Congress passed a housing bill this past weekend and it was signed into law on Wednesday by President Bush. The new law will make many needed changes. It will provide mortgage relief for more than 400,000 US homeowners facing foreclosure. The law will also provide $300bn in federal guarantees to help refinance problem mortgages and will also assist US mortgage giants Fannie Mae and Freddie Mac.
Although there are some very good things in the bill there is one major item that will affect many new Homeowners. This bill will totally eliminate down payment assistance as of Sep 30 2008.
With that said several people in Congress have pledged to do everything the can to keep these programs. It’s estimated that the down payment assistance programs have helped over 700,000 Americans purchase a home. Many consumers would not be able to get a Home Loan without down payment assistance. Company’s like The Mortgage Bank of Arkansas use DPA with a large part of their home loans.
There is still some time but to be safe borrowers seeking home loans that need to be combined with DPA need to act fast. The new law will require that they come up with a minimum of 3.5% for down payment. Many Mortgage Lenders forced to seek out customers who have the money for the 3.5% down payment
Here are the major components:
1. FHA Changes
Mortgage limits for high cost areas will be increased to $625,000 on a permanent basis (115% of the current conforming limit).
The FHA floor will go from 48% to 65% of the current conforming limit. This will put the new permanent floor at $271,000.
Cash down payment is set at 3.5%.
The seller funded down payment assistance program (DPA) will be terminated on September 30.
The risk based premium established by HUD last week will be suspended on September 30. The ceiling on upfront premiums will go to 3%.
2. Fannie and Freddie
The conforming loan limit will be increased to 115% of area median up to $625,000.The bill provides for a federal "backstop" for Fannie and Freddie which allows the Treasury to capitalize the companies by taking an equity stake.
A new regulator with enhanced powers is created.
The bill creates an affordable housing trust fund paid for by assessments on Fannie and Freddie to help prevent foreclosures and facilitate affordable housing
3. FHA Rescue Fund
The bill creates a special FHA refinance program designed to allow the refinance into fixed rate FHA products of up to $300 billion in distressed mortgages.
4. Licensing
Encourages a nation wide licensing and registry system for loan originators by setting minimum qualifications and assigning responsibility to HUD for establishing new rules for those states that do not enact licensing laws.
5. Redevelopment of Foreclosed Properties
Provides $4 billion in funds for local governments to purchase and redevelop foreclosed properties.
6. Tax Incentives
Establishes a range of housing incentives, including a first time homebuyer tax credit and expands the Low Income Housing Tax Credit.
Wednesday, July 30, 2008
Saturday, July 26, 2008
As I stated in my previous post Arkansas Mortgage Rates as well as national mortgage rates are at their highest point this year. The benchmark for the 30 year fixed is 6.77% and the 15 year fixed is 6.32%. The last time the fixed rate for Arkansas Mortgages was higher was June of last year when it reached 6.82%. When searching for Arkansas Home Loan consumers may want to wait the upturn in mortgage rates out before locking in their fixed rate mortgage.
Today the Commerce Department said that the seasonally adjusted, annualized pace of new home sales fell by 0.6% last month to 530,000. Despite the decline, May's originally reported pace of 512,000 was revised up to 533,000, April's previously reported 525,000 was revised up to 542,000, and March's 501,000 was revised up to 513,000.
The report said that the pace rose by 5.3% in the Northeast and by 2.5% in the Midwest. But in the two largest contributing regions, the rate fell. The South saw a decline of 2.0% and the West saw one of 0.9%.
With new home construction declining, the inventory of homes on the market fell by 5.3% to a seasonally adjusted, annualized level of 426,000. This was a fourteenth consecutive monthly contraction. But since the sales pace picked up, the inventory level represented 10.0 month's of sales, down from a 10.4 month turnover time in May.
The average new home price declined by just $300 to $298,000 but this was 2.6% lower than what it was a year earlier. The median price rose by $3,200 to $230,900 but was 2.0% down on a year-over-year basis.
Today the Commerce Department said that the seasonally adjusted, annualized pace of new home sales fell by 0.6% last month to 530,000. Despite the decline, May's originally reported pace of 512,000 was revised up to 533,000, April's previously reported 525,000 was revised up to 542,000, and March's 501,000 was revised up to 513,000.
The report said that the pace rose by 5.3% in the Northeast and by 2.5% in the Midwest. But in the two largest contributing regions, the rate fell. The South saw a decline of 2.0% and the West saw one of 0.9%.
With new home construction declining, the inventory of homes on the market fell by 5.3% to a seasonally adjusted, annualized level of 426,000. This was a fourteenth consecutive monthly contraction. But since the sales pace picked up, the inventory level represented 10.0 month's of sales, down from a 10.4 month turnover time in May.
The average new home price declined by just $300 to $298,000 but this was 2.6% lower than what it was a year earlier. The median price rose by $3,200 to $230,900 but was 2.0% down on a year-over-year basis.
Thursday, July 24, 2008
Arkansas Mortgage
Arkansas Mortgage rates along with naitonal rates saw a 35 bps increase for the week. There is no one thing causing the increase. It can be linked to a number of things including increasing inflation, tighter lending guidelines all around, a loss of confidence in Fannie Mae and Freddie Mac, and an upcoming general election.
A little later tomorrow morning, the report on new home sales for June will be released. This may have an effect on Little Rock Home Loans In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981. This may have a negative effect on Arkansas Mortgage loans.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
Washinton Mutual was the story of the day. Shares dropped sharpley as concerns grew about their portfolio. Earlier in the week WAMU reported a 3 billion dollar loss.
Downey Finacial was another big loser wih shares down 34%. Downey was one of the biggest sellers of option-ARMs, which let home loan borrowers defer part of the monthly payment and add it to the principal. Option-ARMs become more risky for banks when housing prices are falling because the loan's size can quickly exceed the home's value. In Downey's home state, households are foreclosing at 2.6 times the national average, contributing to a $258.9 million loss in the second quarter for the company and about $600 million in losses over the past year.
A little later tomorrow morning, the report on new home sales for June will be released. This may have an effect on Little Rock Home Loans In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981. This may have a negative effect on Arkansas Mortgage loans.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
Washinton Mutual was the story of the day. Shares dropped sharpley as concerns grew about their portfolio. Earlier in the week WAMU reported a 3 billion dollar loss.
Downey Finacial was another big loser wih shares down 34%. Downey was one of the biggest sellers of option-ARMs, which let home loan borrowers defer part of the monthly payment and add it to the principal. Option-ARMs become more risky for banks when housing prices are falling because the loan's size can quickly exceed the home's value. In Downey's home state, households are foreclosing at 2.6 times the national average, contributing to a $258.9 million loss in the second quarter for the company and about $600 million in losses over the past year.
Wednesday, July 23, 2008
Wednesdays Market
Today Mortgage Rates saw a decline by early afternoon. The average Little Rock Mortgage Rate was 6.5% . Oil continued its decline and is now down $20 from its all time high. It closed at its lowest since June 4. Financial Services Committee chairman Barney Frank (D-MA), Senators Chris Dodd (D-CT) and Richard Shelby (R-AL) on Wednesday rolled out a housing proposal that could be put to the Senate floor for a final vote as early as this week.
“Americans are looking to Congress to deliver solutions to the housing crisis, which has forced millions of homeowners to file for foreclosure, reduced home values for millions more, crippled the mortgage markets, and significantly weakened the American economy,” said Dodd.
The comprehensive housing legislation contains provisions from a Dodd-Shelby bill that was approved by the Senate Committee on Banking, Housing and Urban Affairs on May 20, as well as measures from the Foreclosure Prevention Act, which passed the Senate in April.
Tomorrow morning brings the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
To obtain an Arkansas Mortgage you may visit The Mortgage Bank of Arkansas.
“Americans are looking to Congress to deliver solutions to the housing crisis, which has forced millions of homeowners to file for foreclosure, reduced home values for millions more, crippled the mortgage markets, and significantly weakened the American economy,” said Dodd.
The comprehensive housing legislation contains provisions from a Dodd-Shelby bill that was approved by the Senate Committee on Banking, Housing and Urban Affairs on May 20, as well as measures from the Foreclosure Prevention Act, which passed the Senate in April.
Tomorrow morning brings the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
To obtain an Arkansas Mortgage you may visit The Mortgage Bank of Arkansas.
Friday, July 18, 2008
Friday: 07/18/08 5:00 PM EDT :
Treasuries muddled along in negative territory throughout today's session. On a number of occasions, prices pared losses but a sense of resignation among traders and thin, Friday afternoon volumes sent prices to near their worst levels of the day at the close. Another decline in oil futures contributed to the perception that stocks would continue to get traction from lower energy prices, though stocks finished mixed.
In late trading, the 10-Year Treasury Note was down by 23/32, raising its yield to 4.08%; the Dow was up by 49.91 points to 11,496.57; and the Nasdaq was down by 29.52 points to 2,282.78.
A barrel of light, sweet crude oil for next month delivery fell by $0.41 on the New York Mercantile Exchange to settle at $128.88. In the last four sessions, the price has fallen by $16.30 and today's close was the lowest for a front-month contract since June 5.
The Dow gained 0.44% on the day and the S&P 500 made a nominal increase of 0.03%. A negative response to the earnings reports from Google and Microsoft left the tech-heavy Nasdaq with a 1.28% loss for the day. But all three indices made progress on the week. The Dow was the best performer with a gain of 3.57%, the S&P 500 rose by 1.71%, and the Nasdaq by 1.95%.
A number of better than expected earnings reports in the financial sector and news of government backing for Fannie Mae and Freddie Mac brightened the mood of stock traders this week and diluted the safe-haven allure of Treasuries. The yield of the benchmark 10-Year Treasury Note rose by 12 basis points, closing today at its highest level since June 25 (yield moves inversely to price).
Next week's economic calendar is extremely light. On Monday, the only major release is the Index of Leading Economic Indicators for last month. In May's report, the Conference Board, an independent research firm, said the index edged up by 0.1%, matching the increase in April. The index was unchanged (0.0%) in March after five months of negative readings.
Back-to-back gains have been rare in the last few years but the modest increases still suggest that the economy is not headed for a dramatic expansion. The main contributors to the positive index in May was the steeper interest rate spread between the effective federal funds rate and the 10-year Treasury yield, a general increase in stock prices, and increases in manufacturers' orders for consumer and capital goods items.
With steep losses in stocks, rising gasoline prices, and declining consumer expectations, another contraction reading is expected. But estimates call for just a decline of about 0.1%.
On Tuesday, there are no major economic indicators scheduled but the Treasury will be selling an additional amount of last January's issue of 20-Year Treasury Inflation Protected Securities (TIPS). TIPS have a fixed coupon (interest) rate, but their face value is regularly adjusted according to the Consumer Price Index, so the interest payout amounts fluctuate according to the changes in inflation. At maturity, the greater of the inflation-adjusted principal or the original face value is paid out.
January's initial offering was met with mixed demand. Bids exceeded the $8 billion offer amount by 1.79 to 1, the lowest bid-to-cover ratio for the security in two years. Individual investor demand was relatively strong, however, with noncompetitive bids totaling $37.5 million -- a two-year high. But foreign demand was lackluster. Indirect competitive bids, which include those from foreign central banks, garnered 52.9% of the issue, the smallest portion in three years.
Tuesday's reopening issue will have a face value of $6 billion. The deadline for competitive bids is 1:00 PM Eastern Time. The deadline for noncompetitive bids is noon.
Out on Wednesday afternoon is the latest edition of the Federal Reserve's Beige Book, an anecdotal summary of economic conditions from the Fed districts, which the monetary policy committee uses as reference material in its regular deliberations. The next Fed policy meeting is scheduled for the August 5th.
The Beige Book reflects economic data that has already been released; however, observers will be watching for any emphasis or change in tone that might provide clues to upcoming policy actions.
Wednesday afternoon also brings the monthly auction of 2-Year Treasury Notes. June's offering was a success. The bid-to-cover ratio for the $30 billion issue was 2.64, the highest in the last eight auctions.
Noncompetitive bids totaled around $696 million. While this was down from $767 million in May, it was still the second highest amount since August of last year. Noncompetitive bids represented 2.3% of the offer amount, down from May's 2.6% but the second highest amount since January.
Foreign demand was solid. Indirect competitive bids received 27.8% of the issue. This was up from the award portion of 21.8% in May and was above the 25.8% average for the twelve auctions preceding June's.
On Thursday, the employment situation will be addressed once again in the jobless claims report. Yesterday, the Labor Department reported that the seasonally adjusted level of initial claims for state unemployment benefits rose last week by 18,000 to 366,000. The increase was the largest in five weeks but it was not unexpected given the 56,000 drop the week before.
The Independence Day adjustment factor is suspected to have contributed to the preceding week's steep decline. The four-week moving average, which smoothes out some of the short-term volatility, declined by 4,500 last week to 376,500.
Regardless of the recent gyrations, the trend is still up. For the first twenty-eight weeks of the year, the weekly average claims figure has been 362,357. For the same period last year, the average was 315,000.
Today's report said that continuing claims for the week ending July 5 (continuing claims must be at least a week old) fell by 81,000 to 3.122 million. This was the largest drop since the first week of 2006 but it too was likely skewed by the holiday.
Like the initial claims data, the underlying trend in continuing claims is also is up. The four-week moving average rose by 16,500 to 3,142,750, the highest reading since mid-February of 2004. For the twenty-seven weeks of data this year, the average continuing claims reading has been 2,941,852. For the same period in 2007, the average was 2,511,407.
Many analysts feel that the latest increase in the initial claims figure was not enough to compensate for the holiday-distorted drop. Therefore, another increase is expected in this week's claims figure.
Also out on Thursday morning is the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
A slight decline of 0.8% is predicted for June's sales pace, bringing it down to 4.95 million.
On Thursday afternoon, the Treasury will be conducting its monthly auction of 5-Year Notes. Last month's had mixed results but overall demand was strong. The bid-to-cover ratio for the $20 billion offer was 2.48, the highest in the last eight auctions. But individual investor demand was a little soft. Noncompetitive bids totaled $91 million, down from $118 million in May and down from the average of $109 million in the twelve auctions preceding last month's.
Foreign demand was also relatively weak. Indirect competitive bids received 21.1% of the issue. Although this was a marked improvement from May's award portion of 16.3%, it was still lower than the twelve-month average of 26.0%.
On Friday, the durable goods orders report for June will be released. In May's report, the Commerce Department said that the seasonally adjusted level of new orders for durable goods items were virtually unchanged (0.0%). The figure was in line with analyst predictions but the report said the level fell in April by 1.0% instead of the previously reported decline of 0.5%.
Durable goods are defined as items meant to last three years or more. They are usually labor-intensive to produce, expensive, and therefore often financed. Because of this, the trend in orders provides some insight regarding upcoming production activity and the effect interest rates may be having on the process.
A large but volatile orders category is transportation and it saw a 2.6% increase in May. Excluding the category, the orders level fell by 0.9% after a 1.9% increase in April (previously reported a gain of 2.4%).
Observers also look at the orders level excluding the defense sector since defense orders are not governed by standard market forces. Defense orders were up by 11.3% but excluding the category, orders were down by 0.6% following a 0.8% decline in April.
Another closely watched category is that of nondefense capital goods minus aircraft, seen as a gauge of core business demand. The order level there fell by 0.8% in May after a 3.1% increase in April.
Little change in the overall orders level is predicted for June. Forecasts range from a slight decline to a slight increase.
A little later, the report on new home sales for June will be released. In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
The last release of the week is the final read on consumer sentiment for the month from the twice-monthly surveys conducted by the University of Michigan. The preliminary survey results, released last Friday, showed an overall sentiment index of 56.6, up slightly from June's final reading of 56.4 and better than the 56.0 that analysts had predicted. Despite the improvement, June's reading was the lowest since 1980 and the preliminary reading for July was not much better.
The final index is not expected to have changed much from the preliminary reading.
10:30 AM EDT : Treasuries are down once again this morning but price action has been choppy. Oil futures are up, bouncing after three days of sharp declines. The move in oil has pressured stocks and the indices are currently in negative territory. A better than expected (less awful than feared) report from Citigroup is providing some footing for stocks but the lure to take profits following the rallies of the last two days is generating a selling bias.
There are no major economic releases today so technical factors will take on added significance. Bond traders may feel that recent losses have been overdone but the recent improvement in the financial sector has diluted safe-haven buying of Treasuries.
Traders are also looking ahead to more supply coming next week. The Treasury will be selling an additional $6 billion of last January's 20-Year TIPS issue on Tuesday, its monthly issue of 2-Year Notes on Wednesday (probably $30 billion), and July's issue of 5-Year Notes on Thursday (probably $20 billion).
Since the new issues will have greater liquidity, traders avoid buying the soon-to-be off-the-run issue. Traders who will be bidding at the auction avoid buying the old issue since they want to keep yield levels high (bids are for yield). And many traders take to the sidelines until they learn how well the new issue has been received.
Next week's economic calendar is light but does include the existing and new home sales reports on Thursday and Friday, respectively.
Citigroup's better than expected earnings report joins those from Wells Fargo and JP Morgan Chase this week and is underpinning a recovery in the financial sector of the stock market.
But the price of a barrel of crude oil for August delivery was recently trading up by $1.53 to $130.82 per barrel. Though the bounce is not too surprising following an almost $16.00 plunge in the last three days, traders will be keeping an eye on how far the price moves today. Rising energy prices act as a brake on the economy since they weaken business and consumer spending in other areas of the economy.
The tech sector of the market is currently the worst performer on disappointing earnings reports released after the bell yesterday by Microsoft and Google . . . .
Treasuries muddled along in negative territory throughout today's session. On a number of occasions, prices pared losses but a sense of resignation among traders and thin, Friday afternoon volumes sent prices to near their worst levels of the day at the close. Another decline in oil futures contributed to the perception that stocks would continue to get traction from lower energy prices, though stocks finished mixed.
In late trading, the 10-Year Treasury Note was down by 23/32, raising its yield to 4.08%; the Dow was up by 49.91 points to 11,496.57; and the Nasdaq was down by 29.52 points to 2,282.78.
A barrel of light, sweet crude oil for next month delivery fell by $0.41 on the New York Mercantile Exchange to settle at $128.88. In the last four sessions, the price has fallen by $16.30 and today's close was the lowest for a front-month contract since June 5.
The Dow gained 0.44% on the day and the S&P 500 made a nominal increase of 0.03%. A negative response to the earnings reports from Google and Microsoft left the tech-heavy Nasdaq with a 1.28% loss for the day. But all three indices made progress on the week. The Dow was the best performer with a gain of 3.57%, the S&P 500 rose by 1.71%, and the Nasdaq by 1.95%.
A number of better than expected earnings reports in the financial sector and news of government backing for Fannie Mae and Freddie Mac brightened the mood of stock traders this week and diluted the safe-haven allure of Treasuries. The yield of the benchmark 10-Year Treasury Note rose by 12 basis points, closing today at its highest level since June 25 (yield moves inversely to price).
Next week's economic calendar is extremely light. On Monday, the only major release is the Index of Leading Economic Indicators for last month. In May's report, the Conference Board, an independent research firm, said the index edged up by 0.1%, matching the increase in April. The index was unchanged (0.0%) in March after five months of negative readings.
Back-to-back gains have been rare in the last few years but the modest increases still suggest that the economy is not headed for a dramatic expansion. The main contributors to the positive index in May was the steeper interest rate spread between the effective federal funds rate and the 10-year Treasury yield, a general increase in stock prices, and increases in manufacturers' orders for consumer and capital goods items.
With steep losses in stocks, rising gasoline prices, and declining consumer expectations, another contraction reading is expected. But estimates call for just a decline of about 0.1%.
On Tuesday, there are no major economic indicators scheduled but the Treasury will be selling an additional amount of last January's issue of 20-Year Treasury Inflation Protected Securities (TIPS). TIPS have a fixed coupon (interest) rate, but their face value is regularly adjusted according to the Consumer Price Index, so the interest payout amounts fluctuate according to the changes in inflation. At maturity, the greater of the inflation-adjusted principal or the original face value is paid out.
January's initial offering was met with mixed demand. Bids exceeded the $8 billion offer amount by 1.79 to 1, the lowest bid-to-cover ratio for the security in two years. Individual investor demand was relatively strong, however, with noncompetitive bids totaling $37.5 million -- a two-year high. But foreign demand was lackluster. Indirect competitive bids, which include those from foreign central banks, garnered 52.9% of the issue, the smallest portion in three years.
Tuesday's reopening issue will have a face value of $6 billion. The deadline for competitive bids is 1:00 PM Eastern Time. The deadline for noncompetitive bids is noon.
Out on Wednesday afternoon is the latest edition of the Federal Reserve's Beige Book, an anecdotal summary of economic conditions from the Fed districts, which the monetary policy committee uses as reference material in its regular deliberations. The next Fed policy meeting is scheduled for the August 5th.
The Beige Book reflects economic data that has already been released; however, observers will be watching for any emphasis or change in tone that might provide clues to upcoming policy actions.
Wednesday afternoon also brings the monthly auction of 2-Year Treasury Notes. June's offering was a success. The bid-to-cover ratio for the $30 billion issue was 2.64, the highest in the last eight auctions.
Noncompetitive bids totaled around $696 million. While this was down from $767 million in May, it was still the second highest amount since August of last year. Noncompetitive bids represented 2.3% of the offer amount, down from May's 2.6% but the second highest amount since January.
Foreign demand was solid. Indirect competitive bids received 27.8% of the issue. This was up from the award portion of 21.8% in May and was above the 25.8% average for the twelve auctions preceding June's.
On Thursday, the employment situation will be addressed once again in the jobless claims report. Yesterday, the Labor Department reported that the seasonally adjusted level of initial claims for state unemployment benefits rose last week by 18,000 to 366,000. The increase was the largest in five weeks but it was not unexpected given the 56,000 drop the week before.
The Independence Day adjustment factor is suspected to have contributed to the preceding week's steep decline. The four-week moving average, which smoothes out some of the short-term volatility, declined by 4,500 last week to 376,500.
Regardless of the recent gyrations, the trend is still up. For the first twenty-eight weeks of the year, the weekly average claims figure has been 362,357. For the same period last year, the average was 315,000.
Today's report said that continuing claims for the week ending July 5 (continuing claims must be at least a week old) fell by 81,000 to 3.122 million. This was the largest drop since the first week of 2006 but it too was likely skewed by the holiday.
Like the initial claims data, the underlying trend in continuing claims is also is up. The four-week moving average rose by 16,500 to 3,142,750, the highest reading since mid-February of 2004. For the twenty-seven weeks of data this year, the average continuing claims reading has been 2,941,852. For the same period in 2007, the average was 2,511,407.
Many analysts feel that the latest increase in the initial claims figure was not enough to compensate for the holiday-distorted drop. Therefore, another increase is expected in this week's claims figure.
Also out on Thursday morning is the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
A slight decline of 0.8% is predicted for June's sales pace, bringing it down to 4.95 million.
On Thursday afternoon, the Treasury will be conducting its monthly auction of 5-Year Notes. Last month's had mixed results but overall demand was strong. The bid-to-cover ratio for the $20 billion offer was 2.48, the highest in the last eight auctions. But individual investor demand was a little soft. Noncompetitive bids totaled $91 million, down from $118 million in May and down from the average of $109 million in the twelve auctions preceding last month's.
Foreign demand was also relatively weak. Indirect competitive bids received 21.1% of the issue. Although this was a marked improvement from May's award portion of 16.3%, it was still lower than the twelve-month average of 26.0%.
On Friday, the durable goods orders report for June will be released. In May's report, the Commerce Department said that the seasonally adjusted level of new orders for durable goods items were virtually unchanged (0.0%). The figure was in line with analyst predictions but the report said the level fell in April by 1.0% instead of the previously reported decline of 0.5%.
Durable goods are defined as items meant to last three years or more. They are usually labor-intensive to produce, expensive, and therefore often financed. Because of this, the trend in orders provides some insight regarding upcoming production activity and the effect interest rates may be having on the process.
A large but volatile orders category is transportation and it saw a 2.6% increase in May. Excluding the category, the orders level fell by 0.9% after a 1.9% increase in April (previously reported a gain of 2.4%).
Observers also look at the orders level excluding the defense sector since defense orders are not governed by standard market forces. Defense orders were up by 11.3% but excluding the category, orders were down by 0.6% following a 0.8% decline in April.
Another closely watched category is that of nondefense capital goods minus aircraft, seen as a gauge of core business demand. The order level there fell by 0.8% in May after a 3.1% increase in April.
Little change in the overall orders level is predicted for June. Forecasts range from a slight decline to a slight increase.
A little later, the report on new home sales for June will be released. In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
The last release of the week is the final read on consumer sentiment for the month from the twice-monthly surveys conducted by the University of Michigan. The preliminary survey results, released last Friday, showed an overall sentiment index of 56.6, up slightly from June's final reading of 56.4 and better than the 56.0 that analysts had predicted. Despite the improvement, June's reading was the lowest since 1980 and the preliminary reading for July was not much better.
The final index is not expected to have changed much from the preliminary reading.
10:30 AM EDT : Treasuries are down once again this morning but price action has been choppy. Oil futures are up, bouncing after three days of sharp declines. The move in oil has pressured stocks and the indices are currently in negative territory. A better than expected (less awful than feared) report from Citigroup is providing some footing for stocks but the lure to take profits following the rallies of the last two days is generating a selling bias.
There are no major economic releases today so technical factors will take on added significance. Bond traders may feel that recent losses have been overdone but the recent improvement in the financial sector has diluted safe-haven buying of Treasuries.
Traders are also looking ahead to more supply coming next week. The Treasury will be selling an additional $6 billion of last January's 20-Year TIPS issue on Tuesday, its monthly issue of 2-Year Notes on Wednesday (probably $30 billion), and July's issue of 5-Year Notes on Thursday (probably $20 billion).
Since the new issues will have greater liquidity, traders avoid buying the soon-to-be off-the-run issue. Traders who will be bidding at the auction avoid buying the old issue since they want to keep yield levels high (bids are for yield). And many traders take to the sidelines until they learn how well the new issue has been received.
Next week's economic calendar is light but does include the existing and new home sales reports on Thursday and Friday, respectively.
Citigroup's better than expected earnings report joins those from Wells Fargo and JP Morgan Chase this week and is underpinning a recovery in the financial sector of the stock market.
But the price of a barrel of crude oil for August delivery was recently trading up by $1.53 to $130.82 per barrel. Though the bounce is not too surprising following an almost $16.00 plunge in the last three days, traders will be keeping an eye on how far the price moves today. Rising energy prices act as a brake on the economy since they weaken business and consumer spending in other areas of the economy.
The tech sector of the market is currently the worst performer on disappointing earnings reports released after the bell yesterday by Microsoft and Google . . . .
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