30-year fixed-rate mortgage: Averaged 6.37 percent with an average 0.6 point for the week ending July 10, 2008, up from last week when it averaged 6.35 percent. Last year at this time, the 30-year FRM averaged 6.73 percent.
The 15-year fixed-rate mortgage: Averaged 5.91 percent with an average 0.6 point, down from last week when it averaged 5.92 percent. A year ago at this time, the 15-year FRM averaged 6.39 percent.
Five-year Treasury-indexed ARMs: Averaged 5.82 percent this week, with an average 0.6 point, up from last week when it averaged 5.78 percent. A year ago, the 5-year ARM averaged 6.35 percent.
One-year Treasury-indexed ARMs: Averaged 5.17 percent this week with an average 0.5 point, unchanged from last week. At this time last year, the 1-year ARM averaged 5.71 percent
Clearly, the Fed is more concerned with inflation now and is really between a rock and a hard place. We all know that the twins are on the ropes, if not bankrupt. They have 5 trillion dollars of mortgages they own or insure. To hammer home how much trouble we have gotten ourselves int, the International Monetary Fund has requested a complete review of the American financial system - first time in US history.
Big time problems. I took a look at high income funds, one of the major institutional buyers of sub primes. The top high yield funds recommended by Morningstar lost on average 9.33% vs the S&P 500 which lost 15.19% this quarter. None of these high income funds owned mortgage passthroughs. I also looked at Federated Total Return Bond Fund. The portfolio is 53% mortgage backed securities, about 18% of which are BBB or lower. This fund is up 0.57% for the year.
What are the markets telling us? If you look at the financial sectors you see real losses, yet the holders of ][e`high yield product surprised me....I didnt see the sky falling.
Either the banks were playing so fast and loose with investors money that they tanked the American financial system (which I think is criminal and people should be held accountable) or its a stock market over reaction to a very bad situation. There comes a time when good companies become a buy. If we are coming close to this for the big banks, then we may be putting in a bottom. Tricky, to predict and no telling how long a bottoming process can take. Still, its seems like a disconnect between funds losses bank losses. My Citigroup is down to $16.41 form a high of $54.
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