg, who has been saying the Fed will cut its target rate as low as 1% during this cycle, isn't the only one talking about a prolonged slowdown. Merrill chief John Thain made a similar point in the firm's first-quarter earnings call two weeks ago. He said the firm believes the worst of the capital markets dislocation is past, but that related problems could just be coming to light.
"I think the real risk going forward here is how much do all of the problems in the financial and credit markets seep into the real economy," Thain said. "What is the impact of higher energy prices, higher food prices, higher unemployment, and falling home prices on the consumer and what's the impact of that in terms of the U.S. economy and ultimately the global economy?"
More bad news on the home-price front came this week, when Standard & Poor's said prices in 20 major markets dropped an average of almost 13% from a year ago in February. "There is no sign of a bottom in the numbers," said David M. Blitzer, chairman of the Index Committee at S&P. "Prices of single family homes continue to drop across the nation."
Falling house prices are likely to weigh on consumer spending, by preventing homeowners from funding consumption by tapping their home equity. That slowdown makes Dan Libby, a senior portfolio manager of the Sands Brothers Select Access Management fund, skeptical of the prospect that the economy will bounce back fast enough to permit the Fed to hold rates steady for long.
Libby said he believes Bernanke has staved off a deep recession and a market panic by acting as quickly as he did. But he said that he sees little sign that a strong recovery is at hand. While Libby said the Fed doesn't want to repeat its mistakes of the last cycle, when it left interest rates at very low levels even as economic growth picked up, he believes rates could fall to 1.5% before Bernanke & Co. are forced to confront a possible monetary tightening.
"I expect to see a slow, grinding muddling-through type of economy" for the next year or two, Libby said. He added that the Fed must "be careful about sounding too hawkish" when it issues its statement Wednesday laying out how it sees the risks confronting the economy.
That statement is what investors expect to be focusing on at 2:15 p.m. EST, when the Fed announces the results of today's meeting. "What is critical is what signal the Fed provides in the press statement," Rosenberg wrote this week, "and how much emphasis they put on inflation."
First Published: April 30, 2008: 3:42 AM EDT
By Colin Barr, senior writer
The market is eager to see Ben Bernanke heading for the sidelines. But with the U.S. economy softening, he may not stay there for long.
The Federal Open Market Committee is due to conclude a two-day policy meeting Wednesday afternoon. Trading in futures markets predicts the Fed will cut its key fed funds overnight lending target by a quarter-point, to 2%, and hold the line there in coming months. If the markets are right, the Fed is ready to go on hold for the first time since it began cutting rates last summer in response to troubles in the credit markets. The shift wouldn't come a moment too soon for some observers.
"Lower fed funds?" wrote Bill Gross, managing director at bond investor Pimco in Newport Beach, Calif., in his May investment outlook. "They would, in Pimco's opinion, likely do more damage than good from this point forward." Gross wrote Tuesday it's imperative that the Fed hold rates steady because "foreign and domestic investors are being fleeced with negative real interest rates, and the weak dollar, stratospheric commodity prices and steadily rising import inflation are the result."
But while surging food and energy prices have stolen the headlines this month, some observers believe falling house prices will force a substantial consumer retrenchment that could turn the Fed's attention back to economic growth. So while the Fed will surely be eager to show Wednesday that it hasn't forgotten that inflation is a concern, it could find itself cutting rates again later this year.
"The Fed is very likely going to find a way to signal a wait-and-see approach," Merrill Lynch economist David Rosenberg wrote this week. "That should not, by the way, be confused with an end-of-the-cycle approach."
For now, a pause in Fed action would be a welcome development after months of unrest. In addition to cutting the fed funds rate from 5.25% back in September, the Fed has expanded the scope of emergency loan programs to keep financial institutions lending to consumers and businesses. Since last month's Fed-brokered rescue of Bear Stearns (BSC, Fortune 500), fears of a default at rival brokerages such as Merrill Lynch (MER, Fortune 500) and Lehman Brothers (LEH, Fortune 500) have fallen sharply, judging by trading in the firms' credit default swaps.
But if Bernanke's policies have succeeded in easing the market's liquidity problems, signs of a slowdown in the United States economy have only become more pronounced. Rosenberg points to steep declines in home sales, retail sales and consumer confidence over the past three months. Merrill Lynch now expects second-quarter gross domestic product to fall 2.3% from a year ago, in the first quarterly contraction of U.S. economic output since the 1990 recession.
Rosenberg, who has been saying the Fed will cut its target rate as low as 1% during this cycle, isn't the only one talking about a prolonged slowdown. Merrill chief John Thain made a similar point in the firm's first-quarter earnings call two weeks ago. He said the firm believes the worst of the capital markets dislocation is past, but that related problems could just be coming to light.
"I think the real risk going forward here is how much do all of the problems in the financial and credit markets seep into the real economy," Thain said. "What is the impact of higher energy prices, higher food prices, higher unemployment, and falling home prices on the consumer and what's the impact of that in terms of the U.S. economy and ultimately the global economy?"
More bad news on the home-price front came this week, when Standard & Poor's said prices in 20 major markets dropped an average of almost 13% from a year ago in February. "There is no sign of a bottom in the numbers," said David M. Blitzer, chairman of the Index Committee at S&P. "Prices of single family homes continue to drop across the nation."
Falling house prices are likely to weigh on consumer spending, by preventing homeowners from funding consumption by tapping their home equity. That slowdown makes Dan Libby, a senior portfolio manager of the Sands Brothers Select Access Management fund, skeptical of the prospect that the economy will bounce back fast enough to permit the Fed to hold rates steady for long.
Libby said he believes Bernanke has staved off a deep recession and a market panic by acting as quickly as he did. But he said that he sees little sign that a strong recovery is at hand. While Libby said the Fed doesn't want to repeat its mistakes of the last cycle, when it left interest rates at very low levels even as economic growth picked up, he believes rates could fall to 1.5% before Bernanke & Co. are forced to confront a possible monetary tightening.
"I expect to see a slow, grinding muddling-through type of economy" for the next year or two, Libby said. He added that the Fed must "be careful about sounding too hawkish" when it issues its statement Wednesday laying out how it sees the risks confronting the economy.
That statement is what investors expect to be focusing on at 2:15 p.m. EST, when the Fed announces the results of today's meeting. "What is critical is what signal the Fed provides in the press statement," Rosenberg wrote this week, "and how much emphasis they put on inflation."
First Published: April 30, 2008: 3:42 AM EDT
Wednesday, January 23, 2008
Fed decision to lower the rate...
After Fed decision to lower the rate, I get phone calls from my clients asking me what rate they can get now. Even though mortgage companies most likely will lower rate soon, it does not happen right away, after Fed's decision, and did not happen yet.
The common question is why?
What the Fed did on Tuesday will not directly lower mortgage rates. Mortgage rates are not tied to the Fed rates, they are tied to the Treasury rates.
So the bond market is the influence over mortgage rates. When the bond market goes up – mortgage rates go down and vice versa.
The common question is why?
What the Fed did on Tuesday will not directly lower mortgage rates. Mortgage rates are not tied to the Fed rates, they are tied to the Treasury rates.
So the bond market is the influence over mortgage rates. When the bond market goes up – mortgage rates go down and vice versa.
Monday, October 15, 2007
Shall you lock the rate if you are purhcasing the house?
Continuation, Monday News:
This week’s economic calendar features several reports that have the potential to move the market. But the big report for the week will be Wednesday's release of the Consumer Price Index. This read on consumer inflation could influence whether the Fed will again cut the Fed Funds Rate at their upcoming October 31st meeting.
For the moment, the Bond price has drifted below the 50-day Moving Average. However, close underlying support could help prices improve, so we want to be patient. I recommend cautiously floating at this time
This week’s economic calendar features several reports that have the potential to move the market. But the big report for the week will be Wednesday's release of the Consumer Price Index. This read on consumer inflation could influence whether the Fed will again cut the Fed Funds Rate at their upcoming October 31st meeting.
For the moment, the Bond price has drifted below the 50-day Moving Average. However, close underlying support could help prices improve, so we want to be patient. I recommend cautiously floating at this time
Monday, October 8, 2007
Four Factual Economic Reports
This week brings us four factual economic reports for the markets to digest. They are all scheduled for release Thursday and Friday, so the first part of the week will be left mostly up to the stock markets. In addition to the factual reports, we will also get the minutes from the last FOMC meeting that can also cause movement in rates. Three of the four reports and the minutes are considered to be moderately or highly important to the bond market and mortgage rates. Therefore, we should expect to see another week of movement in rates.
The bond market will be closed today in observance of the Columbus Day holiday. The first report of the week comes Tuesday afternoon when the Fed will release the minutes to the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher Tuesday afternoon. However, if they indicate a likelihood of another rates cut in the coming months, we should see the bond market rise and mortgage rates drop during afternoon trading.
The bond market will be closed today in observance of the Columbus Day holiday. The first report of the week comes Tuesday afternoon when the Fed will release the minutes to the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed's next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher Tuesday afternoon. However, if they indicate a likelihood of another rates cut in the coming months, we should see the bond market rise and mortgage rates drop during afternoon trading.
Wednesday, September 19, 2007
It was a Fed day afternoon yersterday- now when you know what happened, see the thoughts before it happened..
It's a Fed day afternoon. And both the stock and bond markets will be reacting to the words and actions of the Fed at 2:15pm ET. Let's break down the important questions - Will it be a half or quarter point cut? And what will the Fed say about inflation?
Everyone seems to have an opinion. Some are saying the Fed should not hike because of inflationary fears and Dollar weakness. The weakness in the Dollar is assumed to be inflationary because it will cost more to buy imports.
Some say the the Fed is already late and needs to cut by 50bp to avoid a recession. Jobs are weak, inflation is tame, housing and mortgages are performing poorly.
Others, like us, think that we will get a 25bp cut - the first cut in four years. Additionally, the Fed will cite inflation as a concern but should acknowledge that it is presently contained. We see this as the best balance to slowly help the economy without being an inflation threat. The Fed should have a green light to cut because their favored inflation measure, The Personal Consumption Expenditure Index (PCE) is under 2%. The result should be that stock traders will be disappointed, as they want a 50bp cut. Bond traders would rather see no cut to protect inflation, but will live with the 25bp.
Then there is good old Alan Greenspan. Appearing to have camera withdrawal, Mr. G is soaking up any media opportunity to pump his new book. His comments undermine the excellent job that Ben Bernanke has done. In contrast to Greenspan, Bernanke has been correctly patient and waited for the previous hikes to bring inflation down to the Fed's target zone. It would have been likely that Greenspan would have hiked much more aggressively, sending the country into a nasty recession, with Greenspan's only answer being another series of panic cuts, which would cause another bubble.
In the last bit of inflation news before the Fed meets to decide monetary policy, the Producer Price Index (PPI) “fell off a cliff” with a reading of -1.4% in August. Lower food (-0.2%) and energy (-6.6%) prices during the month led the unexpected decline in the Index. After excluding volatile food and energy prices, however, the Core Producer Price Index rose to a greater than expected 0.2% on higher drug and auto prices. Economists were predicting the PPI to fall to -0.3% and the Core PPI to rise by 0.1%. Overall, the PPI data is favorable.
Technically, bonds remain in a holding pattern trending above key support provided by the 200-day MA at $100.12
Everyone seems to have an opinion. Some are saying the Fed should not hike because of inflationary fears and Dollar weakness. The weakness in the Dollar is assumed to be inflationary because it will cost more to buy imports.
Some say the the Fed is already late and needs to cut by 50bp to avoid a recession. Jobs are weak, inflation is tame, housing and mortgages are performing poorly.
Others, like us, think that we will get a 25bp cut - the first cut in four years. Additionally, the Fed will cite inflation as a concern but should acknowledge that it is presently contained. We see this as the best balance to slowly help the economy without being an inflation threat. The Fed should have a green light to cut because their favored inflation measure, The Personal Consumption Expenditure Index (PCE) is under 2%. The result should be that stock traders will be disappointed, as they want a 50bp cut. Bond traders would rather see no cut to protect inflation, but will live with the 25bp.
Then there is good old Alan Greenspan. Appearing to have camera withdrawal, Mr. G is soaking up any media opportunity to pump his new book. His comments undermine the excellent job that Ben Bernanke has done. In contrast to Greenspan, Bernanke has been correctly patient and waited for the previous hikes to bring inflation down to the Fed's target zone. It would have been likely that Greenspan would have hiked much more aggressively, sending the country into a nasty recession, with Greenspan's only answer being another series of panic cuts, which would cause another bubble.
In the last bit of inflation news before the Fed meets to decide monetary policy, the Producer Price Index (PPI) “fell off a cliff” with a reading of -1.4% in August. Lower food (-0.2%) and energy (-6.6%) prices during the month led the unexpected decline in the Index. After excluding volatile food and energy prices, however, the Core Producer Price Index rose to a greater than expected 0.2% on higher drug and auto prices. Economists were predicting the PPI to fall to -0.3% and the Core PPI to rise by 0.1%. Overall, the PPI data is favorable.
Technically, bonds remain in a holding pattern trending above key support provided by the 200-day MA at $100.12
Thursday, August 30, 2007
MORTGAGE MARKETS
"The market volatility continues as Mortgage Bonds are trading higher after yesterday’s 34 basis point sell-off. Prices still remain below a very tough and now tested ceiling of resistance at the 200-day Moving Average.
The Preliminary Gross Domestic Product, or GDP, for the second quarter was revised to 4.0%, which was slightly below expectations of 4.1%. The number is better than Q1, but still a bit on the slow side.
Traders will be very focused on tomorrow's action which includes a speech from Fed Chair Ben Bernanke and the release of the Core Personal Consumption Expenditure; the Fed’s favorite measure of consumer inflation.
For today, I am recommending to float ahead of tomorrow's events."
The Preliminary Gross Domestic Product, or GDP, for the second quarter was revised to 4.0%, which was slightly below expectations of 4.1%. The number is better than Q1, but still a bit on the slow side.
Traders will be very focused on tomorrow's action which includes a speech from Fed Chair Ben Bernanke and the release of the Core Personal Consumption Expenditure; the Fed’s favorite measure of consumer inflation.
For today, I am recommending to float ahead of tomorrow's events."
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