Tamalewagon
Little Buddy
- Joined
- Sep 24, 2007
- Messages
- 9,173
- Reaction score
- 3,214
Midday Update:
WEDNESDAY AFTERNOON UPDATE: This week’s FOMC meeting has adjourned with an announcement of a .500% hike to key short-term interest rates, slowing the pace of the previous four meetings. Today’s increase brings the benchmark Federal Funds rate to its highest level since December 2007. It was widely expected that Chairman Powell and friends would make this move.
Comments from the post-meeting statement and press conference indicate the Fed has no plans at the moment to pause these increases to bring down inflation. In fact, some of the charts are pointing towards the Federal Funds rate now peaking at 5.1%, up from the previous update of 4.6%. This means the Fed feels they need to be more aggressive to tackle inflation that previously thought.
Along with this meeting came revised economic projections from the Fed that indicate they feel inflation is going to stronger than thought while a noticeable slowdown in economic activity and a sizable rise in unemployment are on the horizon. The higher inflation is problematic for bonds and mortgage rates, but the other two headlines can be considered favorable news for rates.
We saw an initial negative reaction in bonds before recovering the knee-jerk losses. On the other hand, stocks have reacted negatively with the major indexes giving up morning gains. The Dow is now down 102 points while the Nasdaq is down 51 points. The bond market is currently up 2/32 (3.49%), which should keep mortgage rates at this morning’s levels, at least for the time being. There is a possibility of bonds falling back into negative ground or maybe extending the rebound to cause an intraday revision in rates before the end of the day.
This week’s second big economic report will come early tomorrow morning when November's Retail Sales report is posted at 8:30 AM ET. It gives us insight into highly important consumer spending habits that make up over two-thirds of the U.S. economy. Rapidly rising spending raises the possibility of seeing solid economic growth and stronger inflation. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, an unexpected increase in sales will likely drive bond prices lower and mortgage rates higher tomorrow. Analysts are expecting to see a 0.2% decline in November's sales, meaning consumers spent less last month than in October. Favorable results for mortgage rates would be a larger decline that shows weaker than thought economic activity.
Also tomorrow morning will be the release of November's Industrial Production report at 9:15 AM ET. This moderately important report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts show a 0.1% rise in output. A decline will be good news for bonds and mortgage rates, while a stronger reading would show manufacturing strength and be considered unfavorable. The sales data will draw much more attention than this release will.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...
WEDNESDAY AFTERNOON UPDATE: This week’s FOMC meeting has adjourned with an announcement of a .500% hike to key short-term interest rates, slowing the pace of the previous four meetings. Today’s increase brings the benchmark Federal Funds rate to its highest level since December 2007. It was widely expected that Chairman Powell and friends would make this move.
Comments from the post-meeting statement and press conference indicate the Fed has no plans at the moment to pause these increases to bring down inflation. In fact, some of the charts are pointing towards the Federal Funds rate now peaking at 5.1%, up from the previous update of 4.6%. This means the Fed feels they need to be more aggressive to tackle inflation that previously thought.
Along with this meeting came revised economic projections from the Fed that indicate they feel inflation is going to stronger than thought while a noticeable slowdown in economic activity and a sizable rise in unemployment are on the horizon. The higher inflation is problematic for bonds and mortgage rates, but the other two headlines can be considered favorable news for rates.
We saw an initial negative reaction in bonds before recovering the knee-jerk losses. On the other hand, stocks have reacted negatively with the major indexes giving up morning gains. The Dow is now down 102 points while the Nasdaq is down 51 points. The bond market is currently up 2/32 (3.49%), which should keep mortgage rates at this morning’s levels, at least for the time being. There is a possibility of bonds falling back into negative ground or maybe extending the rebound to cause an intraday revision in rates before the end of the day.
This week’s second big economic report will come early tomorrow morning when November's Retail Sales report is posted at 8:30 AM ET. It gives us insight into highly important consumer spending habits that make up over two-thirds of the U.S. economy. Rapidly rising spending raises the possibility of seeing solid economic growth and stronger inflation. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, an unexpected increase in sales will likely drive bond prices lower and mortgage rates higher tomorrow. Analysts are expecting to see a 0.2% decline in November's sales, meaning consumers spent less last month than in October. Favorable results for mortgage rates would be a larger decline that shows weaker than thought economic activity.
Also tomorrow morning will be the release of November's Industrial Production report at 9:15 AM ET. This moderately important report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts show a 0.1% rise in output. A decline will be good news for bonds and mortgage rates, while a stronger reading would show manufacturing strength and be considered unfavorable. The sales data will draw much more attention than this release will.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...
