Larry Bailey

"I KNEW THE RECORD WOULD STAND UNTIL IT WAS BROKEN." Yogi Berra. And while last week's Jobs Report wasn't the worst record breaker of all time, it showed a loss of 533,000 jobs during the month of November, which represented the most job losses the US has seen in 35 years. And adding more pain to the Report were heavy downward revisions for September and October, which erased an additional 199,000 jobs. In addition, last month was only the fourth time in 58 years that our economy lost over 500,000 jobs.

So what does this mean for Bonds and home loan rates? We first have to acknowledge that we are not in a typical trading environment, where weak or negative economic reports always lead to improved pricing for home loans and vice versa. The dynamics of hedge funds de-levering - where fund managers are selling all types of securities with whatever timing they need to, in order to raise capital - have caused unprecedented volatility of late, and it is not quite clear when that will end.

The Fed has indicated that they would like to be a buyer of Mortgage Bonds, which has resulted in attractive, lower rates right now. But as stated above, the trading environment is extremely volatile, and opportunities to capitalize on lower rates that make sense should be taken advantage of. There have been recent rumors of interest rates being brought down towards 4.5% by the Treasury. This irresponsible release included no definitive plan, no indication of who might qualify, or what the restrictions would be. Like many other recent legislative "solutions", the restrictions might be very tight, with income limits set very low, and as a result, helping very few people. Remember, it may make sense for you to act now, and take advantage of current historically low rates...with the possibility of refinancing should rates decline further.

In other news to note from last week, the Bank of England and the European Central Bank both cut their key benchmark interest rates in an effort to revive their sagging economies. The reduction in rates was expected as part of a global coordinated effort, and our Fed is widely expected to cut its benchmark rate during its meeting on December 16. While a cut by the Fed often causes home loan rates to rise - because a Fed rate cut can lead to inflation, which is the arch enemy of Bonds and home loan rates - the deflationary environment we are currently in may prevent home loan rates from worsening significantly after the Fed cut.

Bonds and home loan rates tested their best levels of 2008 throughout last week, but could not improve beyond them. As a result, Bonds and home loan rates ended the week slightly worse than where they began...even in the midst of rumors of rates declining as mentioned above.

GAS PRICES SURE HIT A RECORD EARLIER THIS YEAR, BUT NOW THAT THEY HAVE IMPROVED, THE IRS HAS ISSUED NEW MILEAGE RATES FOR 2009. SEE THIS WEEK'S MORTGAGE MARKET VIEW FOR ALL THE DETAILS!

We will likely see another volatile Friday this week, with the release of several important reports at 8:30am ET. First we have the Producer Price Index, which measures inflation at the wholesale level. Given the recent whispers of deflation, this will be an important report to watch. Consumer Sentiment will also be released…but given the state of the economy, the results likely won’t be much of a surprise.

In addition, we’ll get a read on consumer spending patterns with November’s Retail Sales Report. This Report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation. Black Friday kicked off the holiday shopping season last week and the National Retail Federation amazingly estimated that shoppers spent 7.2% more than last year…but this is likely a result of the deep discounting seen by retailers, and it could well be that many shoppers who normally wait until December to get started on holiday purchases went out early to take advantage of the sales. Don’t be surprised if this is a horrible report, as not only have the holiday shopping lists become shorter, but the amount spent for each individual has likely been reduced. In any event, it will be important to see what the report reveals, as a lousy report should be friendly towards home loan rates.

Remember, as Bond prices move higher, home loan rates move lower. And as you can see in the chart below, Bonds have stalled out in their improving direction for the time being, after making some great gains over the last month. Home loan rates currently stand at historic lows.

I will keep you updated as things progress, but give me a call to talk about the current historically low rates, and how this opportunity might benefit you.

Economic Calendar for the Week of December 08 – December 12

"I KNEW THE RECORD WOULD STAND UNTIL IT WAS BROKEN." Yogi Berra. And while last week's Jobs Report wasn't the worst record breaker of all time, it showed a loss of 533,000 jobs during the month of November, which represented the most job losses the US has seen in 35 years. And adding more pain to the Report were heavy downward revisions for September and October, which erased an additional 199,000 jobs. In addition, last month was only the fourth time in 58 years that our economy lost over 500,000 jobs.

So what does this mean for Bonds and home loan rates? We first have to acknowledge that we are not in a typical trading environment, where weak or negative economic reports always lead to improved pricing for home loans and vice versa. The dynamics of hedge funds de-levering - where fund managers are selling all types of securities with whatever timing they need to, in order to raise capital - have caused unprecedented volatility of late, and it is not quite clear when that will end.

The Fed has indicated that they would like to be a buyer of Mortgage Bonds, which has resulted in attractive, lower rates right now. But as stated above, the trading environment is extremely volatile, and opportunities to capitalize on lower rates that make sense should be taken advantage of. There have been recent rumors of interest rates being brought down towards 4.5% by the Treasury. This irresponsible release included no definitive plan, no indication of who might qualify, or what the restrictions would be. Like many other recent legislative "solutions", the restrictions might be very tight, with income limits set very low, and as a result, helping very few people. Remember, it may make sense for you to act now, and take advantage of current historically low rates...with the possibility of refinancing should rates decline further.

In other news to note from last week, the Bank of England and the European Central Bank both cut their key benchmark interest rates in an effort to revive their sagging economies. The reduction in rates was expected as part of a global coordinated effort, and our Fed is widely expected to cut its benchmark rate during its meeting on December 16. While a cut by the Fed often causes home loan rates to rise - because a Fed rate cut can lead to inflation, which is the arch enemy of Bonds and home loan rates - the deflationary environment we are currently in may prevent home loan rates from worsening significantly after the Fed cut.

Bonds and home loan rates tested their best levels of 2008 throughout last week, but could not improve beyond them. As a result, Bonds and home loan rates ended the week slightly worse than where they began...even in the midst of rumors of rates declining as mentioned above.

GAS PRICES SURE HIT A RECORD EARLIER THIS YEAR, BUT NOW THAT THEY HAVE IMPROVED, THE IRS HAS ISSUED NEW MILEAGE RATES FOR 2009. SEE THIS WEEK'S MORTGAGE MARKET VIEW FOR ALL THE DETAILS!

We will likely see another volatile Friday this week, with the release of several important reports at 8:30am ET. First we have the Producer Price Index, which measures inflation at the wholesale level. Given the recent whispers of deflation, this will be an important report to watch. Consumer Sentiment will also be released…but given the state of the economy, the results likely won’t be much of a surprise.

In addition, we’ll get a read on consumer spending patterns with November’s Retail Sales Report. This Report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation. Black Friday kicked off the holiday shopping season last week and the National Retail Federation amazingly estimated that shoppers spent 7.2% more than last year…but this is likely a result of the deep discounting seen by retailers, and it could well be that many shoppers who normally wait until December to get started on holiday purchases went out early to take advantage of the sales. Don’t be surprised if this is a horrible report, as not only have the holiday shopping lists become shorter, but the amount spent for each individual has likely been reduced. In any event, it will be important to see what the report reveals, as a lousy report should be friendly towards home loan rates.

Remember, as Bond prices move higher, home loan rates move lower. And as you can see in the chart below, Bonds have stalled out in their improving direction for the time being, after making some great gains over the last month. Home loan rates currently stand at historic lows.

I will keep you updated as things progress, but give me a call to talk about the current historically low rates, and how this opportunity might benefit you.

Economic Calendar for the Week of December 08 – December 12