The Weekly Rap! Friday Feb 15, 2013

The Dow is currently trading at 13,966 lower by 18 pts compared with last Friday.  The S&P 500 is trading higher at 1,519.  Gold is trading at $1,600 an ounce, a sis month low, while oil futures at $95.68 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.79/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, are trading at 2.02%.  30-year Treasury Bond yields are trading at 3.20%.  The MBS (Mortgage Backed Security) FNMA 30-year fixed 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days.  This security is currently at 102.75 trading as low as 102.59 this week.  It looks like we are trying to establish a new trading range and could go as low as 102.00.  The current trend is toward lower prices and higher rates as if the Fed will discontinue their bond purchases earlier than posted.

Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  Think of anything above 100 as a credit.  The higher the number (price), the better the rate.

In economic news this week; The economy continues to crawl forward at a snail’s pace but at least we’re moving forward.

The National Federation of Independent Business said its small-business sentiment index edged up 0.9 points to 88.9, helped by an increase in the number who expect the economy to improve.. Even though there was a five-point advance in those who expect the economy to improve, at -30%, that component was the fourth-worst on record.  U.S. retail sales barely grew in January, suggesting a tax increase at the beginning of the year worried consumers.

The Labor Department reported that Job openings at workplaces pretty much stayed the same in November and rose a slight 0.2% in December. With about 12.21 million unemployed people in December, there were about 3.4 potential job seekers for each opening,

So, I about fell over when I read that the government ran a budget “surplus” of $3 billion in January, the first monthly surplus since September 2012.  The surplus was driven by a 16% increase in revenue compared to January 2012, including from the expiration of a temporary payroll-tax cut at the end of last year.  The payroll-tax cut expiration represented about $9 billion of an overall $13 billion in revenue from individual withheld taxes.  A year ago in January, the government recorded a deficit of $27 billion. There hasn’t been a monthly surplus in January since 2008.  Carful folks, this is only one month.

Last week, the Congressional Budget Office said that the federal budget deficit in 2013 would fall below $1 trillion for the first time during Obama’s tenure. The nonpartisan CBO said that the deficit would be $845 billion versus the $1.1 trillion recorded in 2012.  The more they run a deficit and add to the national debt (think really gigantic credit card) the less money they have out of each dollar to spend on programs as more goes to service (pay interest) the debt.

The Empire State manufacturing index jumped to 10 in February from negative 7.8 last month, according to the survey released by the New York Federal Reserve.  The Empire State data is watched closely because they are the month’s first reading of the health of the manufacturing sector. Indicators of manufacturing activity have been mixed over the past few months.

The University of Michigan consumer-sentiment gauge rose to 76.3 this month, the highest level since November, from a final January reading of 73.8. The gauge increased in January after plunging in December, when consumers were worried about the fiscal cliff. The sentiment gauge, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the most recent recession.

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Bill Bartok

Mortgage Advisor

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