12/15/2008
Mortgage backed securities have opened higher this morning and are
at the best levels of the year, which means we should see about the
best rates of the year as well. It will be interesting to review lenders
rate sheets this morning as I suspect some will worsen pricing to slow
things down and other lenders will price aggressively looking to fill their
pipelines.
The week ahead does include some key economic reports which could
move the markets.
Monday
- NY Empire State Index, economist’s expecting -27.0. This report
is a survey of manufacturers across New York which measures the
strength of manufacturing. Actual reading came in at -25.8.
- Industrial Production, economists’ expecting -0.5%. This report
measures the change in the production of the nations industries.
Tuesday
- Housing starts, economists’ expecting 730,000 after last months
791,000
- Core Consumer Price Index, economists’ expecting 0.1%
increase after last months -0.1% decrease. This report measures
inflation at the consumer level excluding food and energy. Higher
inflation leads to higher rates.
- Consumer Price Index, economists’ expecting a -1.3% drop after
last months -1.0% drop.
- FOMC Meeting on interest rates, economists expecting a 50 bp
cut to the fed fund rate. Remember, a cut to the fed fund rate does not
equal a cut to mortgage rates.
Thursday
- Jobless claims, economists’ expecting 575,000 after last weeks
573,000
- Leading Indicators, economists’ expecting -0.5%.
- Philadelphia Fed Index, economists expecting -40.0. This report
measures strength of manufacturing in the Philadelphia area.
As a general rule, weaker then expected economic data is a positive for
mortgage backed securities and lower mortgage rates. Things appear
to be ripe for floating today but a concern for me would be the fed
meeting which concludes tomorrow with their decision on interest
rates. It does appear a cut is in the bag; however, the concern being
each time this year we have had a cut mortgage backed securities
have sold off and mortgage rates have increased. One item that is
different this time is the Treasury is starting to buy mortgage backed
securities which is helping to keep mbs prices high and mortgage rates
low. If you can lock today at a sub 5% rate, that would be very hard to
pass up. Can rates go lower? Sure, but they could move much higher
and that is always the risk when playing the lock/float game. If we start
to see a sell off, we will get back to you in time so you can lock in
before a reprice to the worse, but at lender cut off for rate lock, you
should always review your pipeline or your personal loan and consider
locking. Since rates are at historic lows, locking is never a bad idea. If
you are happy with the rate and payment quoted to you, locking will
take all risk out of the equation. In times like these, things can change
very quickly. One headline could pop up and we see a huge sell off
leading to higher rates. Two other items that bring me some concern is
the dollar is weakening and oil is starting to rise. With a weaker dollar,
commodities such as oil which are traded in dollars, go up in price
which could spark inflation. Already this morning oil has touched the
$50 per barrel level after closing one day last week at $40 per barrel.
As said many times before, our biggest enemy to lower rates is
inflation.
Currently our 5.0 mbs is trading 1 tick up on the day.
Mortgage backed securities have opened higher this morning and are
at the best levels of the year, which means we should see about the
best rates of the year as well. It will be interesting to review lenders
rate sheets this morning as I suspect some will worsen pricing to slow
things down and other lenders will price aggressively looking to fill their
pipelines.
The week ahead does include some key economic reports which could
move the markets.
Monday
- NY Empire State Index, economist’s expecting -27.0. This report
is a survey of manufacturers across New York which measures the
strength of manufacturing. Actual reading came in at -25.8.
- Industrial Production, economists’ expecting -0.5%. This report
measures the change in the production of the nations industries.
Tuesday
- Housing starts, economists’ expecting 730,000 after last months
791,000
- Core Consumer Price Index, economists’ expecting 0.1%
increase after last months -0.1% decrease. This report measures
inflation at the consumer level excluding food and energy. Higher
inflation leads to higher rates.
- Consumer Price Index, economists’ expecting a -1.3% drop after
last months -1.0% drop.
- FOMC Meeting on interest rates, economists expecting a 50 bp
cut to the fed fund rate. Remember, a cut to the fed fund rate does not
equal a cut to mortgage rates.
Thursday
- Jobless claims, economists’ expecting 575,000 after last weeks
573,000
- Leading Indicators, economists’ expecting -0.5%.
- Philadelphia Fed Index, economists expecting -40.0. This report
measures strength of manufacturing in the Philadelphia area.
As a general rule, weaker then expected economic data is a positive for
mortgage backed securities and lower mortgage rates. Things appear
to be ripe for floating today but a concern for me would be the fed
meeting which concludes tomorrow with their decision on interest
rates. It does appear a cut is in the bag; however, the concern being
each time this year we have had a cut mortgage backed securities
have sold off and mortgage rates have increased. One item that is
different this time is the Treasury is starting to buy mortgage backed
securities which is helping to keep mbs prices high and mortgage rates
low. If you can lock today at a sub 5% rate, that would be very hard to
pass up. Can rates go lower? Sure, but they could move much higher
and that is always the risk when playing the lock/float game. If we start
to see a sell off, we will get back to you in time so you can lock in
before a reprice to the worse, but at lender cut off for rate lock, you
should always review your pipeline or your personal loan and consider
locking. Since rates are at historic lows, locking is never a bad idea. If
you are happy with the rate and payment quoted to you, locking will
take all risk out of the equation. In times like these, things can change
very quickly. One headline could pop up and we see a huge sell off
leading to higher rates. Two other items that bring me some concern is
the dollar is weakening and oil is starting to rise. With a weaker dollar,
commodities such as oil which are traded in dollars, go up in price
which could spark inflation. Already this morning oil has touched the
$50 per barrel level after closing one day last week at $40 per barrel.
As said many times before, our biggest enemy to lower rates is
inflation.
Currently our 5.0 mbs is trading 1 tick up on the day.
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