Phil Osborne here with the Wealth Center bond market update…
This morning, the bad news continued for Stocks, and there is a developing situation that could have serious repercussions for the financial system. On the heels of yesterday’s surprise downgrade, Bond insurer MBIA Inc just reported a $2.3 Billion loss for its fourth quarter earnings due to heavy losses from the sub-prime mortgage assets it guarantees. This has investors extremely concerned about possible further downgrades for the bond insurance companies from credit agencies. And new downgrades to bond insurers like MBIA could cause a cascading effect where downgrades and lower ratings applied to existing mortgage investments could trigger another round of mortgage-related losses and write-downs for the large financial institutions totaling an estimated $265 Billion. Why are the Bond insurers, also called mono-line insurers, so important? Imagine that you own a home and heaven forbid, suffer a major loss that you turn to your insurance company to cover. But what if your insurance company themselves have become financially weak or insolvent, and are unable to really help mitigate your loss, due to their own financial problems? This is exactly the issue at hand. In today’s economic headlines, the highly anticipated Core Personal Consumption Expenditure Price Index (PCE) for December matched consensus estimates of 0.2%, resulting in a 2.2% year-over-year Core rate. This is still above the Fed’s desired target zone of 1 - 2%, but the good news is that it did not increase from last months year-over-year Core reading. Personal Income and Spending rates for December were slightly higher than forecast with Income rising by 0.5% with Spending rising by 0.2%. Adding selling pressure to Stocks was this morning’s Initial Jobless Claims which were reported at a whopping 375,000, which was well above expectations of 320,000 and the highest weekly increase since September 2005. The four-week moving average climbed to 326,000 claims. Stocks have since reversed course and are currently up 160 points and the bond market after being up 33 points after the weak jobs data and tamer inflation have come down 17 points currently higher on the day at 16 points which will have little impact on interest rates. It typically takes approx 25-40 basis points for mortgage interest rates to improve. Tomorrow is a big day for mortgage interest rates as the jobs report is unveiled. If the labor market has improved we could see some significant selling pressure in the bond market and interest rates could bounce higher. So stay tuned and have a wonderful day!
Daily Bond Market Update 1-30-08:
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This is Ken Unangst with the Lehigh Valley Wealth Center, with the daily Bond Market Update. More conflicting news in the market today as well as an anticipated Fed rate cut of 50 basis points, lowering the fed funds rate to 3%. The fed funds rate is not a mortgage interest rate, as many get this confused, but the interest rate that banks borrow at from one another. The fed mentioned that the economy is under considerable stress and that the credit has tightened for households and businesses. They also said that the action from today as well as past rate cuts should help to promote moderate growth for the economy. Remember it can take 6 to 9 months for a rate cut to fully integrate into the economy and have a positive effect overall. But they did let the door open for future rate cuts and would act in a timely manner. Bond Market didn’t like this news, as investors view rate cuts as inflationary leading us down the road to higher inflation. We all know that inflation is the arch enemy of the bond market and more importantly for the economy, mortgage interest rates. Initially stocks were trading lower, and immediately jumped higher and went from negative territory to up about 130 point. Mortgage bonds since then have drifted lower.
The ADP Employment Report was released this morning, suggesting that Friday’s official jobs number should come in around 150,000 new jobs - which is more than double current consensus estimates. Good news for the economy. Bad news for bonds, however overshadowed by the rate cut today the ADP Report - while interesting - took a back seat to the more reliable and much weaker than expected 4th Quarter GDP Report. Fourth quarter GDP showed a 0.6% annual growth rate, almost half the 1.1% growth rate expected by economists and far below the 4.9% rate recorded during the third quarter. Overall, GDP grew by only 2.2% during 2007, the slowest growth rate since 2002, when the economy was coming out of a brief recession.
Overall not a good day for the bond market or mortgage interest rates, however it is just another day of volatility in this uncertain economic market. Stay tuned to our Mortgage Bond Update, hope you enjoy being kept informed and use these updates as a tool to keep you better informed in the market and to maximize your investment potential. Don’t forget to tell others who can benefit from our consistent efforts to serve the community here at the Lehigh Valley Wealth Center. Thank you
Phil Osborne here with the Wealth Center Bond Market update…
Mortgage Bonds are now trading lower after this morning’s Durable Goods release, which was reported well above expectations. It is known that, the Durable Goods Report is a volatile one, Continue reading ‘Daily Bond Market Update 1-29-08′
Daily Bond Market Update 1-28-08:
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Phil Osborne here with the Wealth Center Bond Market Update…
Today is the calm before the storm as mortgage interest rates remain unchanged which little change in the bond market today. The storm is coming though as this week’s economic calendar is steaming with volatile reports stacked every day. The reports include, Wednesday’s Fed rate announcement, Thursday’s Core Personal Consumption Expenditure (PCE) Index (a key reading on inflation) and Friday’s Jobs Report. That’s a huuuuge list with all of those economic reports having significant impact on interest rates and the direction of our economy. Kicking off the week was the New Home Sales Report for December, which came in at 604,000, below expectations of 645,000. The supply of new unsold homes rose to 9.6 months from November’s reading of 9.3 months.At the height of last week’s stock market panic sell-off, Fed Funds Futures traders were pricing in another 50bp rate cut by the Fed for when they meet this Wednesday. Now, however, the Fed Funds Futures have cooled and are pricing in just a 25bp rate cut. This has caused some uncertainty in the markets as to which way the Fed will go. With inflation still a real and present concern, it is very difficult to handicap this. And predictions from highly regarded economists range from no cut at all to a 75bp cut.
So stay tuned to our home page as we keep you updated on what is happening. Also we believe it is now a good time to develop a strategy to refinance as interest rates reach 3 year lows. Don’t miss this opportunity to restructure to increase cash flow, leverage to invest or purchase a home. Please visit the wisdom center and go to the refinance link to learn more.
Update for the week of January 28th
There is a financial wreck that is occurring and will get worse if we don’t change. In this show you will learn what needs to change and way and how to avoid the financial disaster that is looming over our nation. The solution lies within each of us as individuals, we will make the change?
Phil Osborne here with the Wealth Center Bond Market Update…
The tug of war volatility continues as the bond market recaptured about half of its 2 day losses and stocks retreated currently down 170 points on the day as recessionary fears resurfaced. The “Maestro”, former Fed Chair Alan Greenspan, is back on the soapbox - but this time with a more positive tone. While he still thinks the chance of a recession (2 consecutive quarters of negative GDP growth) is 50/50, he said that if the US economy did enter one, it would be short and shallow. Moreover, he thinks 2008 could be the bottom in housing. We are glad to see he is thinking the same way we have been. There is still a lot of inventory to soak up, so prices won’t rocket higher next year, but we should see stabilization and modest price appreciation. According to Greenspan and many other economists this may be a short lived recession. So the window to take advantage of 3yr low rates and purchasing real estate in a down market may be closing sooner than you think. It is time to take action now! What do you do…call us and schedule a consultation, we will give you advice, offer solutions, and we can look at opportunities to invest as well. Enjoy your weekend.
The bond market has taken a beaten the past 2 days and is currently down over 100 points since yesterday afternoon. The stock market is advancing forward as congress reveals details of the stimulus package being released which includes a temporary change to the conforming loan limit from $417,000 to $730,000 which would give much needed relief to the jumbo market. Continue reading ‘Daily Bond Market Update 1-24-08′
Daily Bond Market Update 1-23-08:
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The wild ride continues as the bond market and stock market play tug of war. The way the stock market has fought back from tremendous losses both yesterday and today is shocking everyone. The Dow ended the day yesterday down only 140 points battling back from over a 300 point deficit! Continue reading ‘Daily Bond Market Update 1-23-08′
In a surprise move this morning - The Fed cut the Fed Funds Rate by .75%, lowering it to 3.50%. The Fed decided to hold a special meeting last night as US Stock futures were trading significantly lower and Stocks around the world sold off sharply yesterday and this morning as foreign countries fear a US recession. This morning’s Fed cut was the first intermeeting Fed action since September 17, 2001, and the deepest one day Fed Cut since 1984.
The Fed Funds Futures are still fully pricing in another 50bp cut at next week’s meeting, which would lower the Fed Funds Rate to 3%. This is interesting with inflation still a concern. The news today has sent mortgage backed securities up over 50bps which should move mortgage interest rates slightly lower, however the last 3 times the Fed has dropped the Fed Funds rate we saw a temporary improvement in the bond market followed by a large sell off which spiked interest rates higher because of the inflationary pressure caused by lowering the Fed Funds rate. Remember mortgage interest rates are not tied directly to the Fed Funds Rate, they are solely tied to the trading of mortgage backed securities on the bond market. So mortgage interest rates did not go down .75% today if you were wondering!! Mortgage interest rates should continue to trend lower as long as inflationary pressures are subtle.
Those of you with home equity lines of credit will benefit from this move as lines of credit are tied to the Prime lending rate which track with the Fed Funds Rate.
Treasury Secretary Hank Paulson is also in the news this morning saying he, and his team at the US Treasury, has been monitoring the global sell-off in stocks. Perhaps in an effort to stem the global panic selling that has been taking place and to restore confidence in the US economy, Paulson said he will move to carry out an economic stimulus plan “as soon as possible.” Paulson stated he is optimistic a plan can be implemented with Congressional approval “long before winter turns to spring.”
So a recession is upon us. The last recession was followed by a huge time of growth with real estate leading the charge. Now is an incredible time to get into the real estate market as more and more amazing deals become available, prices are low, rents are adjusting higher and interest rates continue to drop! If you are interested in real estate investing please visit the wisdom center to learn more, you can also schedule a private mortgage planning consultation.
