TOMORROW IS OFTEN THE BUSIEST DAY OF THE WEEK

"TOMORROW IS OFTEN THE BUSIEST DAY OF THE WEEK." Spanish Proverb. And it sure seemed that way every day of last week, with one of the busiest economic calendars seen in years. Friday’s Jobs Report capped off a week filled with election results and a big announcement from the Fed regarding the next round of Quantitative Easing (QE2). So what impact did all of this news have on Bonds and home loan rates? Let’s break it down.

On Friday, the Labor Department reported that 151,000 jobs were created in October, all in the private sector. This was much higher than the 60,000 job creations that were expected - and while the economy needs a lot more job creations to put a dent in the unemployment rate, this is a great start to a recovery in the labor market.

Adding to the positive tone of the report, there were upward revisions to both August and September's numbers, and the Unemployment Rate held steady at 9.6%. The Average Hourly Wage increased as well - and across the board, the numbers were stronger than anticipated. Should this trend continue in the coming months, it would support the notion that labor has not only stabilized - but is perhaps even expanding, which would be welcome news indeed.

And while this is great news for the economy, remember that when good economic news arrives, investors move money into Stocks... and this pulls money out of all types of Bonds, including Mortgage Backed Securities, which home loan rates are based on. When money moves out of Bonds, it causes Bond pricing and home loan rates to worsen - and that’s exactly what happened, following the better than expected Jobs Report. Although we all like to hear good news for the economy - any strong, positive economic news is bad news for Bond pricing and home loan rates.

Home loan rates were exceptionally volatile all last week - and likely to remain so ahead. While rates are still at very low, affordable levels - they won’t last forever, so please get in touch if you have questions about how the current rate climate might benefit your situation.

In other big news last week, the Federal Reserve Board made their much anticipated announcement regarding another round of "Quantitative Easing" or QE2, where the Fed will participate in purchasing Treasury Securities in a bid to keep the economic recovery on track. On Wednesday, the Fed announced that they intend to purchase $600 Billion in Treasuries, starting now and continuing through mid-2011, which equates to about $75 Billion in purchases per month. So how will this impact home loan rates ahead?

We need to be mindful that the Fed initiated QE2 for three reasons. One, to help lower interest rates in order to spur consumer and business spending... which in turn will create inflation. Two, to help lower the unemployment rate via an economic boost. And three, to help push Stock prices higher. And all three of these factors will cause headwinds for Bonds and home loan rates down the road.

As the Fed gets to work on putting their latest plan into effect - we can be sure that inflation readings in various economic reports will likely be more highly scrutinized by the markets. Upcoming reports will reveal whether the Fed will be successful in their quest to fight deflation, and create a level of Goldilocks inflation that is not too hot, not too cool... but juuuust right. Ultimately, if inflation expectations creep higher, interest rates for long-term Bonds - like Mortgage Bonds - will rise as well.

One thing is certain, the volatility we saw in the markets last week is sure to continue. If you have any questions about how you can take advantage of today’s historic low rates and fabulous home prices, please contact me, and let’s evaluate your current situation. And feel free to forward this email to any friends, family members, or colleagues who may have questions as well - I’m always pleased to talk with anyone you’d refer my way.

All "Betts" on Brian! The Only Relator you want!