THE BASIS POINT

WeeklyBasis 07/18/05: Rates Hold Steady Prior to Greenspan Testimony

Rates open even this week, but are still about .25% higher than they’ve been in the past 4 to 5 weeks. This was unexpected given last week’s flat inflation data. Usually benign inflation reports are good for rates. Low inflation signals that the Fed might be toward the end of its tightening cycle, and bond prices and yields hold steady. But last week, investors interpreted lower inflation – along with the previous week’s improved jobs picture – as signals of growth. So there has been a lot more demand for stocks than bonds. Bond selling pushes prices down and yields (rates) up. On Wednesday, Fed chairman Greenspan will be giving his semiannual Congressional testimony on the strength of the economy. He’s a rock, so we can’t expect too much diversion from his messaging of late. My bet is that rates will hold steady this week, or move up slightly.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 5.625% (5.765% APR)
15 Year: 5.25% (5.39% APR)
5/1 ARM: 5.5% (5.65% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 5.875% (6.015% APR)
15 Year: 5.375% (5.515% APR)
5/1 ARM: 5.375% (5.525% APR)