Mortgage Rates Predictions

July 22, 2008 | Mortgage Rates are at their worst level in 2008…

Inflation, Inflation, Inflation!  Today the Philly Fed President Charlie Plosser said that inflation is too high and the Fed would have to “back up their words with action”.  The Fed will need to begin hiking the Federal Funds rate as soon as possible to fight inflation.  It seams that we are at the rock bottom with mortgage rates assuming the Fed starts to take action and raise their Feds Cut Rate.  Mortgage backed securities are -44bp on the day at 99.12.

Mortgage Rates Predictions

 

June 10, 2008 | Mortgage Rates are increasing!

The Balance of Trade was slightly higher than analyst expected today.  Mortgage Bonds are still getting slaughtered -68bp!  The Fed Chairman Ben Bernanke’s speech last night has pushed mortgage bonds to their lowest level since March.  Mr. Bernanke is concerned about inflation, but he believes the market will work itself out.  The Fed’s lack of action will cause a weaker dollar, higher oil prices, and more inflation.  Read more

Feds Cut Rate is not going lower and Mortgage Bonds love it!

FOMC Minutes for April 30, 2008

The Fed met today at 2:00pm ET to release the Fed Minutes Report regarding the April 30th meeting that resulted in a -.25% cut bringing the Feds Cut Rate to 2.00%.  They are still very concerned about inflation and unemployment.  The Fed believes the economy is still weak and will continue to be in the near future.  The Federal Reserve has decided not to continue cutting interest rates even with a sluggish economy.  The negative economic news is helping mortgage bonds as investors realize they will not continue to get bailed out by the Fed boosting the economy with further cuts.  This is one more reminder that Fed Rate Cuts do not equal lower Long Term Mortgage Rates.  In fact the absence of more Fed Cuts is benefiting Mortgage Backed Securities as investors buy up low risk mortgage bonds.

Feds Cut Rate 2%

The Feds cut the Federal Funds Rate by .25%.  They will be monitoring inflation.  Mortgage Bonds were initially down -25bp on the news.  Now Mortgage Backed Securities are up +16bp, hopefully better rates will be ahead.

Feds Cut Rate coming soon…

FOMC Meeting | Reported [1:15pm Central] | ELEVATED

ADP Employment Report | Reported +10,000 | Est -55,000 | Prior 8,000 | MODEST

Employment Cost Index | Reported 0.7% | Est 0.8% | Prior 0.8% | ELEVATED

GDP | Reported 0.6% | Est 0.4% | Prior 0.6% | MODEST

GDP Chain Deflator | Reported 2.6% | Est 3.o% | Prior 2.4% | ELEVATED

Chicago PMI | Reported 48.3 | Est 48.5 | Prior 48.2 | ELEVATED

Crude Inventories | Reported [10:30E] | Prior 2,421,000 | MODEST

The markets appear to be anxiously awaiting the Feds Cut Rate announcement today.  The notoriously misleading ADP report came in much better than expectations signally job growth.  Friday we will see the real Employment Report to gauge the economy more accurately.  The employment cost index, GDP, and GDP Chain Deflator all come in better than the revised expectations.  GDP Chain Deflator is an important inflation index, so it coming in better than expectations is actually a good thing for Mortgage Backed Bonds.  If the Fed has decided to hold off on rate cuts because they believe the economy has shown signs of recovery, that will reassure bonds traders that inflation will not continue to be ignored and should be good for Mortgage Rates.

This is going to be a huge week for Mortgage Rates

This is going to be a huge week for mortgage rates.  The economic reports include consumer confidence tomorrow, the Fed meeting on Wednesday, PCE Thursday, and the Employment Report on Friday.  These are all ELEVATED market movers.  The Feds Cut Rate is expected to be lowered -.25% tomorrow.  It is also important to note that Traders will be anxiously deciphering the Feds statements to see if they hint to further Fed rate cuts.  The Feds rate cuts stimulate the economy and increase inflation, the enemy of mortgage bonds. 

Now would be a good time to lock in an interest rate ahead of all this upcoming volatility if the rate and program you want are available.  There is a good chance though that we see 30 fixed rates in the 5’s again by the end of this week.  In January, when rates dropped down to the low 5’s, they came and went quickly, so be prepared to lock.

Mortgage Rates for April 28th, 2008

30 Year Fixed/apr | 6.125%/6.225%

15 Year Fixed/apr | 5.625%/5.725%

3/1 Interest Only [1%]/apr | 5.125%/5.388%

5/1 Interest Only [1%]/apr | 5.375%/5.575%

7/1 Interest Only [1%]/apr | 5.625%/5.825%

Economic Reports March 28 | 30F 6.000%

Personal Consumption YOY | Reported 2.0% | Est 2.0% | Prior 2.2% | ELEVATED

Personal Income | Reported 0.5% | Est 0.3% | Prior 0.3% | MODEST

Personal Spending | Reported 0.1%  | Est 0.2% | Prior 0.4% | MODEST

Personal Consumption FEB | Reported 0.1%  | Est 0.3% | Prior 0.2% | ELEVATED

Consumer Sentiment | Reported 69.5  | Est 71.0 | Prior 70.5 | MODEST

Inflation seams to be within the Fed’s 1-2% range based on YOY PCE.  With inflation in check the Fed should have a green light to lower the Feds Cut Rate.  The bond market is currently only up +22bp this morning.  There is a full day of trading a head, so pending on how the stock market reacts to these reports, we may see a little better long term rates this afternoon.

Feds Cut Rate

FOMC Meeting | Reported -.75% | Est -1.0% | ELEVATED

When is the next Fed meeting?

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.

Mortgage Update | 2.10.2008 | 30 Fixed 6.375% 15 Fixed 5.750%

 

We are set for another wild week for Fannie Mae Mortgage Backed Securities.  Today the mortgage bond market has moved 66bp again today.  30 Year Fixed interest rates lowered .125% at open, then rose about .25% by mid morning, and now sit almost equal to Friday.  The economic reports due this week are Balance of Trade [3.11], Crude Inventories [3.12], Retail Sales [3.13], Initial Jobless Claims [3.13], Consumer Price Index [3.14], and Consumer Sentiment [3.14].  Read more