Archive for June, 2011

Fixed mortgage rates hold steady near yearly lows

Thursday, June 30th, 2011 | Finance News

WASHINGTON – Fixed mortgage rates were mostly unchanged this week, hovering near their annual lows.

The average rate on the 30-year loan rose slightly to 4.51 percent, Freddie Mac said Thursday. It hit its lowest level of the year three weeks ago, at 4.49 percent.

The average rate on the 15-year fixed mortgage, a popular refinancing option, stayed at 3.69 percent. It reached its low point of the year two weeks ago, at 3.67 percent.

Rates typically track the yield on the 10-year Treasury note, which has been rising in the past week.

That could change this week when the Federal Reserve's $600 billion bond buying program ends.

The Fed has purchased around $75 billion worth of bonds each month since November. That drove the yield on the 10-year Treasury note lower than 3 percent this spring. As a result, rates on mortgages and other loans also fell.

Still, low mortgage rates and plummeting home prices have done little to boost the troubled housing market. Tougher lending standards and bigger down payment requirements have prevented many people from taking advantage of the ultra-low rates. Many people who can qualify are holding off, worried that prices have yet to bottom out.

Fewer people purchased previously occupied homes in May. Sales fell to their lowest level of the year. Since the housing market went bust in 2006, sales have fallen in four of the past five years and hit a 13-year low last year.

New-home sales fell last month to a seasonally adjusted annual rate of 319,000 homes. That's fewer than half the 700,000 that economists say must be sold to sustain a healthy housing market.

Federal Reserve Chairman Ben Bernanke said last week that the housing market is dragging down the broader economy. For the market to recover, he said foreclosures must be cleared from the pipeline of homes for sale.

Most economists say home prices will keep falling through the rest of the year. Many forecasts don't anticipate a rebound in prices until at least 2013.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

The average rate on a five-year adjustable-rate mortgage fell from 3.25 percent to 3.22 percent, the lowest rate on records dating back to 2005. The average rate on a one-year adjustable-rate loan fell to 2.97 percent, slightly above the record low of 2.95 percent.

The rates do not include the extra fees known as points. One point is equal to 1 percent of the total loan amount.

The average fees for the 30-year and 15-year fixed loans were 0.7, according to Freddie Mac's survey. The average fees for the five-year and one-year ARM were 0.6.

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Chevy U.S. car sales at highest brand share in 20 years

Thursday, June 30th, 2011 | Finance News

DETROIT (Reuters) – General Motors Co's (GM.N) U.S. Chevrolet car sales in the first half of the year are set to reach their highest share for the brand in 20 years, outselling trucks in June for the third straight month.

Chevy cars accounted for just above 50 percent of the brand's total U.S. sales for June -- the third consecutive month in the majority -- and 47 percent for the first six months of 2011, said Alan Batey, vice president of sales and service for Chevrolet. He declined to disclose GM's expected total results for June, which the company will report on Friday.

"You'll see continued strength in passenger cars, particularly in the compact and mid-car segments," Batey said.

Citing gasoline prices that are still about $1 a gallon higher than a year ago, GM pointed out that 46 percent of Chevy's retail buyers in the first six months chose a more fuel-efficient four-cylinder engine in their vehicles, double the rate of five years ago.

"We have been a very, very strong trucks brand and frankly have underperformed in cars," Batey said. "It's as simple as that. You have to go back a long way to see a car performance this strong."

The last time Chevy cars outsold trucks for three straight months was in May, June and July of 1991, when they made up 52 percent of sales for the year. Chevy is benefiting now from strong demand for its Cruze small car and Malibu mid-size sedan.

However, Batey sees the historical pattern of stronger truck sales in the second half of the year holding true for 2011, noting a steady increase in truck sales over the last two to three weeks.

"Although the cars will remain robust and strong, I expect the trucks will come back somewhat in the second half of the year," he said. He forecast cars' full-year share of Chevy sales at 42 percent to 45 percent.

Long term, Batey sees Chevy sales at a third each for cars, crossovers, and the pickup and SUV segment. However, he said 2012 would get a boost from a full year of the Sonic subcompact, which goes on sale this fall, as well as the introduction of the new Malibu early in 2012 and the Spark minicar later in the year.

For the first six months, Chevy car sales will be up 23 percent, Batey said. Sales of pickup trucks and sport utility and crossover vehicles will show a 9 percent rise for an overall gain of 15 percent for the brand.

GM expects Chevy's retail sales to be up 26 percent for the first half. That includes gains of 42 percent for cars and 16 percent for trucks.

GM said Chevy was on track to sell 80,000 more cars and 40,000 more trucks through the first six months than a year earlier.

The Chevy brand has gained almost 1 percentage point in retail market share through April -- the latest period for which figures are available, GM said, citing Polk data. Cars are up 1.1 percentage points, and trucks up 0.7 points.

(Editing by Lisa Von Ahn)

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Investors stay cautious as H2 starts: Reuters poll

Thursday, June 30th, 2011 | Finance News

LONDON (Reuters)- Investors have become a little more upbeat heading into the second half of the year, lifting stock allocations from 2011 lows but remaining cautious with plenty of safe-haven cash and bonds.

They also lifted their exposure to euro zone stocks and bonds in the month, despite the ongoing debt crisis.

Reuters asset allocation polls released on Thursday showed leading investors across the world recovering from May's retrenchment, brought on by fears over a stagnant U.S. economy, potential over-heating in China, and the euro zone debt crisis.

On average, 58 fund firms in the United States, Europe excluding the UK, Japan and Britain held 51.5 percent of a balanced portfolio in equities, up from 50.7 percent in May.

Bond holdings were at 35.1 percent, down slightly from 35.5 percent a month earlier. Cash was at 4.9 percent, down from 5.2 percent.

The overall picture suggested that investors have overcome some of their worst fears but are far from bullish.

June's equities allocation, for example, is far closer to what it was last year before the Federal Reserve launched its second asset-buying quantitative easing program (QE2) than it was in the immediate months that followed.

QE2, which ends on Thursday, provided a major sentiment boost for investors.

"The investment environment continues to be highly uncertain," said Yoshinori Nagano, senior strategist at Daiwa Asset Management in Tokyo.

Investors are being battered by the Greek sovereign debt crisis, in which a default could spread into a wide range of other assets through banking losses and contagion into other euro zone countries.

Despite this, the euro zone saw more interest from investors in June, with holdings of both euro zone stocks and bonds rising.

This appeared to be based on a belief that policymakers would do what was necessary to keep the crisis contained.

"Ultimately, (Greece) cannot be allowed to fail because this could cause a contagion effect across peripheral Europe," said Neil Michael, executive director of investment strategies at London & Capital.

REGIONALLY

U.S. fund managers added to equities for the first time in two months and decreased bond exposure.

Fifteen U.S.-based fund management firms held an average of 63.9 percent of assets in equities, up from 61.6 percent a month earlier and 63.3 percent in April.

Bond holdings decreased to 28.5 percent in June from 30 percent in May and 29 percent in April. Cash exposure remained at 3 percent in June.

European investors raised equities and cut cash for the first time this year while they held their bond holdings largely steady.

The survey of 17 Europe-based asset management firms outside Britain showed a typical balanced portfolio holding 47.6 percent of equities in June compared with 45.5 percent in the previous month.

It held 39.0 percent in bonds compared with 39.5 percent in May. Cash holdings fell for the first time since December to 7.1 percent from 8.8 percent.

Japanese fund managers' global bond weighting was near a record high while their stock weighting sunk toward a 12-year low.

The poll of 13 institutions found the average weighting for global bonds was 49.5 percent, close to the 49.6 percent logged in March and May, which was the highest since the survey began in February 1995.

Their average weighting for global equities edged down to 42.6 percent in June after a three-month high of 43.0 percent in May. Cash positions rose to 4.8 percent this month from the three-month low of 4.5 percent in May.

British fund managers trimmed equity holdings and lifted bonds.

The 13 UK-based management companies polled held 52 percent of their portfolios in stocks, down from 52.0 in May. Bond holdings rose to 23.3 percent from 22.9 percent.

Cash weightings rose slightly to 4.5 percent from 4.4 percent.

(Additional reporting by Chris Vellacott and Natsuko Waki in London, Jennifer Ablan in New York, Kaori Kaneko in Tokyo and Bangalore Polling Unit; Reporting by Jeremy Gaunt)

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