Posts Tagged ‘mortgage rates’

Bear Flattener in Treasuries Continues; Mortgage Rates Climb

Bear Flattener in Treasuries Continues; Mortgage Rates Climb

Courtesy of Mish 

Curve Watchers Anonymous has a quick update on US Treasuries.

click on chart for sharper image

The yield curve is flattening, in a bearish way. A Bull flattener would be when yields are dropping across the board with yields on the long end dropping more than the short end.

In this case, 5-year and 10-year yields are up about 45-50 basis points from the low just after QE II started, while yields on 30-year treasuries are up only about 30 basis point.

Daily Snapshot

You can see this easily in a daily snapshot from Bloomberg.

click on chart for sharper image

As I have pointed out before, this action is not at all usual. It is an artifact of everyone front-running the Fed’s announcement of Quantitative Easing purchases, then selling the news.

Yields are higher across the board than in August when the Fed first hinted at another round of QE.

Mortgage Rates Climb

Curve Watchers Anonymous also points out that mortgage rates are on the rise

Mortgage rates are a quarter point higher than a month ago and back to where they were three months ago, even as housing slips further into the gutter. Please see Bernanke Claims QE II will Create 700,000 to 1 Million Jobs; Where? Mexico, Peru, China for more on mortgage applications and mortgage rates.

Mike "Mish" Shedlock


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The Fed Funds Target Rate and Mortgages

The Fed Funds Target Rate and Mortgages 

Courtesy of Doug Short 

A few minutes after posting my latest Treasury Yield Snapshot, Claire at mortgagerates.info sent me this rather opinionated graphic of the Federal Funds Target Rate and how it played out in mortgages.

Greedscam.

Infographic by Mortgage Rates 

[Click on chart to enlarge]


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Freddie Mac Announces 95LTV loans, Re-bubble – With This Option You Too Can Join the Underwater Club In As Little As Three Months!!!

Freddie Mac Announces 95LTV loans, Re-bubble – With This Option You Too Can Join the Underwater Club In As Little As Three Months!!!

Courtesy of Reggie Middleton

This is part one of my update on residential real estate mortgages, whose credit conditions have seen a marked improvement over the past year. Of course (yes, you know  there is always a but), I believe the improvement is the result of the rampant government intervention in the mortgage markets. As we shall see in part two for this update, even with rampant intervention some of the major mortgage institutions are so sick as to appear to be beyond mere assistance. Brace yourself for Financial Meltdown 2.0, open source edition.

Is it really a Housing Double Dip if Conditions Never Stopped Getting Worse?

Many analysts have speculated housing would reenter a “double dip” courtesy of falling home prices, decreasing home sales, increasing housing inventory, and other issues that have not been resolved since the collapse of the housing market began nearly three years ago.  Inevitably, housing policy at the federal level has completely failed to support any regeneration of demand.

Mortgage Rates Can’t Find Rock Bottom: WSJ

  • The Freddie Mac survey of 30 year mortgage rates has shown new record lows in rates for 11 straight weeks
  • 15, 10, and 5 year rates have also continued their free fall as employment data fails to ease fear in the housing market

Figure 1: Courtesy of Freddie Mac

Figure 2: Courtesy of the Kansas City Federal Reserve Branch

Figure 3: Courtesy of the National Association of Realtors

Housing Prices Climb amid Falling Home Sales (the government’s hidden bid at work): CBS

  • Foreclosures continue to increase, July home sales fell by 27%, employment conditions are not getting better, and home prices found a way to rise 7%
  • Robert Shiller claims the San Francisco market is “booming” after climbing 21% since 2009 (but don’t ask about the record drops in 2008)
  • If you are wondering where your unemployed neighbor is spending all of his free time, check and see if there is a distressed homeowners convention in town

Figure 4: Courtesy of the National Association of Realtors

Federal Reserve Still Watching Foreclosure Data: International Market News

  • Average property vacancies have increased from 114 days in 2006 to 954 days in 2010


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Trillions for Wall Street

Trillions for Wall Street

Courtesy of MIKE WHITNEY writing at CounterPunch

High angle view of a stack of Indian banknotes of different denominations near a flame Square

On Tuesday, the 30-year fixed rate for mortgages plunged to an all-time low of 4.56 per cent. Rates are falling because investors are still  moving into risk-free liquid assets, like Treasuries. It’s a sign of panic and the Fed’s lame policy response has done nothing to sooth the public’s fears. The flight-to-safety continues a full two years after Lehman Bros blew up. 

Housing demand has fallen off a cliff in spite of the historic low rates. Purchases of new and existing homes are roughly 25 per cent of what they were at peak in 2006. Case/Schiller reported on Monday that June new homes sales were the "worst on record", but the media twisted the story to create the impression that sales were actually improving! Here are a few of Monday’s misleading headlines: "New Home Sales Bounce Back in June"--Los Angeles Times. "Builders Lifted by June New-home Sales", Marketwatch. "New Home Sales Rebound 24 per cent", CNN. "June Sales of New Homes Climb more than Forecast", Bloomberg.

The media’s lies are only adding to the sense of uncertainty. When uncertainty grows, long-term expectations change and investment nosedives. Lying has an adverse effect on consumer confidence and, thus, on demand. This is from Bloomberg:

The Conference Board’s confidence index dropped to a 5-month low of 50.4 from 54.3 in June. According to Bloomberg News:

"Sentiment may be slow to improve until companies start adding to payrolls at a faster rate, and the Federal Reserve projects unemployment will take time to decline. Today’s figures showed income expectations at their lowest point in more than a year, posing a risk for consumer spending that accounts for 70 per cent of the economy.

“Consumers’ faith in the economic recovery is failing,” said guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, whose forecast of 50.3 for the confidence index was the closest among economists surveyed by Bloomberg. “The job market is slow and volatile, and it’ll be 2013 before we see any semblance of normality in the labor market." (Bloomberg)

Confidence is falling because unemployment is soaring, because the media is lying, and because the Fed’s monetary policy has failed. Notice that Bloomberg does not mention consumer worries over "curbing the deficits". In truth, the public has only a passing interest in the large…
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BERNANKE’S GREAT MONETARIST GAFFE

BERNANKE’S GREAT MONETARIST GAFFE

Courtesy of The Pragmatic Capitalist 

I had to chuckle at the headline on Yahoo Finance throughout much of Monday’s trading session:

rateshead BERNANKES GREAT MONETARIST GAFFE

It’s an accurate headline.  Mortgage rates have declined in recent weeks as U.S. government bonds have surged.  But the actual article was filled with very dramatic certainties (most of which were inaccurate and/or misleading).  For instance, the excellent Mark Zandi of Moody’s was quoted saying that we are seeing a once in a generation buying opportunity in real estate:

“It’s the best time in our generation to buy.  It may be the best time in any generation. Mortgage rates are so low and with homes prices down and lots of inventory, you couldn’t pick a better time to buy or re-finance.”

Wow, sounds like we should all go out and buy houses, right?  It gets rosier though.  The article details why we should all run out and buy houses immediately:

But the decline in rates probably won’t last long, analysts say. So homeowners need to move fast.

“I think they won’t last much longer than a month or two at the best,” says Lawrence Yun, chief economist at the National Association of Realtors. “I can see them going up to 5.5 percent by the end of June if not sooner.”

Move fast, huh?  Prices are low.  Rates are going back up.  That sounds pretty convincing.  If interest rates (and home prices) are only going to be low for a brief period then we should capitalize on that opportunity.  Right?   But then the article takes a dramatic turn for the worst when they try to explain the actual fundamentals behind the rising interest rate argument:

“The US is fortunate now that there’s no pressure on interest rates,” Yun goes on to say. “But going forward, higher rates will be needed for financing the debt.”

(Screeching sound).   Uh oh.  Here we go again with the hyperinflation, the USA is dying, the dollar is finished, higher interest rates will be needed to “finance our debt”, argument.  The dots are easy to connect in this article.  In essence, the article implies that interest rates are at record lows because investors have sought the safety of government bonds and mortgage rates have subsequently declined.  What they fail to expand on is why interest rates have been declining in recent weeks when, according to…
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Where Do Mortgage Interest Rates Go Absent The Fed Training Wheels

Where Do Mortgage Interest Rates Go Absent The Fed Training Wheels?

Courtesy of Tom Lindmark of But Then What

foreclosure

No one covers the residential housing market like Calculated Risk and he has been doing a great job of following what appears to be mounting concern about the Fed withdrawing from the MBS market. Tonight he has a compendium of thoughts on the subject, all verging more or less on terror at the prospect.

I’ll let you click over there to take a quick glance at the various concerns. For his part, the blog’s author has been pretty steadfast in his belief that when the Fed does withdraw the impact on interest rates is going to be in the neighborhood of 35 basis points. Disagreeing with him is perilous business but in this case, I think he might be too optimistic.

Obviously, the impact is not one that will occur in isolation but will be influenced by the general state of the bond market, inflation expectations and the general state of the housing market, particularly the outlook for further foreclosures. Having said that, I think that it could easily push rates up by 50 to 100 bps.

There hasn’t been an established market for residential MBS since the bottom fell out of everything and there seems little reason to suppose that investors, especially overseas investors, are going to rush back into the market absent some fairly generous risk premium. It’s not like there is a dearth now or for the foreseeable future of US government securities which carry less baggage than MBS.

Specifically, the value of the implicit guarantee could be substantially diminished were the economy to start heading in the wrong way thus necessitating further deficit accumulation. It’s an Armageddon scenario that the US would find itself so strapped for financing that it stopped honoring anything other than direct obligations of the government but, if we’ve learned anything the past couple of years it is that what once seemed beyond possible isn’t necessarily so.

I do agree with Calculated Risk’s assessment that the Fed will at least try exiting the program and will bounce right back in if things go awry. At the very least, it’s going to be a great test of the degree to which the markets have returned to normal and give us


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Mortgage Backed Securities – What Happens When The Training Wheels Come Off?

Mortgage Backed Securities – What Happens When The Training Wheels Come Off?

Courtesy of Tom Lindmark at But Then What

training wheels

Calculated Risk points to an interesting but short article at Bloomberg by Meredith Whitney in which she postulates that once the Fed withdraws its support for the mortgage backed securities market, mortgage rates will move up and the banks will be faced with more writedowns.

CR plots the historical spread of of the 30 year mortgage versus the ten year Treasury and comes to the conclusion that the Fed’s intervention has amounted to somewhere around a 50 BP subsidy so far. He then postulates that we could expect to see rates increase by this amount once the Fed exits the market.

Now let me say that I bow to no one in my admiration for CR. When stretched for time, it’s the only blog I read and it’s always the first blog I turn to. The author gets the data and then reaches well thought out conclusions and doesn’t seem to let personal bias intrude on his analysis. Having said that, I think he may be underestimating the potential effect on rates that may occur when there is no more Fed support.

If you read me often you will have seen this quote before. From George Will, “History tends to repeat itself until it doesn’t.” That is the problem that I have with CRs chart on this one. It presupposes that the world hasn’t changed and that the historical relationship between Treasuries and mortgage rates will persist.

Maybe it will and maybe it won’t. It might not because the world has changed. We’ve not seen before the unprecedented political interference in the market for mortgage securities that we have witnessed over the past 18 months. Contract law has been stretched to the point of breaking and what was normally considered standard procedure for resolving mortgage defaults has been turned on its head.

I have no idea as to whether or how much investors have been harmed by government actions and I suppose that no one at this point in time can generate any verifiable numbers. I’m not sure that, in fact, that makes much difference.

When the Fed does withdraw, the risk premium that investors demand is once again going to be subject to market discipline. Now it might not


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Rosenberg: The U.S. dollar could be next

Rosenberg: The U.S. dollar could be next

the U.S. dollarCourtesy of Edward Harrison at Credit Writedown

While Tim Geithner is out in the Middle East making the obligatory rounds, professing support for a strong U.S. dollar, investment strategists are wondering aloud whether a weak U.S. dollar is really what the U.S. government wants.  David Rosenberg put out the following note over at Gluskin, Sheff.

It is the second anniversary of the credit crunch and after all of the fiscal and monetary policy initiatives, the best we get are green shoots and now that story is getting stale. Go back two years and you will see that the funds rate was 5.25%. Today it is zero. The fiscal deficit was 2.0% of GDP two years ago. Today it is 13%. Mortgage rates were 6.5%. Today they are 4.7%. Homeowner affordability with all the government measures is 70% stronger today than it was then too. The Fed’s balance sheet then was $850 billion. Today it is bloated at $2 trillion. The government has tried just about everything. Or has it? What if we were to tell you that the one policy tool that is unchanged since the summer of 2007 is… the U.S. dollar? It is exactly the same level now, on any trade-weighted measure, as it was back then. The greenback is struggling at the 50-day moving average, and this could well be the next policy shoe to drop.

We have seen huge fiscal and monetary stimulus.  We have seen the Fed buy up toxic assets and bloat its balance sheet to unprecedented levels.  There have even been mammoth changes in the affordability of homes, largely due to lower mortgage rates (and declining values). In short, everything has been done in the last two years to spur growth in America – that is everything except devaluing the greenback.

With unemployment still rising and Congress’s biannual election season coming up in no time, it would be quite tempting to orchestrate a devaluation in order to get a short-term boost.

As we said above, the U.S. government has practically exhausted all of its policy options … except for one; the U.S. dollar. It is the only policy tool that has not budged one iota since the crisis erupted two years ago. As we mull this over, we recall all too well this great book that a client referred us


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Phil's Favorites

Thomas Cook: tourism experts explain the travel company's collapse

 

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Thomas Cook: tourism experts explain the travel company's collapse

Courtesy of Anna Hillingdon, Bournemouth University and John Fletcher, Bournemouth University

The shock of Thomas Cook’s collapse may create reverberations that travel much further than the 150,000 holid...



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Zero Hedge

China Secretly Ordered NBA Commissioner To Fire Rockets' GM Over Hong Kong Tweet

Courtesy of ZeroHedge View original post here.

NBA Commissioner Adam Silver revealed on Thursday that the Chinese government insisted the league fire Houston Rockets general manager Daryl Morey over a now-deleted October 4 tweet supporting the protesters in Hong Kong, according to Time

...



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Kimble Charting Solutions

Bank Index Breakout? Stock Market Bulls Sure Hope So

Courtesy of Chris Kimble

One of the most important sectors of the stock market is the banking industry and bank stocks.

When the banks are healthy, the economy is likely doing well. And when bank stocks are participating in a market rally, then it bodes well for the broader stock market.

In today’s chart, we look at the Bank Index (BKX).

As you can see, the banks have been in a falling channel for the past 20 months. As well, the banks have been lagging the broader market during this time as well – see the Ratio in the bottom half of the chart above.

That said, th...



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The Technical Traders

Currencies Show A Shift to Safety And Maturity - What Does It Mean?

Courtesy of Technical Traders

Recent rotation in multiple foreign currencies hints at the fact that a new stage of the “Capital Shift” process is taking place and that skilled technical investors need to pay very close attention to how these currencies continue to react over the next 3 to 6+ months.  In the recent past, most of the world’s foreign currencies were declining in value while the US Dollar continued to strengthen.  In fact, we authored many research articles about these trends and how weakness in foreign currencies will drive new foreign investment into the US stock markets for two simple reasons; strength and security. 

Now that a few of the world’s most ...



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Insider Scoop

Citigroup Appoints New Head Of Asia Pacific Business

Courtesy of Benzinga

American multinational financial services corporation Citigroup Inc. (NYSE: C) has appointed Peter Babej as the new chief executive officer of its Asia Pacific region, a memo sent to staff by Citi global CEO Mike Corbat shows. Babej previously served as the bank’s global head of financial institutions group.

He joined Citi in 2010 to co-head the company’s financial institutions...



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Chart School

Review of Andrew CardWell RSI with Wyckoff price waves

Courtesy of Read the Ticker

RSI measures relative strength of price action of a set period versus prior set periods. It helps review the price swings or waves, the power of each price thrust into new ground, or lack of it. Price thrust like many things relies on energy, and energy is not a constant, it has a birth, a life and a death and relative strength helps us see that cycle. 

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Digital Currencies

Zuck Delays Libra Launch Date Due To Issues "Sensitive To Society"

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Facebook is taking a much more careful approach to Libra than its previous projects, CEO Mark Zuckerberg has confirmed. 

“Obviously we want to move forward at some point soon [and] not have this take many years to roll out,” he said. “But ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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