Will they go for the gusto, .75 cut with a big market push and take the markets through the two resistance lines,
or
a weak .25 cut that drags us to 1260 and delivers the bull a kick to where it really hurts.
We shall see.
Tuesday, January 29, 2008
FED rates for tomorrow.
U.S. Treasuries fell a second straight day as a report showed orders for durable goods surged last month, fueling speculation Federal Reserve interest-rate cuts will help bolster the U.S. economy. Notes also declined before the Treasury's auction today of $14 billion of five-year securities, the most since 2006, after demand waned at a two-year sale yesterday. Traders expect the Fed to lower its benchmark interest rate by at least a quarter- percentage point tomorrow, futures contracts indicate.
The yield on the benchmark 10-year note rose 10 basis points, or 0.10 percentage point, to 3.68 percent as of 11:18 a.m. in New York. The price of the 4 1/4 percent security due in November 2017 fell about 7/8, or $8.75 per $1,000 face amount, to 104 20/32.
Traders see a 72 percent chance of a half-point Fed rate cut to 3 percent tomorrow, down from an 86 percent likelihood yesterday, futures on the Chicago Board of Trade show. Policy makers, who lowered the target rate for overnight loans between banks by three-quarters of a percentage point on Jan. 22, begin their two-day meeting today. The rest of the bets are on a quarter-point cut. The chances the Fed will drop its rate to 2.75 percent at its meeting on March 18 are 61 percent, down from 67 percent yesterday, futures show.
The yield on the benchmark 10-year note rose 10 basis points, or 0.10 percentage point, to 3.68 percent as of 11:18 a.m. in New York. The price of the 4 1/4 percent security due in November 2017 fell about 7/8, or $8.75 per $1,000 face amount, to 104 20/32.
Traders see a 72 percent chance of a half-point Fed rate cut to 3 percent tomorrow, down from an 86 percent likelihood yesterday, futures on the Chicago Board of Trade show. Policy makers, who lowered the target rate for overnight loans between banks by three-quarters of a percentage point on Jan. 22, begin their two-day meeting today. The rest of the bets are on a quarter-point cut. The chances the Fed will drop its rate to 2.75 percent at its meeting on March 18 are 61 percent, down from 67 percent yesterday, futures show.
Friday, January 25, 2008
A little stimulus thank you.
As part of the economic stimulus package, an increase in the conforming limit could now be a reality, at least for a brief period. Congress and President Bush agreed, but have not voted yet, on a 1-yr increase in the conforming loan limit to $730K. There is not a lot of detail yet (there is confusion as to whether the $730K, or $725, is for high cost housing areas, or everywhere, and just what high cost areas are?). Just when mortgage originators everywhere were breaking out the bubbly, OFHEO's director James Lockhart (Office of Federal Housing Enterprise Oversight, who oversees FNMA & FHLMC) issued a statement saying "We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform. To restore confidence in the markets we must ensure that the GSEs' regulator has all the necessary safety and soundness tools. Yesterday Chairman Dodd talked about moving a GSE reform bill early this year.
Now what? Frankly, analysts feel that enactment is possible by mid-February but looks more likely by early March. No large investors will make any policy changes or announcements until the issues are less confusing, or even voted into law. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market! One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And "temporary" items like this are difficult to rescind after a year, which would also be good news for originators.
Here in California Gov. Arnold Schwarzenegger wants Congress to raise the Fannie Mae and Freddie Mac lending limit from $417,000 to at least $625,000 as part of the economic stimulus package. State Assemblyman Ted Lieu is pushing for a bill that requires mortgage lenders to tighten up already strict guidelines to make sure homebuyers can afford their basic monthly bills before qualifying for a mortgage loan.
This bill would also ban certain designer mortgage loans such as the option arm mortgage. The option arm mortgage, also known as the pay option arm, allows borrowers to pay less than the interest that is due by adding the unpaid interest to the balance of the mortgage loan. The bill would also allow some homeowners to refinance their homes without being responsible for any penalties or unnecessary fees.
Now what? Frankly, analysts feel that enactment is possible by mid-February but looks more likely by early March. No large investors will make any policy changes or announcements until the issues are less confusing, or even voted into law. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market! One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And "temporary" items like this are difficult to rescind after a year, which would also be good news for originators.
Here in California Gov. Arnold Schwarzenegger wants Congress to raise the Fannie Mae and Freddie Mac lending limit from $417,000 to at least $625,000 as part of the economic stimulus package. State Assemblyman Ted Lieu is pushing for a bill that requires mortgage lenders to tighten up already strict guidelines to make sure homebuyers can afford their basic monthly bills before qualifying for a mortgage loan.
This bill would also ban certain designer mortgage loans such as the option arm mortgage. The option arm mortgage, also known as the pay option arm, allows borrowers to pay less than the interest that is due by adding the unpaid interest to the balance of the mortgage loan. The bill would also allow some homeowners to refinance their homes without being responsible for any penalties or unnecessary fees.
Tuesday, January 22, 2008
Bear comes to the SP 500
S&P 500 starts the bull cycle.
President Bush even agrees, if we don't do something it could be bad for the economy.
Meryl Lynch says, "we are in a recession"
Housing problems are just the start of our credit problems. In some states 50 % of car loans are past due, 20% of credit card balances are past due, commercial adjustables are also in trouble.
Watch out for Capital One Financial..........
Here is the daily chart.
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