Tag Archives: Mortgage Backed Securities

Analyzing the Federal Reserve’s Balance Sheet … Interesting Analysis of MBS … Big Purchases … Big Sales

As mentioned Friday, there were a lot of words dictated, typed and researched over the weekend in preparation for the Q 4 Newsletter.

During some of the research, a stumble on to the follow chart occurred. Being totally unrelated to our Newsletter information, but very eye catching and interesting, a share was in order!

From our Friends at JPMorgan and their Market Insights Slide deck:

What is most striking to the eye, or at least our eyes, is the disproportionate amount of MBS (Mortgage Back Securities – think packs of Mortgages) the Federal Reserve purchased during this latest round of asset purchases.

This month the Federal Reserve has stated they are now pushing 97 Billion dollars of these assets back into the market, up from a prior mentioned 40 Billion monthly sale.

This may be a reason that Current Mortgage Rates are by almost any measure WAY to high, compared to their historical normal spreads between other similar assets.

Bottom line, the Federal Reserve likely over pushed rates low and they may be doing just the opposite now.

Just as eventually the sugar wears out, so will the salt of higher rates!

Have a Great “Had to Share a Neat Fed Chart” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Mortgage Rates, Possible Technique for New Mortgages

With the FOMC (Federal Open Market Committee) winding down their monthly purchases of US Treasury and Mortgage Backed Securities (Pools of Actual Mortgages) it is not surprising to see Mortgage rates, specifically the 30 year rate move up, FOR NOW!

Key Technique for New Mortgages

Knowing you may not read the entire article… we are all busy, so completely understand, the meat of the following information is think twice before trying to “buy down” your mortgage rate. Yes, they (rates) have gone up and yes it is more than just a few quarters ago, but it is entirely likely that the next economic slowdown will welcome in lower rates. If you pay a lot of money to lower your rate now … your hurdle to refinance in the future is much greater!

Mortgage Rates Review

While we may think recent rates are sky high… let’s take a longer term view.

Source: Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US, February 22, 2022.

The Short Term View looks much different

Source: Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US, February 22, 2022.

Between FOMC lowering their monthly artificial purchases, interest rate markets front running the FOMC and a slight reversion to the mean … rates are higher than recently… but think twice before “buying down” that rate!

Have a Great “Mortgage Rate Analysis” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

December 2013 Monthly Review (Video)

Welcome to our Monthly review video where we look back each month and highlight important items and MAYBE  few crumbs the crowd missed.

 http://youtu.be/KdQbx6fSWmI

Click here if all else fails

Vimeo if all all else fails.

Bernanke Begins Removing the Punchbowl

In surprise move the FOMC zigged a little and threw the street off (present party included) by slowing the asset purchases by $10 billion monthly in December. Our thinking was skeptical of this move due to the Bernanke sunset term (Janet Yellen takes over in late January) and the moderate economic numbers. No matter the reason, we are very happy at the move as were market participants.

Recall the FOMC had instated a $85 billion monthly asset purchase to artificially lower longer term interest rates in order to stimulate the economy, especially housing. Their announcement included not only at $10 billion trim of asset purchases to $75 billion monthly but also the vague intent to continue the declined purchases at each of the FOMC meetings in 2014, thereby being completely out of the asset purchase game by year-end 2014 …. if all goes well. Horaay we say as we have desired this slowing of stimulus for some time.

All eyes including ours will be watching the 10 year treasury rate (below, a multi-year chart of 10 year treasury), mortgage-backed security rates and Municipal Bond rates. We desire a smooth increase, of course markets can be vicious, so outcomes may be different…. So Far so good!

10 Year Treasury 2011-2013 Chart

Goldilocks is in the House … A Strong December Finish

There is nothing more that can be said about much of 2013 other than, not too hot, not too cold….just perfect….Oh I am sorry that is little Red Riding Hood…well the shoe may fit. 2013 may go down as the Goldilocks, Little Red Riding Hood year in many books with December capping off a sugary ice cream topping desert year.

Not to steal too much from our pending Newsletter, but 2013 was a VERY friendly equity capital market. Unfortunately it just does not always work that way. Sometimes it giveth and often times it taketh…. Attached is a chart showing the draw downs annually. Notice how small 2013 was/is.

Intrayear-1024x592

Diversification Will Always Win

As we say goodbye to 2013 and especially December, we wanted to re-iterate the MOST important item in investing in the current economic and political condition is to stay diversified. While we lean in certain directions, we always recommend a toe in most collective investment waters for safety, participation and good long-term outcomes. It is never a good idea to have all our collective chickens in one basket!

Diversification

Have a Great Day!

John Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225
http://www.jkfinancialinc.com
http://www.street-cents.com