Forex News | Currency News by Forexlive

WASHINGTON (MNI) – The following is the text the Kansas City
section of the Federal Reserve’s Beige Book report on current financial
conditions released Wednesday:

TENTH DISTRICT – KANSAS CITY

Growth in the Tenth District economy edged higher in October and
early November but remained moderate overall. Consumer spending improved
further, and manufacturing activity rose modestly. High-tech firms
reported generally strong growth, and the energy industry continued to
expand at a robust pace. Bankers reported mostly steady loan demand,
better loan quality, and rising deposits. Transportation firms reported
stable activity, while agricultural activity was mixed due to varying
rainfall and drought conditions across the District. Residential and
commercial real estate activity remained sluggish, though some
improvements were noted. Prices were generally flat, and wage pressures
were limited outside of several skilled labor positions.

Consumer Spending. Consumer spending strengthened, and expectations
improved for the months ahead. Retail sales continued to grow solidly,
and the majority of contacts expected continued sales growth in coming
months. Sales of apparel and seasonal outerwear were noted as
particularly strong, while a few contacts characterized sales of
high-end appliances and jewelry items as weak. Store inventories leveled
out somewhat but were above year-ago levels in most establishments. Auto
sales remained solid, with several dealers reporting high demand for
mid-size SUVs and fuel efficient vehicles. Expectations for future auto
sales were mostly positive, and auto inventories increased slightly over
the previous survey. Restaurant sales improved, with further growth
expected in coming months. Tourist activity was largely flat, but some
contacts were cautiously optimistic about the upcoming winter season.

Manufacturing and Other Business Activity. District manufacturing
activity edged higher from the previous survey, and expectations
rebounded after easing somewhat the past few months. Factory orders
slowed slightly, but shipments increased and hiring plans remained
solid. Plant managers indicated moderate growth in capital spending
plans. Transportation firms noted generally stable conditions, but
expectations for future activity increased over the previous survey and
capital spending plans were positive. The majority of high-tech services
firms reported strong growth in sales and expected this trend to
continue. Future capital expenditure plans at high-tech firms remained
solid.

Real Estate and Construction. Residential and commercial real
estate activity remained generally sluggish in October and early
November. Housing starts dropped from the previous survey, with
construction of higher-priced homes particularly weak. Expectations for
future homebuilding remained slow, and materials were generally
available. Sales at residential construction supply firms improved
somewhat, driven in part by an increase in remodeling as more consumers
updated existing homes. Home sales picked up slightly but remained weak
overall. Expectations for future home sales were more positive than in
previous months, and home inventories drifted lower as home prices
continued to ease in most areas. Mortgage lending activity was positive
and remained above year-ago levels, though some contacts reported
continued buyer financing difficulties. Commercial real estate activity
edged higher from the previous survey, but remained sluggish overall
with little further improvement expected. Vacancy rates dropped
slightly, though they were expected to rise somewhat in future months.
Office prices and rents increased but remained below year-ago levels,
and expectations were flat. One contact in Joplin, Missouri noted
considerable building activity as a result of the devastating tornado in
that area last spring.

Banking. Most bankers reported steady or stronger loan demand,
stable or improving loan quality, and increased deposits compared with
the previous survey. Overall loan demand increased marginally as demand
for commercial and residential real estate loans strengthened, demand
for consumer installment loans declined, and demand for commercial and
industrial loans weakened slightly. Credit standards remained largely
unchanged in all major loan categories, and deposits increased for the
seventh straight survey. Bankers generally reported loan quality as
steady or improving compared to a year ago, with even more improvement
expected for the next six months.

Energy. Energy activity continued to expand strongly in October and
early November. Nearly all contacts reported an increase in drilling
activity and were optimistic about the months ahead. Crude oil prices
remained favorable for drilling, and one contact noted that overall
drilling activity was approaching levels reached before the price
collapse in 2008. However, contacts reported that shortages of equipment
and labor continued to constrain the rate of increase in

exploration to some degree, and one producer said the delay in the
Keystone Pipeline project was hindering future growth.

Agriculture. Agricultural activity varied across the District in
October and early November. Northern portions of the District, which
received ample summer precipitation, reported above average corn and
soybean yields at harvest and the majority of Nebraska’s wheat crop
emerged in good condition. In contrast, drought conditions severely cut
crop production in the District’s southern regions, with Kansas and
Oklahoma winter wheat crops in fair or poor condition. Robust export
demand continued to boost crop and livestock prices. Farm income rose in
areas with bumper harvests, while crop insurance was expected to
mitigate losses in cases of poor yields or crop failure. Strong farm
income boosted farm loan repayment rates and trimmed demand for
operating loans. With rising farm income and strong demand from both
farmers and non-farm investors, District farmland values posted another
record high, with the strongest gains in the northern Plains.

Wages and Prices. Price levels were generally stable, and wage
pressures remained mostly contained, outside of a few skilled positions.
Manufacturing price pressures moderated somewhat, especially for raw
materials, and fewer firms planned to raise selling prices. Prices for
construction materials stabilized, and retail prices were also flat as
fewer firms expected increases. However, transportation firms reported
continued high input prices, and restaurants expected higher menu prices
due to rising food costs. Wage pressures were still contained in most
industries. However, some firms reported difficulties finding skilled
workers and were forced to raise wages, particularly in energy and
information technology fields. Hiring plans were generally solid for
most firms, particularly those in the energy, information technology,
and manufacturing sectors.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]

WASHINGTON (MNI) – The following is the text the Minneapolis
section of the Federal Reserve’s Beige Book report on current financial
conditions released Wednesday:

NINTH DISTRICT–MINNEAPOLIS

The Ninth District economy grew moderately since the last report.
Strong growth was reported in the agriculture, energy and mining
sectors. Modest to moderate growth was noted in consumer spending,
tourism, residential and commercial construction, residential real
estate and professional services. Activity in commercial real estate was
flat, while manufacturing was mixed. Labor markets showed some signs of
tightening, while wage increases remained moderate. Prices generally
were level.

Consumer Spending and Tourism

Consumer spending grew moderately. A major Minneapolis-based
retailer reported that same-store sales in October increased about 3
percent compared with a year earlier. A Minneapolis area mall reported
that recent sales were up between 3 percent and 5 percent, as cooler
weather inspired shoppers to buy fall goods. According to the University
of St. Thomas Holiday Spending Sentiment Survey, Minneapolis-St. Paul
households are predicted to spend 3.4 percent more on holiday gifts than
last year. Auto sales in the Minneapolis-St. Paul area increased since
the last report, according to a domestic auto dealer. However, a
Minnesota-based clothing retailer announced plans to close several
stores and reduce its workforce. Preliminary results of the Minneapolis
Fedfs business outlook poll indicated that respondents expect slight
increases in consumer spending in their communities and increased sales
of their businessesf products and services.

Tourism activity was up from a year ago. According to officials,
momentum from a very good summer tourism season in Montana continued
into the fall. Occupancy at Minnesotafs hotels and motels increased
almost 5 percent during the third quarter compared with a year ago.

Construction and Real Estate

Commercial construction activity increased modestly since the last
report. Respondents to a November Minneapolis Fed ad hoc survey of
commercial construction contacts reported an increase in construction
activity for health care facilities and industrial buildings. However,
the value of commercial building permits in the Sioux Falls, S.D., area
was down slightly in October from October 2010. Residential construction
increased from last year. Several multifamily construction projects were
announced or are under construction in the Minneapolis-St. Paul area.
The number of permitted residential units in Minnesota was up in
September from a year ago.

However, in the Sioux Falls area, the value of residential building
permits in October was level with the same period a year earlier.

Commercial real estate markets were flat. Respondents to the
Minneapolis Fedfs ad hoc survey noted flat revenues and profits over
the past three months. The commercial real estate sector is still very
weak, particularly in office space. “Very little expansion by
companies, so the only activity seems to be companies shopping for lower
rates,. commented a Minneapolis-St. Paul area contact. Residential real
estate markets grew. Home sales in October were up significantly from
the same period a year ago in the Minneapolis-St. Paul area, while the
inventory available for sale shrank.

Services

On balance, professional business services firms expect increased
activity. Based on results from the business outlook poll, respondents
from the services sector expect to increase sales and capital investment
in 2012. “Things generally are better,. commented a Montana
professional services firm.

Manufacturing

Manufacturing activity was mixed since the last report. An October
survey of purchasing managers by Creighton University (Omaha, Neb.)
showed that production increased in Minnesota and North Dakota, but
unexpectedly contracted slightly in South Dakota. Bank Directors noted
that manufacturing was doing well with some equipment backlogs extending
throughout 2012. Producers of storage bins for agricultural use reported
strong demand. However, a window maker announced that it will lay off
workers due to weak home construction. A large printing operation in
Minnesota halted expansion plans due to uncertainty about the economy.

Energy and Mining

The energy and mining sectors saw continued strong growth. Oil
exploration activity increased in Montana since the last report, but
decreased slightly in North Dakota. In North Dakota, regulators approved
plans for a 105-megawatt wind farm, and three other wind energy projects
are under review. A short line railroad reported that it saw strong
demand growth from the wind energy and oil drilling sectors. District
mines continued to operate at very high capacity utilization rates.

Agriculture

Agricultural conditions remained generally strong. Farm financial
conditions were very strong due to high commodity prices. Prices for
hogs, cattle, turkeys and eggs increased in October; prices for corn,
soybeans and wheat declined, but remain substantially above their
year-earlier levels. The harvest went quickly, thanks to recent dry
weather. District corn production was roughly even with 2010; however,
soybean production was down more than 12 percent. Wheat production was
down dramatically in some areas of the District.

Employment, Wages and Prices

Labor markets showed some signs of tightening. In a recent survey
of Minnesota manufacturers, 45 percent of respondents reported that
skilled-worker shortages were a moderate or serious problem,
particularly for skilled production and IT workers. A Minnesota
recreational vehicle manufacturer reported that it isnft running a
plant at capacity because of a surprising shortage of workers. A
representative of a Minnesota employment services firm noted robust
demand for temporary light industrial positions during September and
October; demand for permanent positions was volatile. A South Dakota
manufacturer reported difficulty finding qualified workers in order to
expand operations. In Montana, a job fair indicated that employers were
recruiting recent college graduates with engineering, business and
computer science majors. According to the business outlook poll, 36
percent of respondents consider securing workers a challenge or serious
challenge in 2012, up from 24 percent in last yearfs poll. Wage
increases were moderate. Members of a South Dakota county highway union
recently agreed to a 5 percent pay cut in 2012. The business outlook
poll shows that 96 percent of respondents expect wages and salaries in
their communities to increase no more than 3 percent. However, some fast
food restaurants in western North Dakota were offering wages as high as
$15 per hour to attract employees. Prices generally remained level,
although some exceptions were noted. Minnesota gasoline prices continued
to decrease since the last report, but were still 54 cents per gallon
higher than a year ago. Meanwhile, a South Dakota manufacturer noted
that steel prices have softened recently. According to respondents to
the business outlook poll, 41 percent expect to increase prices for
their businessesf products and services in 2012, up from 35 percent
last year.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]

WASHINGTON (MNI) – The following is the second and final section of
the summary of the Federal Reserve’s Beige Book survey of economic
conditions in the 12 Districts, prepared by the Minneapolis Bank on
responses up until Nov. 18, published Wednesday:

Agriculture and Natural Resources

Districts mostly reported favorable agricultural conditions.
Harvests were ahead of pace or completed in Richmond, Atlanta, Chicago,
Minneapolis, and Kansas City. The corn harvest was even with last year
in Chicago and Minneapolis, while soybean production decreased. Wheat
production was down dramatically in parts of the Minneapolis District.
Corn and soybean yields were above average in the northern portions of
the Kansas City District, but drought conditions severely cut crop
production in the Districts southern regions, and the winter wheat
crops were in poor to fair condition. The severe drought in the Dallas
District continued but eased slightly. Prices for most agricultural
commodities except soybeans remained above year-earlier levels, and farm
income increases were reported by Chicago, Minneapolis, and Kansas City.
Export demand remains strong for agricultural products, particularly
meat, but Dallas reported a recent decrease in demand for grain exports.

Activity in the energy and mining sectors increased since the
previous report. Cleveland, Minneapolis, Kansas City, Dallas, and San
Francisco saw increases in oil exploration. Cleveland and Dallas also
reported growth in shale gas extraction. Coal production was flat in
Cleveland and decreased slightly in St. Louis, though it is still up for
the year. Minneapolis reported that more wind energy projects were
planned. Mining activity increased in San Francisco and remained at
elevated levels in Minneapolis.

Employment, Wages, and Prices

Hiring was generally subdued, but some firms with open positions
reported difficulty finding qualified applicants. Stable employment
levels or subdued hiring were mentioned by New York, Philadelphia,
Cleveland, Atlanta, Chicago, and Dallas. Assessments of labor market
conditions were mixed in Richmond and St. Louis, while labor markets
showed some signs of reduced availability of labor in Minneapolis. In
Boston, demand for workers at services firms grew, but hiring among
manufacturers was limited. In Kansas City, hiring plans among
manufacturers remained solid, while expectations of future hiring among
manufacturers in Philadelphia nearly doubled. Meanwhile, Boston,
Philadelphia, Cleveland, Richmond, Atlanta, and Minneapolis noted that
some firms looking to fill open positions were having difficulty finding
qualified workers, particularly for high-skilled manufacturing and
technical positions. Atlanta noted there was growing concern that the
skills of the unemployed were deteriorating.

Wages and salaries remained stable across Districts, although some
exceptions were noted. In Cleveland, wage pressures emerged for truck
drivers as the pool of available drivers shrank relative to job
openings. Manufacturing wage growth strengthened in Richmond, while
hiring stabilized and the average workweek was unchanged. Some wage
growth was noted among the highly skilled trades in Atlanta. In
Minneapolis, wages increased sharply at some fast food restaurants in
western North Dakota. Kansas City reported that some energy and
information technology firms raised wages for skilled workers; Dallas
reported the same for airlines and a few construction-related
manufacturers. San Francisco noted persistent upward pressure on benefit
costs, especially for employee health care.

Overall price increases remained subdued, and some cost pressures
were reported to have eased.

Boston, Atlanta, Chicago, and Kansas City noted a moderation in
input cost pressures. In Cleveland, manufacturers reports on changes
in raw materials prices were mixed; the transportation sector noted
higher prices for tires, parts, and equipment; and fuel prices exhibited
some volatility. Richmond reported that raw materials, retail, and
services prices grew at a somewhat faster pace. Restaurants in Kansas
City expected higher menu prices due to rising food costs. In Dallas,
prices for new cars rose slightly, and staffing and legal services firms
noted modest increases in billing rates, but natural gas prices remained
low. San Francisco reported a recent uptick in the prices for energy
inputs, particularly oil, and for assorted food items at the retail
level. Atlanta noted that most businesses had limited ability to pass on
increases in input prices from earlier in the year.

(2 of 2)

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]

WASHINGTON (MNI) – The following is the summary section of the
Federal Reserve’s Beige Book survey of economic conditions in the 12
Districts, prepared by the Minneapolis Bank on responses up until Nov.
18, published Wednesday:

Summary

Overall economic activity increased at a slow to moderate pace
since the previous report across all Federal Reserve Districts except
St. Louis, which reported a decline in economic activity. District
reports indicated that consumer spending rose modestly during the
reporting period. Motor vehicle sales increased in a number of
Districts, and tourism showed signs of strength. Business service
activity was flat to higher since the previous report. Manufacturing
activity expanded at a steady pace across most of the country. Overall
bank lending increased slightly since the previous report, and home
refinancing grew at a more rapid pace. Changes in credit standards and
credit quality varied across Districts. Residential real estate activity
generally remained sluggish, and commercial real estate activity
remained lackluster across most of the nation. Single family home
construction was weak and commercial construction was slow. Districts
mostly reported favorable agricultural conditions. Activity in the
energy and mining sectors increased since the previous report.

Hiring was generally subdued, although some firms with open
positions reported difficulty finding qualified applicants. Wages and
salaries remained stable across Districts. Overall price increases
remained subdued, and some cost pressures were reported to have eased.

Consumer Spending and Tourism

District reports indicated that consumer spending increased
modestly, on balance, during the reporting period. Kansas City reported
that consumer spending strengthened, while retail sales rebounded in
Richmond. Gains in retail sales were noted in Philadelphia, Cleveland,
Minneapolis, and San Francisco. Boston reported that retailers
estimates of 2011 sales were generally more positive than they were at
the beginning of October, while same-store sales in New York were mostly
on or ahead of plan. Meanwhile, in Dallas, retail sales growth
moderated, and Atlanta and St. Louis reported weaker activity. A few
Districts noted that recent colder weather had spurred apparel sales.
Inventory levels were generally at desired or comfortable levels in New
York and Dallas. Retailers in Atlanta continued with tight inventory
management practices, and retailers in Richmond were cautious regarding
inventory and expansion. In Kansas City, inventories were above
year-earlier levels. Holiday sales were generally expected to be flat or
to increase modestly over a year ago in Cleveland, Atlanta, St. Louis,
Minneapolis, Dallas, and San Francisco. In Philadelphia, high-end,
online, and outlet retailers were the most optimistic for holiday sales,
while retailers in Chicago expected to use extended promotional periods
and heavy discounting to keep traffic volumes steady.

Motor vehicle sales increased in a number of Districts. Gains in
auto sales were noted in Philadelphia, Cleveland, Richmond, Atlanta, St.
Louis, and Minneapolis. Chicago also reported gains in sales during
October, but noted the pace of sales slowed in November and that dealers
suspected consumers may be waiting for potential end-of-year deals.
Upstate New York dealers reported that sales were steady to stronger and
that dealers service and parts departments continued to perform well.
Auto sales were solid in Kansas City, while demand held steady in
Dallas. Inventory levels were generally lean or lower than dealers would
like in Philadelphia, Cleveland, and St. Louis. In Dallas, vehicle
inventories had mostly normalized, while inventory levels increased in
Kansas City. Both Philadelphia and Dallas noted supply disruptions for
some foreign nameplates due to the flooding in Thailand.

Tourism showed signs of strength. New York and Atlanta described
tourism as robust and strong, while activity increased in Minneapolis
and posted moderate improvement in Richmond. Boston noted that the
travel and tourism sector continued to see strength in overseas and
business travel, while discretionary domestic leisure spending was
fueled by the affluent customer. In Richmond, tourism was largely flat,
but some contacts were cautiously optimistic about the winter season.
Airline contacts in Dallas expected to see stable demand through
year-end. Strength in hotel bookings and occupancy were noted in Boston,
New York, Richmond, Atlanta, Minneapolis, and San Francisco.

Nonfinancial Services

Business service activity was flat to higher since the previous
report. Boston, New York, Philadelphia, Minneapolis, and Kansas City
reported increased activity. St. Louis was mixed, while Richmond,
Chicago, and San Francisco indicated overall flat activity. Dallas
reported that demand for staffing services held steady at high levels.
St. Louis reported that firms in business support services, medical
research services, and transportation services announced plans to expand
operations and hire new workers, while contacts in temporary help
services, government services, and education services announced plans to
decrease operations. San Francisco noted that sales continued to grow
for providers of technology services, in particular for software
applications used for mobile computing and communication devices.

Manufacturing

Manufacturing activity grew at a steady pace across most of the
country, with all Districts other than St. Louis reporting increases in
orders, shipments, or production. Chicago, St. Louis, and San Francisco
reported positive results in metals and fabrication, while Cleveland saw
flat steel production and Philadelphia noted decreased demand for
primary metals. Cleveland and Chicago reported increased auto production
year over year, but Boston noted signs of slower auto component
production. Dallas saw steady demand for electronics, computers, and
high-technology goods, but San Francisco reported that demand for
consumer electronics continued to decrease. Philadelphia, Cleveland, and
Chicago saw increased production of energy-related products. For
construction-related goods, Chicago and Minneapolis reported declining
demand, while Dallas said demand was stable. Overall, St. Louis saw more
plant closures than plant openings or expansions. Freight transportation
volumes increased in Cleveland, held steady in Atlanta and Kansas City,
and were mixed in Dallas.

Banking and Finance

Overall bank lending activity increased slightly since the previous
report. New York, Philadelphia, Cleveland, and Kansas City reported
increased loan demand. Several Districts reported an increase in home
refinancing activity. Richmond reported mixed loan activity. Boston
noted plentiful financing and favorable terms for premier properties,
while financing remains harder to obtain for riskier properties and for
those in secondary and tertiary markets. Chicago, St. Louis, Dallas, and
San Francisco noted relatively unchanged loans. Atlanta saw soft loan
demand as companies continued to reduce their debt loads and limit
expansion and capital improvement plans.

Changes in credit standards and credit quality varied across
Districts. Philadelphia noted that credit quality continued to improve
but at a slower rate. Kansas City saw stable or improving loan quality.
Dallas noted that the quality of loans outstanding continued to improve,
with contacts reporting a decline in problem loans. San Francisco saw a
slight improvement in overall credit quality. Cleveland, Chicago, and
St. Louis noted relatively unchanged credit quality. Boston, Richmond,
and Atlanta saw some tightening of standards. In New York, bankers
reported declining delinquency rates for commercial and industrial
loans, but no change in delinquencies for other loan categories.

Real Estate and Construction

Overall residential real estate activity increased, but conditions
were varied across Districts. Philadelphia, Richmond, Minneapolis,
Kansas City, and Dallas noted increased activity. New York, Boston,
Cleveland, and San Francisco reported flat activity at relatively low
levels. Atlanta and St. Louis indicated decreased sales. Residential
construction remained sluggish. Single-family home construction remained
weak, while multifamily construction picked up in New York,
Philadelphia, Cleveland, Chicago, and Minneapolis. San Francisco
remained wanemic, while St. Louis and Kansas City reported decreased
activity.

Commercial real estate markets remained sluggish across most of the
nation. Boston, New York, Chicago, Minneapolis, and San Francisco
indicated roughly unchanged activity. Atlanta and Kansas City noted
slight improvement. Philadelphia and Dallas indicated mixed activity.
However, Richmond and St. Louis noted that vacancy rates increased.
Commercial construction was somewhat mixed. Cleveland saw steady to
slowly improving commercial construction; Chicago and Minneapolis
experienced modest to moderate increases. New York and Philadelphia
noted generally weak conditions; Richmond and St. Louis reported slow
activity, although industrial construction picked up.

-more- (1 of 2)

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]

US DATA: Beige book prepared for Dec 13 FOMC says “Overall economic
activity increased at a slow to moderate pace since the previous report
across all Fed Dists except St.L, which reported a decline.” Consumer
spending rose modestly. Motor vehicle sales increased in a number of
Dists, and tourism showed signs of strength. Business services was flat
to higher. Mfg expanded at a steady pace across the country. Overall
bank lending increased slightly & home refi grew more rapidly. Changes
in credit standards & quality varied. Res real estate remained sluggish,
and comml real est remained lackluster. Hiring reported as subdued with
wages stable. Overall prices seen as subdued, some price pressures
eased. Book was prepared at Minneapolis Fed, based on info collected
before Nov 18 (really just 2 wks past the prior FOMC meeting).

By Isobel Kennedy

NEW YORK (MNI) – This week’s Mortgage Bankers Association data
release seems to signal that Agency mortgage-backed prepayments have
likely peaked and will slow in the future.

The MBA’s Refinace Index decreased 510 points or 15.3% to 2,834 in
the week ended November 25 while the seasonally adjusted Purchase Index
was only down 0.8%.

The Refinance share of mortgage activity fell to 73.9% from 75.8%
in the previous week. This is the lowest level of refinancing activity
since July 2011.

On a seasonally adjusted basis, the MBA’s Composite Index fell
11.7% in the week ended November 25.

Market sources expressed surprise at the deep drop in the Refinance
Index since 30-year mortgage rates have hovered in the 4.00% to 4.10%
over the last month.

Mortgage traders and strategists routinely use Bankrate.com for
mortgage levels as it is updated daily as opposed to other sources that
update only once a week or less.

Noting that the weekly Refinance Index has surprised the markets
with back-to-back drops, Janaki Rao, head of mortgage strategy at Morgan
Stanley, says “it could be signaling faster than expected burnout.”

In other words, anyone who was able to refinance at 4.00% has
probably already done so.

Wednesday’s data has implications for prepayment speeds for agency
MBS investors, including the New York Federal Reserve.

Prepayment data, which includes mortgage payoffs and refinancings,
is released by Fannie Mae and Freddie Mac on the fourth business day of
each month to inform investors in mortgage pools about incoming cash
flows from securities that will get paid off.

The New York Federal Reserve’s agency mortgage portfolio hovers
around $870 billion so it receives a fair share of mortgage prepayments
each month.

On September 21, 2011, the New York Fed said it would begin
reinvesting prepayments from its mortgage portfolio back into agency
MBS. Prior to that, the Fed was taking that money and putting it into
the U.S. Treasury market.

Prepayments from any mortgage portfolio vacillate monthly for a
wide variety of reasons like interest rates, 30-year mortgage rates,
credit conditions, consumer confidence, the employment situation.

For the 30-day period from November 14 to December 12, the NY Fed
said it expected its portfolio prepayments to be about $28 billion and
it uses that money to buy “to-be-announced” agency MBS in the secondary
market.

For the 30-day period October 14 to November 10, the Fed’s
prepayments were only $22 billion reflecting higher rates for 30-year
mortgages and therefore less cost benefits in refinancings.

Mortgage prepayment reports are due out next Tuesday and the Fed
will announce its estimated prepayments for the next 30-days on December
13.

Head of mortgage strategy at FTN Financial, Walter Schmidt, says
Wednesday’s drop in the Refinance Index makes it the lowest reading
since July when 30-year mortgage rates were closer to 4.50% and 4.60%.

But there will likely be a lag before the drop in refinancings
seeps into prepayment speeds.

“Since the previous peak 3,967 (Refinancing Index) occurred just
four weeks ago, the current elevated speed profile of the Agency MBS
market is essentially baked in for the next factor report due out next
Tuesday,” Schmidt said.

“But with a typical 6-8 week lag between refi applications and the
realization of prepayments in the monthly factor report, speeds should
start to abate rapidly in subsequent reports,” Schmidt added.

Agency mortgage-backed securities were tighter on the day vs.
Treasuries and the prospect of lower prepayments was a positive factor.

Both lower and higher coupon MBS were doing well Wednesday. Lower
prepayments means less current coupon supply gets sold into the market
and that helps the lower coupons.

Slower prepayments means the MBS with higher coupons have less of a
chance of getting called away from investors.

In addition to the slower prepays, MBS have seen very good buying
this week from real and fast money accounts who are seeking to get
returns that are more attractive than the Treasury market.

And, in times of stress, MBS also often see a form of
flight-to-quality buying.

** Market News International New York Newsroom: 212-669-6430 **

[TOPICS: M$U$$$,MMUFE$,M$$AG$,MN$MO$,MAU0B$]

• Slow to moderate growth in 11 or 12 districts
• Consumer spending rose modestly
• Several districts reported increased home refinancing
• Wages and salaries remain stable
• Hiring was generally subdued

Nothing great, but doesn’t sound like an “In Case of Emergency Break Glass and Deploy QE” scenario to me. Full report here.

By Steven K. Beckner

SAN FRANCISCO (MNI) – Despite the positive market reaction to the
latest coordinated effort by central banks to ease European financial
strains, a high level of anxiety about the European debt crisis remains
among officials on both sides of the Atlantic.

No one is under any illusion that cheapened currency swap lines or,
for that matter, the latest efforts of European leaders to beef up their
bail-out fund, have ended the crisis.

Federal Reserve officials have been openly talking about how the
intensification of the Euro zone crisis has worsened downside risks to
the U.S. economic outlook just in the past few weeks. And the mood was
not significantly changed by Wednesday’s dramatic announcement, MNI
understands.

At the Nov. 2 Federal Open Market Committee meeting, Fed
policymakers downgraded their economic projections, in good part because
of the European situation. And now, officials acknowledge the outlook
for economic growth and unemployment has deteriorated further.

The Fed, European Central Bank, the Bank of Canada, the Bank of
England, the Bank of Japan and the Swiss National Bank announced
Wednesday morning they were extending and lowering the pricing of
currency swap lines “to enhance their capacity to provide liquidity
support to the global financial system.”

The Fed said the purpose of the new swap arrangements, which will
allow banks to obtain dollar credits at 50 basis points less, was to
“ease strains in financial markets and thereby mitigate the effects of
such strains on the supply of credit to households and businesses and so
help foster economic activity.”

The central bank coordination followed on the heels of a belated
agreement among European authorities to leverage, and effectively
increase, the euro zone’s bail outfund — the European Financial
Stability Facility.

The central bank actions were praised at the San Francisco Fed’s
Asia Economic Policy Conference.

“The central banks have just given us a fine example of global
policy coordination,” said University of California-Berkeley economics
Professor Barry Eichengreen, a former senior advisor to the
International Monetary Fund.

He was echoed by Ted Truman, former head of the Federal Reserve
Board’s international department.

That view is shared among officials. But, while stocks surged on
the announcement, it is recognized that the actions do not improve the
underlying European fundamentals.

But while the cheaper swaps ease dollar funding strains, they do
not address the underlying problem afflicting Europe, namely the loss of
investor confidence in a growing number of European governments’ ability
and will to curb deficit spending and manage their mounting debts.

As they have fled the Euro bond markets, the yields at which
governments must borrow to fund those debts has skyrocketed — and not
just in Greece and Italy.

The swiftly unfolding crisis has leapfrogged official efforts to
contain it, and what was considered nearly unthinkable just a few weeks
ago — an at least partial dissolution of Europe’s single currency
system — has become all too real a prospect.

One foreign official confided sadly that he now expects a
“break-up” of the euro zone.

Fed officials are hopeful that the European crisis can be defused,
but are bracing for further shock waves from Europe and preparing for
the worst.

Aside from aiding the ECB with liquidity problems, Fed policymakers
have made clear they are prepared to ease monetary policy further —
first through enhanced forward guidance on the duration of zero
short-term interest rates; second through additional large-scale asset
purchases to lower long-term rates.

When asked by MNI about the impact of the European crisis on the
U.S. economic outlook Tuesday, San Francisco Federal Reserve Bank
President John Williams told reporters the crisis has increased downside
risks and that the Fed is “watching this very carefully.”

He expressed the hope that European leaders “come up with a
solution that avoids a worsening of the crisis. We don’t want to see a
spreading of the financial crisis there.”

But Williams indicated he is prepared to increase U.S. monetary
accommodation if necessary to counter headwinds from Europe.

Responding to a similar MNI question at a press conference Tuesday,
Minneapolis Federal Reserve Bank President Narayana Kocherlakota said he
still thinks the Fed will need to “reduce accommodation” next year based
on projections of lower unemployment and stable inflation.

But he said the European crisis likely has lessened the need to
reduce accommodation, and he allowed for additional accommodation if the
outlook proves worse than expected.

Asked by MNI how the worsening of the European crisis since the
Nov. 2 FOMC meeting affects his policy calculations, FOMC voter
Kocherlakota responded, “I still see unemployment falling and the
outlook for unemployment falling but perhaps even more gradually. …

“On my baseline forecast, you’d still be looking to reduce
accommodation on my baseline forecast,” he said, adding that initially
reducing accommodation “should take the form of a shorter length of the
horizon before we start to raise rates … before we initiate exit.”

Fed Vice Chair Janet Yellen said Tuesday the world is at “a
dangerous moment” and emphasized the need for “global policy
coordination.” She said the Fed still has “some scope” to ease monetary
policy through either communications policy or additional asset
purchases.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]

According to this map.

H/T @SimoneFoxman.

Friend of ForexLive Vincent Cignarella from DJ FX Trader points out:

After the coordinated swap lines were announced in mid-September, the euro jumped 200 pips the following week only to close down fall 700 the following two weeks. It then traded up and waffled within a large range subject to one headline risk after another. On Oct. 27, the euro jumped to $1.4248 on news of EU leaders expanding the EFSF bailout facility.

Two things to watch for–will the euro fall the next week and will it rise after the EU ministers meet on Dec. 9, when they may announce an expanded EFSF bailout facility possibly including the IMF? The answer is it didn’t matter before as the euro kept falling after prior events, and it won’t matter now. The ECB is the only answer. Accept no substitute.

• <
• 1
• ...
• 3
• 4
• 5
• 6
• 7
• ...
• 303
• >