Posts Tagged ‘Europe debt crisis’

Market recap for week ending 03/29/2013

Posted on: March 29th, 2013 by Fred Bohman No Comments

The markets are closed today for Easter, but at the time I am writing this, mortgage interest rates are less than 1/8th of a percent lower than they were last Friday.

The Euro zone continued to shake up the markets this week. During the last weekend Cyprus was able to secure a bail out by raiding banks accounts with balances over 100k from the 2 banks that were in trouble. Most of the large account holders were Russian nationals that used Cyprus as a tax haven. The banks opened up yesterday after a 2 week bank freeze. The banks are open but there is a 300 Euro a day withdrawal limit to prevent a bank rush.

Even though it seems that the Cyprus Bank crisis has been avoided for now investors fear that similar problems are brewing in Spain, Portugal, and Italy which has sent those countries bonds tumbling. With money flowing out of risky government bonds it is going into “safe” investment such as US bonds causing US interest rates to fall.

There has been much negative news over in Europe, but the US stock market continues to set new highs. Many people are calling for a pull back since the stock market seems overbought, but every time it starts selling off it quickly rebounds. This week we saw a slight dip in rates, but unless we start seeing enough negative economic news here in the US to slow down the stock market I think the long term outlook for rates is still higher.

Market recap for week ending 03/1/2013

Posted on: March 1st, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are almost 1/8th lower than they were last Friday.

This week mortgage bonds broken out of the tight range they have been trading in. On Monday we saw a sharp selloff in the stock market which drove mortgage rates down. This sell off was sparked by negative news out of Europe. The main piece of news was that the Italian elections were a mess. The outcome of the election was that the power was split between two parties with different ideas on how to deal with the financial crisis. With Italy being one of the countries that are at default risk, investors saw political uncertainty as a big negative.

After the big sell off on Monday the stock market recovered it losses the following days and on Wednesday it closed just 89 points shy of its all-time high set back in 2007. So far it has not been able to break that all time high, but the fact that we are this close to it shows that investors are confident in the economic recovery. On Tuesday and Wednesday the Federal Reserve (FED) president Ben Bernanke did his semiannual testimony in Washington. At the testimony he reassured that the Fed will continue to keep interest rates low for as long as needed and that they will give clear signals ahead of changing this policy.

Looking forward the US government will run out of money on March 27th unless the debt ceiling is raised again. As usual our two parties in Washington don’t agree on how to solve this problem.

Market recap for week ending 01/25/2013

Posted on: January 25th, 2013 by Fred Bohman No Comments

the time I am writing this mortgage interest rates are almost unchanged from last Friday, although we might see a re-price for the worse this afternoon.

Yesterday afternoon and this morning we saw a big sell off in the mortgage bond market. The main fuel behind this sell off was optimism in Europe. Part of the reason rates have been so low lately is that Europe has been struggling with their debt problem. Fears that some countries in Europe might default on their debt has caused investors to pursue safer US investments such as mortgage bonds. Today it was announced that 278 European financial institutions will return 137.2B euros for early repayment of their emergency loans from the EU. Economist had predicted that only 84B euros would be paid back early. The fact that the European banks are able to pay back the money they borrowed early is a sign that the debt crisis is moving in the right direction, but many economists are warning that is far from over.

Next week the Federal Reserve Board (FED) will meet to discuss Fiscal policy. Investors will be monitoring meetings closely as last month’s meeting minutes shocked the market as they indicated the FED had discussed stopping quantitative easing (QE). QE is the practice of buying mortgage bonds and treasuries to artificially deflate interest rates. I don’t believe we will see QE come to an end any time soon, but at some point it will have to and any discussion of it by the FED tends to spook investors.

Market recap for week ending 12/07/2012

Posted on: December 7th, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are at the same level they were at last Friday.

This week was dominated by news about the Fiscal Cliff and the Europe debt crisis. Politicians still can’t come to an agreement about how to avoid the approaching Fiscal Cliff when the all of the Bush tax cuts are set to expire. As long as there is uncertainty the market will remain volatile. My guess is still that they will wait to the last minute then come to a short term agreement, basically extending the problem until the new Congress starts.

Today the US employment report came out. The report was mainly good with strong job creation numbers and the unemployment rate dropping.  However many economist are discounting the report saying the numbers were affected by Hurricane Sandy and temporary holiday jobs.

In Europe, most of the region is already officially in a recession, and the economically strongest country Germany looks like they are about to slip into a recession as well.  Yesterday the European Central Bank left their version of our Fed Funds rate unchanged at 0.75%.

Next week on Tuesday the Federal Reserve(FED) is meeting and is expected to announce some details about quantitative easing on Wednesday. The Fed has been using quantitative easing to keep mortgage rates low by selling short term debt and buying long term debt such as mortgage backed securities. This keeps mortgage rates low because then there is more money competing for mortgage backed securities thus driving rates down.  The Fed is almost out of short term debt to sell, but most economists believe the Fed will still continue buying long term debt by printing more money.

Market recap for week ending 11/30/2012

Posted on: November 30th, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are almost 1/8th of a percent lower than they were last Friday.

This week was dominated by news about the Fiscal Cliff and the Europe debt crisis. Politicians still can’t come to an agreement about how to avoid the approaching Fiscal Cliff when the all of the Bush tax cuts are set to expire. Both sides want to extend some of them, but can’t come to an agreement of which to extend and which to let expire. As of today we have 1 month left for the politicians to come to agreement. As long as there is uncertainty the market will remain volatile. My guess is that they will wait to the last minute then come to a short term agreement, basically extending the problem until the new Congress starts.

In Europe, Greece is back in the fore front. This week Greece was approved for a $44.6B loan in December to keep the country from defaulting on their debt. I am not sure how giving a country that is already drowning in its debt more debt is going to solve anything, but that’s what the Euro finance ministers decided was best.

Over the last month interest rates have stayed in a narrow range going slightly up but then back down. It seems that rates have bottomed out for the time being. Events that would have normally caused rates to drop have had a muted effect. If you have been holding on to see if rates can go any lower I would recommend taking action now.

Market recap for week ending 11/23/2012

Posted on: November 23rd, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are less than 1/8th of a percent higher than they were last Friday.

This week was a short week with Thanksgiving on Thursday and lack Friday today. Yesterday the markets were closed and today was a half day. Many traders left early on Wednesday and are not returning till Monday so we saw light volume of trades for half the week.

Europe is still struggling with their debt problems. European leaders are trying to come to an agreement of what to do about Greece, as they are once again on the brink of defaulting on their debt. As long as there is a threat of Greece and other struggling Euro countries defaulting on their debt it will be considered good news for US interest rates.

In the US we are still dealing with the approaching Fiscal Cliff and politicians on both sides are trying to come to an agreement. My guess is that they will come to a short term compromise, which will just delay the problem a few months until the new congress starts.

Today being black Friday starts off the holiday shopping season. Investors will be watching the spending numbers closely to judge how our economy is doing. If holiday spending is high, it will be bad news for interest rates and vice versa.

Market recap for week ending 11/16/2012

Posted on: November 16th, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are less than 1/8th of a percent higher than they were last Friday.

With the election over now the focus has turned to the approaching Fiscal Cliff and Europe’s debt problem. All of the Bush tax cuts are set to expire at the end of year unless Democrats and Republicans can come to an agreement on which ones to extend and which ones to let expire. The closer we get to the deadline the more anxiety investors will get and the more volatile the market will become. The President is meeting with Republican leaders today to try to come to some sort of agreement. I think it is unlikely that they will come to an agreement this early on.

Europe is officially back in a recession as defined as two consecutive quarters of declining growth. This is not really news to anyone as we have been seeing weak economic reports coming out of the region all year, but now it is official. The only two counties that showed growth in Europe this last quarter is France and Germany, but it was not enough to offset the decline of the other countries.

Generally the bad news out Europe and the approaching Fiscal cliff would be good news for US interest rates, because investors would move their money into safe US bond investments. However this week we have not seen the flight to safety trade. I don’t think interest rates will go up, but the decline seems to have stalled for the moment.

Market recap for week ending 11/09/2012

Posted on: November 9th, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are about 1/8th of a percent lower than they were last Friday.

The big event this week was the election on Tuesday. On Monday the market were quiet, but on Tuesday we saw a spike in interest rates on rumors that Romney was going to win the election. On Wednesday after it was confirmed that Obama won we saw a drop in rates that cancelled out Tuesday spike and then some. There are two factors that caused this drop. First, since Obama does not want to extend the Bush capital gains tax cuts that are set to expire at the end of the year, many investors in the stock market are selling off in order to take their gains now at a lower tax rate. Whenever money flows out of the stock market it usually flows into bonds thus driving rates down. Second, Obama is seen as more likely to support the continued quantitative easing which is also keeping interest rates low.

Europe is back in the headlines and once again Greece is in the fore front. Greece is running out of money and is getting closer to defaulting on its debt unless they get more bailout funds. Also financial reports from across Europe confirm that most of the region is slipping back into a recession. Bad news out of Europe is mostly considered good news for US interest rates as investors will move their money to safer US investments.

Looking forward, now that the election is over we have the approaching “financial Cliff. All of the Bush tax cuts are set to expire at the end of year unless Democrats and Republicans can come to an agreement on which ones to extend and which ones to let expire. The closer we get to the deadline the more anxiety investors will get and the more volatile the market will become. Hopefully our country’s leaders can get their act together and get something done quickly.

Market recap for week ending 10/26/2012

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

At the time I am writing this mortgage interest rates are exactly where they were last Friday.

Europe is still grappling with its debt problems after 2 years of trying to solve it. At the moment European leaders seem to be on track to a solution to their debt crisis, but the crisis is not over yet. Germany is still showing resistance to the current plan of buying up bad debt from struggling Euro zone countries.

In the US we had some noteworthy events this week in regards to mortgage interest rates. Yesterday the weekly jobless claims report came out and claims dropped 23k versus the 13k forecasted. Anytime we have better than expected job numbers it is generally bad news for rates, as it shows the economy is on track to a recovery.

Today the third quarter advanced gross domestic product (GDP) report came out. The advanced GDP report is an early report that aims to forecast how the actual report will look like. The GDP report is a measurement of all goods and services produced within the US. The third quarter advance GDP report was slightly better than expected and showed that our economy grew at a pace of 2%. The fact that our economy is growing would generally be bad news for interest rates, but since this was only an advanced report it did not have that big of an impact on rates.

Market recap for week ending 10/19/2012

Posted on: October 19th, 2012 by Fred Bohman No Comments

At the time I am writing this mortgage interest rates are about 1/8th of 1 percent higher than they were last Friday.

This week was generally bad for mortgage rates with a slight recovery today. Between Tuesday and Wednesday we saw a big hit to the mortgage bond market. The main reason for the selloff was that we saw some positive US economic reports and some positive news out of Europe. For the moment it looks like Spain is going to ask for support from The European Central Bank with their debt problem. With Europe backing away from their debt problem investors are pulling their money out of safe US investments and returning them to other investments driving US interest rates up.

The reason we saw a slight recovery today was because at the European economic summit that was held today there was not much talk about additional help to Spain. European leaders did however agree to create a bank supervisory entity by the end of the year.

A lot of loan officers and bankers were freaking out this week thinking that the refinance boom was over and that rates were going back up to 5%. I don’t think our economy or the world economy is out of the woods yet and therefore I don’t think we will see rates go to high anytime soon. This tends to happen once a month or so, a few good US economic reports combine with some positive rumors out of Europe and rates shoot up for a few days until the sobering realty comes back that the global financial crisis is far from over.