WeeklyBasis 08/04/06: Friday Special: Fed Rate Pause Imminent

Here’s a Friday special WeeklyBasis to make up for me being out the last couple Mondays and this coming Monday. And it’s good news too … Fixed and ARM rates are down .25% in the past 2 weeks after continued violence in the Middle East and lackluster jobs growth. These things have raised doubts about whether economic growth of the past 2 years is sustainable, which causes bonds to rally – when bond prices rally, bond yields (or rates) drop. The next Fed meeting is this Tuesday, August 8, and Fed Funds futures trading as of this morning is pricing in a 63% probability of no rate hike, and a 37% probability that the Fed will hike rates by .25%. This probability of NO hike is by far the highest we’ve seen in 2006, and this morning’s weak jobs report only reinforces this trading sentiment. If the Fed pauses, it’s reasonable to expect a short-term rate dip (beyond the .25% we’ve already seen), which would give us all some momentum going into the Fall. More to come when I resume my normal WeeklyBasis schedule on 8/14.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.375% (6.515% APR)
10/1 ARM: 6.5% (6.64% APR)
5/1 ARM: 6.25% (6.4% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.5% (6.64% APR)
10/1 ARM: 6.625% (6.765% APR)
5/1 ARM: 6.375% (6.525% APR)