Rates Fall As Egypt Unrest Outweighs Improving U.S. Economic Data

Rates are down to about 4.75% today as turmoil in Egypt is causing stocks to fall and bonds to rise. The Dow is currently down 172 points and mortgage bonds are currently up 34 basis points (4% FNMA 30yr). When bond prices rise on this kind of rally, rates fall. HuffingtonPost has lots of Egypt coverage. This is outweighing today’s news that the economy grew 3.2% in 4Q2010, a nice improvement over 3Q2010’s 2.6% reading. Consumer spending increased 4.4%, the fastest since early-2006 and double the 2010 average for the first three quarters. The economy grew at 2.9% for all of 2010 (versus a decline of -2.6% in 2009), but that’s still subject to revision because today’s 4Q reading was the first of three. The 4Q second reading is February 25. On Monday we’ll get more data on consumer income and spending, as well as consumer inflation. Rates are ending the week well but this week’s data suggests rates would go higher, so we can expect that to happen if the Egypt situation stabilizes.