RateWatch ALERT – March 24

Market: We’re off 90bps, meaning that we’ve lost almost a whole point in price on the benchmark 4.5% 30-year FNMA bond. That means rate pricing is off by just about that same amount, and 5% is on the ragged edge of no good anymore.  Most lenders will be pricing at 5.25% in the morning.
Analysis: We did have some good economic news this morning, with durable goods orders excluding transportation up by .9% (consensus was for a .6% increase).  Of course, durable goods including transportation was up by only .5%, versus a consensus of .9%, so that wasn’t rosy; apparently transportation is still in the soup. But then, we lost .34 right off the open and it’s gotten worse every tick since all day.  Markets were looking for a reason to sell.
They were looking for a reason because the Health Care monstrosity is projected to increase the federal deficit by $800 billion (roughly 80% more than it is now).  That means the fed prints more money, which means inflation, which means bonds are a bad investment, which means rates are headed higher.  Thank your Congressman, if he’s a Democrat.  As you might have heard, every single Republican in Congress voted against the thing, which is itself an Easter Miracle.
What this further means is that when tomorrow’s employment numbers come in crappy, nobody is going to care.  Rates are headed higher, and the Fed purchase of mortgage-backed securities has nothing to do with it.  This is a political problem.
Action: If you want the tax credit for buying a home, find a house RIGHT NOW.
Chris Jones
City 1st Mortgage Services


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