Todd Crampton
Todd Crampton
Money Market Recap and Forecast
December 13th, 2010
What a week it was! Last week the benchmark 10-year note yield, which moves inversely to price, made its biggest two-day gain in two years on Tuesday and Wednesday.
The yield surged to 3.24% on Wednesday — up from Monday’s 2.94% close. The cause was the agreement on the tax package worked out by President Obama and Republican leaders that was assumed to be a “done deal.” Of course, we learned Thursday that there might be no deal at all.
But Treasuries sold due to concerns that the $800-$900 billion that would be added to the nation’s deficit would put more Treasuries on the market, which would lead to their devaluation.
Treasuries got a boost on Monday due to Fed chairman Ben Bernanke’s “60 Minutes” interview that aired Sunday evening. He said that it could be four to five years until employment returns to normal and that fears of long-term inflation are “overstated.” He also didn’t rule out a third round of quantitative easing. Uncertainty sent investors back to bonds.
On Tuesday the two-day sell-off began.
On Thursday the markets took a breather. Although first-time jobless claims for the week ended Dec. 4 fell by 17,000 to 421,000, Treasuries held their ground. Economists noted that during December employment numbers are unusually volatile.
Wholesale inventories in October rose by a stronger-than-expected1.9%, which raised a few eyebrows but didn’t have long-term effects.
Friday’s report showed the U.S. trade balance shrank 13% in October. Strong demand for U.S. goods and services could add to 4thquarter GDP.
Friday’s final report showed the University of Michigan’s preliminary consumer sentiment survey for December rising to higher-than-expected 74.2 from 71.6. This and the prospect of a higher GDP put selling pressure on Treasuries. The 10-year note yield, which closed at 3.22% on Thursday, rose to 3.26% by midmorning.
The Mortgage Bankers Association reported that, for the week ended Dec. 3, purchase applications rose for the third straight week, increasing 1.8%. Refinances, however, fell 1.4%, the fourth consecutive decline.
This week is the polar opposite of last week, as there are a number of potentially influential economic reports due, with most being released between Tuesday and Thursday.
Retail sales for November could disappoint, as they are expected to rise 0.5% versus a 1.2% increase in October. When auto sales are excluded, however, sales should rise 0.6%, which would pass the 0.4% increase the previous month. Like most reports, if they’re on target the markets don’t react strongly.
The other major report is the November producer price index, or PPI, which looks at wholesale inflation. It’s expected to rise 0.6% after rising 0.4% the previous two months. The more closely watched PPI core, which eliminates food and energy costs (the one the Fed watches) is predicted to rise 0.3% after falling 0.6% the previous month. Separately, business inventories for October should rise 0.8% versus the previous 0.7% increase.
Tuesday afternoon the Fed will announce its decision on rates, which will be “no change,” but attention will be paid to the comments made afterward.
Wednesday the all-important inflation gauge, the consumer price index, will be released. It’s expected to have risen 0.2% in November — the same as October. The core rate could rise by a tame 0.1%. It was flat in October.
Two manufacturing reports should show some improvement. Industrial production for November is expected to rise 0.4% versus a flat reading in October, while capacity utilization should edge up to 75 from 74.8. And the NY Empire State index for December is expected to increase to -3.0 from -11.1. These reports could encourage selling in Treasuries.
A third manufacturing index, the Philly Fed, due Thursday, is expected to decline to 15 from 22.5. But the more likely influence will be the first-time jobless claims for the week ended Dec. 11. Another substantial decrease in claims could bring out the sellers. In addition, housing starts/building permits for November are expected to improve. Starts should climb to an annual rate of 550,000 units from 519,000, while permits could rise to 570,000 from 550,000.
The index of leading economic indicators, Friday’s only report, should rise to 1.2% from 0.5% in October.
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Money Market Recap and Forecast
December 6th, 2010
The yield on the benchmark 10-year note hit a five-month high last week as Wall Street went on a two-day tear in the wake of good economic reports and the hope that European debt problems that have been dogging the markets will be resolved.
These hopeful signs diminished the need for safe-haven buying and yields, which move in the opposite direction of prices, climbed as traders sold.
Monday was the best day of the week for Treasuries as concerns about the health of Europe’s economy escalated; China’s continuing effort to fight inflation and troubles between North and South Korea also made news. This gave investors multiple reasons to turn to the safety of U.S. Treasuries.
Buying continued into Tuesday in spite of a big rise in November consumer confidence index. It jumped from 49.9 to 54.1 — the highest since June and the 16thstraight increase. High expectations for the future drove the index upward, but the Conference Board, which conducts the study, added that when the economy is clipping along at a good pace the index is in the 90s.
A stronger-than-expected Chicago PMI index on November manufacturing may have slowed buying a little. It rose to 62.5 from 60.6.
Wednesday the fortunes for Treasuries turned. Stocks surged when ADP, the payroll people, reported that 93,000 private sector jobs were added in November — the most in three years. Separately, construction spending in October rose 0.7% when a 0.5% decline was forecast.
Although the ISM index for November manufacturing conditions edged down to 56.6 from 56.9, there were signs of improved manufacturing in China, Europe and Great Britain. And hope increased that the European Central Bank would assist in calming the iffy economic situation.
The Fed beige book showed better economic conditions in 10 of 12 federal districts, led by increased factory production and increased consumer spending. The 10-year yield closed at 2.95% — up 15 basis points.
Treasuries were under pressure again on Thursday. Even though initial jobless claims rose by 26,000 to 436,000 for the week ended Nov. 27 and continued claims leapt by 10,000 to 4.27 million, bonds lost ground due to news that the ECB could support debt issues in Europe. That sent the 10-year yield up to 3.00%.
Friday’s employment report showed only 39,000 jobs were added to nonfarm payrolls — far less than forecast. The unemployment rate also rose unexpectedly to 9.8%. In addition, the ISM index on the service sector rose to 55 from 54.3 in November, while October factory orders fell 0.9%.
The 10-year note yield fell to 2.96%, but some analysts believe the heyday for bonds is over. Another camp says yields should remain low well into next year.
As mortgage rates rise, refis decline, and that was never truer than during the week ended Nov. 26. According to the Mortgage Banks Association, refinances fell 21.6%, while purchase application crept up 1%.
Economic reports are sparse this week. But that doesn’t mean that Treasuries won’t be affected. What’s going on in China, Europe and Great Britain could keep both stocks and bonds moving. The question is: which way?
If the debt crisis worsens in Europe, or hostilities expand between North and South Korea, safe-haven buying could explode. But if the outlook on these trouble spots improves, investors won’t need the protection that bonds afford.
Thursday’s report on first-time jobless claims for the week ended Dec. 4 could be a market mover should claims rise or fall sharply. The other release, wholesale inventories for October, will not likely be a factor. Inventories are expected to rise 0.8%, which would be about half the 1.5% increase in September.
Trade data generally doesn’t sway the markets either, and those are the first two reports on Friday. The U.S. trade balance for October is expected to be -$44 billion, the same as in September. This is followed by the import and export price indexes for November.
The final report of the week is the preliminary consumer sentiment report for December. Analysts believe it will climb to 72.2 from 71.6, which could cause light selling of Treasuries. If the index is higher, more aggressive selling could ensue.
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What is a FHA loan?
December 2nd, 2010
Most of you must not be aware of what is either FHA lender or FHA loans. The first most important question being, what exactly is this FHA? Let us go back to the year 1929. A financial crisis made a lot of Americans lose their home. Due to the crisis the banks were unable to pay the home loan amounts. The homeowner had no other option at that time apart from bank to repay the loans.
To cope up with this crisis situation, banking system in US was modified in the year 1934. A separate agency FHA (Federal Housing Administration) came into picture at that time. Their main function is to control the rate of interest, terms and condition for mortgage loans. They bought mortgages & also insured them. This helped the banks with their loan overhead.
Now when you have got a brief picture of what FHA is, let us discuss about the benefits of FHA loans. These loans are not available from any traditional institutions like the bank. You have to get the loan from an Individual FHA lender. In the recent past people got reluctant about FHA loans as some other better options were made available to them by the state. But when recession again hit the market, people started bending towards FHA loans again ensuring a comeback for FHA lenders too. Let us discuss some of the benefits of FHA loans:
1)With a minimum down payment of 3.5% you can get a loan up to 97% of the actual value of your house. A certain percentage can come as a gift which is a great benefit for new buyers.
2)Your credit score will not be a problem for availing FHA loans except for people who have extremely bad credit record may be denied a loan by an FHA lender. You will be given a thought even if you have bankruptcy or foreclosure in your credit history.
3)If you are self employed and are being denied loans by banks, an FHA lender is the solution to your problems. You can get a loan approval just by showing tax returns for last two years, present year balance sheet and a statement of your profit & loss account.
4)The mortgage rate of FHA loans is fixed. You will not have to loose your sleep worrying over fluctuating interest rates and get stable payments throughout the period of the loan.
5)An FHA lender will never insist you for collaterals. Hence if you are facing rejection from other financial institutions for not being able to provide collaterals, you can always get FHA loans.
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US Construction Ticked Up in October
December 2nd, 2010
The Census Bureau reports that construction spending rose 0.7 percent in October compared to September, despite continued weakness in the single-family sector. Private residential investment climbed 2.5 percent for the month, due mainly to a 3.2 percent gain in new multifamily projects and a 6.2 percent increase in repair and maintenance work. Single-family home construction, however, decreased 1.2 percent for the month.
KHL Group (12/02/2010) Sleight, Chris
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Money Market Recap and Forecast
November 30th, 2010
All the gains U.S. Treasuries made last Monday and Tuesday disappeared Wednesday when first-time jobless claims for the week ended Nov. 20 fell by 34,000 to 407,000. That neared a July 2008 low, and aggressive selling in Treasuries ensued.
While Wall Street rallied, Treasury yields, which move in the opposite direction of price, soared. The benchmark 10-year yield rose 15 basis points. There was talk on the street of job market recovery, even though the Fed said it might take five or six years.
The other news released Wednesday was not as promising, but it couldn’t undo the damage that had been done.
New home sales in October plunged 8.1% to an annual rate of 283,000 units, when analysts expected 310,000. In addition, the median home price fell 14% to $194,000 — its lowest since 2003. Separately, durable goods orders in October fell 3.3%, following a 5.0% increase the previous month. Excluding transportation, orders were down 2.7% versus a 1.3% increase.
Personal income and spending for October were close to estimates, but both showed improvement. Income was up 0.5% from 0.0%, while spending rose 0.4% from 0.3%. The core PCE, a major inflation gauge, remained at a record low 0.0%.
The final University of Michigan November consumer sentiment survey rose to a stronger-than-expected 71.6 from 69.3, putting even more selling pressure on bonds. The yield on the 10-year note rose 15 basis points, closing at 2.91%.
Concerns about the economies of Spain and Portugal flared overnight Thursday, igniting safe-haven buying in bonds early Friday morning. The 10-year yield fell to 2.78%.
Last Monday, Ireland’s decision to formally seek a bailout renewed concerns about the European economy. The 10-year yield fell to 2.81%.
Tuesday’s reports showed 3rdquarter GDP being revised upward to 2.5% from the advance 2.0%, surpassing the 2.3% forecast. The increase was due to more consumer spending and higher exports.
Existing home sales fell 2.2% in October to an annual rate of 4.5 million units. Although median prices fell to near record lows, foreclosures, hard-to-get credit and high unemployment hindered sales.
These reports did not move bonds like word of hostilities between North and South Korea, the economy overseas, and the possibility that China will stop lending to keep economic growth in check did. These reports reawakened safe-haven buying sending the 10-year yield down to 2.76%.
For the week ended Nov. 19, the Mortgage Bankers Association said applications to purchase rose 14.4% — the highest level the index has hit since early May. Refis, however, were off 1.0%.
Reports this week begin Tuesday and end with November’s employment report on Friday. Analysts expect 165,000 jobs to have been added to nonfarm payrolls — more than the 151,000 additions in October. If the numbers come in as expected, there might be selling in Treasuries. If the numbers are much stronger, selling should ensue. The unemployment rate is expected to hold at 9.6%.
The ISM index for the service sector in November should rise to 55.0 from 54.3, but that shouldn’t take traders’ minds off the employment data. Likewise, a 0.6% decline in October factory orders will likely be overlooked.
Reports begin Tuesday with the Chicago PMI index on manufacturing for November. It’s expected to edge down to 59.8 from 60.6, which shouldn’t cause a stir. A rise in consumer confidence to 52.0 from 50 could put selling pressure on bonds. A higher number probably would
Wednesday the ISM index on manufacturing won’t be a factor if it comes in on target. It’s predicted to fall to 56.8 from 56.9. A bigger loss, though, might help bonds. A revised 2.3% increase in 3rdquarter production could ease inflation worries if costs remain low. And construction spending is expected to fall 0.5% versus a similar gain in October.
The Fed releases its beige book Wednesday afternoon, and it could impact trading. The report looks at economic conditions in the nation’s 12 federal districts. If stronger economic improvements are evident, selling in Treasuries should ensue. But recent releases have been extremely cautious.
Thursday’s first-time jobless claims are expected to show an increase of 18,000 to 425,000, and, while that would be welcomed by traders, everyone will be waiting for Friday’s employment numbers.
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Basic Requirements and Benefits of FHA Streamline Mortgage Refinance
November 23rd, 2010
Any borrower who is FHA insured can obtain FHA streamline mortgage refinance loan. These kinds of loans provide lower rate of interest, and the tenure can be fixed according to the borrower’s requirement. Borrower can also avail the opportunity of zero initial expenses. Moreover one can be relaxed while undertaking FHA streamline loan, as the paperwork is reduced to almost half of what is required in any other type of loan.
Federal Housing Administration or the FHA, since its inception in 1980, has allowed streamlining refinances on FHA mortgages. The word “streamline” refers to the fact that opting these kinds of loans will reduce the borrower’s paperwork to almost half of that, what is required by any other kind of refinancing bank. Before applying for the loans, one can learn about certain essentials of FHA refinance program.
The Basic Requirements For Streamline Mortgage Refinance Are:
1) The mortgage which has to be refinanced should be FHA insured.
2) The property should be legal.
3) The monthly installment should reduce the borrower’s monthly principal amount and interest payments.
4) No money can be drawn on refinanced mortgage.
The Benefits of Streamline Mortgage Refinancing:
1) People facing credit problem can relax, as for FHA credit evaluation is not required.
2) The borrower has to carry out minimal paper work.
3) No income verification, no employee verification is required.
4) oan tenure can be increased or decreased as per the individual’s requirement.
5) Interest rates are comparatively lower than other mortgage refinances.
Beside all the above, very little or zero initial expenses are involved.
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Money Market Recap and Forecast
November 22nd, 2010
MMRecap for Nov. 22
It was another tough week for Treasuries, with the benchmark 10-year note yield, which moves inversely to price, holding around 2.90% most of the week.
Positive economic indicators, concerns about future inflation and uncertainty about multiple aspects of the global economic picture (especially China’s effort to control growth and the re-emergence of Ireland’s debt problems) left buyers on the sidelines.
Monday’s report on retail sales for October pushed yields up big-time. Sales shot up 1.2% from 0.7% in September and rose 0.4% when auto sales were excluded. This pushed the10-year yield to 2.89% from 2.76% on the previous Friday.
A disappointing slide in the NY Empire State index of manufacturing in November couldn’t undo the damage. The index plunged to -11.14 from 15.73 in October. Business inventories in September rose by an expected 0.9%.
Tuesday was better for bonds due to the re-emergence of debt problems for Ireland and Spain and bond-friendly economic reports. Stocks tumbled, while safe-haven buying energized Treasuries.
October’s producer price index, or PPI, rose 0.4%, matching expectations. But the core rate, which excludes food and energy costs, fell 0.6%, versus a 0.1% increase in September. The PPI checks wholesale inflation.
Industrial production in October provided little information. It came in flat after falling 0.2% in October. Capacity utilization remained at 74.8%. The 10-year yield fell to 2.85%.
Wednesday saw little change in spite of an 11.7% drop in housing starts in October. They fell to an annual rate of 519,000 units, the lowest level in 11 months. Permits, however, were up 0.5% to an annual rate of 547,000.
The consumer price index temporarily erased concerns about inflation. It rose 0.2% in October, while the core rate came in flat. The core, which excludes food and energy prices, has risen 0.6% over the past 12 months — the smallest yearly increase since the government began tracking it in 1957.
On Thursday Wall Street was buzzing early due to news that Ireland might accept a bailout loan to solve its debt problems. Global markets surged overnight on the news, erasing need for investors to seek the safe haven of bonds. Stocks were also pumped up by GM’s very successful IPO — the biggest in history.
Thursday’s economic news put more downward pressure on bond prices. Even though first-time jobless claims rose by 2,000 to 439,000, the numbers were lower than expected. Leading economic indicators for October, which look at the economy six to nine months ahead, rose by 0.5%, the same as in September. The Philly Fed index of manufacturing conditions for November soared to 22.5 from 1.0 in October.
On Friday bonds were flat, with the 10-year yield at 2.90% midmorning.
An increase in mortgage rates during the week ended Nov. 12 caused mortgage applications to decrease sharply, according to the Mortgage Bankers Association. Purchases were off 0.5%, but refis plunged 16.5%.
Thanksgiving week is odd at best. There are tons of reports scheduled — all on Tuesday and Wednesday.
Tuesday’s reports could put slight selling pressure on bonds. The first revision of 3rdquarter GDP should show economic growth increasing to 2.3% from the advance 2.0% reading.
Existing home sales for October are predicted to edge up to an annual rate of 4.55 million units from 4.53 million.
Five reports are due Wednesday, beginning with first-time claims for the week ended Nov. 20. A big change either way could set the tone for the day. Personal income and spending in October are each expected to rise 0.4% — higher than September totals. The core PCE should rise 0.01%, which would make inflation-watchers happy.
Durable goods orders for October are expected to climb 0.7%, but excluding transportation, they should fall 0.1%.
The University of Michigan’s final consumer sentiment survey for November shouldn’t be a game-changer. It’s expected to rise to 69.5 from 69.3.
New home sales in October are forecast to rise to an annual rate of 320,000 units from 307,000 units, but this is a low-impact report.
At 2:00 p.m. (EST) the minutes of the FOMC’s Nov. 3 meeting will be released. The markets will be winding down, so the impact, if any, probably won’t be felt until Friday
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Money Market Recap and Forecast
November 15th, 2010
The lack of economic indicators last Monday left U.S. Treasury securities little changed. Concerns about upcoming auctions and uncertainty regarding the G-20 and the Fed’s quantitative easing program, or QE2, kept buyers away.
On Tuesday prices took a dive as worries about Wednesday’s auction of 30-year bonds escalated and anxiety regarding the global reaction to QE2 and the G-20 persisted. The 10-year note yield, which moves in the opposite direction of price, rose 10 basis points, hitting 2.66%.
Wholesale inventories for September, released Tuesday morning, saw a 1.5% increased versus a 1.2% gain in August.
The report of first-time jobless claims for the week ended Nov. 6 was released Wednesday. It showed claims dropping by 24,000 to 435,000 during that week. This is the second time in three weeks that claims were below 450,000. The more reliable four-week average fell to 446,500 — its lowest in two years.
Traders took the news well, with the 10-year yield edging up one basis point. News of a 5.3% decrease in the September U.S. trade gap to $44 billion didn’t have much effect, either, even though a jump like that could add to 4th quarter GDP.
Thursday was reasonably quiet, although stocks took a beating. All eyes were on the opening of G-20.
Friday’s preliminary consumer sentiment survey for November from University of Michigan showed sentiment rising to 69.3 from 67.7. This added to selling in stocks and bonds, which were already down as word that the G-20 conference had closed with no plan to boost the sagging global economy. It was agreed that “persistently large imbalances” will be addressed next year.
At mid-morning, the 10-year yield was at 2.69% — up 13 basis points from where it closed on Monday.
The week ended Nov. 5 was another good one for mortgage applications. The Mortgage Bankers Association reported that refinances rose 6.0%, while purchase apps jumped 5.5% — the third straight week of increases.
This week the economic reports make up for last week’s dearth in both quality and quantity. There’s at least one market-mover scheduled each day Monday through Thursday.
Retail sales for October are first up, with good numbers expected. Sales should rise 0.7% versus the previous 0.6% and 0.3% when auto sales are excluded. A somewhat encouraging report like that would likely put selling pressure on bonds. But that could be erased with the release of the NY Empire State index on manufacturing conditions for November. It’s expected to fall to 11.3 after leaping 11-plus points to 15.73 last month.
Business inventories for September should rise 0.6%, the same as in August.
On Tuesday the producer price index, or PPI, for October should rise 0.7% — up from 0.4% the previous month. This could cause mild alarm, as the PPI checks for inflation in wholesale prices. But the core rate, which eliminates volatile food and energy prices, is expected to rise by a tame 0.1% — and that’s the one the Fed watches.
Industrial production and capacity utilization for October are both expected to improve. Production should rise 0.3% versus a 0.2% decline in September, while capacity utilization could edge up to 74.8 from 74.7. If these numbers hold, Treasuries should take them in stride.
Wednesday begins with the more influential consumer price index for October, which looks for inflation at the retail level. The index should rise 0.3% versus the previous 0.1% increase, while the core rate is expected to edge up to 0.1% from 0%. That should be acceptable to traders.
Housing starts and building permits for October could come in mixed, with starts falling to an annual rate of 608,100 units from 610,000 in September. Permits, however, could rise to an annual rate of 553,000 to 539,000 a good sign for the future.
Thursday might be the least volatile day of the week. It depends on how initial jobless claims for the week ended Nov. 13 go. If they drop again, that could put selling pressure on bonds.
The other reports shouldn’t make waves. Leading economic indicators for October could rise 0.5% from 0.3%, while the Philly Fed index on manufacturing conditions in November is expected to edge up to 2.0 from 1.0.
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Business Better as Rates Retreat
November 12th, 2010
Mortgage activity picked up this week as interest rates were lower. But jumbo mortgage prices worsened relative to conforming rates.The conforming 30-year fixed-rate mortgage declined to 4.181 percent from 4.230 percent in the Mortech-Mortgage Daily Mortgage Market Index report for the week ended Wednesday. Meantime, the 30-year jumbo was unchanged at 5.070 percent — inflating the jumbo-conforming spread to 89 basis points from last week’s 84 BPS.
The Mortgage Market Index, itself, jumped to 311 from 288 seven days earlier. The improvement appears to be the work of rising refinances; the total refinance share moved up to 61 percent from 60 percent last week. This week’s share included a 46 percent rate-term share and a 15 percent cashout share.
The average U.S. loan amount rose to $214,267 from the previous week’s $212,501 — indicating average origination fees also increased. The highest average mortgage amount was Alaska’s $295,095, and the lowest was Nebraska’s $151,977.
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From Frost Mortgage to our Veterans…Thank You!
November 11th, 2010
“Well, today, Veterans Day, as we do every year, we take that moment to embrace the gentle heroes… of all our wars. We remember those who were called upon to give all a person can give, and we remember those who were prepared to make that sacrifice if it were demanded of them in the line of duty, though it never was. Most of all, we remember the devotion and gallantry with which all of them ennobled their nation as they became champions of a noble cause…… Our young friends — yes, young friends, for in our hearts you will always be young, full of the love that is youth, love of life, love of joy, love of country — you fought for your country and for its safety and for the freedom of others with strength and courage. We love you for it. We honor you. And we have faith that, as He does all His sacred children, the Lord will bless you and keep you, the Lord will make His face to shine upon you and give you peace, now and forever more.
Thank you all, and God bless you.”
Ronald Reagan
Delivered 11 November 1988, Washington D.C.
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