Credit market getting tighter

Monday, December 17, 2007

ECONOMIC DATA / NEWS

Manufacturing is off to a slow start in December.  The first report from this sector came from the New York region.  The Empire State index fell 17 points to 10.3.  Last months reading of 27.4 was extremely high for this index.  The 0 level is the divider between expansion and contraction, so there was a major slowdown in activity.  The New York area has consistently been stronger than Philadelphia and Chicago.  It has also been ahead of the national average.  This could be the first sign of a broader decline in manufacturing activity.  Our next indicator comes from the Philadelphia region on Thursday.

Foreign investors have taken an interest in U.S. securities once again.  After two of the worst months in the last decade, October made a huge comeback with $114.0 billion flowing into the U.S. from other countries.  Part of the reason could actually be the weaker dollar.  Foreigners may see U.S. securities as a bargain, if they are anticipating a rebound in the value of the dollar.

And, the Fed will auction half of the $40 billion dollars that they plan to make available to banks for the purposes of adding liquidity to the lending markets.  Based on the stock markets reaction after their announcement of the plan last week, it appears that investors are not fully convinced that the concept will work.  The results of today’s auction will probably result in some late day market activity.

TECHNICAL ANALYSIS

Today’s candlestick on the FNMA 30-year 6.0% chart is trying to sneak out of the upward trend, but the 50-day moving average has kept it in line so far.  Prices are up 3bp at 100.91 with no resistance prior to 101.12.  Prices can pierce support levels without actually breaking them, and that could be what we’re seeing today.  The support is a range more so than an exact point, so we can still consider prices to be within the upward trend at this point.

Treasuries made a nice improvement, as money from Friday’s late drop in stocks has been filtered into bonds this morning.  The additional losses in the stock market this morning have the pushed yields down even more.  The 10-year yield is back under 4.20%, but it is hitting support around 4.18%.

Read more articles on our Mortgage News page, or view our entire Mortgage News Archive.

Mortgage News & More Info

Modesto mortgage news feed provided by Winchester Lending Group