Austin Mortgage Blog

Posts Tagged ‘interest rates’

Austin mortgage borrowers are encouraged to lock in mortgage interest rates to take advantage of the current pricing

Treasury has just auctioned $16bln in new 30-yr bonds, and the issue tailed about 2bps stopping at a 4.49% yld.  The auction had a 2.6 bid to cover compared to the recent average of 2.56.  What does Bid-to-Cover Ratio mean? It is the ratio that compares the number of bids received in a Treasury security auction to the number of bids accepted.  A ratio above 2.0 usually indicates a successful auction comprised of aggressive bids. A low ratio is an indication of a disappointing auction, marked by a wide bid-ask spread.  Indirect bidders took 32.5% of the bonds compared to 36.8% in April.  While the auction was not bad, we are taking a little heat as stocks are making their way back to unchanged/+.  Keep an eye on current levels as we are now off 5 ticks from morning levels and price changes for the worse could be in the cards.  Austin mortgage borrowers are encouraged to lock in mortgage interest rates to take advantage of the current pricing.

Mortgage companies and loan officers telling borrowers and REALTORS they have guaranteed USDA money is plain and simple not true

Let me set the record straight on the availability of USDA funds. First of all, USDA has NOT been reallocated and will run out of money soon.  Locking in a loan does NOT guarantee a borrower will receive USDA money. Mortgage companies and loan officers telling borrowers and REALTORS that THEY have guaranteed USDA money is plain and simple not true.  The only way to guarantee a loan from USDA is to have USDA approve the loan and issue the certificate. USDA approval can only happen once the mortgage company approves first, and then sends the loan to USDA for approval.  I have received emails from loan officers who read my blog. They are adamant that USDA funds are still available to guarantee their customers. I will take the high road with this program and let the other guy be the one explaining to the REALTOR and borrower that USDA ran out of funds despite being told otherwise.  Disappointing your customer will be multiplied by 10.  Telling the truth will earn you respect. Borrowers still MIGHT be able to get a USDA loan, but I would never guarantee a loan program that is likely to run out of funds before closing.

CPI, inflation at the consumer level, rose a meager .1% while the core (ex-food and energy) remained unchanged. Owner’s equivalent rent (.25% of the index) helped the core index while a drop in transportation costs (-.1%) helped the overall index.  The report was a good one, telling us that there is little to no inflation in the pipeline.  Retail Sales were also released, up a better than expected 1.6% with the ex-autos component  up .6%.  The breakdown was interesting as retail stores increased sales (primarily women’s and teen apparel) yet electronic sales fell 1.3%.  Sales of food and beverages rose .2% and as I mentioned, clothing sales jumped 2.3%.

Year on year, total retail sales are up 7.6% which looks good on the surface but digging into the details, there are concerns. One is that the majority of sales involve purchases of less than $500.00.  Probably pent up demand as sales, especially fashion have not been great since 2007.  The other question is how sustainable is this pace given our soft employment picture.

Mortgage applications for last week were on the slide as well, down 9.6% with both refi’s and purchase applications off an equal amount. A spike in interest rates combined with an under employed borrower will continue to be a challenge.  The good news here is that Austin interest rates will stay low until the recovery brings housing into the mix.  At that time, Austin mortgage rates will go up a bit but no one will care as the public will feel better about the future and homes for sale will have 3 contracts to present the first week they are on the market.  Get ready, it will happen.

As far as the market is concerned, stocks are better (up 50 on the big board), the 10 year note is off 6/32’s (yield 3.83%), and mortgage backs are off the same amount (6/32’s). Buyers have not been able to maintain overnight gains which is consistent with a trendless market.  As we may see more range trading ahead, the overall chart picture has improved on both the market profile and slow stochastics metrics.  The improvement we see in a number of studies will keep us in the neutral/bullish camp for the time being.

Austin mortgage pricing should remain relatively stable for most of the week and then worsen post Unemployment Report data on Friday

With February in the rear view mirror, bonds, notes, and mortgage backs are starting the new week/month off on the defensive side.  Although last week’s data (Housing, Consumer Confidence, etc.) did not paint a pretty picture of the economy, many are blaming the severe winter weather for skewing the numbers.  To that bias, traders are looking for a soft payroll number on Friday, say job losses of 50K and a 9.9% Unemployment Rate.

Looking at last week’s rally, most of the trade was on short covering which means that traders were not initiating new long positions (expecting the market to continue to rally).  We buy that argument and if correct, we would suggest that you “buy the rumor, sell the news”.  In English, this means that mortgage pricing should remain relatively stable for most of the week and then worsen post Unemployment Report data on Friday.  To be honest, the market is so volatile that any headline seems to lead us up or down by the nose.

Earlier today, Personal Income rose .1% while Spending rose .5%.  PI came in on the low side of estimates and PS was right on the screws.  Construction Spending was also on the docket, down .5%, in line with economist’s expectations.  Private and Public construction both fell while the Federal Government’s construction rose to an all time high of 30.7 billion.  Go figure.

Last up was the ISM report (Institute of Supply Management Manufacturing Index) which fell 1.9 points to 56.5.  The decline came from a drop in new orders and production.  Given the data, we would expect to see at least 15K in manufacturing layoffs in this Friday’s report.  Since this is the first day of March, it also means it’s the last month for the Fed to buy mortgage backed securities. The removal of this stimulus brings the question of “how much of the news is priced in”.  Fed Vice Chairman Donald Kohn said that any increase in rates is likely to be “modest” but added “that judgment is subject to considerable uncertainty”.  Thanks for the advice!

To be sure, we would advise a defensive bias for those clients locking an interest rate this month.  While a number of guru’s are talking about mortgage rates (by year end) being 5.75% to 6.25%, this month will be more critical that most. Someone will need to pick up where the Fed leaves off so be cautious.

Technically, the stall below the tough resistance level tested last week has created a neutral, inside day.  Important point here is that it is not a reversal, only a stall which is corrective in nature.  To get this market moving to the upside (rally) again, the 10 year note will need to close at or below 3.59%.  Currently, we are trading a 3.62% yield, off 8/32’s on the day.  Mortgage backs are off 5/32’s and stocks are plus 81 on the big board.

With 15 minutes to go in cash Treasury/MBS trading, the market is going out on the lows (highest yields/worst mortgage pricing) of the day

With 15 minutes to go in cash Treasury/MBS trading, the market is going out on the lows (highest yields/worst mortgage pricing) of the day.  Fed Governor Hoenig’s dissent looks to us like an interest rate protest or maybe it’s the first vote/trial balloon.

Traders were expecting the same old, same old and got sideswiped by the hawkish detail I just mentioned.  This one is a tough call, trying to figure out if it’s the beginning of a tightening cycle or the Fed’s way of testing the market towards removal of accommodation (stopping the Treasury/MBS purchase program, etc.)  With so many cross currents it’s tough to remember who’s on first.

I can tell you from a technical stand point that the market put in an outside day down, including a test of the best levels we’ve seen since November and then failing.  The rejection from the top and outside day down are strong indicators of a market top in the making.  This does not mean that the consolidation we expect will be huge, just that it has a very high probability.  Given the fact that the 8 day moving average held, sellers will need to trade the market above 3.65% for a sustained period of time to do any real damage.

For now, the brackets to watch are 3.65% to 3.57% (we are set to close right at 3.65%).  Anything outside these parameters to the high side is bearish for interest rates and below 3.57% is bullish.  Given the uncertainties on so many fronts, you should expect the unexpected right along with volatile trading and mortgage pricing.  Hopefully, the State of the Union Speech will give us a little help.

Housing market is stabilizing but will need to content with another wave of foreclosures as homeowners remain underwater and the loan modification programs to date have been a bust

CPI, inflation at the consumer level, rose a meager .4% headline while the core index (ex-food and energy) remained unchanged.  Higher energy prices bumped the headline number, just like they did with yesterday’s PPI.  Food prices, especially dairy products and nonalcoholic beverages, took a dip, helping the core index to hold steady.  The results were in line to a touch better than expected, taking the sting out of yesterday’s jump in PPI.  Overall, renewed demand for energy products and the falling dollar will continue to nudge headline inflation numbers higher but will have little effect on Fed policy.

November Housing Starts were also on the calendar, rising 8.9% to 574K units.  Although the print was up from last month, it came in below economists’ estimates of 580K units.  Supply of existing homes fell to 7 months, a nice improvement from the peak of 11.3 months in 2008.  Overall, we feel that the housing market is stabilizing but will need to content with another wave of foreclosures as homeowners remain underwater and the loan modification programs to date have been a bust.

All eyes have now turned to the FOMC and any change in interest rates/policy statement.  Given Global uncertainty (think Dubai, Spain, Greece, etc.) and year end constraints, we see today’s FOMC as a carbon copy of last month’s release.  Technically, the combination of oversold conditions and good support at the 3.60% yield level has given life to our bond market.  Currently, the 10 year note is up 13/32’s (yield 3.55%), mortgage backs up 6/32’s, and stocks up 25 points on the big board.  Technically, the market is trading in a counter trend move (rally) within the larger bearish trend.  Good resistance remains overhead at the 40 day moving average (3.49% yield).  The limited range is forming a neutral, inside day with the bears still in control.  As much as we want to like this market, it is nothing more than putting “lipstick on a pig.”  Keep your defense on the field.

Expecting the market to move much in any direction is possible but probably not in the cards

Just a quick note before the day slips away.  Not much to report as both the 10 year note and mortgage backed securities waffle around, trading on both sides of unchanged.  Currently, the note is unchanged and MBS off 2/32’s.  As you can see from the calendar, tomorrow will be this week’s main event.  PPI, inflation at the wholesale level, Industrial Production/Capacity Utilization, NAHB Housing Index, and the one day FOMC meeting/announcement will all be in play.  For the record, the Fed (FOMC) is expected to leave everything the same, from interest rates to the policy statement at the 1:15 pm cst release.  CPI, inflation at the consumer level, will be Wednesday’s treat, along with New Residential Construction.  Thursday’s plate will feature Weekly Claims, Leading Economic Indicators, and the Philly Fed Index.  With trading volume starting to fall off a cliff, expecting the market to move much in any direction is possible but probably not in the cards.  Next week will be worse.

Austin Mortgage Market Update – For the week of November 30, 2009

For the week of November 30, 2009 – Vol. 7, Issue 48 >> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE The economic reports before Thanksgiving were packed with housing market data and, guess what, they were all extremely positive! Monday saw Existing Home Sales UP 10.1% to an annual rate of 6.10 million, the highest since February 2007. Sales are now UP 20% in the past two months and UP 36% from their January lows. Even better, the supply of existing homes was down to just 7 months, with inventories down to 3.57 million, the lowest level in almost three years. This puts existing homes very close to the 6-month supply level of a healthy housing market. The Case-Shiller 20-City Composite Home Price Index rose 0.3% in September. The index also showed its second consecutive quarterly increase, UP 3.1% for Q3, returning to August 2003 levels. Wednesday, New single-family Home Sales were UP 6.2% in October to an annual rate of 430,000 units. New Home Sales are now UP 30.7% over their January low. The unsold supply of new homes dropped to 6.7 months as of October, with inventories at 239,000, 58.2% down from their mid-2006 peak and at their lowest level since mid-1971. The median price was down only 0.5% from a year ago and average price down just 4.7%. Freddie Mac reported mortgage rates down for the fourth straight week, reaching historic lows well below 5%, with an average 0.7 point, for prime borrowers with 20% down payments. Freddie Mac’s chief economist said, “Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this year’s peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage.” >> Review of Last Week TWO KINDS OF BLACK FRIDAY… Leading up to Thanksgiving, we had lots to be grateful for, with market gains and encouraging economic reports. Retailers’ Black Friday exceeded expectations, but unfortunate financial news from Dubai turned Wall Street’s Friday a depressing black, with the Dow losing 154 points on the day. The Dubai government announced there would be a six-month “standstill” on debt repayments for Dubai World, its holding company. This sent world markets reeling with fears of multi-billion dollar defaults. But Dubai is part of the super-wealthy United Arab Emirates (U.A.E.), which should provide deep support. In addition, Dubai’s debt is mostly held by U.K. and European banks, with little U.S. involvement. The situation bears watching, although our recovery remains clearly on track. On Tuesday, for example, Q3 GDP growth was revised down to a still substantial 2.8% annual rate. The key item in the report was the look at Q3 corporate profits, which grew at a very strong 50% annual rate, the third consecutive quarterly increase. Wednesday, initial jobless claims dropped to 466,000, sending the four-week moving average down to 496,500, below the level a year ago. Continuing claims are now down to 5.423 million. The Richmond Fed Manufacturing index showed expansion of activity for the seventh straight month. Consumer Confidence went up to 49.5 for November, beating consensus estimates. This tied in nicely with Wednesday’s reports showing personal incomes are rising, consumer spending is up and the savings rate is 4.4% vs. 1.7% just two years ago. Even non-mortgage consumer debt is down 5% from its mid-2008 peak. Nonetheless, the Dubai surprise left the Dow off 0.1% for the week, at 10309.92; the S&P 500 was up just 0.11 points, to 1091.49; while the Nasdaq slipped 0.4%, to 2138.44. Prices held higher in the bond market, as investors anticipate the fall-out from Dubai and its state supported debt issues. The FNMA 30-year 4.5% bond we watch ended up 72bp from the previous week’s close, finishing at $102.50. Mortgage rates, as noted above, fell last week to historically low levels! >> This Week’s Forecast FOCUS ON JOBS… The week opens with insight into the continually improving manufacturing sector, while Pending Home Sales figures hold our interest on Tuesday. But the real focus for the week will be on Friday’s November jobs report. Analysts will be looking for further signs of recovery in this lagging economic indicator. The consensus expects the unemployment rate to plateau, which is an improvement over rates on the rise. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of November 30 – December 4 Date Time (ET) Release For Consensus Prior Impact M Nov 30 09:45 Chicago PMI Index Nov 53.0 54.2 HIGH Tu Dec 1 10:00 ISM Index Nov 54.8 55.7 HIGH Tu Dec 1 10:00 Pending Home Sales Oct –0.5% 6.1% Moderate W Dec 2 10:30 Crude Inventories 11/27 NA 1.02M Moderate Th Dec 3 08:30 Initial Unemployment Claims 11/28 483K 466K Moderate Th Dec 3 08:30 Continuing Unemployment Claims 11/21 5.517M 5.423M Moderate Th Dec 3 08:30 Productivity–Rev. Q3 8.5% 9.5% Moderate Th Dec 3 08:30 Employment Cost Index Q4 NA 0.4% HIGH Th Dec 3 10:00 ISM Services Index Nov 51.5 50.6 Moderate F Dec 4 08:30 Average Workweek Nov 33.1 33.0 HIGH F Dec 4 08:30 Hourly Earnings Nov 0.2% 0.3% HIGH F Dec 4 08:30 Nonfarm Payrolls Nov –114K –190K HIGH F Dec 4 08:30 Unemployment Rate Nov 10.2% 10.2% HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months. The Fed continues to affirm it will keep rates down until the recovery looks more solid, but inflation is always a concern. Overall consumer prices in the last six months are up at an annual rate of 2.7%, but economists don’t expect any rate changes in the near future. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Dec 15 0%–0.25% Jan 27 0%–0.25% Mar 16 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Dec 15 1% Jan 27 1% Mar 16 3% ß This blog entry is an advertisement for Max Leaman. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is copyrighted by PrimeLending, A PlainsCapital Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of PrimeLending, A PlainsCapital Company. Š 2009 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, a PlainsCapital Company (NMLS #: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AL, AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NY, NC, OH, OK, OR, PA, SC, SD, TX, UT, VA, WV, WY. Licensed by the Arizona Dept. of Financial Institutions-license #BK 0907334; California Department of Real Estate-license ID #01857468; California Department of Corporations- license #4130996; Connecticut Department of Banking-license #ML-13649; District of Columbia Department of Insurance, Securities and Banking- license #MLO13649, Illinois Dept. of Financial and Professional Regulation-license #MB.6760635; Indiana Dept. of Financial Institutions- license #11169; Maine Dept. of Professional & Financial Regulation-license #SLM8285; Maryland Dept. of Labor, Licensing & Regulation-license #11058; Massachusetts Division of Banking- license # MC5404, Michigan Dept. of Labor & Economic Growth-license #FR 0010163 and SR 0012527; Nevada Dept. of Business and Industry, Division of Mortgage lending-exempt license #732; New Hampshire Dept. of Banking- license #14553-MB; New Jersey Dept. of Banking and Insurance-license #0803658; New Mexico Regulation and Licensing Dept., Financial Institutions Division-license #01890; North Dakota Dept. of Financial Institutions-license #MB101786; Tennessee Dept. of Financial Institutions-registration #4023; Texas Regulated Loan License-license #7293; Vermont Dept. of Banking, Insurance, Securities and Health Care Administration- lender license #6127 and broker license #0964MB; Washington Dept. of Financial Institutions-license #520-CL-49075; Wisconsin Department of Financial Institutions-license #214170. 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October Housing Starts fell 10.6%: some have blamed the fall on uncertainty over the 8K first time home buyers stimulus while others point to a consumer who is unemployed and over budget

CPI was suppose to be the day’s headliner but Housing Starts stole the show.  While CPI, inflation at the consumer level, was in line with expectations (up .3% with the core index up .2%), October Housing Starts fell 10.6% to 529k units (annualized).  The decline was in large part due to a 33.3% drop in multi-family homes (5 units or more), setting a new record low.  Building Permits fell as well, down 4.0% to 552K.  Every region in the country took a dip with the Northeast leading the way (down 9.6%).  The best performing region was the wild West, off 5.9%.  Some have blamed the fall on uncertainty over the 8K first time home buyers stimulus while others point to a consumer who is unemployed and over budget.

The MBA Purchase Index reflects the latter with new applications off 4.7% even though interest rates are low.  Reinforces our belief that the Fed will continue to buy mortgage backed securities, helping to keep mortgage rates low into the new year.  Market reaction to all of the above has been a bit choppy.  Mortgage backs were down as much as 10/32’s this morning, in line with fast money selling of treasuries.  We have started to recover but are still off 6/32’s.  Stocks opened slightly lower, then accelerated to the downside but have now cut their losses in half (Dow down 37 points).  The dollar index is once again on the slide, falling below 75 after yesterday’s brief, dead cat bounce ( no offence cat lovers).  The slide has everything to do with the Obama Administration trying to convince the Chinese to let the Yuan appreciate, helping American exports.  Fat chance given their (China’s) treasury and real estate holdings in the U.S.

Technically speaking, the market continues to rattle around within the confines of a bullish upward sloping trend channel.  Most oscillators, including trend intensity are giving bullish reading yet the chart fails to make new highs.  This is somewhat of a concern so we need to be careful.  That said, the onus is still on the bears to take control which just hasn’t happened.  We like the market but want to see a new high (lower yield on the 10 year) by week’s end.

Austin Mortgage Market Update For the week of October 26, 2009

For the week of October 26, 2009 – Vol. 7, Issue 43

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE The week ended with the terrific news that Existing Home Sales shot UP 9.4% in September to a 5.57 million annual rate. This was almost twice the increase the consensus expected and a nice boost coming off the slight drop we saw in August. Best of all, the inventory is now down to a 7.8 month supply, getting us closer and closer to the 6-month level of a normal housing market. Earlier in the week, Housing Starts for September were UP 0.5% to an annual rate of 590,000 units. The consensus expected more, but the drag on the number all came from a drop in those volatile multi-unit starts. Single-family starts were up a strong 3.9%, their sixth gain in the last seven months and UP 40.3% since the January-February bottom. The rate of building is well below underlying demand, which some put at about 1.6 million units per year, based on population growth and the need for replacement because of fires, disasters and knock-downs. The Mortgage Bankers Association reported that for 30-year fixed-rate mortgages, the average contract interest rate was 5.07% with 1.13 points (including the origination fee) for 80% loan-to-value ratio loans to borrowers with good credit. First time buyers have just five weeks to get in on these still great rates AND the $8,000 tax credit set to go away at the end of November. >> Review of Last Week CAN’T STAY ABOVE 10,000… It was a strange week in the stock markets, as the Dow shot past the “magic” 10,000 mark two days in a row, but a freaky Friday hammered that benchmark back down below 10,000. All three major indexes saw modest drops for the week. Some analysts said the seven-month rise in stock prices made us ready for a dive. Even analysts who are bullish long-term hinted we were due for a temporary pullback. We can be grateful these experts’ wishes were fulfilled in such a modest way. The negative yak was extra strange because Q3 corporate earnings continued to impress investors. We saw what some called “blowout results” from Apple and Amazon.com, while a long list of companies had very nice upside surprises — outfits like American Express, AT&T, Capital One, Caterpillar, McDonald’s, Texas Instruments, UPS and Yahoo! And let’s not forget the strong single-family Housing Starts and very strong Existing Home Sales that show the housing recovery is moving along. Initial Unemployment Claims inched up a bit last week, but Continuing Claims continue to fall, now down to 5.9 million. Gloomy pundits say this just shows people’s unemployment benefits are expiring, but a few folks surely must be getting jobs to support the now recovering and growing economy! These pundits might want to consider Treasury Secretary Tim Geithner’s prediction that we’ll see “…positive growth in 2010 at a level that will begin to gradually bring down the unemployment rate.” For the week, the Dow ended down 0.2%, to 9972.18; the S&P 500 was down 0.7%, to 1079.60; while the Nasdaq fell just 0.1%, to 2154.47. It was an up-and-down week in the bond market, which ultimately ended down. Friday, investors were anticipating this week’s record auctions, which could squeeze prices some more. The FNMA 30-year 4.5% bond we watch fell again from the previous week’s close, ending at $100.59. Still, mortgage rates stay in historically low territory. >> This Week’s Forecast HOUSING? GDP? INFLATION?… We’ll have new answers to all three questions, beginning Wednesday with New Home Sales, then Thursday we get our initial look at GDP for Q3, the first quarter that’s expected to show the economy expanding again. Friday we get numbers for PCE and Core PCE, which are the Fed’s favorite inflation indicators. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of October 26 – October 30 Date Time (ET) Release For Consensus Prior Impact Tu Oct 27 09:00 Consumer Confidence Oct 53.5 53.1 Moderate W Oct 28 08:30 Durable Goods Orders Sep 1.0% -2.4% Moderate W Oct 28 08:30 New Home Sales Sep 440K 429K Moderate W Oct 28 10:30 Crude Inventories 10/23 NA 1.31M Moderate Th Oct 29 08:30 Initial Unemployment Claims 10/24 525K 531K Moderate Th Oct 29 08:30 Continuing Unemployment Claims 10/10 5.915K 5.923M Moderate Th Oct 29 08:30 GDP-Advanced Q3 3.2% –0.7% Moderate Th Oct 29 08:30 GDP Chain Deflator-Advanced Q3 1.3% 0.0% Moderate F Oct 30 08:30 Personal Income Sep 0.0% 0.2% Moderate F Oct 30 08:30 Personal Consumption Expenditures (PCE) Sep –0.5% –0.5% HIGH F Oct 30 08:30 Core PCE Sep 0.2% 0.1% HIGH F Oct 30 09:45 Chicago PMI Oct 48.7 46.1 HIGH F Oct 30 09:55 Univ of Michigan Consumer Sentiment–Revised Oct 70.0 69.4 Moderate F Oct 30 10:00 Employment Cost Index Q3 0.4% 0.4% HIGH >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months. Last week the Producer Price Index (PPI) fell 0.6% for September. This tells the Fed that wholesale prices appear to be safe from inflation for now. As the recovery builds, rates should stay down unless inflation bubbles up. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Nov 4 0%–0.25% Dec 15 0%–0.25% Jan 27 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Nov 4 1% Dec 15 3% Jan 27 11% This blog entry is an advertisement for Max Leaman. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is copyrighted by PrimeLending, A PlainsCapital Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of PrimeLending, A PlainsCapital Company. Š 2009 PrimeLending, a PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, a PlainsCapital Company is exempt from licensing in the following states: AL, AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NC, NE, NV, NY, OH, OK, OR, PA, SC, SD, TX, UT, VA, WV, WY. 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We’ll stick with our neutral call, keeping one eye on a stock chart and the other on MBS

Quiet start to the week as stocks trade higher on grand expectations for Apple and others while bonds, notes, and MBS are treading water near unchanged.  The week ahead will be a busy one from the data front starting today (1:00 pm cst) with the NAHB Housing Index.  PPI, inflation at the wholesale level will be tomorrow’s headliner followed by New Residential Construction.  Wednesday’s “Beige Book” will provide a look at how each of the Fed’s 12 districts are doing (economy, employment, etc.) followed by Weekly Claims, Leading Economic Indicators, and FHFA House Price Index on Thursday.  Friday will clean up the week with Existing Home Sales.  Technically, the market found a bottom last week and has now moved into the center of the range.  With most chart time frames in harmony, the future of interest rates will most likely follow the stock market’s lead.  We’ll stick with our neutral call, keeping one eye on a stock chart and the other on MBS.