Fed Comments Push Mortgage Rates Higher
Fed comments pushed mortgage rates higher as investors began
last week watching for fresh information about Greece and China. The Fed stole
the spotlight on Wednesday with news that was unfavorable for mortgage markets,
and mortgage rates ended the week moderately higher.
The Fed currently has significant influence on mortgage
rates. Over the last
year, the Fed pushed mortgage rates lower by purchasing
over $1 trillion in mortgage-backed securities (MBS). Wednesday, the Fed's
Plosser suggested that the Fed should begin selling those MBS "sooner rather
than later." Later that day, the Fed released the detailed minutes from the
January 27 Fed meeting. The minutes revealed that "several" Fed officials
favored starting the sale of the Fed's MBS portfolio "in the near future."
Investors were not expecting that Fed MBS sales would begin any time soon. Quite
simply, adding to the supply of MBS being sold means that yields would need to
move higher to attract buyers. Since mortgage rates are largely determined by
MBS yields, mortgage rates rose after the news.
Thursday, the Fed announced an increase
in the discount rate, the emergency rate at which banks borrow money from the
Fed. The Fed made clear that this in no way reflected a change in broader
monetary policy or its economic outlook. This was simply a return to more normal
levels for one Fed tool now that the financial crisis has eased. As a result,
there was very little impact on mortgage rates. According to Fed officials, a
move to begin to tighten overall monetary policy, which almost certainly would
cause a significant reaction, is still expected to be at least several months
away. The inflation data released this week continued to show low levels of
current inflation, providing little pressure for the Fed to rush to take action.
Also last week:
- January Core CPI inflation increased at a tame 1.6%
annual rate
- January Housing Starts increased 3% to the highest level
in six months
- The Treasury will auction $118 billion in 2-yr, 5-yr,
and 7-yr securities next week
- The Fed purchased $11 billion in agency MBS, with about
$55 billion more to go
This Week
Next week, New Home Sales will be released on Wednesday.
Durable Orders, an important indicator of economic activity, will come out on
Thursday. Friday will be the biggest day for economic data with Existing Home
Sales, Preliminary GDP, and the Chicago PMI manufacturing index. Consumer
Sentiment and Consumer Confidence will round out the schedule. In addition,
there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Finally,
Fed Chief Bernanke is scheduled to speak on Wednesday.
Kelly Wolfe
is our featured
locals mortgage professional with
Integrity Mortgage Group.
 |
NEW Sandhills Voices!
What's Your Favorite Community in the Sandhills?
NEW Featured Locals! Featured Locals Professionals and Neighbors
 |
Kelly Wolfe
Integrity Mortgage |
 |
Jim
Leach
State Farm Insurance |
 |
Scott Riggsbee
Carolina Property Sales |
 |
Frank Thigpen
Thigpen & Jenkins Attorney at Law |
 |
Cypress Creek
Townhomes
Southern Pines |
|
