December 6, 2012 by Leave a comment

Mortgage backed securities have been pretty volatile this morning, but as of now they are up on the day.  The continuation of this trend would lead to improved mortgage rates, but I doubt we see any real movement in one direction or the other.  Rates have been in the same general vicinity for the last few months, and that probably won’t change until a deal emerges from the fiscal cliff negotiations and/or the situation in Europe gets demonstrably better or worse.  I don’t anticipate either event in the very near future.

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The only major economic data of the day, weekly initial jobless claims,  which appears to still be out of whack from the hurricane.  Claims dropped by 25,000 from the week prior to a seasonally adjusted pace of 370,000.  The four-week moving average ticked up by 2,250 to a pace of 405,750.  Much of this data is pretty worthless due to the hurricane skew, but the overall trend still seems to be a sideways grind.  I don’t think this report will have much, if any impact on the markets today.  I think tomorrow’s non-farm payroll report will have a diminished impact for basically the same reasons.

In fiscal cliff news, both sides appear to be increasingly entrenched, and blah, blah, blah.  A deal is going to get done at the last minute.  It might even get done after the last minute and be retroactive.  Whatever happens, bear in mind that a combination of tax increases and spending cuts will put a drag on growth in the coming year.  Assuming that a real deal is made (and the can is not just kicked down the road for another couple of months), this is what is coming, in one form or another.  A deal will probably initially be bad for mortgage rates (and bonds in general), up until we start seeing the impact on the economy.  Again, a deal is still probably at least a couple of weeks away.

Once again, despite the day-to-day volatility, rates will be little changed on the week.

Today’s Links:

Salon: Simpson-Bowles is Magic. “It is whatever you want it to be.  It will fix the deficit and frow the economy and it does it without raising taxes on anyone, unless you want to raise taxes on some people, and the it does that.”

Credit Slips: Student-Loan Collections Could Be Subject to Drastic Overhaul.

Scientific American: NASA Releases Stunning Animation of Earth at Night.

The Atlantic: Citigroup Eliminates 11,000 Jobs in History’s Most Corporate-Jargony Paragraph Ever.

Financial Times: Paulson’s Bet on Eurozone Backfires.

Mental Floss: 8 Other Pro Sports Teams That Changed Their Nicknames. I’m sort of inclined to like the “Pelicans” nickname.  It’s not terrible.

Dave Dayen: Banks Rake in Profits – Largely From Government Supports.

Dealbook: Trail to a Hedge Fund, From a Cluster of Cases.

Reuters: Both Sides Dig In On ‘Fiscal Cliff,”, but ‘Nothing Going On.”  Of course, because nothing will happen until the last minute.

Bloomberg: Berlusconi Threatens to Topple Monti as Elections Near.  Like the works needed another monkey wrench.

AP: Man’s Home a 14-Foot Canoe in Boston Harbor.

Youtube: PM Julia Gillard Addresses the End of the World.  Both Australia and Julia Gillard are awesome.

Hardballtalk: Brian Cashman Can’t Spend Money. True or not, this headline warms the cockles of my heart.

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