February 13 2006

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For the week of Feb 13, 2006 --- Vol. 4, Issue 7

Last Week in Review

GOING ONCE, GOING TWICE….SOLD! With a week lacking much economic news, a triple play of Bond and Treasury Note auctions took center stage for most of the week. Since strong foreign buying of our US Notes and Bonds has helped to keep Bond prices high and home loan rates low, Traders always watch the extent of foreign participation in auctions very carefully. The 3-year offering had 22% purchased by foreign investors, the 10-year saw 41%, but the highly anticipated re-issuance of the 30-year Bond was at a whopping 65.4%! Good news to see that foreigners still have a healthy appetite for our Notes and Bonds, especially the longer term paper, as their continued buying power will help to keep home loan rates low. But although foreign investors stepped up and filled their plates with US debt, a large influx in the supply of any product can cause prices to be forced lower, and Bonds are no different. With $48 Billion of new supply having hit the market, Bond prices were pressured lower over the course of the week, with home loan rates rising by about .125% across the board. But looking forward…can we count on foreign investors to keep up their buying pace and help keep home loan rates low? Another recent bit of news suggests perhaps not. The latest US Balance of Trade data showed a widening trade deficit of 1.5% in December to -$65.7 billion, and 2005 chalked up a record trade deficit of -$725.8 billion, or 5.8% of GDP. What does this have to do with home loan rates? Let’s look closer. A trade imbalance with China alone accounted for 25% of December's deficit…and a widening deficit with China will bring pressure from the US government for China to allow their currency, the Yuan, to float higher against the Dollar. Although this can help to reduce the widening trade deficit with China and increase purchases of US goods, the way this is done is to have China buy less of our Bonds. And if a big buyers’ demand for our Bonds is reduced, prices will naturally decline, causing home loan rates to rise. SAYONARA, ADIOS, AU REVOIR, CIAO…NO MATTER HOW YOU SAY IT, WOULDN’T YOU LOVE TO GIVE ALL YOUR ANNOYING JUNK MAIL A BIG FAT KISS GOODBYE? BELIEVE IT OR NOT, NOW YOU CAN…DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW.

Forecast for the Week

This week’s economic calendar swings back into gear with a full slate of releases on Retail Sales, the Manufacturing sector, Housing Starts and more. Traders have been itchy for some economic news to trade on, and home loan rates may be more volatile in the week ahead. The chart below shows how Bond prices have been riding a “Down Escalator”, meaning home loan rates have been inching higher. But how low can it go? If the news of the week is economically strong and positive, it sure appears that Bond prices may limbo a bit lower still, causing home loan rates to increase. If the news turns out to be surprisingly weak, perhaps Bonds will attempt a break away from the Down Escalator…but the downward trend is strong, and it would likely take some pretty dismal news for Bonds to bust a move much higher and help home loan rates improve significantly. Chart: Fannie Mae 6.0% Mortgage Bond (Friday Feb 10, 2006)

The Mortgage Market View...

Tired of finding your mailbox full of unwanted credit card offers? How about the time you waste sorting through unsolicited mail and schlepping it to the recycle bin? And how frustrating is it when that official looking notice turns out to be just another piece of junk mail? Here’s some good news…now you can JUST SAY NO to junk mail! With a quick phone call, letter or online request…you will soon be saving yourself countless amounts of time and energy. Here are the simple steps to take: Credit Card Offers: The credit bureaus offer a toll-free number that enables you to get out of having card offers mailed to you for either five years…or permanently. Just phone 1-888-5-OPTOUT (567-8688). You will be prompted to provide some personal information, including your home telephone number, name, address, and social security number. All information provided is confidential and is used only to process your request. And if over time you get lonely for some junk mail and decide that you want to receive the card offers again, simply phone the same number and you will be added back on the list. “Junk” Mail: The Direct Marketing Association has a Mail Preference Service that allows you to reduce the amount of commercial advertising mail that you receive at home for five years. There are several ways to have your name added to the “do not mail” list. The quickest and most efficient way is to hit this link: Do Not Mail Website. From the website, you can enter the required information, print the letter, and mail the letter to the address listed below. Or for a nominal fee of $5, enter the required information and hit the “register online” button. Don’t want to enter your information online? No problem, just mail a letter that includes a brief paragraph requesting to be excluded from the marketing lists, your name – be sure to list all name variations including, Jr, Sr, etc. – current and previous address, and signature to: Direct Marketing Association Mail Preference Service PO Box 643 Carmel, NY 10512 Important note: You will not stop receiving mailings from organizations that are not registered with the Association’s mail preference service, but at least this measure will greatly reduce the amount of advertising mail you receive. Email: The Direct Marketing Association also has an Email Preference Service that allows you to get out of receiving unsolicited commercial email for five years. Visit Do Not Email Website. Enter up to three email addresses and a confirmation will be sent to each email acknowledging the request. Replying to each email confirmation within 30 days is required by DMA, or the email address will be deleted and the request will not be processed. Unfortunately, this measure will not eliminate most “spam” email, but again, will at least help to reduce the amount of junk email you may be receiving. Removing your information from the above lists will not only save you a lot of time and frustration, it could also curb identity theft. If you or someone you know has been a victim of identity theft and would like information about how to erase the effects of identity theft, either contact your trusted advisor who sent you this newsletter, or hit this link – CREDIT SAVVY – for a free copy of “How To Erase the Effects of Identity Theft in 10 Days” – written by Edward Jamison. Mr. Jamison is the founder of Jamison Law Group, P.C., and is an attorney who specializes in consumer credit, identity theft and numerous software products tailored to the mortgage industry. Jamison is a nationally recognized expert on credit scoring.

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of February 13 – February 17 Date ET Economic Report For Estimate Actual Prior Impact

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.