Posts Tagged ‘Ben Bernanke’

Market recap for week ending 7/19/2013

Posted on: July 19th, 2013 by Fred Bohman No Comments

This week’s big event was the Federal Reserve’s (FED) President Ben Bernanke’s biannual testimony in front of Congress and the Senate. The reason this is so important is that the FED has been keeping interest rates low in order to stimulate the economy. The Fed has been doing this by spending 40 billion dollars a month buying mortgage backed securities in a program called Quantitative Easing (QE). Bernanke’s testimony was centered on whether the FED will continue QE at its present levels or if they will start winding it down.

As you might recall over the last few week’s interest rates have been very volatile making big swings up and down. This was all caused by remarks made by Bernanke and other Fed members about when QE will start winding down. Our financial markets during the last few weeks have seen trillions of dollars disappear and reappear based on these comments and rumors surrounding them.

In my opinion Bernanke did the right thing in his testimony this week. Instead of trying to set a time frame as has in the past he said the future of the QE program will depend on how our economy is doing. If the economy appears strong over the next few months then they will begin tapering down QE, and if the economy recovery slows or stops then they will continue with the QE program. This returns interest rates and our financial markets to reacting to actual financial news rather than comments and rumors.

Looking forward the most important upcoming economic report is the July employment figures that are released two weeks from today.

Market recap for week ending 7/12/2013

Posted on: July 12th, 2013 by Fred Bohman No Comments

This week the markets finally seem to be returning to normal after the last few week’s wild ride. It all started back on 6/19 when the Federal Reserve Board (FED) President Ben Bernanke announced that the economy is showing signs of improving and because of this the FED is thinking about winding down their Quantitative Easing(QE) program. The QE program is what the FED has been using to keep rates low and the thought that they may be slowing it down freaked investors out and sent interest rates through the roof.

On Wednesday Ben Bernanke held a press conference where he attempted to calm down the markets by stating that the FED will not be slowing QE now. Bernanke’s comments seem to have worked as we have seen rates drop over the last few days. However, rates are not back down to where they were before 6/19 and personally I don’t believe they will ever return to those lows. The markets over reacted on Bernanke’s initial comments, but the economy is showing signs of improving and as long as it continues to do so the long term trend for rates will be up.

Market recap for week ending 8/31/2012

Posted on: August 31st, 2012 by Fred Bohman No Comments

Market recap for week ending 8/31/2012

This week was a relatively calm week for mortgage rates compare to recent weeks. As of this morning rates were slightly better than they were Monday morning and by the end of today they ended up about .25% better than Monday.

This morning the Federal Reserve Bank(FED) President Ben Bernanke held his long awaited opening speech at the Jacksonhole conference. The reason this speech was so anticipated was because investors were waiting to see if Bernanke would reveal any details in regards to another quantitative easing program. As I have mentioned in my previous articles another easing preprogram would stimulate the economy by having the FED purchase additional Treasury bonds and mortgage backed securities which in turn would bring down interest rates and the cost of borrowing which in theory would cause people to spend more money and stimulate the economy.

Like many times when Bernanke speaks he said a lot without giving any details. In today’s speech he did not give any details about another easing round but he did mention that the FED is ready to ease if they see the need to. Apparently that was enough for investors, because we saw a big rally in the bond market after the speech. Once again a rally in the bond market equals lower interest rates.

In Europe this week leaders have continued on working on a plan to solve their debt problem. Germany is still showing some opposition to the current plan, but they are not as strongly opposed to it as they were. The German court is to rule on whether it is legal or not for the European Central Bank (ECB) to buy bonds from struggling EU countries on September 12th . The reason Germany has so much to say in the matter is that they are the largest economy in Europe and there for has most of the money. Once again the reason this affects mortgage rates is that when Europe is in trouble investors move their money to safer US investments driving down our rates.

Bernanke reassures that the FED will keep the Federal Funds rate at current level

Posted on: March 26th, 2012 by Fred Bohman No Comments

Mortgage rate outlook and market preview for the week starting March 19th 2012.

Early this morning the bond and mortgage markets were under pressure with stock indexes trading higher on anticipation of a better open at 9:30. Mortgage prices started down 7/32 (.22 bp) but by 9:00 climbed back to unchanged frm Friday, the 10 yr note at 9:00 -5/32 frm -13/32 at 8:00 am, the yield at 2.25% +2 bp. Bernanke spoke this morning saying the drop in the unemployment rate may reflect a reversal of the large layoffs that occurred during late 2008 and over 2009. “To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” he said. He also reiterated that while the economy is improving, he still sees structural weakness that will require the Feds to keep the FF rate at this level for a lot longer. Last week there was some talk among traders that the Fed would not hold rates through the end of 2014 as the Fed had been saying, Bernanke didn’t put a time frame on his comments this morning but did counter the idea that inflation was heating up to the point that the fed would have to begin increasing rates.

At 9:30 the DJIA opened +97, NASDAQ +26, S&P 500 +11. The 10 yr note -3/32 at 2.24% +1 bp and MBS prices on 30 yr loans +3/32 (.09 bp).

The only data today; at 10:00 the NAR reported pending home sales for Feb (contracts signed but not yet closed). Forecasts were for sales to have increased +0.5%, as reported sales fell 0.5%. There was no reaction to the report, although as the day moves on the stock indexes are improving and mortgage prices slipping back a little; mortgage prices -4/32 (.12 bp) at 10:10, at 9:30 +3/32 (.09 bp).

Comments from Bernanke this morning that he will keep FF rates low and has no thoughts of any increases as far out as he can see has added support to both stocks and bonds. Concerns still persist in his mind that the economy remains fragile. His remarks stabilized the bond market which was weak. Even with the stock indexes rallying hard so far, the bond and mortgage markets are doing well considering that when the stock market does better the bond and mortgage markets suffer. Mortgage prices actually holding a minor improvement at 9:30, based on Bernanke saying the economic recovery is essentially improving more than what the Fed was thinking two months ago. Pressure on the rate markets is less than what would be the norm with the key indexes doing better because of his statement that the Fed would keep rates low with no increases in sight. It is reducing the link between equity markets and the bond markets; at least so far today.

Technically, 2.25% on the 10 yr note could well be a resistance level but at this time we need more trading to be sure. Still suggest locking on rallies as we don’t believe rates will decline much—-unless—Europe comes back to the edge of default and at the point that doesn’t seem likely, or the US stock market declines and too doesn’t show much promise even with many calling for a correction.