Hey Team! One step closer to Friday:)

Rates are holding steady today. As I mentioned earlier in the week, there is a chance today mid afternoon of a sharp increase in rates if the Fed’s $16billion sale of 30yr bonds does not receive strong interest from investors, this could push our rates higher very quickly after lunch today. I will update again in 3 hours.

Rates today:
4.75% 30yr
4.25% 15yr
3.75% 5yr ARM

Thank you,

D. Stephen Steakley, Jr.
Austin, Texas Home Loan Expert
512-577-8898 ph
Austin, TX Home Loan – Quick Application

Hope you had a great weekend!

The interest rate market is doing good today with my short term trend favoring slightly lower interest rates but we are at tipping point.

30yr fixed is 4.75% today with the 15yr fixed running about 4.25%

Here is what is going on in the market:
“Trading activity in the mortgage market is extremely subdued this morning as investors await the results of Uncle Sam’s record setting $40 billion auction of 3-year notes. The auction will conclude at 1:00 p.m. ET.

Demand will likely be solid for this offering as investors can earn an extra 0.50 percent point in yield as compared to the 2-year notes — in exchange for taking only slightly more interest rate risk. The Fed’s continuing pledge to keep their benchmark short-term rates near zero and a very weak October payroll report will probably make this offer hard to resist for domestic and foreign investors alike. Uncle Sam will return to the credit markets tomorrow afternoon looking to borrow $25 billion in 10-year notes and he’ll auction off a $16 billion stack of 30-year bonds on Thursday afternoon. Even though demand for government debt has remained strong this year it is unclear whether strong results from today’s 3-year note auction will carry over to the two other auctions scheduled for this week. The Federal Reserve’s $300 billion Treasury purchase program ended last month, removing one element of demand from the bidding process.

This week’s longer-dated auctions will be the first without direct participation from the Fed. 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.” —Larry Bear, market specialist

D. Stephen Steakley, Jr.
Austin, Texas Home Loan Expert
512-577-8898 ph
Austin, TX Home Loan – Quick Application

Big news for buyers — the home buyers tax credit has been signed by President Obama!

Under the legislation, homebuyers will qualify for the tax credit until April 30, 2009 (as long as they have entered a binding contract), and have an additional 2 months (until June 30, 2009) to close the transaction. Borrower income limits have also been increased to $125,000 for individuals and $225,000 for couples (up from $75,000 and $150,000 respectively under the current program). The legislation also includes a tax credit not exceeding $6,500 for move up buyers who have owned their current homes for at least 5 years.

D. Stephen Steakley, Jr.
Austin, Texas Home Loan Expert
512-577-8898 ph
Austin, TX Home Loan – Quick Application

SHORT-TERM TREND (10 days or less)- Favors lower rates.
LONG-TERM TREND (11 days or more) Tilted slightly in favor of lower rates.

Commentary: The mortgage market was improved in this morning’s early going by a surprisingly weak labor sector snapshot.

The nation’s jobless rate jumped to a reading of 10.2% in October — matching its highest level since April 1983, while employers axed a steeper-than-expected 190,000 jobs last month. The average workweek length of just 33 hours did not move from the historic low set in September. The bright spots in this morning’s report were few — the government data wonks revised job losses for August and September to show 91,000 fewer jobs lost than first reported. Also worth noting was the fact that temporary employment has now risen for three consecutive months. Temporary employment always tends to accelerate in the early stages of a recovery in the labor sector as employers do everything possible to avoid adding permanent head-count until they are confident a sustained acceleration in economic activity is at hand. This reticence to add permanent jobs will not only forestall meaningful job growth, it will pose a drag on consumer spending — the engine that drives more than 70% of domestic economic activity.

Fixed income investors (those that buy and hold government debt obligations and mortgage-backed securities) are concerned that the government may feel compelled to develop another round of economic stimulus to replace the lack of spending at the consumer level. On its face it sounds like a very worth while and noble idea — but in practice it would lead to a massive expansion of government debt — a condition that would almost certainly put notable upward pressure on private borrowing costs of all sorts. No one knows for sure how the current economic quagmire will be resolved — but if it involves issuing more government debt you can take-it-to-the-bank the prospects for lower mortgage interest rates will come out on the proverbial “short-end-of-the-stick.”

Speaking of government debt, Uncle Sam will be in the credit markets next week looking to borrow a record setting $81 billion in the form of three- and 10-year notes together with a smattering of 30-year bonds on Monday, Tuesday, and Thursday respectively. The three-year notes will likely draw strong demand but the other two offerings may prove to be a problem. If so, it will probably be difficult, if not impossible for mortgage interest rates to move conspicuously lower over the coming five business days.

Next week’s economic calendar offers nothing of consequence but does include a mortgage market holiday on Wednesday for the Veteran’s Day Holiday.

D. Stephen Steakley, Jr.
Austin, Texas Home Loan Expert
512-577-8898 ph
Austin, TX Home Loan – Quick Application

Here are my thoughts on today’s interest rate market. I think rates will hover where they are now for a week or so with an ever so slight chance of lower rates in 10 days.

Mortgage investors will likely spend the balance of the day putting the finishing touches on their risk management strategies before moving to the safety of the sidelines in front of tomorrow morning’s October nonfarm payroll report.
News from the Labor Department earlier today indicating third-quarter productivity surged 9.5% on an annualized basis spawned a rally in the stock market while data contained in the same report showing unit labor costs plunged 5.2% ignited some buying interest in the mortgage market. Mortgage investors view the very powerful productivity gain and super-low labor costs as conditions reinforcing the Fed’s ability to forgo any increase in their benchmark short-term interest rates for an “extended period of time” — and that is a condition that tends to be supportive of steady to perhaps fractionally lower mortgage interest rates.

In a separate report the Labor Department said the number of people receiving first-time jobless benefits fell by 20,000 last week to the lowest level since March. That is the good news portion of the current story from the labor market. The bad news is that during the week of October 17th enrollment in extended benefits programs increased by 24,600 while the Emergency Unemployment Compensation program enrollment rose by 90,000+. In recovery, businesses generally first expand existing worker hours and hire temporary workers before more permanently expanding payroll size. Neither of these trends has shown signs of picking up yet, implying the near-term prospects for the job market remain fairly bleak. The “so what” factor here is that against such a backdrop — the power of a “surprise” improvement in the headline October nonfarm payroll figure to create a “Maalox Moment” in the mortgage market featuring rising rates and falling investor prices — looses much of its potency.

D. Stephen Steakley, Jr.
Austin, Texas Home Loan Expert
512-577-8898 ph
Austin, TX Home Loan – Quick Application