YOUR Mortgage Minute -- December 30. 2009

Good Morning,

Mortgage Bonds are higher so far this morning. Stocks are taking a breather and the money from Stocks looks to be moving back into Bonds, helping prices move higher.

The Bond has been able to move higher this week in spite of the so-so auction results. But this afternoon’s auction of $32 Billion of 7-Year Notes carries more inflation risk to investors due to the longer maturity date. So I will be watching to see how the market reacts to the auction.

For now, I recommend floating to see if prices can build on the positive technical momentum, and potentially climb back up towards the next ceiling of resistance. If anything changes, I will certainly let you know. In the meantime, I hope that you have a great rest of your day. If there is ever anything that I can do for you, please let me know.

YOUR Mortgage Minute -- The Week That Was 12/21-12/24, 2009

Good Afternoon,

I hope you had a terrific Christmas and are enjoying all the festivities that this time of year brings. Here's a look back at what happened in the markets.

It felt more like Groundhog Day than Christmas last week. Continued selling in Treasuries pushed the yield on the benchmark 10-year note to yet another four-month high. It closed at 3.80% on Thursday. This has everyone talking about the yield curve (the difference between the yield on the 2-year and 10-year notes). On Tuesday it hit a record high, indicating to many that economic recovery is on the way. Investors are deserting the safety of government debt and heading for riskier Wall Street investments.

Treasuries are headed for their worst monthly performance since January, and could be hit by further losses next week. Traders and analysts are already fretting over a $118 billion in notes going on the auction block at a time when extremely light trading could kill demand for government debt. Treasuries got pounded last week, in spite of a mixed bag of economic reports that began with a big increase in existing home sales for November. Sales rose 7.4% to an annual rate of 6.54 million units. Analysts, however, attributed some of the increase to first-time buyers who wanted to cash in on the tax credit, thinking it would expire at the end of the month.
The final revision of 3rd quarter GDP was more bond-friendly. Economic growth was revised downward to 2.2% from 2.8%. The initial report showed growth of 3.5%. Less spending on business investments and consumer services like health care dragged the GDP down.

A couple of weak reports on Wednesday gave bonds their only plus day of the week -- and the gain was small. New home sales in November plunged 11.3% to an annual rate of 355,000 units, the lowest since April and far below a prediction of 421,000 units. But inventory dropped to 7.9 months.

The University of Michigan's final consumer sentiment survey for December also came in below expectations. It fell to 72.5 from 73.8 two weeks previous, but it rose during the month from the November end index of 67.4.

Personal income in November rose 0.4% -- the best since April -- thanks to an increase in worker compensation. Spending rose 0.2% -- less than the 0.4% October increase. The core PCE, a key inflation gauge, came in at 0%, falling from 0.2% in October. This provided some good news for bond traders that fear inflation will rob fixed rate assets of value over time.
The final reports for the week didn't support Treasuries. First-time unemployment claims fell by 28,000 to 452,000 for the week ended Dec. 19. The four-week moving average also fell to 465,250. And continuing claims -- those collecting benefits for more than one week -- dropped to 5.076 million.

Orders for durable goods, big ticket items meant to last for more than three years, rose 0.2%. Excluding autos, orders were up 2.0% -- both beating October totals but falling short of analysts' expectations. During the week ended Dec. 18 it appears that more people were shopping for gifts than for mortgages. In spite of attractive rates, the Mortgage Bankers Association reported that purchase applications fell 11.6% and refinances were down 10.1%.

This last week of the year will feature light trading and few economic indicators, although there are a couple that could influence the markets. Probably the most influential of the reports is Tuesday's consumer confidence index for December, as reported by the Conference Board. Economists predict it will rise to 53.7 from 49.5 in November. This would put pressure on Treasuries, as spending consumers would likely push the economy forward.

The Case/Shiller report on housing prices in the nation's 20 largest cities generally has little impact on Treasuries, although Wall Street often reacts. It's expected to show October prices down 7.45% -- better than the 9.36% decline in September. Wednesday brings the Chicago Purchasing Managers Institute (PMI) index of December manufacturing conditions in the area. While it's expected to edge down to 55.6 from 56.1, any number above 50 indicates expansion in the sector. The year wraps up with first-time unemployment claims for the week ended Dec. 26. Analysts expect the number to edge down to 450,000 from 452,000, which would not have much impact on the markets.

I hope that you have a terrific week. Enjoy the last days of 2009! If there is ever anything that I can do for you, please let me know.

YOUR Mortgage Minute -- The Week That Was 12/14-12/18 2009

Good Morning,

I hope that your Monday is off to a terrific start. It was another tough week for Treasuries. Mostly positive economic reports spurred selling in bonds, as traders continued to worry about an early rate. Selling sent the yield on the benchmark 10-yield, which moves in the opposite direction of price, to 3.59% -- its highest level since mid-August.

Tuesday's producer price index for November didn't sit well with traders. It rose by a stronger-than-expected 1.8%. Energy prices accounted for three-quarters of the increase, opening the door for future inflation. And the core, which eliminates food and energy prices, rose 0.5% due to the higher cost of trucks and cigarettes.

Industrial production beat expectations, rising 0.8% -- the biggest increase since August. It remains down 5.1% over the past year. But the Empire State index of December manufacturing conditions plunged to 2.55 from 23.51 when 22 was expected.

On Wednesday the consumer price index, which measures retail inflation, calmed inflation anxiety. It rose 0.4% in November and the core was unchanged from October. But once again there were signs that the housing market is recovering. Building permits in November rose to an annual rate of 584,000 from 551,000, while housing starts jumped by 47,000 to an annual rate of 574,000 units.

That afternoon the Federal Reserve once again said that interest rates will be "exceptionally low" for an "extended period of time." It did note, however, that although economic conditions will remain weak, they are stabilizing, with housing and consumer spending on the rise. It noted that the labor market and businesses continue to struggle. In the end, there was little reaction from the financial markets.

Not so on Thursday. First-time unemployment claims for the week ended Dec.12 rose by 7,000 to 480,000, while the more-accurate four-week average fell for the 15th straight week. Continued claims, those collecting benefits for more than one week, also rose to 5.186 million.

Two strong reports followed: leading economic indicators, or LEI, and the Philly Fed index of December manufacturing conditions. LEI rose 0.9%, and for the first time since December 2007 employment did not negatively impact the index. The Philly Fed jumped to 20.4, its highest level since April 2005. These reports spurred selling in bonds.

But the rise in initial claims, another credit downgrade for Greece and the Fed's cautious outlook for economic recovering prompted a big sell-off on Wall Street and the flight to quality was on. The 10-year yield fell below 3.50% for the first time in a week.

The Mortgage Bankers Association reported that applications to refinance rose 0.9% for the week ended Dec. 12, and accounted for 75.2% of all mortgages -- the highest percentage since April 24. Purchase apps edged down 0.1%.

This week features another three-day release calendar, but big moves are not on the radar. And trading should be light.

Tuesday's first report is the final 3rd quarter revision of GDP. Analysts expect growth to come in at 2.7% -- down a hair from the previous 2.8% revision. GDP prices are expected to show a 0.5% increase, which would be unchanged.

Existing home sales for November are expected to support the theory of a housing market rebound. Sales should rise to an annual rate of 6.30 million units, up from 6.10 million.

Wednesday's report on new home sales for November should follow suit. Sales are expected to rise by 10,000 units to an annual rate of 440,000.

Personal income for November is predicted to rise 0.5% from the previous 0.2% increase. However, personal spending should rise 0.7%, the same as in October.

Separately, the University of Michigan's final consumer sentiment survey for December is expected to climb to 73.9 from 73.4. Two weeks ago the index shocked traders when it rose 6 points, sending Treasury prices tumbling.

Thursday's initial claims report for the week ended Dec. 19 could sway Treasuries if it shows another big increase in initial claims. Or not.

The final report, durable goods orders for November, is predicted to improve from October. Orders are forecast to rise 0.4% versus a 0.6% decline, while orders, excluding transportation, should increase 1.0% -- far better than the previous1.3% decline.

I hope you have a terrific week. If there is ever anything that I can do for you, please let me know.

YOUR Mortgage Minute -- December 17, 2009

Good Afternoon,


Mortgage Bonds started the day sharply higher after Initial Jobless Claims rose higher than expected. Upon hearing the news, investors shifted money from Stocks to Bonds--which helped Mortgage Bonds improve dramatically

Yesterday, the Federal Reserve reiterated that its Mortgage Backed Security purchase program will end in March as scheduled.

For now, I recommend floating to see if Bonds can gain some additional ground before facing a ceiling of resistance at the 50-day Moving Average. I will let you know if a change of course is needed. Have a great rest of your day. If there is ever anything that I can do for you, please let me know.

YOUR Mortgage Minute -- December 16, 2009

Good Afternoon,

I hope that your are having a terrific day so far. Today at 2:15pm ET, the Federal Reserve will release their Interest Rate Decision and Policy Statement. The Fed isn’t expected to change the Fed Funds Rate, but the statement could influence the markets. If the Fed reaffirms that rates will remain low for an extended period, Bonds could see a nice move higher.

In other news, the Consumer Price Index (CPI) was reported in line with expectations, signaling that inflation remains low for now. Housing Starts for November were also in line with estimates while Building Permits, which are a leading indicator of housing construction, reached the highest level seen in the past year.

Bonds are attempting to remain above a key support level. I recommend floating but I will let you know if the Fed’s statement or other news of the day requires a change of course. In the meantime, I hope you enjoy the rest of your day. If there is ever anything that I can do for you, please let me know.

YOUR Mortgage Minute -- December 14, 2009

Good Morning,

I hope that this note finds you well and that your week is off to a terrific start already.

In the markets today, Bonds are starting the week near unchanged and attempting to stabilize after a couple weeks of price losses. There are no economic reports due for release today, but the rest of the week is loaded up with reports, including the Fed Meeting and Monetary Policy Statement on Wednesday.

In other news, the House of Representatives passed the HR 4173 bill on Friday, otherwise known as the Wall Street Reform Act and Consumer Protection Act. The bill will now be voted on by the Senate. If it passes as is, it could have a big impact on inflation and interest rates in the future.

I recommend floating for now as Bonds approach a key ceiling of resistance. I'll let you know if we need to change course. In the meantime, I hope you have a great rest of your Monday. If there is ever anything that I can do for you, please let me know.

YOUR Mortgage Minute -- Letter to Clients, December 2009

I hope that this note finds you well and enjoying a truly rewarding holiday season so far this year. As we approach the end of 2009 and look towards 2010, I wanted to take just a moment to reach out to you as your trusted mortgage advisor and let you know of a potential extra tax deductible incentive available to you, if you happen to itemize your deductions on your tax return. That incentive is to pay your mortgage payment for January 2010 so that it is received by our office on, or prior to, 12/31/2009.

As you may recall, the mortgage payment due for January 2010 would include interest for the month of December 2009, as mortgage interest is always paid one month in arrears. By paying it this year, you'll have 13 months' worth of mortgage interest to write off for calendar year 2009. You can apply this same prepayment opportunity with a vacation or second home too. Many clients have used this opportunity to pay extra to another creditor in January, since the mortgage payment has already been made for the month. Whatever choice you make, I just wanted to make sure you were aware of this option. I really appreciated the opportunity to partner with you on our mortgage and this is just yet another way that I will say “thank you” for allowing me to be of help to you.

As always, if you have any questions about this email, or just want to say "Hello", I'm always here to serve you. Thanks again for your loyal business and referrals. If there is ever anything that I can do for you, please let me know. In the meantime, here’s to a terrific 2010 for you.

YOUR Mortgage Minute -- December 1, 2009

Good Morning,

Happy December! Here's hoping that the month is off to a terrific start for you.

In the markets today, Mortgage Bonds are slightly lower this morning, while Stocks have moved higher.

In other news, the Pending Home Sales report came in better than expected, and the Institute of Supply Manager's Index was reported slightly lower than expected. Thus far, the reports have not impacted Bonds.

Currently, Bond prices remain overbought, as they have for the past few weeks. I recommend floating for now to see how prices behave near the current ceiling of resistance, but be prepared to lock if they move lower. If circumstances warrant a change of course, I will certainly let you know. In the meantime, I truly hope that you have a great rest of your day ahead. If there is ever anything that I can do for you, please let me know.