Ding, Ding, Ding………………round 2 says the Fed. Yes this is round 2 by the Fed to print real cheap money (almost free) $600 Billion worth to buy our debt in the form of U.S. Treasury Bonds. How does that work into the mortgage market and interest rates? How the FED lowers mortgage rates is by printing more money, this typically causes the interest rates to go down. Also when there is a lot of people buy U.S. Treasury Bonds then simple economic supply and demand takes hold which keeps the mortgage rates down. The reason for this is the 30 year fixed mortgage rates are usually hedged by the 10 year treasury notes. This is mainly because, on average, a mortgage will only last 7 years until it changes again, either by refinance or person selling their house and getting another one.

So…….the elections are past us and now we know how some policy and laws will be headed over the next 2 years. The Fed is printing almost free money and keeping the interest rates real low and causing cheap money. Can’t really predict the future but from history….just gotta say, beware of inflation, but for now……..hello cheap money…..grab it while you can and stimulate this economy!!!

Want to get a better explanation about this process, just check out this article on the global post.

When markets are on very shaky ground, everyone hangs on the way sentences and wording come out of Fed Chairman Ben Bernanke’s mouth. So of coarse since he is talking later on this Friday, all eyes are on his mouth, well at least the words coming out of it. Here is what CNBC has to say about what might take place, hope you enjoy

http://www.cnbc.com/id/38872170

Bernanke Speech to Set Market Course Friday and Beyond

Published: Thursday, 26 Aug 2010 | 9:30 PM ET

By: Patti Domm
CNBC Executive Editor

Fed Chairman Ben Bernanke speaks on the economy and policy, at a time when both are shaky in the eyes of the markets.

Bernanke’s Friday morning address in Jackson Hole, Wyo. has become one of the most discussed, debated and dissected of his career, even before he’s given it.

“He’s going to need a miracle to satisfy all these multiple expectations that are all over the place,” said Art Cashin, director of floor operations at UBS. It is hoped that Bernanke will clarify two things – how bad the Fed believes the economy is getting and what it might do about it.

Friday’s markets will also get a look at the revisions made to second quarter GDP at 8:30 a.m. That could put the growth rate for the quarter ended June 30 at just 1.3 percent, compared to the previously reported 2.4 percent. That would also be the starting point for the current quarter, which by all signs is showing a continuing drop off in activity.

“Friday is going to bring a meaningful downward revision to GDP…Does the average person in the market know that? I don’t know,” said Dan Greenhaus, chief economic strategist at Miller Tabak. Consumer sentiment data is released at 9:55 a.m. and could also be a market mover.

Bernanke speaks at 10 a.m. before the Kansas City Fed’s annual symposium, which is attended by central bankers, economists and academics, plus an entourage of journalists. He will make his comments behind closed doors, away from television cameras, but on the other side of the country, Wall Street will be hanging on every word.

“The problem the Fed has is their forecast hasn’t changed very much, but the probability of a downside event has gone up, and they don’t think there’s much probability of an upside surprise. The problem they are having is how do they communicate that to people,” said Barry Knapp, head of equities portfolio strategy at Barclay’s Capital.  “It’s not a normal distribution. The downside risks are growing, but we can’t get more aggressive policy until their forecast moves, and they’re not there yet.”

“I think people expecting him to say something that’s going to be beneficial to the market are fooling themselves,” Knapp said.

Communication is what turned the heat up on Bernanke in the first place. When the Fed released the statement after its Aug. 10 meeting, it surprised and confused many in the markets by both downgrading its view of the economy and then immediately moving to a new easing program. Just three weeks before, Bernanke told a different story in Congressional testimony.

“I can’t remember a time when there was so much anticipation for a speech..How did he get here? I

don’t think it’s his fault. It’s the economy,” said J.P. Morgan economist Michael Feroli. But Feroli said the events leading up the last Fed meeting didn’t help, nor did the Fed’s communication after the meeting.

“The statement itself didn’t execute well in conveying a clear message,” he said.

The so-called quantitative easing announced in August involves the Fed replacing its maturing mortgage securities with Treasury securities, which in essence keeps the Fed balance sheet stable. In theory, it also could prevents a passive tightening.

The Fed also left the door open to further easing, which some in the market believe could ultimately be multiple trillions in Treasury purchases. The expected outcome would be that the Fed’s purchases would help force down rates, helping to spur lending. Traders have been gaming how and when the Fed might act.

Many in the market point to the communications that have come from the newspaper, rather than Fed officials. There was a Wall Street Journal article just before the August meeting that suggested the Fed would adopt a program to replace maturing mortgages on its balance sheet by purchasing more securities. Many in the  markets did not believe it would be an imminent action because of Bernanke’s July comments.

Then this week, ahead of Bernanke’s speech, another highly-detailed Wall Street Journal story described a split of opinion within the Fed, and noted that at least seven of 17 members disagreed or were concerned about quantitative easing.

“He does have a committee to respect, but he can push the agenda forward. If he lays out the framework and the conditions under which they would act, and kind of lays out the forecast, I think it’s possible to infer the likelihood of quantitative easing,” said Feroli.

There has also been criticism of Bernanke for not showing stronger leadership, and Fed watchers expect him to use the speech as a way to restore confidence in the Fed’s processes and in himself.

“Maybe people were used to a leader from (former Fed Chairman Alan) Greenspan, but there’s nothing that necessarily says that’s the proper way for a central bank to be governed,” Feroli said.

The Dow Thursday fell 74 to 9985, and the S&P 500 slid 8 to 1047, below a key support level. Bonds saw buying, and the yield on the 10-year moved down to 2.50 percent. Thursday’s weekly jobless claims improved slightly to 473,000, but the number of emergency claims rose sharply, worrying investors. The Kansas City Fed’s survey, released in the late morning, also painted a gloomy picture. New orders fell sharply, not unlike the Philadelphia Fed survey last week.

After the Fed’s two day meeting it is expected that they will continue with the language for keeping the rates low for “an extended period”. This is the over night rate that the banks get charged for using money and that are at near zero rates. What does this mean for mortgage rates? Well, there are many different factors that make up the movement of the mortgage rates just like the treasury note auction and any other items like employment and general markets. The Fed will give their announcement at 1:15pm CST. Below is an article that talks a little bit more about Fed’s meeting and the market. Hope this helps

Fed Set to Renew Promise of Continued Low Rates

Published: Wednesday, 28 Apr 2010 | 10:02 AM ET

http://www.cnbc.com/id/36824213

The Federal Reserve on Wednesday resumed a two-day meeting where it is expected to repeat a vow to keep interest rates at rock bottom levels for “an extended period” while acknowledging the U.S. economic recovery is getting stronger.

A flare up of financial turmoil in Europe, caused by concerns that Greece and Portugal might default on debt, should reinforce the Fed’s reluctance to close out a two-day meeting with any sign that might suggest U.S. monetary policy could soon be tightened.

The Fed cut benchmark overnight rates to near zero in December 2008 and in March last year promised “exceptionally low” rates for “an extended period,” a vow it has renewed at every meeting since.

While the world’s biggest economy is crawling out of its deepest recession in decades, Fed officials have said the recovery remains wobbly and they have warned that the jobless rate is likely to remain uncomfortably high for a long time.

The Fed is expected to announce its policy decision at around 2:15 p.m.

Recent signs suggesting the recovery was strengthening may provoke lively discussion at the meeting about whether the time to drop the low-rate pledge from the central bank’s post-meeting statement is drawing near.

Data released Tuesday showed that house prices rose on an annual basis for the first time in more than three years in February and that U.S. consumer confidence rose to a 1-1/2 year high in April.

Other reports have shown stronger retail sales and factory activity, and hiring by U.S. employers in March at the fastest rate in three years. However, inflation has been negligible.

“The recovery is likely to be seen as broadening out geographically as well among industry groups, while the inflation data highlight the risk of deflation taking root in the economy,” said Steven Ricchiuto, an economist with Mizuho Securities USA Inc in New York.

Some Fed officials are worried that the hundreds of billions of dollars they pumped into the economy after running out of rate-cutting room could spur a bout of inflation as the recovery gains ground. These policy-makers have pressed for the Fed to begin selling some of those securities.

However, with the Fed’s buying spree recently ended, the central bank is not expected to signal any immediate turn-around. Even when it does begin to ponder monetary tightening, the Fed will likely start by draining liquidity from the banking system and raising the interest it pays on bank reserves.

Kansas City Federal Reserve Bank President Thomas Hoenig is likely to dissent for the third time this year against keeping the “extended period” vow in place. Hoenig has argued the recovery is strong enough that the Fed should preserve flexibility to quickly move away from ultra-easy money.

However, Fed Chairman Ben Bernanke and Vice Chairman Donald Kohn have made clear that with the U.S. unemployment rate holding at 9.7 percent for three months in a row, and with inflation not a problem, there is no need to rush to tighten monetary policy.

Financial companies that trade securities directly with the Fed generally do not see the first Fed rate hike coming until the last three months of the year.

Copyright 2010 Reuters.

Here we go again, with the 10 year treasury note auction coming up May 5th is the announcement and May 12th is the auction date and it will be interesting to see where the mortgage rates go. So far the 10 year treasury notes have found demand but how long will this last for………who knows. You also have another factor which is the government now has a bunch of mortgage backed securities and will want to start selling them off soon. It will be interesting to see how the pricing goes for mortgage backed securities and what it will cause the mortgage rates to do. Now for the answer to the always asked question, “What are the rates going to be?” or “When are the rates going up?” ……….the answer………… don’t know. The reason for not know is because we just don’t know how everyone’s demand is going to be for the items that tie into the mortgage rates. Best way to look at it, rates are truly at an ALL TIME LOW and you will never be able to get the EXACT lowest mortgage rate, so instead of trying to shoot for the lowest, just lock in and pay an extra $50 to $100 a month towards principal and it will all work out.  Since my previous post about the treasury note auctions had the dates for the auctions, thought I would give the link for the schedule again……….here is the treasury note auction schedule. Hope this helps   Love to hear your comments and what you think as well.

Looks like rising mortgage interest rates  might be delayed as I stated before. Treasury auction today shows demand is still there for 10 Year Notes which are one of the key plays tied into what mortgage rates look. Found this good article below and wanted to share with you guys. The key now is to watch the Treasury note schedule of when the auctions are for the 10 year notes and see how demand will be for the notes. If the auctions do not find demand then rates will rise, just not sure how high. Right now the mortgage interest rates are mainly speculation on the demand and this will cause a roller coaster ride. Hope you find this helpful

Treasury Auction Finds Strong Demand For 10-Year Notes

Published: Wednesday, 7 Apr 2010 | 1:10 PM ET

By: Jeff Cox
CNBC.com http://www.cnbc.com/id/36220519

Investors showed surprisingly strong appetite for long-dated Treasurys in a Wednesday auction that saw high demand and lower-than-expected yield.

After a series of auctions two weeks ago that indicated that the market was tiring of the government’s infusion of notes into the market, a sale of $21 billion in 10-year notes fetched a yield of 3.90, a bit beneath the when-issued rate but clearly indicative that the psychologically important yield level of 4 percent was a resistance level.

Demand was 3.72 times the amount of money auctioned, well above the normal bid-to-cover ratio of 2.87.

Foreign demand, as measured through the indirect bid outside of the Treasury, came in at a healthy 43 percent, while direct bidding came in at 16 percent. Nearly all the bidding—99.62 percent—was at the high yield.

Prices for US Treasurys headed higher after the auction after being mixed before the auction.

The benchmark 10-year gained 13/32 in price to yield 3.898 percent, while the 30-year bond also rallied, gaining 27/32 to yield 4.78 percent, down from 4.83 percent Tuesday.

• The catalyst for the strong results appeared to come from Federal Reserve Open Market Committee minutes released Tuesday that suggested the central bank had little desire to move interest rates up soon.

With inflation seemingly tame and economic growth likely to remain incremental, investors find appeal in safe government securities likely to hold their value.

“We’ve gotten a pretty improved technical outlook after the 4 percent level held earlier this week,” said Kim Rupert, managing director of global fixed income analysis for Action Economics in San Francisco. “The notes really had cheapened up quite a bit along curve and against other issues like German bunds.”

Indeed, there reportedly was a spate of buying just ahead of the auction results that pushed up prices and drove down yields.

The solid result could bode well for the last of the auctions this week, a $13 billion sale of 30-year bonds on Thursday.

“It’s hard to say anything’s automatic these days, but we can be fairly sanguine about tomorrow’s auction,” Rupert said.

In addition to the Fed minutes, investors also have been encouraged by continued prospects for economic growth, mostly recently reflected in the Institute for Supply Management’s measure of nonmanufacturing activity, which was surprisingly strong in March.

Continued uncertainty about the sovereign debt crisis in Greece also is spiking interest in more-secure US debt

What you need to watch for to see if mortgage rates will rise is the 10 year Treasury Note sale date after the end of March. The FED is ending their stimulus program for buying mortgage backed securities and debt which comes in one form as Treasury Notes. The mortgage rate market will be pretty bumpy up until the 1st auction is held without one major buyer which is the FED and that date is April 7th according to the Treasury Note auction schedule. Some of this is explained in this old prediction post mortgage rates will rise by end of 1st quarter 2010. I decided to put out a couple of key dates you should be watching for, but in the mean time get ready to hold on to the interest rate roller coaster for the next month or so.

March 31st — Ends the FED stimulus of being a 1.25 Trillion dollar buyer in the market of our debt.

April 6th — this is the auction date for 3 year Treasury Notes. (are not tied into mortgage rates as much but a good indication of the demand for buying Treasury Notes.

April 7th — 10 Year Treasury Note Auction, the bid day of determining what the demand will be for this debt and one of the key elements tied into mortgage rates. This is also the first auction after the FED pulled out of being a 1.25 Trillion dollar buyer in this market.

Be interested in hearing what you think about this. Hope this helps

Just like in an earlier post Mortgage Rates Will Rise, looks like demand is slowing down at least at the 5-year auction. The big one will be watching for the 10-year Treasury auction since they are  the ones that are tied into mortgage rates. It will be very interesting over the next few weeks to see how the market will react about mortgage rates. Some are saying mortgage rates will stay the same and the market has already set the price. Others are saying that mortgage rates will be jumping up by maybe one whole percentage point. Only time will tell which way the mortgage rates will go, and we will not know for sure until we are fullying into April and after the 10-year Treasury note aution takes place then. Here is an article from CNBC, Hope this helps

http://www.cnbc.com/id/36018558

Weak 5-Year Auction Sends Treasury Yields Up Sharply

Published: Wednesday, 24 Mar 2010 | 1:16 PM ET

By: CNBC.com with wires

Investors soured on the latest round of debt auctions, greeting a sale of five-year notes Wednesday with low demand that sent Treasury yields well higher.

The $42 billion sale fetched a yield of 2.605 percent, full 10 basis points, or 0.10 percentage points, higher than where the five-year was trading when the results were released at 1 pm. A higher yield reflects lower demand as the government must provide investors with more incentive to buy the product.

Demand also was below average, as show in the 2.55 bid-to-cover ratio, a figure that measures the amount bid for each dollar auctioned.

The indirect bid, which reflects foreign demand through primary dealers, was 40 percent.

Prices on Treasuries added to a sharp earlier drop that sent benchmark 10-year yields to their highest in a month, on strong economic data and worries over appetite for the government’s enormous debt issuance.

New orders for long-lasting U.S. manufactured products, or durable goods, rose for the third straight month in February, and inventories posted their biggest gain since December 2008, government data showed.

The news comes as analysts are already preparing for a possible positive turn in the U.S. job market in next month’s payrolls report, while the Federal Reserve has promised to keep interest rates near zero for the foreseeable future.

An improving economy coupled with low rates could be a toxic combination for bonds, which perform well during times of economic weakness but see their value eroded by inflation.

“The Fed seems very reluctant to raise rates, and in the meantime we’re getting stronger data. This durables report was pretty good,” said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.

“There is the expectation of a strong payrolls number. If you couple that with a Fed that is probably going to still be on hold for a long time, it is not terrific for the long end of the Treasury market.”

The benchmark 10-year note was down more than a full point in price, yielding 3.82 percent versus Tuesday’s close of 3.69 percent.

Reflecting inflation fears, the 30-year bond fell nearly 2 full points, down 1-28/32 in price to yield 4.73 percent against 4.61 percent on Tuesday.

Helping to temper some of the worst of the bond market sell-off, data showed sales of newly built U.S. single-family homes fell for a fourth straight month to a record low in February, heightening fears of renewed weakness in the housing market.

The Commerce Department said sales fell 2.2 percent to a 308,000 unit annual rate from an upwardly revised 315,000 units in January.

Existing five-year notes were down 13/32, yielding 2.50 percent versus Tuesday’s close of 2.43 percent.

During trade Wednesday, the 5-year note’s yield rose as far as 2.56 percent, its highest since Jan. 14.

Two-year yields rose as far as 1.09 percent, their highest since early January.

In politics, financial markets, and real estate the only true constant is change. Ever since November I have been warning about the FED’s stimulus program ending March 31st of 2010 and that would be a factor in making rates jump up a little bit. Sounds like that might change depending on how the politicians roll the dice on this and how our economy is looking. The article below touches on this just a little bit, but only time will truely tell what will happen in the future. Hope you enjoy this and as always, have a glorious day! 

 http://www.cnbc.com/id/35723330 

Fed Might Have to Continue Supporting Economy: Gross

Published: Friday, 5 Mar 2010 | 9:21 AM ET

By: CNBC.com

The slow-moving US economy could cause the Federal Reserve to renew liquidity programs set to expire this month, bond giant Pimco’s Bill Gross told CNBC. With the Fed’s buying of mortgage-backed securities and other programs unwinding, the “new normal” scenario that Pimco has forecast could force the central bank’s hand, said Gross, the co-CIO and manager of the world’s largest bond fund.

“These things have all been very critical but let’s face it—they’re expiring at the end of March,” he said. “The critical question…is do we really need Uncle Sam and the check writing to continue?”

Gross said he remains skeptical of the economy’s ability to grow without the government programs and said it’s possible for “some of these programs to come back” if the economy begins to wobble.

Similarly, he expects some type of bailout for Greece but the European economy to face tough times as well.

“In the meantime, Greece and Portugal and Spain and some of the lookalikes will continue to flounder in terms of yield spread and certainly in terms of economic growth,” he said.

On other issues, Gross said the February unemployment numbers released Friday by the government—36,000 jobs lost, 9.7 percent jobless rate—did not tell the whole story of “structural unemployment,” or the absence of demand of available workers.

The trend fits in with the “new normal” forecast which he said sees economic struggles continuing over a three- to five-year period and even as long as 10 years depending on circumstances.

© 2010 CNBC.com

Hmmmm…..seems like I have been telling of this warning at my earlier blog post Predictions for 2010  <<<Click that link<<<, now others are saying the same thing. Don’t know how high they will go, but not really seeing rates staying at these levels too much longer.

Check out this article I found and let me know what you think.

Full article visit: http://www.cnbc.com/id/34513588

 Mortgage rates have inched upward in  the last weeks of 2009, and that trend will continue through 2010. The question is how high they will go.

 “If you told me by the end of 2010 a 30-year rate was at 6 percent, that sounds about right,” says Mark Zandi, chief economist at Moody’s. “I don’t think there’s any question rates are headed up.”

Rates are still historically low heading into the new year. The average fixed rate on a 30-year mortgage was 4.94 percent the third week of December. But that’s higher from the record low of 4.71 percent the week of Dec. 3.

So far, it’s turned out to be a case of nowhere to go but up, says Lawrence Yun, Chief economist at National Association of Realtors.

“Rates weren’t going to stay that low forever,” says Yun. “But I don’t see anything too alarming. Rates will still be considered attractive.”

If rates seem higher, buyers and sellers need to keep them in perspective, says Jim Gillespie, president and chief executive officer of Coldwell Banker. “I started selling real estate in 1975 when rates were at 7 1/4,” Gillespie says. “In the 1980’s they were 17 or 19 percent. You have to go back to 1940’s to see the rates we have now.”

 Current mortgage rate increases stem from several causes. One crucial component for keeping rates so low has been the Federal Reserve’s purchases of nearly $1.5 trillion in mortgage-backed securities and giving billions of dollars in support to mortgage buyers Freddie Mac and Fannie Mae.

But all that Fed money is scheduled to evaporate in March of 2010, and the Obama home buying tax credit, which has helped spur sales, ends next April.

“The ending of the Fed program will definitely effect rates,” says Mark Goldman, professor of real estate at San Diego State University. “So far, the Fed has not expressed interest in keeping the program going. That could raise rates by some 150-200 basis points.”

There’s also inflation. A recovering economy and a Fed concerned about rising prices could also cause mortgage rates to heat up.

“I think there’s the possibility of some Fed tightening and driving up long-term mortgage rates,” Zandi says. “Inflation is the key. Inflation is still low, but if it starts up, the Fed may be forced to play its hand in raising rates.”

Then there are bond investors and what they can do to the mortgage market, Zandi says. “They are thinking 2011 and 2012. If they question the long-term fiscal situation and the deficit and don’t buy bonds, that may also start to drive up long-term rates.”

Winter is usually a slow time during the homebuying season because of everything taking place near the end of the year. This year is different since you have a stimulus package for buying a home that ends in April, and mortgage rates that more then likely will go up near the end of March. Yes, mortgage applications should be up as people need to realize the time to act is now with all the government help. Hopefully people are listening Always good to speak with a professional and make sure to stay away from a lot of scam artiest. If it sounds too good to be true, walk away and take some time to think about it before acting. Below is a article found on Reuters. Hope you enjoy

NEW YORK, Dec 9 (Reuters) – Demand for U.S. home loans rose last week to the highest level in about two months, mainly from borrowers locking in low mortgage rates by refinancing, the Mortgage Bankers Association said on Wednesday.

Nearly three of every four loan requests last week was for a refinancing rather than a purchase, the industry group said.

Total mortgage applications, based on the group’s seasonally adjusted market index, rose 8.5 percent to 665.6 last week to the highest since early October.

Demand for loans to buy a home increased by 4.0 percent to 241.5, the highest since the last week of October, while refinancing applications jumped 11.1 percent to 3,185.9 last week to a two-month high, the industry group’s indexes showed.

Average 30-year mortgage rates rose 0.09 percentage point to 4.88 percent but haven’t strayed far from all-time lows.

The rate was down from 5.44 percent a year ago and compared with a record low of 4.61 percent set in March, according to the Mortgage Bankers Association.

For a related chart of mortgage rates, right click on the code: aUSMBAMLR and select “Related Graph.”

Home purchasing has been slowly accelerating as affordability improves and government incentives broaden.

Borrowing costs are historically low. Home prices have been slashed about 30 percent, on average, from their 2006 peaks and starting to rise in many areas.

Potential buyers are expected to show up in larger numbers through the usually slow winter months to take advantage of a tax credit that the Obama administration extended.

An $8,000 credit that was set to end Nov. 30 for first-time buyers was extended, with contract signings now due by April 30 and loan closings by June 30. A new $6,500 tax credit to lure move-up buyers was added.

Sherry Chris, chief executive of Better Homes and Gardens Real Estate in Parsippany, New Jersey, said the typical spring season will start this year in January because of the tax credit but cautions that another wave of foreclosures could burden the market with more inventory later next year.

“The move-up buyer needs to start moving, and it can’t just be a first-time home buyer’s market” if there is to be a sustained rebound she said.

The housing market is starting to stabilize after a three-year dive into the deepest slump since the Great Depression, Chris said.

“But what you have now is what you should expect for the next few years,” she added. “We’re warning our brokers and agents not to be overly optimistic and not to necessarily see this as a huge potential upswing in 2010.”

The unemployment rates remains at double-digits, despite some improvement in November, which will keep many buyers inactive.

Sellers are also being less aggressive in discounting home prices to lure buyers, who have more time to shop now that the tax incentive was extended, a new study found on Wednesday.

The new tax credit deadline and shrinking competing inventory have reduced the urgency for sellers to cut listing prices, real estate website Trulia.com said. To read story, see [ID:nN08206975]