THE BASIS POINT

WeeklyBasis 07/25/05: Slight Rate Hike, Bonds Sell Off

Rates open this week up about .125% across the board, bringing the 3 week total to about +.30%. Rates held steady on Greenspan’s economic comments before Congress last week, but then bond markets sold off on the news of China removing it’s currency’s peg to the U.S. dollar. When bonds sell, prices decrease and yields (rates) rise. The reason for this selloff was a belief that foreign demand for U.S. bonds – a very important driver of higher bond prices and lower rates – is decreasing. This is certainly a long-term concern, but the selloff that came after the China news is more of a trading phenomenon in the short term. Meanwhile, existing home sales for May were blistering, and suggest an all-time record of 7.33 million units on an annualized basis. So low rates are obviously keeping things moving for now. This week, market-moving data comes Friday with Consumer Sentiment and 2Q GDP (economic growth). Very important for determining if we will come out of (or continue) the rate rising trend of the past three weeks.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 5.75% (5.89% APR)
15 Year: 5.375% (5.515% APR)
5/1 ARM: 5.625% (5.775% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 6.0% (6.14% APR)
15 Year: 5.5% (5.64% APR)
5/1 ARM: 5.5% (5.65% APR)