Good news for GMAC, Rates help applications everywhere, but How did rates creep back up?

January 5th, 2009 · No Comments


Watching rates go up for no sustainable apparent reason is about as much fun as putting away Christmas ornaments and taking the tree to the curb. As they say, “A rising tide raises all boats”, and low rates have helped every lender still in the ring, big or small, regardless of geographic concentration. U.S. Bank’s refi applications more than doubled last month. Fifth Third, the Ohio area’s largest lender, reported that refinance activity accounted for almost two-thirds of loan applications in December compared with one-third a month earlier. Even the Bank of Kentucky’s applications doubled from November to December.

GMAC Bank’s parent company, GMAC Financial Services, announced that the Federal Reserve Bank has approved its application to become a bank holding company. On top of that, the U.S. Treasury announced that it will purchase $5 billion in senior preferred equity from GMAC, and agreed to lend up to an additional $1 Billion in support of their reorganization as a bank holding company.

Not much happened to the economy in the last 4-5 days, aside from dire numbers coming from retailers which ordinarily would help rates. Yet we find the 10-yr Treasury hit 2.50%! It has come back down slightly from there, but keep in mind that a) The market was overbought, suggesting that a correction was due, b) we have supply ahead with a 3-yr and 10-yr auction this week on Wednesday and Thursday, and a 10-yr TIPS auction tomorrow, c) how much lower did anyone think that rates were going to go, in the near term? Fortunately mortgage rates and doing better than Treasuries, which makes some sense given that they did not participate in the big move down. Currently the 10-yr is at 2.43%, and mortgage prices are perhaps .5 better in price than late last week, although it seems that no one is quite sure of where they should be priced!

There is no news Monday, aside from Construction Spending. Tuesday we have the Commerce Department’s November Factory Orders data. This data gives us a fairly important measurement of manufacturing sector strength, both in durable and non-durable goods, and is expected down 2.6%. Also Tuesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding inflation and monetary policy. The usual Jobless Claims on Thursday, and then the final report of the week comes Friday morning when the Labor Department will post December’s employment figures. Current forecasts call for a 0.3% increase in the unemployment rate up to 7.0%, and Nonfarm Payroll -  500,000.

Tags: Commentary · Mortgage Market · Rob Chrisman

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