Thursday, June 21, 2012
Wednesday, June 20, 2012
The Fed will take action to keep interest rates low! See below article from Bloomberg.com.
Bloomberg News, sent from my Android phone
The Federal Reserve will expand its program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012 in a bid to reduce unemployment and protect the expansion.
The continuation of Operation Twist “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said today in a statement at the conclusion of a two-day meeting in Washington.
The Fed said it is “prepared to take further action as appropriate to promote a stronger economic recovery and sustain improvement in labor market conditions in a context of price stability.”
Policy makers led by Chairman Ben S. Bernanke are taking steps to shore up the world’s largest economy as faltering growth leaves it vulnerable to fallout from the European debt crisis and looming fiscal tightening in the U.S. Payrolls expanded at the slowest pace in a year in May, and the jobless rate has been stuck above 8 percent since February 2009.
“Growth in employment has slowed in recent months, and the unemployment rate remains elevated,” the FOMC said. “The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually.”
The yield on the 10-year Treasury note rose to 1.67 percent at 1:23 p.m. in New York from 1.62 percent late yesterday. The Standard & Poor’s 500 Index was little changed at 1,358.17 after declining as much as 0.9 percent.
Language Change
“The Fed will do more as necessary, and this puts emphasis on it,” said Eric Green, a former New York Fed economist who is now global head of FX, Rates and Commodities at TD Securities in New York. In April the committee said it was “prepared to adjust” its securities holdings “as appropriate”
Policy makers left unchanged their view that economic conditions will probably warrant keeping interest rates “exceptionally low” at least through late 2014. The FOMC has kept the main interest rate in a range of zero to 0.25 percent since December 2008.
The Fed said today it will sell Treasury securities with remaining maturities of about three years or less. It will purchase securities with six years to 30 years remaining.
The existing maturity extension program, known as Operation Twist, was announced in September and expires this month. Under that program, the Fed is selling $400 billion of short-term government debt and replacing it with the same amount of longer- term Treasuries.
Maturing Debt
The Fed left unchanged its policy of reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities.
Inflation “has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable,” the Fed said today. Oil prices have slumped 23 percent to $84.03 a barrel yesterday since reaching a high of $109.77 a barrel in February, while the national average cost of gasoline has declined to $3.49 a gallon from a 2012 peak of $3.94 in April, according to data compiled by the American Automobile Association.
Richmond Fed President Jeffrey Lacker dissented for the fourth meeting in a row, saying he doesn’t support extending Operation Twist. He said last month he believes the central bank will probably need to raise the main interest rate next year.
It was the first meeting for Governors Jeremy Stein and Jerome Powell, who joined the Fed last month, raising the Washington-based board to its full, seven-member strength for the first time since 2006.
Updated Projections
U.S. central bankers at 2 p.m. plan to release updated projections for economic growth, inflation and unemployment for the next three years. Chairman Ben S. Bernanke is scheduled to hold a press conference at 2:15 p.m. in Washington.
Fifty-eight percent of economists in a June 18 Bloomberg News survey said the FOMC would prolong Operation Twist, with an additional 8 percent predicting the Fed would announce the move at its meeting on July 31-Aug. 1. Eleven percent predicted a third round of large-scale asset purchases, or quantitative easing.
Central banks across the world are considering steps to stimulate their economies. Bank of England Governor Mervyn King and three other policy makers were overruled this month as they pushed to expand their bank’s bond-purchase program, meeting minutes showed today. European Central Bank President Mario Draghi left the door open for a rate cut at a June 6 press conference.
Bank of Japan
The Bank of Japan should be ready to “take appropriate actions without ruling out any options in advance” if the European crisis worsens, some of its board members said in May, according to minutes released today. The People’s Bank of China cut borrowing costs for the first time since 2008 earlier this month and loosened controls on banks’ lending and deposit rates.
Europe’s debt crisis has intensified since the FOMC’s meeting in April, roiling financial markets. The Standard & Poor’s 500 Index was down by 4.3 percent as of yesterday from its 2012 peak on April 2.
Since the Fed announced Operation Twist on Sept. 21, the yield on the 10-year U.S. Treasury note declined to 1.62 percent as of yesterday from 1.86 percent. It fell to a record low 1.4387 on June 1.
Spanish 10-year bond yields rose above 7 percent for the first time this week in the shared-currency era even after Spain said it will seek a 100 billion-euro ($127 billion) rescue for its banks.
Global asset prices have rallied since Greek election results stirred speculation the nation won’t exit the euro, and on expectations the Fed would take action to spur growth.
Asset Purchases
The Fed’s two rounds of asset purchases totaling $2.3 trillion and record-low interest rates since December 2008 have left the central bank short of its full-employment goal.
The economy added 69,000 jobs in May, the fewest in a year, and the unemployment rate unexpectedly climbed to 8.2 percent from 8.1 percent, its first increase in almost a year.
Policy makers in April forecast an unemployment rate of 7.8 percent to 8 percent in the fourth quarter of this year and 7.3 percent to 7.7 percent at the end of 2013. Their employment goal is 5.2 percent to 6 percent, according to April’s central tendency forecasts.
Companies are cutting back as the economy shows signs of slowing. FedEx Corp., operator of the world’s largest cargo airline, is restructuring its express business and retiring 24 jet freighters.
Impact of Crisis
“We believe U.S. domestic and global economic conditions will be impacted by the European debt crisis, slowing growth in Asia and the uncertainty these issues create on the global economy and the demand for our services,” FedEx Chief Financial Officer Alan Graf said yesterday on an earnings call.
Also taking a toll on the economy: concern that Congress will fail to reach a compromise in time to avoid $600 billion in tax increases and budget cuts next year.
Among government contractors coping with delayed procurements and agency cost-cutting is Preferred Systems Solutions, a Vienna, Virginia-based engineering and information technology provider.
“I’m feeling more of a pinch and squeeze than I ever have before,” said Scott Goss, president and chief executive officer. “As soon as they start these massive cuts, they’re going to impact the economy.”
Economic data in recent weeks have pointed to slowing growth.
Retail Sales
Retail sales fell 0.2 percent for a second month in May, according to a June 13 report from the Commerce Department, as elevated unemployment and the smallest wage gains in a year prompted consumers to curtail their spending.
Industrial production unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods, data from the Fed showed last week.
On the other hand, housing, the industry at the heart of the financial crisis, has shown some signs of recovery.
Homebuilders broke ground on more single-family houses for a third consecutive month in May and rising construction permits pointed to further gains.
Borrowing costs near record lows are prompting home purchases, said Douglas Yearley, chief executive officer of Toll Brothers, a luxury homebuilder based in Horsham, Pennsylvania.
“There is huge pent-up demand that has built over the last four years,” Yearley said at a June 14 conference. “It’s been seven years since this all began to turn down and you have people that are just ready to move on with their lives, take advantage of great interest rates.”
Mortgage Rates
The average rate on a 30-year, fixed mortgage fell to a record 3.67 percent in the first week of June, according to Freddie Mac.
The Fed’s actions may influence the November presidential election. Unemployment and the economy are a central issue as Mitt Romney, the presumptive Republican nominee, challenges President Barack Obama.
Romney, who has charged Obama with mismanaging the economy, said in a June 17 CBS News interview that quantitative easing didn’t yield the intended benefits and a third round wouldn’t either.
The second round “was not extraordinarily harmful, but it does put in question the future value of the dollar and it will obviously encourage some inflation,” Romney said. “A QE3 would do the same thing.”
To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net
To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net
Find out more about Bloomberg for Android: http://m.bloomberg.com/android
Bloomberg News, sent from my Android phone
The Federal Reserve will expand its program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012 in a bid to reduce unemployment and protect the expansion.
The continuation of Operation Twist “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said today in a statement at the conclusion of a two-day meeting in Washington.
The Fed said it is “prepared to take further action as appropriate to promote a stronger economic recovery and sustain improvement in labor market conditions in a context of price stability.”
Policy makers led by Chairman Ben S. Bernanke are taking steps to shore up the world’s largest economy as faltering growth leaves it vulnerable to fallout from the European debt crisis and looming fiscal tightening in the U.S. Payrolls expanded at the slowest pace in a year in May, and the jobless rate has been stuck above 8 percent since February 2009.
“Growth in employment has slowed in recent months, and the unemployment rate remains elevated,” the FOMC said. “The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually.”
The yield on the 10-year Treasury note rose to 1.67 percent at 1:23 p.m. in New York from 1.62 percent late yesterday. The Standard & Poor’s 500 Index was little changed at 1,358.17 after declining as much as 0.9 percent.
Language Change
“The Fed will do more as necessary, and this puts emphasis on it,” said Eric Green, a former New York Fed economist who is now global head of FX, Rates and Commodities at TD Securities in New York. In April the committee said it was “prepared to adjust” its securities holdings “as appropriate”
Policy makers left unchanged their view that economic conditions will probably warrant keeping interest rates “exceptionally low” at least through late 2014. The FOMC has kept the main interest rate in a range of zero to 0.25 percent since December 2008.
The Fed said today it will sell Treasury securities with remaining maturities of about three years or less. It will purchase securities with six years to 30 years remaining.
The existing maturity extension program, known as Operation Twist, was announced in September and expires this month. Under that program, the Fed is selling $400 billion of short-term government debt and replacing it with the same amount of longer- term Treasuries.
Maturing Debt
The Fed left unchanged its policy of reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities.
Inflation “has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable,” the Fed said today. Oil prices have slumped 23 percent to $84.03 a barrel yesterday since reaching a high of $109.77 a barrel in February, while the national average cost of gasoline has declined to $3.49 a gallon from a 2012 peak of $3.94 in April, according to data compiled by the American Automobile Association.
Richmond Fed President Jeffrey Lacker dissented for the fourth meeting in a row, saying he doesn’t support extending Operation Twist. He said last month he believes the central bank will probably need to raise the main interest rate next year.
It was the first meeting for Governors Jeremy Stein and Jerome Powell, who joined the Fed last month, raising the Washington-based board to its full, seven-member strength for the first time since 2006.
Updated Projections
U.S. central bankers at 2 p.m. plan to release updated projections for economic growth, inflation and unemployment for the next three years. Chairman Ben S. Bernanke is scheduled to hold a press conference at 2:15 p.m. in Washington.
Fifty-eight percent of economists in a June 18 Bloomberg News survey said the FOMC would prolong Operation Twist, with an additional 8 percent predicting the Fed would announce the move at its meeting on July 31-Aug. 1. Eleven percent predicted a third round of large-scale asset purchases, or quantitative easing.
Central banks across the world are considering steps to stimulate their economies. Bank of England Governor Mervyn King and three other policy makers were overruled this month as they pushed to expand their bank’s bond-purchase program, meeting minutes showed today. European Central Bank President Mario Draghi left the door open for a rate cut at a June 6 press conference.
Bank of Japan
The Bank of Japan should be ready to “take appropriate actions without ruling out any options in advance” if the European crisis worsens, some of its board members said in May, according to minutes released today. The People’s Bank of China cut borrowing costs for the first time since 2008 earlier this month and loosened controls on banks’ lending and deposit rates.
Europe’s debt crisis has intensified since the FOMC’s meeting in April, roiling financial markets. The Standard & Poor’s 500 Index was down by 4.3 percent as of yesterday from its 2012 peak on April 2.
Since the Fed announced Operation Twist on Sept. 21, the yield on the 10-year U.S. Treasury note declined to 1.62 percent as of yesterday from 1.86 percent. It fell to a record low 1.4387 on June 1.
Spanish 10-year bond yields rose above 7 percent for the first time this week in the shared-currency era even after Spain said it will seek a 100 billion-euro ($127 billion) rescue for its banks.
Global asset prices have rallied since Greek election results stirred speculation the nation won’t exit the euro, and on expectations the Fed would take action to spur growth.
Asset Purchases
The Fed’s two rounds of asset purchases totaling $2.3 trillion and record-low interest rates since December 2008 have left the central bank short of its full-employment goal.
The economy added 69,000 jobs in May, the fewest in a year, and the unemployment rate unexpectedly climbed to 8.2 percent from 8.1 percent, its first increase in almost a year.
Policy makers in April forecast an unemployment rate of 7.8 percent to 8 percent in the fourth quarter of this year and 7.3 percent to 7.7 percent at the end of 2013. Their employment goal is 5.2 percent to 6 percent, according to April’s central tendency forecasts.
Companies are cutting back as the economy shows signs of slowing. FedEx Corp., operator of the world’s largest cargo airline, is restructuring its express business and retiring 24 jet freighters.
Impact of Crisis
“We believe U.S. domestic and global economic conditions will be impacted by the European debt crisis, slowing growth in Asia and the uncertainty these issues create on the global economy and the demand for our services,” FedEx Chief Financial Officer Alan Graf said yesterday on an earnings call.
Also taking a toll on the economy: concern that Congress will fail to reach a compromise in time to avoid $600 billion in tax increases and budget cuts next year.
Among government contractors coping with delayed procurements and agency cost-cutting is Preferred Systems Solutions, a Vienna, Virginia-based engineering and information technology provider.
“I’m feeling more of a pinch and squeeze than I ever have before,” said Scott Goss, president and chief executive officer. “As soon as they start these massive cuts, they’re going to impact the economy.”
Economic data in recent weeks have pointed to slowing growth.
Retail Sales
Retail sales fell 0.2 percent for a second month in May, according to a June 13 report from the Commerce Department, as elevated unemployment and the smallest wage gains in a year prompted consumers to curtail their spending.
Industrial production unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods, data from the Fed showed last week.
On the other hand, housing, the industry at the heart of the financial crisis, has shown some signs of recovery.
Homebuilders broke ground on more single-family houses for a third consecutive month in May and rising construction permits pointed to further gains.
Borrowing costs near record lows are prompting home purchases, said Douglas Yearley, chief executive officer of Toll Brothers, a luxury homebuilder based in Horsham, Pennsylvania.
“There is huge pent-up demand that has built over the last four years,” Yearley said at a June 14 conference. “It’s been seven years since this all began to turn down and you have people that are just ready to move on with their lives, take advantage of great interest rates.”
Mortgage Rates
The average rate on a 30-year, fixed mortgage fell to a record 3.67 percent in the first week of June, according to Freddie Mac.
The Fed’s actions may influence the November presidential election. Unemployment and the economy are a central issue as Mitt Romney, the presumptive Republican nominee, challenges President Barack Obama.
Romney, who has charged Obama with mismanaging the economy, said in a June 17 CBS News interview that quantitative easing didn’t yield the intended benefits and a third round wouldn’t either.
The second round “was not extraordinarily harmful, but it does put in question the future value of the dollar and it will obviously encourage some inflation,” Romney said. “A QE3 would do the same thing.”
To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net
To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net
Find out more about Bloomberg for Android: http://m.bloomberg.com/android
Tuesday, June 19, 2012
The San Diego Union Tribune reported a "Blockbuster Month" in May with resales hitting the highest mark in nearly seven years. Article below:
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San Diego
Union Tribune 06/14/2012, Page A01
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SINGLE-FAMILY HOME RESALES
AT 7-YEAR HIGH
LILY LEUNG • U-T Local real estate closed out a blockbuster month in May with single-family resales hitting the highest mark in nearly seven years, housing tracker DataQuick said Wednesday. Combine that faster sales pace with an increase in home prices, and some housing insiders say they believe a recovery is within the county’s grasp. “We’re starting to see some people come out of the woodwork,” said Michael Lea, a San Diego State real estate professor. “A lot of people held off selling for a long time, and at some point, for a variety of reasons, people are now selling.” San Diego County recorded a total of 3,750 sales last month, a 21.5 percent increase from a year ago and a 5.4 percent increase from April, said DataQuick, a La Jolla-based real estate information company. The overall median price in May rose 3.2 percent from a year ago to $335,000, the highest it’s been in 18 months, when the median value also was $335,000. Sales saw the most strength in the single-family resale slice, which makes up about two-thirds of total home sales. In this segment, buyers closed on 2,488 homes in May. That’s the highest figure for this category since September 2005, when 2,671 were sold, DataQuick numbers show. Those sales peaked at 3,307 in June 2005, when analyzing the current housing cycle of 2005 to present. All of the county’s major regions showed increases in single-family resales compared to a year ago. The North County inland area, including neighborhoods like Escondido and western Rancho Bernardo, saw the most growth in this segment. More than 700 single-family homes were resold in that area last month, up 33.3 percent from a year ago. San Diego real estate agent Michael Wolf said he has seen an increase in interest across the board, from residents who are tired of renting, to investors trying to find limited steals. Wolf pointed to historically low mortgage rates as one of the biggest reasons potential buyers are starting to look. The 30-year fixed rate is at 3.67 percent, while the 15-year fixed rate is at 2.94 percent, according to Freddie Mac. Another factor, Wolf said, is inventory. A recent snapshot taken by the San Diego Association of Realtors showed that the number of homes listed for sale in San Diego County has fallen to its lowest level in nearly three years. He said this has resulted in more competition, and at times, multiple bids for a single home. Home sales also picked up across Southern California, especially in coastal regions, “where move-up markets have picked up steam,” Data-Quick reported. More than 22 percent of Southern California sales in May were $500,000 and up. That share is up from 21 percent the previous month and a year ago, DataQuick analysts found. “May’s share of sales above $500,000 was the highest since July 2010, when they also made up 22.4 percent of the market,” the report added. The low point was 13.8 percent in January 2009. DataQuick analysts added two more factors that could explain May’s increase in sales and prices: •An extra business day this May. •Fewer foreclosure resales and short sales. Their share of the market in SoCal fell to 44.8 percent, the lowest level in more than four years. Do May’s numbers indicate that the market is bottoming out? “The market is being slowly nursed back to health by low interest rates, a modestly improved economy and, we suspect, a widening sense that the housing sector is at or near bottom,” said DataQuick President John Walsh, in a statement. “There’s still plenty of uncertainty swirling around out there,” he added. “But it looks like more move-up buyers are concluding it makes sense in the long run to sell their homes now, even when it’s hard to swallow the price. The upside for many is a good deal on the next house, and the ability to lock in both a killer mortgage rate and a relatively low property tax base.” lily.leung@utsandiego.com (619) 293-1719 Twitter:@lilyshumleung “ The market is being slowly nursed back to health by low interest rates, a modestly improved economy and, we suspect, a widening sense that the housing sector is at or near bottom.” John Walsh DataQuick President
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