Seth Jacobs – Maine Mortgage Banker / Broker

Fixed mortgage rates dipped to the lowest level of the year this week. The third straight weekly decline comes at the start of the peak buying season. Freddie Mac said Thursday the average rate on the 30-year loan fell to 4.71% from 4.78% the previous week. That matched this year’s low reached in January. But it is above the 40-year low of 4.17% hit in November.

MARKET WRAP:Today was fueled by geopolitical news and the Bond was halted by resistance at the 50-Day Moving Average. Oil prices were on a roller coaster ride today trading as high as $103.41 and as low as $95.62 on the geopolitical news out of North Africa. The news went from the extreme that Gaddafi was about to employ chemical weapons to rumors that the dictator had been shot dead. The rumors were unfounded as oil closed near the bottom end of today’s range at $97.28/barrel down 82 cents. The Bond markets were able to push higher on the unrest in Libya as the 4% coupon rose 22bp to 98.28. Stocks spent most of the day well underwater on the Libyan news despite lower Initial Jobless Claims and a jump in Durable Orders but were able to pare those losses. The Dow fell 37.28 to 12,068.50, the S&P 500 Index lost 1.30 to 1,306.10 while the Nasdaq gained 14.91 to 2,737.90. Tomorrow’s economic data includes GDP – 2nd estimate and Michigan Sentiment.

MARKET WRAP: Mortgage Bonds traded higher for the 3rd straight session on Stock weakness and after softer than expected economic data. Retail Sales were a bit lower than expected, which also helped to boost Bond prices. The 4% coupon rose 25bp to end the session at 97.38. Stocks ended lower today as the recent rally seems to be losing some steam. The Dow dropped 41.55 to 12,226.64, the S&P 500 Index slipped 4.30 to 1,328.01 while the Nasdaq lost 12.83 to 2,804.35. Oil settled at $84.32 down 42 cents and represented an 11th week low. Tomorrow’s economic data includes the Producer Price Index along with Housing Starts/Building Permits.

Oftentimes borrowers don’t have any credit card debt or open lines of credit and this can hurt their scores. For these types of clients it’s recommended they open a secured credit card with a min balance of $300-$500. Problem is where can they get one of these? A simple and easy place for borrowers that need help badly is at capital one.

Here is another link with a list of cards for people with bad-fair credit if the capital one doesn’t work- just make sure it says they report every month to all 3 bureaus.

To apply for a First Time Home loan contact me today!

Seth

Mortgage interest is generally fully tax deductible. For example, being in the 28% federal tax bracket has the effect of lowering your borrowing costs by almost a third. In the early years of a loan, much of the monthly payment is interest, so these savings can really add up. Tax savings are real dollars, so don’t forget to take this benefit into consideration as you make decisions regarding your mortgage financing.

Today’s Data:

• ISM Index at 57.0 for December vs the 57.3 expected and up from 56.6 in November. MBS slightly improve.

• Bank of America to take $3B charge due to mortgage related loans.

• China’s non-manufacturing PMI improved in December and Singapore’s economy expands and is helping to boost US stocks.

• Stock futures higher to kick off 2011 as investors feel that this year the economic environment will continue to improve.

Mortgage bond prices got crushed last week pushing rates considerably higher. Trading started negatively Monday when stronger than expected retail sales figures piled on top of the weakness seen the prior week. There was considerable profit taking as traders sold bonds. Tame inflation readings helped buffer some of the price increases and the Fed’s bond purchasing also helped but they were not enough to stem the negative trend of overall rising rates. For the week interest rates finished worse by about 1 1/2 discount points.

The bond market will be closed Thursday for Thanksgiving. The market will also close at 2 pm ET Friday. This shortened trading week and the likely thin trading conditions could result in continued wild market swings.

LOOKING AHEAD

More Auctions

The US Treasury will auction $35 billion of 2Y notes, $35 billion of 5Y notes, and $29 billion of 7Y notes this week. US Treasury bonds do not directly dictate fixed mortgage interest rate pricing however they do have an indirect impact. Both Treasuries and mortgage bonds often track in the same direction but this is not always the case. There are many times that Treasuries and mortgage bonds move inversely.

The markets usually focus on the foreign demand component of the auction results. Despite the overwhelming size of the US economy, foreign investors can still have an effect on moving the financial markets. When foreign economies struggle foreign investors often purchase US based investments including mortgage bonds. This increase in demand usually causes mortgage bond prices to rise and interest rates to fall. This flight to quality buying was one of the factors that helped mortgage interest rates remain historically low in years past.

The Treasury auctions this week will be important in determining the current appetite of foreign investors for dollar denominated securities. If this week’s auctions are poorly bid mortgage bond prices could fall pressuring mortgage interest rates higher.

Mortgage bond prices opened considerably lower pushing rates higher following the data this morning. The lower coupons are taking it harder than others currently.

Weekly jobless claims came in at 439k, expected at 440k, not bond friendly.

We have Leading economic indicators and Philadelphia Fed data later this morning.

LOOKING AHEAD

Mortgage bond prices opened weaker extending the losses from yesterday afternoon following stronger than expected payrolls data.

Unemployment @ 9.6% as expected, payrolls +151k, expected +60k, not bond friendly.

There is no additional data today but right now we are off on the wrong foot. We warned of the employment report all week so this should not be a surprise and told clients risks favored locking at 12pm et Thursday.