“The U.S. commercial paper market unexpectedly shrank for a sixth week, extending the biggest slump in at least seven years and signaling the Federal Reserve’s interest rate cuts haven’t drawn investors back to short-term debt.”
“Commercial paper is bought by money market funds and mutual funds that invest in short-term debt securities. In asset-backed commercial paper, the cash is used to buy mortgages, bonds, credit card and trade receivables, as well as car loans. Some of the programs are backed by subprime loans, issued to borrowers with poor credit or high debt.”
“The buyers’ freeze shut out borrowers including mortgage lenders Countrywide Financial Corp. and Thornburg Mortgage Inc. as well as GMAC LLC and investment company Cheyne Finance Plc.”
∙ U.S. Commercial Paper Slump Extends to Sixth Week [Bloomberg]
∙ Reader Dave Is In The Money As The FOMC Lowers By Half A Point [SocketSite]
∙ Countrywide Secures Another $12 Billion As Application Volume Falls [SocketSite]
∙ JustQuotes: Signs Of Some (Prime) Liquidity In The Mortgage Market [SocketSite]
For what it’s worth, Dick Kovacevich, chairman of Wells Fargo, is predicting that the availability of jumbo loans will improve sooner than expected:
http://www.bizjournals.com/sanfrancisco/stories/2007/09/17/daily28.html
Worldwide, this has been the best week in CP in a couple of months. The outlook on CP is much better than it was last week.
Today’s hearing before the Senate Banking Committee(?) revealed that the Bush administration now supports a temporary increase in the conforming loan amount. Bernanke took no position but said any increase should be temporary and promptly implemented, which is basically a tacit approval. Fannie and Freddie testify later today and are expected to request a temporary increase to at least $550K, which is the amount Sen. Frank, the chairman has proposed as the new, temporary conforming loan amount. This is starting to sound like it will really happen.
The bailouts begin.
FHA up to $729,9000 with no downpayments
Fannie/Freddie up to $550,000.
That said, who knows what the interest rates will be. Bernanke’s foolish cut did drop the 1 month, 3 month, 2 year Treasurys, however the “long end” (specifically the 10 year treasury) is going up. (investors are afraid to invest in long term stuff because Ben is ruining our currency)
Thus, many mortgage rates are going UP not down (As I predicted earlier this month).
you can look them up, last week to this week… Not much change, but up across the board on ARMs and even fixed rates
http://www.bankrate.com/
It of course comes with a cost. our dollar continues to be worth nothing.
Today $1 Canadian is worth more than $1 American.
Today 1 Euro is worth more than $1.40 American (a record)
Gold is worth more than it’s been in 27 years.
Oil is near all time records as well.
Yes, SF Prices may hold… in nominal terms. But I still doubt it. Ben dropped because we’re about to hit a recession. it’s the only thing that would explain a financial genius (he is a genius) dropping rates like that… he is terrified of what he saw coming.
I don’t think Bernanke is in favor of this, actually (although he will fold). Calculated Risk has a few excerpts from his speech. Interesting reading.
as for the CP market… I think we’ll have to see what happens.
Dropping rates punishes savers in short term Treasurys and other short term “safe” investments. Thus, they are more likely to take their money out of Treasuries and put them in more risky products to get higher yield (in this case, Commercial Paper). So dropping the Fed Funds Rate should in theory help the CP market.
However, a lot of the buyers of Commercial Paper are Foreigners and Pensions/Insurance funds.
They were just slaughtered on CP the last few months… are they willing to jump in so soon? hard to tell.
Also, they were just punished severely by our own Federal reserve… thus, they may choose to take money OUT of long Term Treasurys (like the 10 year, which would raise it’s yield) and also avoid the CP market, and instead invest abroad.
why invest in America for 4.75% with huge inflation risk when you can invest in Europe at 4% with less inflation risk?
(there is actually a reason: to devalue your own currency to stay “competitive” in your exports…)
our Fed now needs for the Bank of england, Bank of Japan, and European Central Bank to drop their rates as well. (there is a good chance they will… as they don’t want their currency too strong since they export to us)
I agree that Bernanke is not in favor of the increase, but he won’t oppose it and that is all that matters. This is a political issue and not an economics issue (or is there even a difference?). Interest rates are still lower than last year and still very low by historic standards. So far, the prognostications for 7+% rates have not materialized.
On an unrelated note, if the dollar continues to drop like this, might we actually see some significant activity in SF real estate from the fabled foriegn investors? NY Times reported a couple of weeks ago that NY realtors are reporting a big uptick in business from foreign buyers. I know, NY is a world city…yada yada… but at some point if assets become cheap enough, whether its through currency movements or actual asset price movements, buyers will see opportunity.
When tech dies, the media always trots out “biotech” as the next great stock savior. It never saves us.
When housing dies, the media always claims “foreign investors: are going to save the day. They never do.
When the dollar declines futher to 1.5/Euro, Affulent Foreign Investors are going to pump up SF real estate prices to unprecedented heights.
ROFL.
San Francisco is simply
-too far from Europe
-weather too similar to Europe
-too small for Europeans
Few Europeans (except Russians) that I know of really want to buy in SF.
They want NYC (because it’s NYC)
and Miami/South Florida (because it’s so warm)
now Asians on the other hand, that is a different story. but they are pegged to our dollar.
as example:
how many rich San Franciscans do you know who want to buy in Berlin? Or Paris? or London?
now how many want to buy in Cabo San Lucas, or Palm Springs, or Maui.
I have seen this idea floated on other sites, so I’m curious. Let me preface this by saying I know nothing about foreign investment in real estate. These are purely questions, not criticisms.
1. Does anyone have or know where to find information about the historical and/or current percentage of residential properties in San Francisco is owned by foreign investors?
2.What is the motivation for foreign investors to invest heavily in residential real estate as opposed to other USD based investments (i.e. stocks, business investment, commercial properties, etc.)? Is it more liquid? Do they get tax breaks? Better ROI? A lower barrier to entry?
3. Would these foreign investors primarily interested in buying individual properties or buildings or land for development? In general, what would make the most financial sense for a foreign investor?
I am really curious about this market factor because it keeps coming up on other blogs and boards and I know absolutely nothing about it. Any information would be greatly appreciated.
[Editor’s Note: Great questions (which we’ve promoted to a post).]