Dec
23
Treasuries Rise as U.S. New Home Sales Fall to Seven-Month Low
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Dec. 23 (Bloomberg) — Treasuries gained for the first time in four days after reports showed spending by U.S. consumers rose less than forecast and purchases of new homes unexpectedly fell to a seven-month low in November.
Treasury 10-year notes, capped their steepest back-to-back decline since July yesterday amid speculation a recovery in the world’s largest economy will fuel inflation, reducing the value of bonds’ fixed payments. The U.S. announced plans to sell a record-tying $118 billion of 2-, 5- and 7-year notes next week.
“Things have improved, but we are not on our way to a strong, sustainable recovery,” said Thomas Tucci, head of U.S. government bond trading at RBC Capital Markets New York, one of the 18 primary dealers that trade with the central bank. “Higher yields brought in some interest.”
The benchmark 10-year note yield fell three basis points to 3.73 percent at 12:44 p.m. in New York, according to BGCantor Market Data. The yield increased 25 basis points this week. The 3.375 percent security due November 2019 rose 1/4, or $2.50 per $1,000 face amount, to 97 4/32.
The U.S. will sell $44 billion in two-year notes on Dec. 28, $42 billion in five-year debt the next day and $32 billion in seven-year securities the day after that.
‘Little Impetus’
Purchases of new homes dropped 11 percent in November to an annual pace of 355,000 after a 400,000 rate in October that was lower than previously estimated, the Commerce Department said in Washington. Sales were projected to climb to a 438,000 annual pace, according to the median forecast in a Bloomberg survey.
Consumer spending rose 0.5 percent last month, below the median forecast for a 0.7 increase in another Bloomberg survey. The Fed’s preferred price measure, which is tied to spending patterns and excludes food and fuel, was unchanged in November from the previous month, the first time it didn’t increase this year. The gauge was up 1.4 percent from a year earlier, the same as in October.
“Overall the data was softer than expected with downward implications for growth and little inflation pressure,” Ian Lyngen senior government bond strategist at CRT Capital Group LLC in Stamford, Connecticut, wrote in a note to clients. The Fed’s price gauge provides “little impetus for the FOMC to shift its policy from the ‘extended period’ stance.”
Debt Auctions
Fed officials on Dec. 16 left the target rate for overnight loans between banks in a range of zero to 0.25 percent and reiterated a pledge to keep the target at almost zero for an “extended period.”
The $44 billion two-year auction would match the record offerings of October and November. The $42 billion five-year sale and $32 billion seven-year offering equal the all-time highest issues set last month.
“There is no doubt that the increasingly loud footsteps of new Treasury supply was partly behind the spike higher in Treasury rates seen in the past few days,” William O’Donnell, U.S. government bond strategist at primary dealer RBS Securities Inc. in Stamford, Connecticut, wrote in a note to clients. “It’s impossible to say if rates have backed up enough to bring in the buyers.”
Less Money
President Barack Obama is borrowing unprecedented amounts for spending programs. U.S. marketable debt increased to a record $7.17 trillion in November from $5.80 trillion at the end of last year.
Efforts by the U.S. to cut its current-account deficit mean other nations accumulate fewer dollars through trade, leaving them with less money to buy Treasuries, Chinese central banker Zhu Min said on Dec. 17 at a forum in Beijing.
“When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken,” Zhu said.
The difference in yields between two- and 10-year notes widened to a record this week as investors speculated the recovery will reduce demand at debt sales.
The spread increased to as much as 288 basis points yesterday and was 285 basis points today. The previous record of 281 basis points was reached on June 5, when Treasuries plunged after a government report showed the smallest decline in U.S. payrolls in eight months. Ten-year note yields touched 4 percent the following week, the highest level in 2009.
Treasuries of all maturities have fallen 3.2 percent this year, according to Bank of America Merrill Lynch indexes.
Dec
12
$2 Trillion of Negative Real Estate Equity for U.S. Households by 2010
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This WSJ article provides a fascinating insight into the dire state of the domestic real estate market in California. Home-owners who bought during the boom years are increasingly abandoning their negative equity homes and taking advantage of much cheaper rental accommodation, often in the very same neighborhood as the homes with the impossible to service mortgage costs. The article makes the point that “California is one of 10 states that largely prevent mortgage lenders from going after the other assets of borrowers who default.”
Read the rest at seekingalpha.com
Dec
10
Dec. 10 (Bloomberg) — Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said.
This year’s filings will surpass 2008’s total of 3.2 million as record unemployment and price erosion batter the housing market, the Irvine, California-based company said.
“We are a long way from a recovery,” John Quigley, economics professor at the University of California, Berkeley, said in an interview. “You can’t start to see improvement in the housing market until after unemployment peaks.”
Foreclosure filings exceeded 300,000 for the ninth straight month in November, RealtyTrac said today. A weak labor market and tight credit are “formidable headwinds” for the economy, Federal Reserve Chairman Ben S. Bernanke said in a Dec. 7 speech in Washington. The 7.2 million jobs lost since the recession began in December 2007 are the most of any postwar economic slump, Labor Department data show. Unemployment, at 10 percent last month, won’t peak until the first quarter, Quigley said.
Through November, U.S. lenders had permanently modified about 31,000 of the 4 million mortgages targeted for relief by the Obama administration’s foreclosure prevention plan. That’s less than 5 percent of eligible loans, the Treasury Department said today.
Loan-modification programs and an expanded government tax credit for first-time homebuyers are helping slow the monthly pace of foreclosure filings and “keeping a lid” on further property seizures, James Saccacio, RealtyTrac’s chief executive officer, said in the statement.
November filings fell 15 percent from the July peak and dropped 8 percent from October, the seller of default data said. That was the fourth straight monthly drop.
Late Payments
A total of 306,627 properties received a default or auction notice or were seized by banks last month, or one in 417 U.S. households, and a similar number are expected for December, RealtyTrac said.
There have been 3.6 million filings from January through November, the most in RealtyTrac records dating to January 2005.
Three loans went bad for every one that improved in the first 10 months of this year, according to a Dec. 2 report from Lender Processing Services Inc.
The combined delinquency and foreclosure rate for all loans increased to 12.6 percent through October, the Jacksonville, Florida-based loan servicing and mortgage data company said.
Fewer than 1.5 million homeowners — or less than half of those targeted — were eligible as of last month for Obama’s Home Affordable Modification Program, Herb Allison, Treasury assistant secretary for financial stability, said in Dec. 8 congressional testimony. More than 697,000 trial modifications had been started through November, Treasury said today.
Loan Modifications Fail
“Federal programs have not been successful and have done little about declining asset values,” Quigley said. “The probability that a renegotiated mortgage goes into subsequent default is substantially high.”
Nevada had the highest foreclosure rate for the 35th consecutive month, with one in 119 households receiving a filing in November. Total filings dropped 33 percent from both a year earlier and the previous month, to 9,295.
Florida ranked second, with filings for one in every 165 households. California was third, at one in 180, RealtyTrac said.
Arizona, Idaho, Michigan, Illinois, Utah, Maryland and New Jersey rounded out the 10 highest foreclosure rates.
California had the most filings with 73,995, up 22 percent from a year earlier. Foreclosure notices in the most populous state have fallen on a monthly basis since peaking in July, according to RealtyTrac.
Florida had 52,935 filings, up 8 percent from November 2008 and 2 percent from the previous month.
State Data
Illinois was third with 16,422 filings, more than double a year earlier. They fell 18 percent from a record high in October.
Michigan ranked fourth with 15,988, up 10 percent from a year earlier. Arizona, Texas, Ohio, Georgia, Nevada and New Jersey completed the 10 states with the most filings, RealtyTrac said.
Filings rose 65 percent from a year earlier to 9,227 in New Jersey. They dropped 3.7 percent to 2,114 in Connecticut, and jumped 69 percent to 4,401 in New York.
Three California cities had the highest foreclosure rates among metropolitan areas with populations of 200,000 or more. Merced led, with one in every 83 households there getting a notice, five times the national average. Stockton was second at one in 85, and Modesto was third at one in 87.
Cape Coral-Fort Myers, Florida, was fourth with one in 96 households receiving a notice, and Las Vegas was fifth at one in 102, according to RealtyTrac.
Riverside-San Bernardino and Bakersfield, both in California, ranked sixth and seventh; Orlando-Kissimmee, Florida, was eighth; Vallejo-Fairfield, California, ranked ninth; and Sacramento came in 10th, said RealtyTrac, which sells default data collected from more than 2,200 counties representing 90 percent of the U.S. population.
Dec
4
Mint Explains Why The Real Unemployment Rate Is 17.2 Percent
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From TechCrunch: “The U.S. unemployment numbers are out today, and most headlines will show that the U.S. unemployment rate in November was 10.0 percent, down from 10.2 percent in October. That number is depressingly large, but even that under-counts the true number of unemployed. For instance, it doesn’t count those people who don’t have a job and have given up looking for one, or those who have found marginal part-time work but still can’t make ends meet and are still looking for a full-time job.”
To explain all of this (and I guess to remind people why it’s important to budget in these trying times), the folks at Mint.com prepared the video below:
Dec
3
Memphis Area Home Sales Rose More Than 10 Percent from September to October
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Memphis area home sales rose more than 10 percent from September to October, according to the Memphis Area Association of Realtors.
“The impending Nov. 30 deadline for the first-time home buyer tax credit helped push buyers into the market in October, which registered the largest gain in sales so far this year,” association president Jon Albright said in a prepared release.
Home sales numbered 1,349 in October, compared with 1,220 in September.
Even though sales were down 2 percent compared to October 2008, that’s the smallest year-over-year drop so far in 2009.
House prices continued to rise compared to last year.
The average sales price in October was $126,405, compared to $121,154 in October 2008.
There were 1,751 pending sales in October, down from the 1,766 pending sales in October 2008.
And the inventory of homes dropped by 1.5 percent the previous month, to 9,375 units for sale in October.
“Now that the tax credit has been extended and expanded to include qualified existing homeowners who have a purchase contract in place by April 30, 2010, we are hopeful we will see continued strength in local sales over the next few months,” Albright said.
Total sales so far for 2009 stood at $1.62 billion by the end of October, compared to $2.07 billion for first 10 months of 2008. That’s a 21.5 percent drop.
The 4,000-member real estate association compiles data on all property transactions for Shelby, Fayette, Tipton, Hardeman, Hardin, McNairy and Lauderdale counties, in Tennessee, DeSoto County in Mississippi and Crittenden County in Arkansas.