THE BASIS POINT

WeeklyBasis 01/12/04: Lots of Economic Data this Week, Expect Rate Volatility

Rates/commentary for the week of January 12, 2004. Rates improved by about 0.25% Friday as Treasury and mortgage-backed bond markets rallied strongly on December’s weaker-than-expected employment data. The end of this week is huge for economic releases. We’ll see reports on inflation (CPI and PPI), retail sales, weekly jobless claims and consumer sentiment. Remember, though, that the market will only move on deviations from what’s already expected, rather than actual news, which is typically already ‘priced in’ to mortgage rates. On the equities side, quarterly corporate earnings will be released in force this week, with large caps like Intel, GE and Delta leading the charge. If these reports positively deviate from consensus estimates, it is bad for the bond market and rates (because, to buy stocks, investors sell bonds which pushes yields up). Bottom line: Now is the time for new borrowers to lock (if they’re ready), and if you locked in the past few weeks, you should seek to capture some of Friday’s rate improvement. We start the week with rates testing their all-time lows of summer 2003, but the trading week will be volatile.

Conforming ($50K – $333,700K) – NO POINTS
30 Year: 5.5% (5.64% APR)
15 Year: 5.875% (6.015% APR)
5/1 ARM: 4.625% (4.775% APR)

Jumbo ($333,701 – $650,000) – NO POINTS
30 Year: 5.875% (6.015% APR)
15 Year: 5.25% (5.39% APR)
5/1 ARM: 4.75% (4.9% APR)