AskShah - Shah Tehrany

I know we were all looking forward to this Memorial Day weekend in spite of what we knew was a gloomy forecast in NY for at least 2/3rds of the weekend. After all the bond markets have been kicking our butts over the last few weeks and I think we were all hoping that this week would be better. After all it could not get any worse, right? Well needless to say I was not very thrilled when I looked at my Bloomberg app @ 7:30 to see that the 10yr was up a handful more from Friday’s close. Read more: http://www.AskShah.com/market-update-52813-from-the-capital-markets-desk-of-franklin-first-financial/

I hate to start off the week on a bad note be unfortunately we are seeing some carry over from the selling last week. It is much of the same story but a strong retail sales number this morning did not help either. The market is still fixated on the story that the Fed is planning is ease their bond purchase program (QE). There was a Wall Street Journal report over the weekend regarding the subject but the reaction to the article was that it did not reveal anything new. So based upon what has yet to be communicated by the Fed, you can make the conclusion that the bond sell-off is a severe overreaction to a non-story. However, if the Fed has formally discussed a easing in QE behind the scenes then maybe there is something to this. Read more: http://www.AskShah.com/market-update-may-13/

Happy May 1st! The summer is within reach and we all know what that means…selling in stocks. You bet. Forget about the Speedo and string bikinis for a second and think stock markets! There is an old stock market adage which I personally cannot stand because I hate all of them but the one for now is “sell in May and go away”. Now this is pretty self-explanatory but for those that have not had their morning coffee yet it means that it is time to sell stocks and take the summer off until we get to the “Santa Clause” rally right after Thanksgiving. Yes it all sounds so stupid but it is out there and a lot of people buy into this nonsense. Read more: http://www.AskShah.com/market-update-5-1-13/

As an expert on the mortgage and housing market, Shah Tehrany was asked to share his professional opinion. He was featured once again on FoxBusiness, where he shares his belief that despite the improvements, the market is still facing some challenges that need to be addressed. You can read the full article here.

Barring any meaningful change today in the bond markets laid back attitude, it looks as if we are going to end this week like we did the previous week which is in this very tight range. The good news is that we are currently on the lower end of this tight range with the 10yr @ 1.68%. Mortgages also continue to follow the trend with the occasional exception by GNMA’s(FHA). I mentioned this the other day but did not give more detail regarding the reason for this. The Bank of Japan is doing what our Federal Reserve is doing which is implementing central bank policy to keep interest rates as low as possible. They are doing it for different reason which is to combat deflation but the current result is the same. So Japanese investors that want to invest in bonds are unable to get yield... Read more: http://www.AskShah.com/market-update-42613-from-the-capital-markets-desk-of-franklin-first-financial

So much for putting away those winter coats!! With that in mind it seems like the bond markets have been in hibernation over the last few weeks. We have seen minimal movement (no complaints from me on that one) as there seems to be storylines that are all away from the bond markets. Obviously last week the country was rightfully consumed by the events in Boston. This had more of an effect on the markets than most would think. Not just the emotional disconnect in focusing on things much more important than making money but the fact that many of the biggest money managers are located in the Boston area. Read more: http://www.AskShah.com/market-update-42213-from-the-capital-markets-desk-of-franklin-first-financial/

April Fools has come and gone as has Opening Day for the Mets and Yankees but yet one thing that remains the same is an origination friendly interest rate environment. The fact that we are sitting at a 1.83% 10yr while stocks are trading at all-time highs should make us all stand up and applaud. Something that A-Rod will not see in Yankee Stadium for a very long time. We all know how we got here with the recent turmoil in Europe but we all have to be encouraged that we are managing to stay here in-spite of some presence of doubt. We did get a domestic boost to lower bonds yields this morning with the release of the ADP report for March which was 42k below consensus @ +158k. There was a revision to Feb which showed an additional +39k but people like headlines so the market reaction is a little bullish for bonds and bearish for stocks. Either way I do not expect any additional focus on this report as the day goes on as all eyes start to turn to Friday’s NFP report for March. Read more: http://www.AskShah.com/market-update-4313-from-the-capital-markets-desk-of-franklin-first-financial

However, we did have some mortgage news that hit the tape yesterday. The Federal Housing Finance Agency announced a new, simplified loan modification program for 90+ day’s delinquent borrowers that will run from July 1, 2013 to August 1, 2015. Here are the highlights of the program: http://www.AskShah.com/market-update-32813-from-the-capital-markets-desk-of-franklin-first-financial

It is real hard sometimes to make sense of everything. The Dow reached another all-time high close yesterday which sounds great. And if taken separately to all else that would indicate that the world is humming along without a care in the world except the task of trying to figure out where to spend all this money that we are all making. However, once we look past this we see a very different picture. We see a very unsettling situation in Europe where the banks in Cyprus have been closed for over a week now on the concern of a run on the bank. There are thousands rioting in the streets to protest against a bailout deal that they fear will push their country into an economic slump and cost many their jobs. Italy still has a uncertain government and investors spoke to that by bidding poorly on the Italian 5yr note auction yesterday that yielded 3.65% which is their highest since October. Even worse was the bid to cover ratio of only 1.22%. A >2.00% is considered a good auction(US auctions tend to be in the 3.00% range). The bid to cover is the ratio of bids received vs. bids accepted. So if the ratio is <1.00% then the auction is oversubscribed which is a rare and very unpleasant event. At 1.22% that is pretty close and signals very poor demand for investors willing in put any more money into a tumultuous political situation. Read more: http://www.AskShah.com/market-update-32713-from-the-capital-markets-desk-of-franklin-first-financial/

You can read the entire guide here .

σας ευχαριστώ!! What the hell is that?? Well that translates to thank you in Greek. Some of you may have heard that over the weekend Cyprus (technically not Greece) began a bailout of 10 billion Euro’s that includes a very controversial tax on bank accounts. This is something that in the past was off limits. A word that I read this weekend was sacrosanct. Yes I had to look that one up but it is always nice to add a word to your personal dictionary. The initial proposal is a tax of 6.7% on deposits under 100,000 euro’s and 9.9% over 100,000 euro’s. 100,000’s euro’s is about $130k so you get the idea. Read more at http://www.AskShah.com/market-update-31813-from-the-capital-markets-desk-of-franklin-first-financial/

So here we are sitting at 1.93% on the 10yr. Since the gift from Italy early last week followed by the mandated budget cuts on 3/1, we got what I had hoped we would get which was a lower shift in the trading range. Remember that we were at 1.95%-2.03% for about a month and then with last week’s events I was expecting a shift down to 1.85%-1.95%. The good news is that we were right in that and managed to spend most of last week on the lower end of that range between 1.85%-1.88%. The bad news is that we are now at the higher end of that range at 1.93%. Now we did get a lot of locks so it did look like a lot of our originators were smart and took advantage of last week’s rally. And if you did not lock then you really have to wonder how much higher stocks will go from record highs. Hopefully a little sanity sets in and we see a pullback which will help the bond markets. Would you put money into stocks at this level? Read the rest of this Market Update here http://www.AskShah.com/market-update-3613-from-the-capital-markets-desk-of-franklin-first-financial

Grazie Italia!! That is all that I could think of yesterday as we finally broke out of this tight trading range with a impressive rally as a result of an inconclusive election in Italy between the pre-election favorite Pier Luigi Bersani and Silvio Berlusconi. This triggered renewed concerns about Europe’s sovereign debt crisis (remember that little issue??). The result was a flight to quality into US Treasuries and at one point yesterday we actually traded at 1.84%. We have come off from this low yield and are currently at 1.88%. But what the hell…it was a unexpected gift from our Italian friends as this uncertainty seemed to catch everyone off guard. Where would we be if not for the EU crisis and good old Uncle Ben!!  Read the rest of the Update here: http://www.AskShah.com/market-update-22613-from-the-capital-markets-desk-of-franklin-first-financial/

Yesterday was a little bit of a head fake. We had reason to be hopeful that our luck might be changing when the day started out but by mid-morning the bond markets started to take a turn for the worse. The selling was a consistent grind into the close where we did end up at 2.00% on the 10yr. So since last Thursday’s close we have gone from 1.84% to 2.00% in just 3 trading days. Read Shah Tehrany's Market Update 1/30/13 here http://www.AskShah.com/market-update-13013-from-the-capital-markets-desk-of-franklin-first-financial

We do have some news to report today that is not like writing the summary to the Jets 2012 season. So yes we have something encouraging to report. While it is way too premature to make the statement that the selling in the bond markets is over, we can report that the selling has subsided. It does appear at this moment that our assessment about the bears wanting to print that 2.00% 10yr and then retreat is correct. Read the rest of the update at http://www.AskShah.com/market-update-12913-from-the-capital-markets-desk-of-franklin-first-financial

It is hard to feel bad when you first wake up on a Friday morning unless of course you had a late Thursday night. You feel good about ending another workweek and you have your eyes set to 2 days of me time. I also felt good about the prospects of a decent day in the bond markets. My thinking was that stocks have just been on a nice run recently as we are approaching 14k on the Dow. So I was looking to Friday as a traditional profit taking day which I thought would help us get back some of yesterday’s losses in the bond markets.  Read the rest of the Update here http://www.AskShah.com/market-update-12513-from-the-capital-markets-desk-of-franklin-first-financial/