With Fannie Mae announcing that their second quarter earnings were three times less than what analysts expected and their CEO stating that they are expecting it to get worse, it would seem logical that the bond and stock market would follow past trends and would both tank... ummm no. Both the bond and stock market has rallied on from what can only be explained as an oil hangover. Oil has fallen down to the $116 range dropping almost $4 today. Now if they will just drop the price of gas as fast as they raise it (that would be another report though). Currently the DOW is up nearly 300 points, and the bond is still up more than 20 Bp. It is all over good news when we have a major rally on the DOW and still hold on to the positive gains in the FNMA 5.5%. It is a float day on rates, but be real careful as sometimes traders sell off on Friday jus to be safe.
On a side note, the company I normally use to get the bond trading information is shutting its doors effective today. I don't mention it as doom and gloom, but rather a sign that this market is affecting all aspects of the housing industry. YOU ARE NOT ALONE!! Keep your chin up and remember that with approximately 7 babies born every second, by default the economy will get better, people will buy more houses, and our commissions will improve.
Unemployment jumped to 5.7% beating estimates, but June employment payrolls 17,000 less than expected. Who makes these estimates!?!?!?! So far, the economy has lost a total of 463,000 jobs this year. Alan Greenspan, famous for being pulled out of the mothballs and dusted off, talked about what he feels as an eminent recession on the horizon. His words, not mine Steve... Here's where the bonds will have a hard time making ground today even with the DOW down more than 70 points in early trading. On his interview on CNBC, he felt that the U.S. housing market is "nowhere near the bottom", and that the government will probably have to nationalize Freddie and Fannie, calling them a "major accident waiting to happen." Thanks Alan. What will really put us into a recession and kill housing more than the actual effects of the downturn is the media time that news like that makes. The bond is down 4 Bps for the day barely holding on to yesterday's gains. Floating the rate in hopes that rates will improve isn't insane, just keep an eye out on the Stock market. If we start to see positive numbers there, you can bet it is taking money from the bond.
I will be out of the office on Monday, but if there ane any questions please don't hesitate to call.
I have a real problem accepting the price of gas when once again Exxon reported record profits... they did miss what analyst expected though. Off my soapbox. The second quarter GDP rose 1.9%, nearly doubling last quarter, but less than the 2% analysts were hoping for. Sounds good to many, but some are worried that the economic Stimulus package was more to thank than the economy actually growing, leading to much weaker numbers in the next quarter. In a direction opposite to yesterdays ADP report, initial jobless claims rose to 448,000 last week, the highest since April 03 and 68,000 more than expected by those that buy and sell. We have the payroll and unemployment report due out tomorrow, so it's wait and see for now. The DOW which had been up is down over 100 points, helping lift the bond up above the level of support. If we can continue this trend, we may be able to see rates improve and level out some. Now.... Who has buyers I can qualify? On a side note, if you are looking for a true 100% loan, look to Rural Housing from USDA. It isn't for the big city folk, but some, if not all outlying areas qualify. You may even qualify (sometimes) without FICO scores.
Let's start with the bad news and work our way to good. Mortgage applications dropped 14.1% to levels not seen since 2000, with purchase applications down 7.8%. This is understandable in our ever tightening loan market. With rates up and concerns on inflation being the biggest reason, the best action is to have rates go down and hope the inflation hype relaxes. On to the good news. Today we had a set of positive signs for investors for both the bond and stocks. This month's ADP jobs report came in with an expected gain of 9,000 jobs instead of the expected loss of 60,000 jobs. Boosting the bond was President Bush signing of the legislation into law in order to help the floundering mortgage industry. Not to be outdone the Fed extended their emergency funding program, which was supposed to end in September, to January 2009. Bonds initially dropped this morning with the news, but has since recovered into positive territory and may even give us a price change for the better today. Keep a sharp eye on oil today as it may drive down the market. Rates are about the same as yesterday, which are near a 1 year high, so fingers crossed for improvement in the Bond.
As always, if anything changes I will let you know.
When bad news goes good... bonds took a slight nosedive today after investment bank Merrill Lynch said late Monday it would take a $5.7 billion write-down and sell off $30 billion in mortgage backed securities (MBS) this quarter.... At 1/5th their face value. They are doing this, along $8.5 billion through the issuance of new stock, just to bring the write-down to only $5.7 Billion. If I were an investor I would dump all I had in MBS and get in line for this fire sale. Also in the bad, good, and ugly, S&P/Case-Shiller Home Price Index dropped again for the 22ND consecutive month. The silver lining here is that it didn't drop as much as last time, therefore we must be nearing the end of this slump. With oil prices down, consumer confidence rose nearly a point in July, when it was expected to once again drop. More of that its darkest before the dawn mentality. Let's hope so, but not at the expense of a solid interest rate. I suggest locking today even though most of the losses were before pricing came out. We have a lot of financial information out this week, so expect volatility in the market.
As always, if you have any questions, please don't hesitate to contact me.
Today is a sure float day... for now. With a number of economic reports due out this week, today's happy bond day is due to the sad stock day. Thankfully oil is in a holding pattern even though there was a small bombing issue on one of the pipelines. What is really giving a boost today is not only the approval of the new housing bill, but that the president is also expected to sign it. The latest addition will not only extend the ability for the Federal government to lend money to Freddie and Fannie, but also buy stock when needed. We have once again moved back above the level of support, and with the strong support for Freddie and Fannie, we should see the levels stay that way barring any major news.
As always, if you have any questions, please don't hesitate to call or e-mail.
Lock. Lock. Lock. Did I mention that you should have your clients lock today? With Oil below $127, gold down more than $17 today and stocks only on a modest gain, it would sound like a great day for the bond market. Unless of course more bad media came out today on the 2 big Mac's today. Which Treasury Secretary Henry Paulson did today when he told congress that they needed to pass funding for them before it's too late. You know I have been occasionally called a doom and gloom guy (talking to you Steve), but even would I know better than to spew out something that doom worthy. Also making the news today is Wachovia Corp. which lost $8.86 billion in the second quarter and decided to exit the wholesale mortgage market and slash over 6,300 jobs. With the newly emphasized worry on Fannie and Freddie, bonds look like a bad investment to many today. There is much more on the plate today bringing it down, but the main point is that when rates go up, more and more clients lose the ability to qualify for a home. What may have just worked at 6.5% may not at 7%. It's a great time to buy, we just need to educate them and tell them to turn off the TV.
Someone find a pulse on the bond. After last weeks tumble, the bond is laying flat today hoping for some better news. With banks posting better than expected losses (that right a good loss), and Junes Leading Economic Indicators dropping only .1%, investors are having a hard time buying anything today. Ading wet wood to the fire Forty-five percent of economists believe the economy will either not grow or will come in at a small 1% pace in the last six months of this year, according the National Association for Business Economics just released. With last month's number revised down to .2%, a storm threatening Texas, and nuclear talks with Iran breaking down over the weekend, oil may be the winner today. I still recommend locking, but keep a keen eye out for a quick reaction right before closing. The investors have a large amount to digest today.
The one thing you can count on when you take time off is that whatever can go wrong will. Earnings reports have been coming out this week, and as expected the losses were major. The interesting part is that they were not as major as expected. Today was no exception. Citigroup came out today reporting their losses $2.5 Billion for the last quarter, beating analysts' estimates of $3.6 billion. With the losses less than expected, investors believe the wave of mortgage defaults are on the wane and the end of the mortgage mess is near. Remember investors are betting on the future not the present. Another future investment is also worth mentioning is oil, which has really taken a beating after reserved were way up. Both of these have had a real strong effect on the bond, dropping us past all levels of support. In short, when you get em, lock em as the bonds are being battered hard by the news.
yea, it's been a lock day. Most of the market news making the DOW shooting up was based not on companies reporting record profit, but rather loosing less than expected. I am a big fan of finding the silver lining in mushroom cloud that has been the market lately, and it seems that the rest of the market is taking the same approach today. Big Ben is on the hill again today making sure that everyone knows Freddie and Fannie are not going to fail or be taken over by the government. Also making the news today is crude inventories rose 3 million barrels for the week when they were expected to drop 3 million. A good sign that society as a whole may have hit the breaking point when it comes to fuel prices. These factors have caused a selling spree in not only oil, but bonds and even precious metals even though the consumer prices rose drastically last month. With the mixed news, don't be surprised on a selloff late in the day. If your clients are still floating today, it may be best to wait and see if the market turns and bonds improve.
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