Mortgage Bonds set new record highs. Weakness in the job market helped Mortgage Bonds move higher again this week. The benchmark 5.00% coupon moved 28 basis points higher to $102.75, 6 basis points more than last weeks high of $102.69. Helping Bonds move higher were disappointing earnings reported from Dow component Proctor & Gamble and Dow Chemical.
Remember, Mortgage Rates fall when Mortgage Bond prices rise. Therefore some lenders reduced interest rates by .125% this week.
The Treasury announced it will be selling $74B in government debt next week.
We will be keeping a close watch on this sale as the results could move the Bond markets in either direction.
Fed Chairman Ben Bernanke stated in a speech on Monday that the Fed must avoid raising interest rates too soon and urged the government to proceed cautiously in cutting spending and raising taxes.
The Fed Chairman also told “Meet the Press” that the US could go into a double dip recession if housing prices continue to decline, and said that we are in a “quasi-recession”.
If only they would listen…
Article- Economic Recovery Depends on the Real Estate Market
Pending Home Sales- came in at -2.6% for June, slightly better than the expected -5.0%. This makes you wonder … did the Tax Credit really offer any meaningful help to the housing market.
We maintain a bias toward locking into rates as we are in uncharted waters.
Fannie Mae 4.0% Bond: 102.75 +28 BP