Jun. 18, 2007: Mortgage monotone and some humor to start the week

What happened Friday, besides schools letting out all over the nation? The Consumer Price Index came in slightly higher than the consensus had predicted, the core index was below expectations. The NY Empire State Manufacturing Survey 25.8 in June from 8 in May. The details of the report were somewhat mixed but generally upbeat. Industrial Production was 0.0%, stagnant for May, and Capacity Utilization was 81.3%.  The University of Michigan Consumer Sentiment Survey was 83.7, compared to May’s final 88.3, a little weaker than expected. After all of that, Treasury and mortgage prices improved a little, and rates dropped a little. U.S. Treasuries Advance After Consumer Prices Slowed Last Month. After the dust settled, yields improved, mortgage prices improved, and stock improved.

For anyone who cares about Fed Funds, in spite of not really influencing mortgage prices, traders are split on whether the Fed will lift or cut rates by year-end. Traders see a 36% chance the Fed will lift its target to at least 5.5 percent in December. A month ago, traders saw no chance of a rate increase by then. This morning stability has returned to market and the 10-yr has rallied back to 5.14%, after touching a 5.33% low. Hopefully it will be a quiet week – there is certainly little economic news.

Did you have to work over the weekend? At Bear Stearns a group of hedge-fund managers spent the weekend scrambling to line up new investors/lenders to keep their fund (High Grade Structured Credit Strategies Enhanced Leverage) alive. On Friday afternoon, Merrill Lynch planned to seize $400 million in collateral from the fund and other investors demanded to get their cash back due to concerns that the fund wouldn’t be able to make margin calls.

What percent of your income goes to housing expense? A record 37.3 million households, or one in three, were paying 30% of their income toward housing in 2005, according to The State of the Nation’s Housing 2007. The study said the number of households with that cost burden had risen roughly 20% since 2001 when rates started to slide helping appreciation and lowering payments.

A doctor was addressing a large audience in Tampa. “The material we put into our stomachs is enough to have killed most of us sitting here years ago. Red meat is awful. Soft drinks corrode your stomach lining. Chinese food is loaded with MSG. High fat diets can be disastrous, and none of us realizes the long-term harm caused by the germs in our drinking water. But there is one thing that is the most dangerous of all and we all have, or will, eat it. Can anyone here tell me what food it is that causes the most grief and suffering for years after eating it?” After several seconds of quiet, a 75-year-old man in the front row raised his hand, and softly said, “Wedding Cake.”

Week of June 18 – June 22