THE BASIS POINT

WeeklyBasis 04/11/05: Rates Stay the Course… this Week

 

Rates/commentary for the week of April 11, 2005. Fixed and ARM rates open this week the same as last week, holding onto the dip we saw after the weak March jobs report. Prior to that, if you recall, rates had jumped up on Greenspan’s comments after the March 22 FOMC meeting. He talked of how “pressures on inflation have picked up in recent months and pricing power is more evident.” Tuesday, the full minutes from that meeting will be released, and if traders interpret policymakers as fearing inflation, we could see rates go back up again. If the Fed sees inflation as a threat, they may go from the “orderly” .25% increases I discussed last week to more aggressive .5% increments beginning with the next FOMC meeting May 3 (this slows the money supply so prices in the economy don’t jump too quick). But more importantly, mortgage and Treasury bond markets will start to price in those predicted Fed Funds Rate increases now. This week, we’ll see retail sales Wednesday, where a modest gain is expected. If it is positive, it will be the first six-month stretch without a decline since 1999. Interestingly though, consumer confidence is still lagging, and estimates for Friday’s consumer confidence data call for a decline. So people are spending a bit more, but without strong jobs growth, they are not as optimistic about future prospects. This keeps rates lower for now, but inflationary concerns could overshadow this.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 5.875% (6.015% APR)
15 Year: 5.5% (5.64% APR)
5/1 ARM: 5.5% (5.65% APR)

Jumbo ($359,650 – $650,000) – NO POINTS
30 Year: 6.125% (6.265% APR)
15 Year: 5.75% (5.89% APR)
5/1 ARM: 5.75% (5.90% APR)

 

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