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Market Update - Friday, December 19, 2008 10:32am ET

12-19-08

Larry Bailey

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Office: (609) 910-4749

Mobile: (609) 760-7222

Current Trend Direction: Sideways

Risks favor: Carefully Floating

Current Price of FNMA 4.5% Bond: $101.44, -38bp

Surprise, surprise...volatility will once again be the key word on Wall Street today, as "quadruple witching" day occurs in the Stock markets. Quadruple witching, which happens four times a year, is the simultaneous expiration of market index futures, market index options, stock options, and stock futures. As Traders rush to unwind positions, Stock prices have the potential to bounce around rather sharply. This volatility has already extended to Mortgage Bonds, as Bond prices have also been jostled around quite a bit in the first hours of trading. It should be noted that on the Monday following a quadruple witching, securities prices often times move in the opposite direction from where they headed Friday.

There are no economic reports set for release today - but there was some big news from Japan. The Bank of Japan trimmed their benchmark interest rate from 0.3% to 0.1%, and unveiled a series of new steps to pump more money into the financial system to ease an emerging credit crunch among Japanese companies. Japan doesn't have much more room to cut rates at these levels, so it will be interesting to see how this stimulus impacts their financial markets.

The auto industry finally received some relief this morning, as President Bush just announced a deal that GM and Chrysler are going to receive $13.4B in government loans to keep operating in exchange for a restructuring. Ford has more cash on hand than the other two, and has said it should be able to avoid tapping into federal dollars unless weak auto sales continue longer than expected into 2009. Auto stocks are higher on the news, and this is providing a lift, as well as a sigh of relief to the entire Stock market.

Hopefully, you have taken advantage of the recent alerts and avoided the price erosion as Bonds seem to have tired out a bit since the move higher earlier this week. Don't you remember we built this rally on weak economic news, talks of the Fed purchasing Mortgage Bonds and rock and roll :)...and those factors have not changed, which bode well longer-term.

Again on new transactions, we recommend floating and here's why...prices do have support just beneath current levels and we feel there is a good chance prices could move higher on our aforementioned quadruple witching reversal theory.

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Wow..what a day on the markets yesterday...4.5% 30 year fixed a REALITY

12-18-08

Larry Bailey

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Office: (609) 910-4749

Mobile: (609) 760-7222

Wed, Dec 17 - 5:00 PM ET
Market Wrap: Our benchmark FNMA 4.5% bond fell 28bp to close at $101.66 while trading within an expanded 137bp intra-day range. The bond showed early upward momentum following yesterday's huge rally but fell to profit taking later in the session as volatility picked up. Mortgage bonds have a history of spiking higher on significant Fed rate cuts only to temporarily sell off in the days that follow. The financial markets spent most of the day pondering future outcomes of the Fed's latest monetary policy. Commercial banks responded by immediately dropping their prime lending rate by 75bp to 3.25%, the lowest rate in over 50 years. This will help millions of business and consumer borrowers. The Fed has also offered to lend up to $200 billion to support securities backing car loans, credit card loans, and student loans. Another expected outcome is lower mortgage rates. Conventional 30-year mortgage rates may fall to around 4.50% from their current average level of 5.47% in the months ahead. The 3-month U.S. dollar LIBOR rate fell to 1.58% from 1.85% yesterday following the Fed's rate cut. Before the credit crisis hit, the 3-month U.S. dollar LIBOR usually traded within 50bp of the official Fed funds rate. We'll know the credit crisis has fully eased when this 50bp relationship has been restored. Stock prices swung back and forth between positive and negative territory before finishing lower. Morgan Stanley reported larger than expected losses of $2.30 billion in the fiscal 4th quarter vs. estimates for a loss of $298 million. Morgan Stanley's earnings troubles along with those of Goldman Sachs $2.12 billion loss posted yesterday weighed on the stock market as traders are quick to sell rallies to lock in profits during this bear market. The Dow fell 99 points to close at 8,824 while the broader S&P 500 Index retreated 8 points to end at 904. The NASDAQ Composite Index gave back 10 points to finish at 1,579.

3:15 PM ET - Crude futures settle at $40.06/barrel down $3.54.

2:22 PM ET - Investors and traders take some chips off the table and cash in. MBS at session lows. Stocks move into the black. Oil retreats to $40.72/barrel down $2.88.

11:34 AM ET - Things don't go straight up. MBS fall from earlier highs. Alert To Lock!

9:30 AM ET - OPEC to cut production by record levels but oil drops to $43.15/barrel down 54 cents.

8:30 AM ET - MBS near unchanged after yesterday's huge rally. Morgan Stanley's 3rd quarter earnings lower than estimates. Stock futures falling.

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Alert To Float. The 5% now near best levels in 3 years.

12-10-08

Larry Bailey

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Office: (609) 910-4749

Mobile: (609) 760-7222

Wed, Dec 10 - 3:45 PM ET
MBS stage a huge rally. Alert To Float. The 5% now near best levels in 3 years.

2:04 PM ET - US posts record November deficit of $164.4 billion.

2:00 PM ET - Conflicting news or uncertainty surrounding the auto bail out sends stock prices into the red. MBS near session highs. US court approves Tribune bankruptcy financing.

1:10 PM ET - Oil moves higher now at $45.17/barrel up $3.13.

11:20 AM ET - A plan to bail out the auto makers has made substantial progress. Stocks higher as are MBS. Oil falls from a daily high of $45/barrel to the current $43.

10:15 AM ET - MBS move into the black and put together a formidable rally - the 5% moves higher by 50bp from its low. Stocks higher led by the energy sector and the possible auto bailout.

8:48 AM ET - Shares of energy companies could move higher today - oil is higher by $2 at $44/barrel.

8:35 AM ET - No economic reports for today. Possible deal on the table for automakers. Treasury sells $28B 3-yr notes at 1:00pm ET. MBS lower. Stock futures higher.

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Market Update - Wednesday December 10, 2008 9:30am ET

12-10-08

Larry Bailey

view my blog
Office: (609) 910-4749

Mobile: (609) 760-7222

Current Trend Direction: Sideways

Risks favor: Carefully Floating

Current Price of FNMA 5.0% Bond: $100.81 -9bp

In light of the recent price improvement in Mortgage Bonds, we have now switched our focus to the FNMA 30-year 5% Bond. This change is reflected on the Bond Page and text messaging.

There are no economic reports due for release today. The ongoing disconnect between the 10-Year Note and Mortgage Bonds continues and can be seen clearly on the Bond Page. There is a large $28B 3-year Note auction this afternoon, which could pressure the Bond market due to added supply.

Stocks are rising today on word that Congress will approve a $15B bailout to keep the Detroit 3 auto makers from seeking bankruptcy protection. However, there is speculation that a so-called "car czar" would be appointed who could force GM and Chrysler LLC into Chapter 11 bankruptcy if the companies don't come up with a restructuring plan by March 31.

Also helping Stocks are shares of energy companies, which are getting a lift from higher oil prices this week. Oil, now at $44.50 a barrel, has risen almost $4 a barrel since Friday's close of $40.81.

Mortgage Bonds are trading in a wide sideways range between a floor of support at $99.96 and resistance at $101.25. We will try and float, but be mindful of the heightened volatility and the continued de-levering we are seeing in the hedge fund world, where hedge funds are dumping well performing Mortgage Bonds into the market in order to raise capital.

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TruClose Financial Monthly Newsletter- Views You Can Use

12-08-08

Larry Bailey

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Office: (609) 910-4749

Mobile: (609) 760-7222

If you can't see the newsletter, or would like to view it online, use this link

Provided to you Exclusively by Larry Bailey

Larry Bailey
Vice President of Marketing
Office: 8885109665x86
Cell: 609-760-7222
E-Mail: Larryb147@gmail.com

For the week of Dec 08, 2008 | Vol. 6, Issue 50

Last Week in Review

"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!

Forecast for the Week

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.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Dec 05, 2008)

The Mortgage Market View...


	IRS RELEASES NEW MILEAGE RATES If you drive a car, truck or van for work, the Internal Revenue Service (IRS) has announced news that impacts you. That's because the IRS has released the new standard mileage rates for 2009. The rates will be used to calculate deductible costs for driving an automobile for business, charitable, medical and moving purposes. The new mileage rates for business, medical and moving purposes will be slightly lower than the rates for the second half of 2008, which were raised in the middle of last year due to spiking gas prices. The rate for charitable driving, however, is set by law and will remain unchanged from 2008. Beginning January 1, 2009, the standard mileage rates for 2009 are as follows: Businesses = 55 cents per mile driven Medical or moving = 24 cents per mile driven Charitable organizations = 14 cents per mile driven Overall, these rates reflect the higher transportation costs compared to a year ago. However, the rates are slightly lower than the second half of 2008 to factor in the recent drop in gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, also enter the calculation. But before you calculate your deduction, make sure you qualify. The IRS reminds taxpayers that they cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously. Remember, you don't have to use the standard rate! Although the IRS provides the standard mileage rate for ease and convenience, you're not required to use it. If you choose, you have the option of calculating the actual costs of using your vehicle instead of using the standard mileage rates. So keep that in mind as you calculate your automobile usage for business, medical, moving, or charity driving in 2009!

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.

Economic Calendar for the Week of December 08 – December 12

Date	ET	Economic Report	For	Estimate	Actual	Prior	Impact
Wed. December 10	10:30	Crude Inventories	12/06	NA		0465K	Moderate
Thu. December 11	08:30	Jobless Claims (Initial)	12/6	NA		509K	Moderate
Thu. December 11	08:30	Balance of Trade	Oct	-$54.0B		-$56.5B	Moderate
Fri. December 12	08:30	Core Producer Price Index (PPI)	Nov	0.2%		0.4%	Moderate
Fri. December 12	08:30	Producer Price Index (PPI)	Nov	-1.8%		-2.8%	Moderate
Fri. December 12	08:30	Retail Sales	Nov	-1.4%		-2.8%	HIGH
Fri. December 12	08:30	Retail Sales ex-auto	Nov	-1.7%		-2.2%	HIGH
Fri. December 12	08:30	Consumer Sentiment Index (UoM)	Dec	58.0		55.3	Moderate

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. 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. As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you. <!-- THIS OPTION VISIBLE WHEN UNSUB_EMAIL IS SELECTED --> In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email: Larryb147@gmail.com If you prefer to send your removal request by mail the address is: 300 Mt. Lebanon Boulevard, Suite 2215 Pittsburgh, PA 15234 Mortgage Success Source, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Success Source, LLC does not grant to you a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.