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Daily Market Watch for Monday, January 22, 2018 (Courtesy of Larry Baer and Market Alert )
Short Term Trend (5 days or less): Favors higher rates and lower prices.
Long Term Trend (6 days or more): Favors higher rates and lower prices.
                      30 Year Fixed (National Average)
15-Minute Daily Chart of the Fannie Mae 5.0% - 30 Year from mktalert.net

 

Dow Jones Industrial Average Last 5 Days          



 
Commentary:

And so it begins.

This will be the fourth government shutdown since 1990. There have been 18 total government shutdowns since 1977.

Most government employees are expected to show up today for up to four-hours to discover whether they will be furloughed. Employees aren't supposed to do any work if they receive a furlough notice even if they want to – the government strictly prohibits accepting voluntary work. Those who are leaving today will turn in their mobile phones, tie up loose ends, secure property, and hit the bricks.

Active duty service members remain on active status even during a shutdown, but like other Federal employees, their paychecks will be delayed until legislators find a way to get the spending bill issues resolved.

Speaking of legislators, each of them will receive their paycheck even though they have cut off the payroll for perhaps up to 800,000 federal workers. Though I am sorely tempted to say significantly more about this issue, I will hold my tongue and focus on what the government shutdown means for the economy in general and mortgage interest rates in particular.

History shows that government shutdowns tend to have little impact on overall economic conditions. Most investors believe a brief closing (seven calendar days or less) won’t matter much. Looking back at the 16-day shutdown in 2013, the impact of the government closure did eventually become apparent-- but primarily in Washington and other areas with heavy concentrations of government workers.

With respect to the impact of government shutdowns on the trend trajectory of mortgage interest rates -- the longer the Congressional impasse lasts, the more damage will be done to global investors view of the creditworthiness of our national debt instruments.

In 2011 the debt rating agency Standard and Poor’s downgraded the credit rating of U.S. Treasury debt instruments due to “political brinkmanship.” Hopefully, the current Congressional logjam will clear before we are subject to another such downgrade since they do nothing but put upward pressure on mortgage interest rates.

My hope is both political parties will work diligently to find a way through the current impasse quickly – especially since they have a keen desire to begin focusing on midterm elections in November.

I’ll keep you posted as the current drama on Capitol Hill plays out.

This week Uncle Sam will be conducting a three-day, three-part debt auction series beginning on Tuesday and running through Thursday.

First up on the block will be $26 billion of 2-year notes followed on Wednesday by $34 billion of 5-year notes. The whole thing will wrap-up on Wednesday with the sale of $28 billion of 7-year notes.

If Congress is still duking-it-out trying to get a budget resolution passed, demand for these securities will likely be limited. If so, it will be difficult, if not impossible for mortgage interest rates to gain much traction toward lower levels.

In terms of economic news -- mortgage investors will get a look at the December Existing Home Sales numbers on Wednesday followed by the December New Homes Sales stats on Thursday. Friday brings the December Durable Goods Orders figures and the government’s first guesstimate of overall economic growth in the form of the Q4 Gross Domestic Product report. All of these reports may potentially be delayed due to the government shutdown.

At this juncture, it is safe to say the debt auctions and the barrage of scheduled economic news will take a distant backseat to Congressional efforts to pass a debt resolution.
 
Commentary and Chart Courtesy of Larry Baer and Market Alert

 
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Jim Norris - President (RMLO #304627)
12010 Miramar Shores Dr.
Houston, TX 77065
(281) 970-1082 ext 1
(866) 717-4556 ext 1 Toll Free

jim@sweetwatermortgage.com 

Elle Roloff Norris - Operations Manager (RMLO #304630)
12010 Miramar Shores Dr.
Houston, TX 77065
(281) 970-1082 ext 2
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elle@sweetwatermortgage.com

 

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Brenham:Gayle Valentine-Hill (RMLO #298234)
119 W Commerce St
Brenham, TX 77833
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119 W Commerce Street
Brenham, TX 77833
979-353-4234
979-251-0726

Email:sandra@texashomeplacemortgage.com
Houston:Jim Norris (RMLO #304627)
12010 Miramar Shores Dr
Houston, Tx 77065
(281) 970-1082 ext 1
(866) 717-4556 ext 1
Email:jim@sweetwatermortgage.com
Houston:Ellen Roloff Norris (RMLO #304630)
12010 Miramar Shores Dr
Houston, TX 77065
281-970-1082 ext 2
866-717-4556 ext 2
Email:elle@sweetwatermortgage.com

 

 
 
  
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