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Rates
Improve on Fed Announcement
Wednesday's
Fed announcement was very favorable for mortgage rates. This week's mixed
economic data, Treasury auctions, and news from Europe had little
influence. As a result, mortgage rates ended the week lower.
The
forecasts from Fed officials for the fed funds rate contained some major
surprises for investors. Fed officials now expect that economic conditions
will allow the fed funds rate to remain at exceptionally low levels until
at least "late 2014". Prior statements extended the expected time
frame only to mid-2013. In addition, comments from Fed Chief Bernanke
suggested that Fed officials would like to see stronger economic growth,
and they are open to the possibility of additional Fed easing. Many
investors think it is likely that the Fed will announce additional MBS
purchases at a later meeting. The expectation for a low fed funds rate and
the possibility of additional Fed purchases of mortgage-backed securities
(MBS) increased demand for MBS, which resulted in higher MBS prices and
lower mortgage rates.
Friday's
release of Gross Domestic Product (GDP) showed an increase at a 2.8% annual
rate during the fourth quarter of 2011, which was a little below the
consensus forecast, but up from 1.8% during the third quarter. Early
estimates for the first quarter of this year are for a slower growth rate.
The long-run average growth rate for the economy is generally considered to
be around 3.0%, and the economy usually grows at a faster than average rate
following a recession. Given that the economy is growing below its
potential and that inflation remains tame, the Fed's expectation that
monetary policy will remain very simulative for a long time is
understandable. |
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Also Notable:
- December Durable Goods Orders rose a strong 3.0%
from November
- December Pending Home Sales declined 4% from
November's 19-month high
- Consumer Sentiment rose to the highest level
since February 2011
- Significant progress was made on reaching a Greek
debt deal
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Average
30 yr fixed rate:
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Last
week:
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+0.08%
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This
week:
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-0.10%
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Stocks
(weekly):
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Dow:
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12,650
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+50
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NASDAQ:
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2,800
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+20
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Week
Ahead
The
biggest economic report next week will be the important Employment data on Friday.
As usual, this data on the number of jobs, the Unemployment Rate, and wage
inflation will be the most highly anticipated economic data of the month.
Before the employment data, Core PCE inflation and Personal Income will be
released on Monday. Chicago PMI Manufacturing and Consumer Confidence will
come out on Tuesday. ISM Manufacturing, Construction Spending, and ADP
Employment are scheduled for Wednesday. Productivity, Factory Orders, and
ISM Services will round out a busy week. |
Call me Today to refer you to a Great Lender! 907-868-2811
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