THE BASIS POINT

WeeklyBasis 07/17/06: Mid-East Violence Pushes Rates Down

Fixed and ARM rates are down about .125% over last week due mostly to violence in the Middle East causing investors to move into bonds for safety. The reason rates dropped is because when bond prices rise in a buying rally, bond yields (or rates) move down. We’re on inflation watch this week, with Producer Price Index (PPI) data Tuesday and Consumer Price Index (CPI) data Wednesday. Also, Fed chairman Ben Bernanke will be briefing Congress on the state of the economy and interest rates about two hours after CPI is released. Since the Fed has been fighting inflation by raising rates over the past 2 years, and the latest inflation data will be hot off the press, this briefing is key. Bernanke is still new enough to where we can’t predict what he’s going to say, but its probable he will say inflation is contained and they’re near the end of their tightening cycle. This plus continued geopolitical unrest could fuel a mid-summer rate dip.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.625% (6.765% APR)
10/1 ARM: 6.625% (6.765% APR)
5/1 ARM: 6.5% (6.65% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.75% (6.89% APR)
10/1 ARM: 6.75% (6.89% APR)
5/1 ARM: 6.5% (6.65% APR)