THE BASIS POINT

WeeklyBasis 09/19/05: Consumer Confidence Confounds, Rates Likely to Move Up

Rates are up about .125% this week, which is peculiar given last week’s larger-than-expected drop in consumer confidence. Normally, if consumer confidence if falling, people are less likely to spend, which eases inflationary concerns and leads to lower mortgage rates. But the bond market shrugged off that news on Friday and instead focused on 1) the implications of paying for the hurricane damage and 2) tomorrow’s Fed meeting. So Treasury bonds, a key rate indicator, finished the week at the highest yields (rates) since early-August. Point #1 drove the market, as investors dumped bonds to buy stocks of companies that may benefit from Gulf Coast rebuilding. On point #2, markets show an 85% probability for another +.25% from the Fed tomorrow. This is, by far, the data highlight for the week, as the markets look not only for any rate moves, but also for the Fed’s outlook going forward.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 5.875% (6.015% APR)
15 Year: 5.375% (5.515% APR)
5/1 ARM: 5.75% (5.9% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 6.125% (6.265% APR)
15 Year: 5.625% (5.765% APR)
5/1 ARM: 5.625% (5.8% APR)