Friday February 4th, 2011 5:11 PM ET
By John Sauro
Bond Prices Fall, Mortgage Rates Rise
After trading in a narrow range for the last three weeks, Mortgage Bonds fell below levels of support and their 25-day moving average. Global economic recovery and growth continues to expand and so does the rise in Mortgage Rates.
The Jobs Report came in at 36K vs the 148K with the Unemployment rate at 9%, adding pressure to Mortgage Bond prices.
Outlook for Mortgage Rates
Inflation in December remained tame as measured by the Personal Consumption Expenditure (PCE) Index, which fell to 0.0% from the November reading of 0.1%, 0.7% year-over-year. The PCE is the Fed’s favored inflation gauge. It’s a bit different from the Consumer Price Index (CPI), as the PCE measure’s the changes in prices of goods and services, and is done based on surveys of businesses. The CPI is a measure of change in the purchasing power of an average family, based on calls to households.
The poor 0.7% year-over-year reading is below where the Fed “wants” inflation. The Fed wants to have a year over year reading somewhere between 1 and 2%, and likely closer to 2%.
Unless the economy starts growing at a much faster than expected rate, inflation as measured by PCE and CPI should continue to remain very low for this year and that will help keep rates at attractive levels for 2011.
Update on FINREG
The SBA Office of Advocacy Warns The Fed of Non Compliance
The Fed Rule on Regulation Z; Docket No. R-1366, Truth in Lending is due to be implemented on April 1st.
The SBA, NAMB as well as other organizations wants the rule to be postponed as the Fed has not issued guidance on the rule.
This rule along with the Dodd-Frank Legislation will further cripple the lending and housing markets.
Many are unaware of the unintended consequences FINREG, the Dodd-Frank Bill and The Fed Rule will have on the cost of home financing and credit availability.
Unfortunately, without repeal or changes to these Bills and Rules , they will change the landscape of home financing by eliminating fair competition in the industry.
The end result will be increase costs to the consumer, create a monopoly of four banks, severely limit the availability of credit and will set precedent for the Fed to do the same to other industries.
It’s time we stand up and say enough is enough.
I ask you vist WWW.REPEALFINREG.COM .
This website will quickly inform on the issues and enable you to easily voice your concerns to your elected officials.
My bias is toward floating rates here, as we anticipate a rebound in mortgage bond prices.