WeeklyBasis 02/25/08: Inflation or Recession or Both?

Fixed and ARM rates are up by almost .5% since last week, and we’re still seeing .25% to .375% swings from day to day. Rates drop on recession concerns and rise on inflation concerns, and markets can’t decide which is the bigger issue. This is the reason for the volatility, and rates are up because three voting members of the Federal Open Market Committee—Dallas Fed president Richard Fisher, Fed Governor Randall Kroszner, and Fed Governor Frederic Mishkin—have spoken publicly in the last week about the Fed’s challenges in this environment. Bond markets have mostly interpreted their comments as having a bias toward fighting fight inflation with higher Fed rates or at least less aggressive cuts.

January’s Existing Home Sales were down .4% from December’s upward revision, and we have January New Home Sales Wednesday. But the real rate-moving news this week is inflation. We have manufacturing inflation data Tuesday, GDP chain deflator inflation data Wednesday and consumer inflation data Friday. This week is critical because it’s the newest inflation data the FOMC will be analyzing ahead of their next meeting March 18. I expect rates to rise or stay even this week.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.375% (6.52% APR)
15 Year: 5.875% (6.03% APR)
5/1 ARM: 5.625% (5.77% APR)

Jumbo ($417,001 – $1,000,000) – NO POINTS
30 Year: 7.25% (7.39% APR)
5/1 ARM: 6.25% (6.40% APR)
7/1 ARM: 6.25% (6.39% APR)

Better rates available for select profiles.