Mortgage Rates Predictions June 05
June 5, 2008
June 5, 2008 | Rates are heading up as the battle for the 200 day moving average continues.
Mortgage Bonds were absolutely slaughtered yesterday. The Fannie Mae Bonds opened yesterday at 99.875 and this morning we saw a low of 98.625 already. As a reminder, Fannie Mae Mortgage Backed Securities correlate directly with Long Term Fixed Mortgage Rates. Every -.40-.50 basis points Mortgage Bonds move is +.125% higher interest rate for consumers. That means if yesterday morning 30 Year Fixed was 6.125% and Mortgage Bonds lost -125bp, [99.875-98.625] then this morning that same consumer would have +.25% to +.375% higher rate [6.375-6.500%]. With yesterdays notoriously misleading ADP report showing growth in employment, investors are looking for a stronger than expected employment report tomorrow. Bonds are down -38bp at 98.81 on the day currently with no other important economic indicators scheduled for release. Consumers should lock in their Long Term Fixed rates in this volatile market and definitely consider 5-7 Year Arms as an alterative to 30 Year Fixed since they have been improving.
Philly Fed Index
March 17, 2008
The Philadelphia Fed Index is an important survey of delivered the third week of the month that gives a look into the manufacturing sector. 50% is no change. <50 = contracting. >50 = expansion. The Philly Fed Index correlates with the ISM a little over 3/4 of the time and is a key inflation indicator. Read more
Index of Leading Economic Indicators [LEI]
March 17, 2008
The Index of Leading Economic Indicators is a collection of 10 indicators from all sectors of the economy. The index is supposed to track trends in the market. Read more
Fed Meeting | FOMC | Federal Open Market Committee Meeting
March 17, 2008
The FOMC is a 12 member committee that meets 8 times a year to decide short term monetary policy. The Federal Funds Rate, the rate banks charge other banks for short term [usually overnight] money, sets the stage for all rates. Lower rates result in more liquidity and should stimulate the economy. Higher rates should slow the economy. When inflation feared the Fed usually tightens their policy by raising interest rates. The Federal Funds Rate does not directly correlate with the long term fixed rates. Long term fixed rates enemy is inflation, stimulating the economy can increase inflation risk. On the other hand, lowering the Fed Funds Rate is a sign that the economy is weak. A weak economy is good for mortgage rates. The FOMC Meeting has an ELEVATED impact on mortgage rates.
Housing Starts
March 17, 2008
Much like the name, housing “starts” are the number of residential properties that have began breaking ground [excavation of a foundation]. In theory starting construction usually means that builders are confident they will be selling the home once construction is complete. This should generate everyone Read more
Industrial Production and Capacity Utilization
March 17, 2008
The Federal Reserve Statistical Release G.17 or Industrial Production and Capacity Utilization is a measure of the changes in production output for utilities, manufacturing, and mining, and the extent that this production is being used. The Production divided by the Capacity gives you the Capacity Utilization rate. Read more
Empire State Index
March 17, 2008
The New York Empire State Index is a survey of New York manufactures. It is released near mid month. There are about 175 executives surveyed in New York State that give their opinion of market conditions in the manufacturing sector today and six months into the future. Read more
When is the next Fed meeting?
March 10, 2008
The next Federal Open Market Committee [FOMC] meeting is Tuesday March 18, 2008. The futures market is expecting the feds cut rate to be 2.25% after the -.75bp cut rate expected on Tuesday. The FOMC meetings have an ELEVATED impact on mortgage bonds and mortgage rates. The lower federal funds rate stimulates the economy, which can cause inflation the arch enemy of Mortgage Bonds.
Consumer Price Index [cpi] and Core CPI
March 4, 2008
The Consumer Price Index is a measure of the average price a set group of goods and services cost 80% of the population. Read more
Retail Sales Index and Ex-Auto Retail Sales
March 4, 2008
The Retail Sale index is a closely watch economic indicator and an ELEVATED mortgage rate mover. Retail Sales are a sample of many different sized retail stores. It does not include services, but it the markets closely observe it. It can be associated with Read more
