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Thursday, December 4, 2008
Thursday, August 14, 2008
Today's CPI Numbers
Why is today's dismal reading on inflation creating a positive bond environment...
Click Play to listen to the details...
Click Play to listen to the details...
Tuesday, July 29, 2008
"Covered Bonds"
Many have recently heard the term "Covered Bonds" getting financial media coverage...what does it mean...so hear it is in a nutshell..
Saturday, June 28, 2008
Friday Market Wrap
Like a broken record, bond traders once again played off of soaring oil prices and a plunging stock market. Our benchmark 6.0% FNMA coupon bond responded by jumping 50bp higher to close at $100.91, powering its way above a pair of tough resistance levels at $100.46 and the 25-day MA ($100.73) in the process. The day's economic news was mostly bond-friendly. PCE Core Inflation in May was relatively tame with an increase of just 0.1% vs. the consensus estimate of 0.2%. Overall, the Core PCE has risen by 2.1% over the past year and is just above the Fed's target range between 1 and 2%. Personal Income jumped by 1.9% in May, the largest gain since Sept. 2005, and was largely due to the arrival of $48 billion in government tax rebate checks. Consumer Spending increased by 0.8% vs. a 0.7% expectation, the highest level since last November. The revised Reuter's/ Univ. of Michigan's Consumer Sentiment Index for June came in at 56.4 vs. expectations of 56.9. It was the lowest reading in 28 years when a 51.7 was recorded in May 1980. Meanwhile, crude oil slammed its way to a new intraday record high of $142.99 a barrel before closing at $140.21 while stocks extended their losses from yesterday's heavy sell-off. The Dow dropped close to 107 points to finish at 11,346 while the NASDAQ Composite Index fell almost 6 points to close at 2,315. The broader S&P 500 Index finished about 5 points lower to close at 1,278.
Wednesday, April 23, 2008
What is Normal Anyway...
"Go on, take the money and run"...Steve Miller.
This morning, Bond prices ran up and touched a ceiling of resistance at the 25-day Moving Average. But then Traders quickly sold Bonds, took some money by grabbing the profits gained and ran to the sidelines.
We literally saw Bond prices drop 38bp in a 15 minute time span. But this is becoming
a very common occurrence, as huge intra-day price swings and rapid directional changes
are now the norm.
CLICK HERE FOR UP TO DATE MORTGAGE MARKET INFORMATION
This morning, Bond prices ran up and touched a ceiling of resistance at the 25-day Moving Average. But then Traders quickly sold Bonds, took some money by grabbing the profits gained and ran to the sidelines.
We literally saw Bond prices drop 38bp in a 15 minute time span. But this is becoming
a very common occurrence, as huge intra-day price swings and rapid directional changes
are now the norm.
CLICK HERE FOR UP TO DATE MORTGAGE MARKET INFORMATION
Interesting article...to expalian the Jumbo Rate Mess
Jumbo mortgages caught up in subprime fallout
Apr 21, 2008 - McClatchy Tribune Business News Author(s): By Brendan M. Case
DALLAS _ For months, mortgage lenders have been backing away from borrowers with spotty credit, all but closing down the so-called subprime mortgage market.
More surprisingly, they've also been increasingly loath to lend to high-end borrowers who might want to finance a high-cost home. That means doctors, lawyers, business owners and corporate execs looking for jumbo mortgages _ those more than $417,000 _ are apt to pay significantly higher interest rates than people with similar credit scores in line for smaller loans. "When the subprime mess came to full fruition, jumbo loans got thrown in with all the subprime loans," said Tom Parker, president of Home Team Mortgage, the in-house mortgage company of Ebby Halliday Realtors in Dallas. "The liquidity not only for subpr me loans dried up, but also for jumbo loans." That's reflected in the divergence of two key interest rates over the last 12 months.
A year ago, a 30-year fixed-rate jumbo came with an average rate of about 7 percent in Dallas, according to Bankrate.com. That was only slightly higher than the 6.75 percent someone might pay on a smaller mortgage with otherwise comparable terms, known in the industry as "conforming" loans. Since then, conforming loans have gotten cheaper, with average interest rates at 5.87 percent last week. But jumbos have become pricier, with interest rates ranging above 7.5 percent in recent weeks before dropping to 7.19 percent last week. The difference adds up, and many say higher jumbo costs are contributing to a growing slump in some high-end home markets that are seeing declines in sales and prices.
If jumbo loans had drifted down to 6 percent, a person taking out a $500,000 fixed-rate mortgage for 30 years would pay just under $3,000 a month in principal and interest, or nearly $1.08 million over the life of the loan. At 7.5 percent, the same borrower would shell out almost $500 more each month _ and an extra $180,000 over the life of the loan. That math made Clayton Roberts think twice about taking out a 30-year fixed-rate loan when refinancing his home recently, even though that was the only kind of mortgage he had used in 15 years of home ownership. Roberts, 48, a Dallas anesthesiologist, wanted to combine two home loans to cut his monthly payment.
He had taken out a loan last year to build a pool and pay for a landscaping project. But with the high interest rates on fixed-rate jumbos, "it just doe n't make sense," he said. Instead, the doctor ventured into unfamiliar territory, opting for a jumbo loan on which he pays only interest for five years, at a rate of about 6 percent. After that, he will have to pay off the outstanding principal and interest over 25 years, at an nterest rate that will be determined later. Roberts knows such adjustable-rate mortgages have gotten many borrowers in trouble. But by reducing his monthly payments during the next five years, he thinks he can apply the savings to reduce the loan's principal by a greater amount.
"I'm going for the ARM to pay down the principal balance," he explained. Roberts is not the only one following that strategy, despite the risk that interest rates could rise, said Gary Akright, president of Dominion Mortgage Corp. in Dallas. "One way you can do it is to take an interest-only feature," he said. "Are you subject to rate volatility? Absolutely." Prime jumbo mortgages are actually less risky than conforming mortgages of the same quality. In January, about 1.3 percent of prime jumbo mortgages were 60 days or more past due, compared with 2.2 percent of prime conforming mortgages, according to First American CoreLogic Inc.'s LoanPerformance, which tracks mortgage data.
But jumbo delinquencies are rising rapidly. In January 2007, less than 0.6 percent of prime jumbo loans were delinquent by 60 days or more. That means the percentage of troubled jumbo loans has more than doubled in 12 months. Moreover, lenders feel safer making the smaller conforming loans because they can sell them to government-sponsored entities such as the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corp., Freddie Mac. Congress is temporarily allowing government-sponsored entities to buy mortgages of up to $729,750 in pricey markets such as Los Angeles and New York (and even larger loans in a few other markets).
But many investors now shy away from mortgage-backed securities, given the recent credit problems. About $19 billion in private-label securities backed by jumbo mortgages was issued between October and December last year, according to government data. That was less than half the amount issued between July and September. "There's no appetite on Wall Street to buy those notes anymore," said Mike Anderson, CEO of Reliance Mortgage Co. in Dallas. "I don't care what the quality is." ___ (c) 2008, The Dallas Morning News. Visit The Dallas Morning News
Apr 21, 2008 - McClatchy Tribune Business News Author(s): By Brendan M. Case
DALLAS _ For months, mortgage lenders have been backing away from borrowers with spotty credit, all but closing down the so-called subprime mortgage market.
More surprisingly, they've also been increasingly loath to lend to high-end borrowers who might want to finance a high-cost home. That means doctors, lawyers, business owners and corporate execs looking for jumbo mortgages _ those more than $417,000 _ are apt to pay significantly higher interest rates than people with similar credit scores in line for smaller loans. "When the subprime mess came to full fruition, jumbo loans got thrown in with all the subprime loans," said Tom Parker, president of Home Team Mortgage, the in-house mortgage company of Ebby Halliday Realtors in Dallas. "The liquidity not only for subpr me loans dried up, but also for jumbo loans." That's reflected in the divergence of two key interest rates over the last 12 months.
A year ago, a 30-year fixed-rate jumbo came with an average rate of about 7 percent in Dallas, according to Bankrate.com. That was only slightly higher than the 6.75 percent someone might pay on a smaller mortgage with otherwise comparable terms, known in the industry as "conforming" loans. Since then, conforming loans have gotten cheaper, with average interest rates at 5.87 percent last week. But jumbos have become pricier, with interest rates ranging above 7.5 percent in recent weeks before dropping to 7.19 percent last week. The difference adds up, and many say higher jumbo costs are contributing to a growing slump in some high-end home markets that are seeing declines in sales and prices.
If jumbo loans had drifted down to 6 percent, a person taking out a $500,000 fixed-rate mortgage for 30 years would pay just under $3,000 a month in principal and interest, or nearly $1.08 million over the life of the loan. At 7.5 percent, the same borrower would shell out almost $500 more each month _ and an extra $180,000 over the life of the loan. That math made Clayton Roberts think twice about taking out a 30-year fixed-rate loan when refinancing his home recently, even though that was the only kind of mortgage he had used in 15 years of home ownership. Roberts, 48, a Dallas anesthesiologist, wanted to combine two home loans to cut his monthly payment.
He had taken out a loan last year to build a pool and pay for a landscaping project. But with the high interest rates on fixed-rate jumbos, "it just doe n't make sense," he said. Instead, the doctor ventured into unfamiliar territory, opting for a jumbo loan on which he pays only interest for five years, at a rate of about 6 percent. After that, he will have to pay off the outstanding principal and interest over 25 years, at an nterest rate that will be determined later. Roberts knows such adjustable-rate mortgages have gotten many borrowers in trouble. But by reducing his monthly payments during the next five years, he thinks he can apply the savings to reduce the loan's principal by a greater amount.
"I'm going for the ARM to pay down the principal balance," he explained. Roberts is not the only one following that strategy, despite the risk that interest rates could rise, said Gary Akright, president of Dominion Mortgage Corp. in Dallas. "One way you can do it is to take an interest-only feature," he said. "Are you subject to rate volatility? Absolutely." Prime jumbo mortgages are actually less risky than conforming mortgages of the same quality. In January, about 1.3 percent of prime jumbo mortgages were 60 days or more past due, compared with 2.2 percent of prime conforming mortgages, according to First American CoreLogic Inc.'s LoanPerformance, which tracks mortgage data.
But jumbo delinquencies are rising rapidly. In January 2007, less than 0.6 percent of prime jumbo loans were delinquent by 60 days or more. That means the percentage of troubled jumbo loans has more than doubled in 12 months. Moreover, lenders feel safer making the smaller conforming loans because they can sell them to government-sponsored entities such as the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corp., Freddie Mac. Congress is temporarily allowing government-sponsored entities to buy mortgages of up to $729,750 in pricey markets such as Los Angeles and New York (and even larger loans in a few other markets).
But many investors now shy away from mortgage-backed securities, given the recent credit problems. About $19 billion in private-label securities backed by jumbo mortgages was issued between October and December last year, according to government data. That was less than half the amount issued between July and September. "There's no appetite on Wall Street to buy those notes anymore," said Mike Anderson, CEO of Reliance Mortgage Co. in Dallas. "I don't care what the quality is." ___ (c) 2008, The Dallas Morning News. Visit The Dallas Morning News
Monday, April 21, 2008
Rates up last week...
"THERE IS NOTHING WRONG WITH CHANGE, AS LONG AS IT IS IN THE RIGHT DIRECTION." ~ Winston Churchill.
And there were some big changes indeed for Bonds and home loan rates last week - but not necessarily all in the "right direction". For most of the week, Bond prices were pummeled lower, causing home loan rates to rise - and even after a Friday afternoon rally, home loan rates worsened by about .25% for the week overall.
And there were some big changes indeed for Bonds and home loan rates last week - but not necessarily all in the "right direction". For most of the week, Bond prices were pummeled lower, causing home loan rates to rise - and even after a Friday afternoon rally, home loan rates worsened by about .25% for the week overall.
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