11/5/09

Good morning. The Senate passed the bill extending the home buyers tax credit and adding 14 weeks to unemployment insurance; it goes to the House for quick passage then to Obama for a TV extravaganza signing event.
As was expected, the FOMC kept its central message and the Fed Funds rate unchanged, noting that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." What are Fed Funds? These are cash balances held by banks with their local Federal Reserve Bank, typically involved in an “inter-bank sale” of a Fed fund deposit for one business day - overnight. And the Fed Funds Rate is the overnight interest rate charged by those banks with excess reserves on hand. Why would this impact the mortgage rate that you pay on your mortgage? They don’t, since the credit profile of a borrower, or house, is more complicated and riskier than a bank with excess funds, and an overnight rate is obviously different than a 30 year rate.
Yesterday, however, in addition to the Fed announcement, Treasury officials announced a record refunding package for next week. Sales include $40 billion in 3-year notes, $25 billion 10-year notes, and a $16 billion 30- year bonds to be held on Monday, Tuesday and Thursday. (Wednesday is a holiday.) For economic news we had Jobless Claims. Claims for jobless insurance hit a 10-month low. Tomorrow, of course, the Labor Department is expected to report that the decline in employment is slowing and that payrolls fell in October, compared to September. Currently mortgage prices are about the same as yesterday. With employment tomorrow look for generally quiet trade today in both stocks and bonds