Market Update Friday August 5th, 2011
By John Sauro
Friday was another whipsaw day for the markets. This time Bonds lost some of the ground gained earlier in the week due to a better than expected Employment Report.
Bond markets surged on Tuesday and Thursday while the Dow plunged.
The flight to safety continued on a weakening US economy and as the European crisis lingers. The 4% Bond coupon rose 69bp Tuesday finishing at 102.59. The rally in Bonds continued through to Thursday, when the stock market lost 500 points.
Bonds finished the week at 102.50 up 50 basis points from Mondays close. The 30 year fixed mortgage rate is currently at 4.25%.
U.S. Credit Rating Downgraded to AA+
Timing is everything.
Monday could be a bad day for Mortgage rates, as the downgrade could weigh heavy on Bond prices which would mean higher rates.
So if you are considering buying or refinancing, take advantage of the volatility by working with a seasoned professional who keeps an eye on the bond market and can advise you when to lock in.
The right advise could mean saving as much as a 1/2 % on the interest rate.
Buckle up, as I don’t think the volatility is over.
Mortgage Deduction Under Fire
President Obama, a Democrat, has no qualms about killing or whittling down the Mortgage Interest Deduction. He just doesn’t get it. This President has done Nothing, Absolutely Nothing to help the real estate market recover. And this is astonishing considering that real estate accounts for one fifth of the GDP. The word on the Hill is that they fully expect the Mortgage Interest Deduction to get carved down to $500k from the current $1 million – as part of a long term debt deal between the GOP and White House.
June Home Construction Climbs to $772.3B Annual Rate
Annual rates for construction spending crept forward in June, according to a report released by the Census Bureau, which reported figures for the industry climbing to $772.3 billion, some 0.2 percent, plus or minus 1.8 percent, above the $770.5 billion estimate over May. Despite contrasting May with gains over June, new construction spending figures that month this year still dropped beneath the $810.4 billion mark seen during the same month last year
The Economy Grew 1.3% in Second Quarter, Slightly Less Than Expected.
Second-half growth to pick up, racking up an annual gain of 2% as the impact of first-half shocks fades, reported “The Kiplinger Letter”. Consumer confidence is ticking upward.
And a decline in initial unemployment claims to below 400,000 spells improvement.
Non-Farm Payrolls Rise by 117,000, Unemployment Rate Drops to 9.1%, which is lower than Expected