“HAVE THE NERVE TO GO INTO UNEXPLORED TERRITORY.” Alan Alda.
Taking those words to heart, Bonds and Pasadena home loan rates did exactly that last week, reaching historic levels.
A few important news items from last week… First, the results are in on the Fed’s first run at purchasing Mortgage Backed Securities under their new $500 Billion buying program. Over the last week, the Fed bought $10.2 Billion of Mortgage Backed Securities. Any time there is increased buying demand – for anything – prices will move higher. When Bond prices move higher, home loan rates improve.
Next, Stocks faced selling pressure last week due to a rash of earnings warnings from the nation’s retailers, including Macy’s, who announced they are closing eleven stores. Because money coming out of Stocks is often parked over into the Bond market, Bonds and Pasadena home loan rates responded by reaching never-before-seen levels.
Finally, the job market reached a level not seen since 1945. The Labor Department reported on Friday that there were 524,000 jobs lost during the month of December, which you can see in the Jobs Report chart below. Why does the chart look unusual? Because it’s measuring a negative number, for something that is normally reported as a positive, as in number of jobs created.
All told, there were 2,600,000 jobs lost in 2008, which represents the biggest job loss in any calendar year since 1945, when 2,750,000 jobs were lost as the wartime economy was demobilized. But we must consider that there are a lot more people in the US today. Adding further sting to the report was the Unemployment Rate, which shot up higher than expectations to 7.2%, the highest reading in 16 years.
As we know…Bonds and Pasadena home loan rates typically improve on negative economic news, since money will flow out of Stocks and into Bonds when bad news hits the wires. But keep in mind, these are volatile times – and it’s hard to know how long the good times will last for home loan rates. Regardless of if you see a move or a refinance in your future, let’s review your situation to determine if any decisions need to be made at this time.
Forecast for the week:
The Fed’s purchasing program will continue to be something to watch in the weeks and months ahead, and there are also several reports that may impact whether Bonds and rates continue to explore new territory during this coming week.
On Wednesday, we will see the Retail Sales Report for December, and since many retailers have already said this holiday season was the worst in a long time, it wouldn’t be a surprise if this is a horrible report…which could be friendly for Bonds and home loan rates.
This week also brings news on the inflation (or deflation) front, with Thursday’s wholesale measuring Producer Price Index (PPI) Report and Friday’s Consumer Price Index (CPI) Report. With the recent concerns on deflation, it will be important to see which way these reports have moved, and what the impact may be on Pasadena home loan rates.
The Week’s Economic Indicator Calendar:
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
|Wed. 1/14||8:30||Retail Sales||Dec||-1.10%||-1.80%||Moderate|
|Wed. 1/14||8:30||Retail Sales ex-auto||Dec||-1.20%||-1.60%||HIGH|
|Wed. 1/14||10:30||Crude Inventories||9-Jan||NA||6682K||Moderate|
|Thu. 1/15||10:00||Philadelphia Fed Index||Jan||-35||-32.9||HIGH|
|Thu. 1/15||8:30||Jobless Claims (Initial)||10-Jan||NA||467K||Moderate|
|Thu. 1/15||8:30||Core Producer Price Index (PPI)||Dec||0.10%||0.00%||Moderate|
|Thu. 1/15||8:30||Producer Price Index (PPI)||Dec||-1.90%||-2.20%||Moderate|
|Fri. 1/16||8:30||Consumer Price Index (CPI)||Dec||-1.00%||-1.70%||HIGH|
|Fri. 1/16||8:30||Core Consumer Price Index (CPI)||Dec||0.10%||0.00%||HIGH|
|Fri. 1/16||9:15||Capacity Utilization||Dec||74.70%||75.40%||Moderate|
|Fri. 1/16||9:15||Industrial Production||Dec||-0.80%||-0.60%||Moderate|
|Fri. 1/16||10:00||Consumer Sentiment Index (UoM)||Jan||60||60.1||Moderate|
The material contained in this newsletter is provided by a third party. 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, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors.