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news relating to your va refinance

11/16/2009

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Earlier this morning the government reported the pace of October Retail Sales rose a brisk 1.4% -- but were much less impressive once auto sales were stripped out.  The "ex. auto" component of this report posted a lower than expected gain of 0.2%.  Even so, given the backdrop of a very anemic labor market, the October retail sales numbers were about as good as could be hoped.  Consumers remain financially constrained with wage income running 5.0% below its year-ago mark - a condition strongly suggesting recovery at the retail level will continue to be lethargic for many months to come.  In the convoluted world of mortgage interest rates investors see slow retail sales activity as a indication that demand for capital will remain low - a scenario that tends to support steady to perhaps fractionally lower mortgage interest rates.   

Definitely worth mentioning again
- the Federal Reserve reached a milestone with its direct mortgage-backed purchase program last week, topping the $1 trillion mark.  The Fed's purchases of agency mortgage-backed securities totals roughly $1.007 trillion so far in 2009.  The central bank has started to slow the pace of its purchases, with buying decreasing from about $25 billion per week in mid-September to only $13.5 billion for the most current week ending Wednesday, November 11th.  The Fed is committed to buying the entire $1.25 trillion allotted for its direct mortgage-backed security program by the end of March 2010. 

These security purchases by the Fed have been hugely supportive of lower mortgage interest rates.  (The following maybe a bit technical for some - but bear with me - and please don't stop reading.)  The yield premium on Fannie Mae mortgage-backed securities paying 4.5% compared with the 10-year Treasury note (the assumed "riskless" rate of return) tightened to 0.668 percentage points last Thursday from 0.720 percentage points last Tuesday, according to Reuter's data.  When yield premiums tighten - mortgage rates move lower.  For comparison, the yield premium was around 1.863 percentage points last year prior to the initiation of the Fed's direct mortgage-backed security purchase program. 

The "so what" factor here is probably obvious to most - mortgage interest rates are almost certain to begin a move to higher levels as the Fed's direct purchase program draws to close.  Look for the pace of the upward move to be in direct, but opposite correlation to the number of dollars remaining in the central banks checkbook.  The fewer dollars rolling around in the bottom of the Fed's bucket - the more intense the upward pressure on mortgage interest rates will become.  Ultimately mortgage interest rates will once again reach their natural equilibrium point -- but until then -- the process of transition may be uncomfortable for those insistent upon trying to hope and wish rates to dramatically lower levels.   I'll keep you posted on the Fed's "burn rate" as this mortgage market friendly program fades into history.       

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news relating to va streamline refinance rates from yesterday

11/13/2009

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Trading activity is thin this morning as investors await the results of this afternoon’s $16 billion sale of 30-year bonds by the Treasury Department.  This auction represents the last leg of a record-sized $81 billion three-part borrowing spree by Uncle Sam.  The Treasury sold $40 billion of 3-year notes on Monday and $25 billion of 10-year notes on Tuesday.  The 10-year sale drew decent demand while the 3-year note auction generated the strongest buyer appetite in more than 20 years.  One group of analysts is arguing the falling dollar will lure bargain shopping foreign investors in droves to today’s 30-year bond sale. The opposing camp is equally convinced that now that the Fed is no longer actively adding to their fixed-income portfolio, these longer-dated securities will likely require higher yields to attract the necessary capital. 

Everybody will be watching intently to see if demand steps up on its own.  If so, interest rates in general -- and mortgage interest rates in particular --will likely remain little changed.  On the other hand, if private demand is weak -- mortgage investors will almost certainly register their displeasure by pushing mortgage interest rates noticeably higher. 

  In other news of the day – the government reported the number of workers filing new claims for jobless benefits dropped by 12,000 last week.  The four-week moving average of new claims, considered a better gauge of underlying trends, fell by 4,500 for the period.  During the latest week for which data is available (week ended October 24th) enrollment in extended benefits programs decreased by 28,240 while the Emergency Unemployment Compensation program enrollment rose by 22,400.  

Behind all this statistical mumbo-jumbo a story of very gradual improvement in the labor sector is beginning to emerge. Even so, it will likely be an extended period of time before the worst collapse in the labor sector since the Great Depression is declared officially over.  Recent economic improvement has to be sustained for many months for hiring to resume, as businesses first increase existing worker hours and bring on temporary workers before increasing payroll head count.  The majority of analysts firmly believe it will be well into the second-half of 2010 before the Labor Department’s headline nonfarm payroll report shows any meaningful gains.  Over the same time frame labor market data will tend to mute the development of upward pressure on mortgage interest rates emanating from other influences.
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