THE BASIS POINT

WeeklyBasis 05/01/06: Rates Higher As Fed Chief Asserts Himself

Fixed and ARM opened about even this morning, but bond markets sold off in reaction to strong manufacturing sector data and to inflation comments from Fed chairman Ben Bernanke. So I expect rates to be up about .125% to .25% tomorrow. Bernanke told a CNBC correspondent that the markets and financial media have under-reacted to cues he’s given on his inflation-fighting style, saying: “It’s worrisome that people would look at me as dovish and not necessarily an aggressive inflation-fighter.” This pushed bond prices lower – and sent rates higher – ahead of the Fed’s rate-setting meeting next Wednesday, May 10. We can expect another .25% in the overnight Fed Funds rates. The biggest data this week comes on Friday with the April jobs and wage growth report, one of the broadest signals of economic growth and inflation. If that number is higher than the 200k consensus predictions, we can expect Bernanke to stay strong on the anti-inflation rhetoric May 10 – which means no rate relief for a bit longer.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.5% (6.64% APR)
10/1 ARM: 6.5% (6.64% APR)
5/1 ARM: 6.375% (6.525% APR)

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