Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on February 19, 2010

Locking Stance: LOCKING    Mortgage Bonds: –22bp

Mortgage backed securities continued there fall yesterday, closing the day down down 47 basis points and finalizing the head and shoulders pattern I discussed.  MBS prices are bouncing around, looking for direction, today as more inflation data hit the airwave.

Today’s data was merely the Consumer Price Index, or CPI, and is one of the most watched inflationary gauges.  The most important is the Personal Consumption Expenditures Index, or PCE, which is the Fed’s favorite and will be released next on March 1.  Today’s CPI data came in just below expectations at 0.2% versus 0.3% and showed a slight dip on a year/year basis to 2.7%.  The Core CPI was –0.1% versus 0.1% and its year/year dropped to 1.5%.  It is not uncommon for PPI and CPI to move opposite, some of which is due to the fact it takes a while for what happens at the producer level to pass through to the consumer.  Additionally, the re are times when what happens at the producer level does not pass through to the consumer, whether up or down.

So why are MBS prices falling despite the favorable CPI report?  That comes down to the fact the Fed hiked the discount rate (not the Federal Funds Rate) unexpectedly, which is leading traders to think the Fed may be ready to enact rate hikes soon, and increasing inflationary questions.  That is what is keeping MBS prices from rebounding today.

What does this mean for Mortgage Rates?  Mortgage rates are acting as expected these days, edging slightly higher and with the over outlook pointing towards continued increases in mortgage rates despite short-term corrective periods.

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