News for March 3rd 2009

Mortgage Market Minute: The market is trading up this morning with the FNMA 4.5% at 100.54, up +.09, the 5.0% MBS is at 101.94, up +.09 as well. The 5.5% MBS is at 102.72, up +.125. It’s a light day for news, with only Pending Home Sales (down surprisingly far) and some comments from Bernanke, neither of which should move markets dramatically. Tomorrow we are supposed to get details on the Obama Administration’s Homeowner Affordability and Stabilization Plan. So far, the Administration has regularly been short on detail, long on rhetoric, so we hope that it isn’t more of the same - - so do the markets. Later in the week we get more on (un)employment, which should be the real mover. Pending home sales fall 7.7%. NAR says home affordability highest since 1970.Pending home sales slid more than expected, according to the latest report from the National Association of Realtors this morning. After showing an unexpected rebound in. December of +4.8% (adjusted downward from 6.3%), January’s numbers showed that pending home sales fell -7.7%, far more than the -3.5% decline that was expected. The Pending Home Sales Index, based on contracts signed in January, was pegged at 80.4, the lowest since the NAR started the series in 2001. Existing home sales in January fell -5.3%, versus the +1.1% increase that was expected. The data is consistent with other reports which show new home sales falling -10.2% in January versus an expected -2.1% drop. “Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales," said Lawrence Yun, NAR chief economist. The NAR's housing affordability index surged 13.6 percentage points in January to 166.8, the highest since tracking began in 1970. "We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit."Fed will launch TALF on March 25 to jump-start securitization market. The Federal Reserve has says it will launch the Term Asset Backed Securities Facility (TALF) on March 25, a program which will provide up to $200 billion to investors owning AAA-rated ABS backed securities in a bid to improve terms in lending to consumers and small businesses and ultimately spur up to $1 trillion in lending. The operation, which the Fed says it hopes will "catalyze the securitization market", will be made on a monthly basis, and will extend until at least December 2009, after which the program will be reconsidered. The Fed also said it anticipates that by April the TALF will also cover rental, commercial and government vehicle fleet leases, as well as ABS "backed by small ticket equipment, heavy equipment and agricultural equipment loans." The Fed is also considering expanding the facility to include a broader range of securities and plans to ask for additional authorities to support the financial system in the United States.
Bernanke says we need more steam.Federal Reserve Chairman Ben S. Bernanke said the banking system may need more than the $700 billion already approved and that policy makers may need to take other aggressive measures --- even if it pushes up the already-bloated deficit. “Without a reasonable degree of financial stability, a sustainable recovery will not occur,” the Fed chairman said today before for the Senate Budget Committee. “Although progress has been made on the financial front since last fall, more needs to be done.” The Obama administration wants congressional approval for a massive $3.55 trillion federal budget for the fiscal year beginning in October -- including standby authority for $750 billion in new aid to the financial industry – on top of the gigantic $787 billion economic stimulus package that is now law. This year, government will spend $3.94 trillion, up 32 percent from a year ago, delivering a record deficit of $1.75 trillion this year (equal to about 12% of GDP, the highest since World War II). Equity markets aren’t happy with policy makers’ decisions, as the S&P500 has fallen -22.5% year-to-date, with the S&P Financials Index off -44.2%. According to Macroeconomic Advisers LLC, the Obama stimulus package could keep the jobless rate at about 8.8% versus the 9.5% rate that would result without the package – a questionable benefit given the enormous cost of the recovery efforts.
On today’s date: March 3…1634: 1st tavern in Boston opens (Samuel Cole)1791: Congress establishes U.S. Mint1853: Transcontinental railroad survey is authorized by Congress1875: Congress authorizes 20 cent coin, lasts only 3 years1955: Elvis Presley made his 1st TV appearance1959: San Francisco Giant's rename their stadium Candlestick ParkThe last word:“I once beat up the school bully with a baseball bat. He had two broken arms. Which is what gave me the courage.” -- Emo Philips