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Boca Mortgage Guy
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Lock Advisory: Suggest Locking

Last week the bond market didn't get much news. Congress was out and little economic data to think about. Congress is back and debt ceiling debates start in earnest. In the last two months there has been an increasing trend by investors to move out of bonds and into the equity market. The ultra-low interest rates in the absence of safety considerations are losing luster while stocks continue to gain. The EU debt crisis has settled removing one of the major attractions to safe US treasuries. The increasing tensions in Washington should keep interest rates from increasing in any substantial way unless a miracle of cooperation unfolds. Rate markets will likely trend higher but should not increase to the extent that it will damage the recovering housing sector.

Lock Advisory: Suggest Locking

The bond and mortgage markets started a little better this morning; bonds over sold, stocks over bought. That said, neither shows evidence of reversing, just some retracments. There are no economic releases today, and not much for the week. Most of the momentum is stocks and bonds last week came from the FOMC minutes. The next POMC meeting isn't until January 30. Today kicks off earnings season for Q4.

Lock Advisory: Suggest Locking

A strong relief rally this morning n the half-baked deal to avoid tax increases and increase taxes on dividend and capital gains. The deal took until the last minute to get done but left all the serious issues to another day; what congress and this Administration does best. - push it down the road. The Cliff was avoided. Next up will be serious debate over debt ceiling that is now 16.4 trillion.

Mortgage Rates up this morning, not as much though as in the treasury market.Although most focus this morning in the markets is on the passage of the Cliff; this week is employment week with Dec. employment data on Friday. Expect increased volatility levels in the coming weeks with more serious debates over the debt ceiling and sequesters on spending cuts due on the 1st of March.

Lock Advisory: Suggest Locking if closing in the next 15 - 30 days

Interest rates have inched up a little over the past couple days. Markets are better today with belief that the US will avoid going over the Cliff in 12 days.Negations are still fragile, at least based on rhetoric coming from both sides; nevertheless based on how markets are reacting here and around the world there will be a a deal before the end of the year.

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Lock Advisory: Suggest Locking if closing in the next 15 - 30 days

Interest rates are holding in a tight range. Nothing new to report on the Fiscal Cliff. The FOMC policy statement and the change in how long the Fed will keep rates low (until unemployment falls to 6.5%) and the Fed's increase in its inflation threshold from 2.0% to 2.5% rocked fixed income market. The Fed's change will put higher floor for rallies; adding additional belief that interest rates will struggle to decline to levels seen last summer as some are touting.

Lock Advisory: Suggest Locking if closing in the next 15 - 30 days

Since early November the interest rate markets have essentially been flat with no significant changes. There has been literally no change in mortgage rates for six weeks. Both stacks and bond traders are willing to sit quietly until there is something out of Washington on the Cliff negotiations. The FOMC meeting begins today, nothing until tomorrow though when the meeting ends with the policy statement.

Lock Advisory: Suggest Locking if closing in the next 15 - 30 days

This week is employment week and the two ISM indexes (manufacturing and service). Normally traders would direct most attention to the reports but this isn't a normal situation; overriding concerns for markets is the Fiscal Cliff that is likely to dominate through most of Dec. The rate markets are well grounded at current levels; nothing has proven any reason to move rates higher or lower. Investors mostly not involved with the Cliff and Europe so uncertain. At these low levels of rates it will require a major shock to push interest rates lower. The wider belief within the capital markets is that long term US rates are more likely to increase than fall. I'm hearing people say around 2.0% for the 10year note, but is does depend on how Washington deals with the Cliff crisis.

Lock Advisory: Suggest Locking if closing in the next 15 - 30 days

Stock market rallied on comments from Washington that were momentarily constructive about the fiscal cliff. This morning the stock market is starting better again. The bond and mortgage markets were a little weaker yesterday, a few lenders took a negative stance and reprices to either slow production ot in anticipation that rates will worsen; unnecessary based on the MBS price movement. Weekly jobless claims were as expected.

Lock Advisory: Suggest Locking if closing in the next 15 – 30 days

Uncertainty about the fiscal cliff, debt limits, and long term challenges of balancing the US budget are already affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets. US interest rates are likely to continue to trade in their narrow ranges. The fiscal cliff comments that will emerge each day and issues in Europe will dominate. If lower rates are in the picture it will have to be on a total failure to avoid the cliff, which I don’t expect to happen.
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