Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on March 27, 2009

Locking Stance: CAUTIOUSLY FLOATING   Mortgage Bonds: +6bp

Mortgage bonds had a pretty good day, no doubt by the fact the Fed increased their purchasing levels, bringing their net MBS purchasing to $33.1B, the highest net thus far.  It certainly helped that there were no Treasury Auctions yesterday as well, as the lack of added supply helped allow pricing to move higher by 22 basis points.

Today is the big day as far as data, with the PCE report (Fed’s favorite gauge on inflation) being released.  Core PCE was inline with expectations at 0.2%, as was Personal Income at –0.2%.  Personal Spending was slightly lower than expected, coming in at 0.2% versus expectations of 0.3%.  Headline PCE was 0.3%, largely due to recent gains in oil.

Despite the numbers, there is valid reasons for the growing inflationary concerns.  For starters, the yearly PCE rate is actually climbing again with this month moving to 1.8%, up from 1.6% last month.  While still within the Fed’s comfort range, it is certainly not moving in a favorable direction for mortgage backed securities.  With inflation clearly creeping back into the markets, mortgage bond traders will have to weigh which is the greater market force, growing inflation or the Fed’s interventions.  If you missed my breakdown of the latest Fed move to increase their MBS purchasing to $1.2% trillion, I think their motive is now realized as exactly what I mentioned.

What does this mean for Florida Mortgage Rates?  As the underlined statement says, so goes the market.  Mortgage Rates will face pressures to rise higher, as I have stated for quite some time, but the Fed’s limitless pockets may manage to keep mortgage rates steady for the foreseeable future.

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