THE BASIS POINT

WeeklyBasis 10/10/05: Holidays Approach, Bring Lump of Higher Rate Coal

Markets have stopped betting on long-lasting negative economic impacts of Katrina. Bottom line: rates may increase as we approach the holidays, the weather changes, and consumers get hit with the one-two punch of higher heating prices and higher gas prices. I will be monitoring this topic in my Monday WeeklyBasis reports. But if you’d like to discuss in detail what it means for your medium-to longer-term clients, just give me a ring.

As for this week, rates opened even after a three week rising trend. Rates rose slightly on inflation fears last week, but then dropped with Friday’s jobs report showing the first negative jobs growth in more than two years. This was the first jobs report following the hurricanes. The most important post-Katrina data this week comes Friday with the Consumer Price Index (CPI), a key inflation measure. Normally traders react to the “core” CPI number, which excludes volatile food and energy costs. But since energy prices have been consistently high for months, this number has been taken more seriously by traders – and by the Federal Reserve’s rate committee. So if CPI is higher than expectations, look for rates to rise as traders prepare for more Fed rate hikes.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 5.875% (6.015% APR)
15 Year: 5.5% (5.64% APR)
5/1 ARM: 5.75% (5.9% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 6.25% (6.39% APR)
15 Year: 5.75% (5.75% APR)
5/1 ARM: 5.75% (5.9% APR)