Monday, January 14, 2008

Mortgage and Financial Market Update

Author: Ed Culin

Today's Mortgage and Bond  Rates

Bond Market Rates                  Mortgage Rates

30 Year Treasury    5.04%          30 year Fixed       6.500%

10 Year Treasury    4.94%          15 Year Fixed      6.250%

2 Year Treasury       4.97%           1 Year ARM       6.375%      

3 Month Treasury    4.79%            5 Year ARM       6.500%

 

Today's News

The Bond market is opening slightly stronger in early trading while the stock market opens lower. Heavy loses overnight in China markets appear to be hurting stocks a bit and bringing some much need strength back to the Bond Market.  The yield on the 10 Year Note stands a 4.93% still near the 10 month highs made on Friday.  The 30 year bond stands at 5.04%. This marks the 8th day that yields were above the  psychologically important 5.0% level. 

In news today Bloomberg has an interesting article regarding Options trading which indicates a market opinion that the Fed may be raising rates not lowering rates in the near term. They feel that weakness in the housing market will be offset by strength in other sectors of the economy. Our view is that most prognosticators are underestimating the impact that the housing market will have on consumer confidence. The losses being seen in housing are going to be more severe and widespread then thought. The article below details the issues:

Fed Faces Growing Pressure to Raise Interest Rates, Options Market Shows

In what some would view as positive news two more mortgage companies have been acquired by Wall Street companies Accredited Lending and ResMae were purchased by two hedge funds. Companies again are bottomed fishing under the hopes that can acquire future production at Rock Bottom Prices. Accredited shares traded as high as 58 less then 2 years ago. The company is being purchased  now at 15.10 per share. The articles below provide specifics:

Citadel's ResMae Purchase Signals Recovery of the Subprime Bond Market

Accredited Home to be bought for $400 mln

 

As we say on a daily basis We continue to urge caution in placing new money into the equity markets. We believe that the weakness in the housing market  will continue to impact economic growth. Rates have risen steadily over the past month further hurting the ability of buyers to afford the housing they desire. This is also making it more difficult for economically challenged folks to affords potential increases in mortgage payments as ARM loans reprice .We believe that this weakness will impact company profitability in all sectors as time goes on, which will  cause lower stock process over time.

We believe that we are in a recession at this point. We continue to believe that the Fed needs to Cut rates at this time to help stabilize the issues that consumers are having in the repayment of their debts. From what we are seeing in the market place there is no indication that the Fed will be acting on this anytime soon.  If action is not taken this will just prolong the slowdown in housing and create a deeper recession.

 

About the author:

This article was written by Ed Culin. Ed is a Mortgage broker who manages the following Web Sites http://www.gofairway.com and

http://www.thebestloandeal. com . Visit these sites for more information about the mortgage process.

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