Rate Update May 8, 2009
Fixed Mortgage Rates are up slightly from yesterday.
Mortgage Backed Bonds are now trading below the 50 and 100 day moving averages, which is at the lowest level since the Fed announced their Mortgage Backed Security purchase plan to increase by another $750 Billion back in mid March. As I mentioned yesterday, the Jobs Report could have a big influence on how mortgage bonds would trade today and it has already been a wild ride. It was reported that the US Economy shed 539,000 jobs in April, better than the 610,000 expectations. Though this has caused some gains in the stock market, Bonds have suffered over the past two days to the levels we are seeing now (lowest since March 18th).
The NY Fed Reserve announced yesterday that they purchased $26 Billion in Mortgage Backed securities last week. This brings the overall total to $450 Billion of the $1.25 Trillion commitment. Although these purchases are helping mortgage rates stay low, they will not drive rates down to the 4% range like many media outlets would have you believe. Out of the $450 Billion in Mortgage Backed Securities that have been purchased, only $393 Million have been low coupon rates of 3.5%…furthermore, if we are ever to see rates fall to 4%, we would need to see 3% coupon bonds being purchased heavily.
Current Outlook: Floating after the damage has been done