The Martini Factor – Last Week…This Week (For the week of Jan 15, 2007)

By
Mortgage and Lending with DNJ / Gateway Mortgage

Thank you all for the wonderful posted comments and personal e-mails.  Please know I am planning to post "The Martini Factor - Last Week...This Week" weekly. Best case it will be posted late Saturday evening and worst by mid Monday mornings.

Last Week

Martini Factor 101... good economic news tends to be poor for bonds and poor home loan rates.  Know that stocks and bonds compete for the same investor.  Hence good news on the economy generally causes investors to retreat from Bonds and into Stocks.  Good news for the US economy most of the time means that inflation is going to rear it ugly head.  Inflation is the nemesis of Bond prices and home loan rates.

Last week we had great news for housing...Mortgage Applications showed the largest percentage increase since mid 2005. (this includes re-fi & purchase).  This was poor for rates?  Simply put this shows potential inflationary pressure.  I read this as great for our industry...rates are favorable...markets are stabilizing...I truly believe if anyone is thinking of purchasing or refinancing, NOW may be the time.  Retail sales also had great numbers...the best in over a year.  Then from across the pond this week, the Bank of England (England Fed) shocked everyone by raising their rate 0.25% (this is like tour Fed raising the rate).

This Week

Markets will be closed on Monday in observance of Dr. King.

This coming week will certainly provide some "fuel" to trade on, and likely cause some motion - but the direction of that movement will fully depend on the news.

We have some big inflation news is in store with the Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday. There will also be news from the Manufacturing sector sprinkled throughout the week, and Housing will take some of the spot light on Thursday with the latest Housing Starts and Building Permits data. If the data comes in suggesting a slower economy and lower inflation, Bonds will likely regain their legs and help home loan rates improve.  {WHEN BONDS GO UP...YIELD GOES DOWN...WHEN YIELD GOES DOWN...HOME LOAN RATES GO DOWN} But if the data has that familiar smell of inflation...Bond prices will head lower and home loan rates will worsen. {WHEN BONDS GO DOWN...YIELD GOES UP...WHEN YIELD GOES UP...HOME LOAN RATES GO UP}

Martini

Kevin Martini

KMartini@HomeBanc.com

 

 

 

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