Extra low interest, anyone?

Two-year US treasury yielding only 0.4977% and ten-year at 2.82%.

Time to refinance to SOR rate mortgages, contact me for more details.

PIMCO's Gross Says Fed Unlikely to Raise Rates for 2 to 3 Years

Good news for those with SOR rate mortgages, feel free to call me to find out why!

Aug. 6 (Bloomberg) -- Pacific Investment Management Co.'s Bill Gross said the Federal Reserve is unlikely to raise interest rates for two to three years.

Gross, Pimco's founder and co-chief investment officer, made the comments in a radio interview today with Tom Keene on Bloomberg Surveillance. A yield of 0.50 percent on two-year Treasury notes signals that investors should buy longer-maturity securities, he said.

Companies in the U.S. added workers in July for a seventh straight month at a pace that suggests the labor-market recovery will be slow to take hold.

Private payrolls that exclude government agencies rose by 71,000, less than forecast, after a gain of 31,000 in June that was smaller than previously reported, Labor Department figures in Washington showed today. Economists projected a 90,000 rise in private jobs, according to the median estimate in a Bloomberg News survey. Overall employment fell 131,000 and the jobless rate held at 9.5 percent.

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China easing off on the brakes?

News reports says that Beijing may ease bank credit later this year to support economic growth, as well as by the banking regulator's clarification on its stance toward its property loan policy. Look out for July inflation data due Wednesday.

Bloomberg: China Said to Tell Banks to Stress Test for 60% Home-Price Drop

Whoa!!! 60% drop?!

Ok, its just a stress test. The tested scenario needs to be as extreme as possible. If the banks & economy passes, then alls well.

The following is the full article:

Aug. 5 (Bloomberg) -- China's banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said.

Banks were instructed to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator's requirement hasn't been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.

The tougher assumption may underscore concern that last year's record $1.4 trillion of new loans fueled a property bubble that could lead to a surge in delinquent debts. Regulators have tightened real-estate lending and cracked down on speculation since mid-April, after residential real estate prices soared 68 percent in the first quarter from a year earlier, according to estimates from Knight Frank LLP, the London-based property adviser.

A deep slump in China's property market may further slow the nation's economy, which grew at a less-than-forecast 10.3 percent pace in the second quarter. China is still the fastest growing major world economy. Concern that China's economy may cool due to a real-estate slump erased an early rally in U.S. stocks. The market rebounded on economic data showing stronger- than-estimated growth in American service industries.

Non-Performing Loans

The China Banking Regulatory Commission said in a July 20 statement that banks should "continue to deepen" stress tests on lending to property and related industries, citing a speech by Chairman Liu Mingkang during a meeting attended by regulatory officials and bank heads. The release didn't give details. Officials at CBRC didn't return calls seeking comment.

Results from previous stress tests show that the ratio of non-performing real estate loans among Chinese banks would rise by 2.2 percentage points if home prices drop 30 percent and interest rates rise by 108 basis points, the person said. Pre-tax profits would fall 20 percent under that scenario. A basis point is 0.01 percentage point.

Measures to cool property-price gains included raising minimum mortgage rates and down-payment ratios for second-home purchases, and a suspension of lending for third homes.

Property prices in 70 Chinese cities dropped 0.1 percent in June from the previous month, the statistics bureau said July 12. Prices rose 11.4 percent from a year earlier, the second monthly slowdown after April's record expansion.

Bad Loans

Bank of China Ltd.'s bad-loan ratio would climb 1.2 percentage points under the worst-case scenario drawn up in the latest stress tests, Li Lihui, president of the nation's third- biggest lender by market value, said May 27.

Record lending last year in China and the ensuing surge in home prices have stoked concern that a bubble is forming that may threaten the banking industry. Property stocks are the worst performers on the Shanghai Composite Index this year with an average 21 percent drop, data compiled by Bloomberg show.

"There is a perception in the real-estate development community that banks and the market cannot tolerate much more than a 25 to 30 percent drop in prices," said Nicholas Consonery, an Asia specialist at Eurasia Group in Washington.

Still, the government probably doesn't expect prices to drop by 60 percent, Consonery said in a phone interview. It's seeking to "signal to the market that banks are sound even with a significant drop in prices," he said.

Rogoff's Warning

China's property market is beginning a "collapse" that will hit the nation's banking system, Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund, said July 6.

Average prices may fall as much as 20 percent over the next 12 to 18 months, with declines of up to 40 percent in "big bubble" cities, Nomura Holdings Inc. said in a July 2 report. The impact on banks' asset quality will still be "limited" as long as borrowers have adequate income to keep paying their mortgages, Nomura said.

Regulators testing banks for a 60 percent correction in "only the most bubbly markets" will probably find lenders "will not pose a systemic risk to the banking system," said Daniel Rosen, principal of the Rhodium Group, a New York-based advisory company.

The banking regulator has reminded lenders that some developers with high debt burdens and large land reserves already face the risk of a funding collapse, the person said. Banks were told to gauge developers' real borrowing needs by monitoring the progress of projects under construction and to "strictly" control the pace of lending, the person said.

"Special mention" real-estate development loans have climbed in Shanghai since April and rose by 1.4 billion yuan ($207 million) in June, Xinhua News Agency reported Aug. 1, without saying where it got the information.

To contact the Bloomberg News staff for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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AP News - What earnings reports have revealed about ads

Spending on advertising is an indicator of how corporations view the economic health going forward. Based on the recent earnings report, ad spending has been quite robust thus pointing to an upbeat view of the US economy.

To read the full article, pls visit:
http://m.apnews.com/ap/db_8596/contentdetail.htm?contentguid=E3hp4ntV

Hong Kong Property Market Update

Property prices in Hong Kong increased by 10.5% for the first half of this year versus an increase of 5% for the Hang Seng Index.

This mirrors the rise of 11% for the Hang Seng Property Index. Experts worry that the HK property market may be facing a bubble when price has appreciated a staggering 42% since the start of 2009.

But property consultants are predicting a further increase of 10% for the second half of 2010. With developers still paying record prices for land auctions, this prediction look set to come true.

Inventories build up & hiring

Data complied by the US Commerce Department showed that inventory-to-sales ratio hit a record low of 1.23 versus 1.46 in December 2008. Any increase in demand would cause a surge in activity and could easily boost hiring.

In a separate note, analysts also expect unemployment to remain high until the end of the year.

Economic update

BULLETIN: China's manufacturing sees first contraction since March 2009, HSBC survey shows.

Although economic data from China has indicated their economy is slowing, it has probably been priced into the market. Moreover the pessimism in the market could very well be overdone, just like most reaction is an overreaction.

Have a great week!!