Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on April 29, 2009

Locking Stance: LOCKING    Mortgage Bonds: –3bp

Wow, was I ever correct in my analysis yesterday.  Despite the fact that mortgage backed securities rose out of the starting gate, they plummeted and ended the day down 22 basis points, just as I said they likely would.  As the week started, I expected mortgage rates to improve slightly based on news and not reality and that when reality hit, mortgage rates may again be on the rise.  It appears that the testing of the 25-day moving average as support is well under way.  If it holds, mortgage rates may again move lower.  Of course the opposite is true as well if it fails.

Today is a big day, aka “Fed Day”, where the FOMC Meeting announces its Fed Funds Rate decision.  You can expect them to hold the Fed Funds Rate steady at this meeting, but also expect more unconventional policies to emerge, possibly even another increase to their MBS purchasing strategy.  One thing is certain, with Big Ben himself saying that inflation concerns will emerge AFTER the FOMC Meeting, you can expect them to release something that will ensure that happens.  Also, remember that the decision is not as important as their Policy Statement, so look for a breakdown of their statement over at Florida Mortgage Report shortly after its release.

Data for today is fairly light weight with the exception of the Fed decision.  However, Treasury announcements and Treasury Auctions may very add to the selling pressures as Treasuries have hit record levels to cover the massive government spending and will not likely let up.  The added supply will put pressure on MBS pricing, especially with the 30-year Treasury announcement. 

We have already seen the MBA Purchase Applications, which showed less applications falling across the board despite low mortgage rates, showing what some people, including the Fed, fail to realize…Mortgage rates do not have a huge effect on saving the housing market, rather issues like employment do.  GDP was also released this morning, coming in rather mixed and should raise some concerns.  While GDP overall came in worse than expected (-6.1% versus –5.0%), while the Chain Deflator (aka GDP Price Index – a measure of inflation) far exceeded expectations, coming in at 2.9% versus 1.8%.  Big Ben’s take on inflation concerns may very well be justified as PCE gets released tomorrow and may show inflation climbing, which will be bad news for mortgage bonds.  All the more reason for the Fed to step up MBS purchasing in their Policy Statement?

What does this mean for Florida Mortgage Rates?  Expect mortgage rates to be under pressure to climb, at least until this afternoon’s Fed decision and Policy Statement.  If the Fed issues another shock to the markets, mortgage rates may improve, though inflation appears to be climbing as well.  The outlook for mortgage rates is uncertain, though technical indications are hopeful.

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