WeeklyBasis 12/11/09: Improving Economic News This Week, Fed Center Stage Next Week

Rates were up slightly this week but still holding close to pre-Thanksgiving record lows despite mortgage bond markets getting worse. Bonds have been selling off (which causes rates to rise) on generally good news that started with last Friday’s much better than expected jobs report showing unemployment improving … to 10% from 10.2% but an improvement nevertheless, and the first since January 2008.

Other positive market news included Bank of America repaying their $45b TARP obligation in full, Citigroup looking to raise $20b through equity issuance to chip away at their $45b TARP debt, and the best retail sales number (+1.3% for November) since August—retail sales have now improved three of the last four months. The main technical factor adversely affecting mortgage bonds was long-dated Treasury auctions this week that weren’t so well received and hurt the whole bond complex.

Add to this that the Fed is 86% finished with their $1.25 trillion bond buying program (set to end March 30), and we are likely to see more selling pressure on mortgage bonds that would push rates up.

Lots of inflation and Fed news next week: consumer and producer inflation data Tuesday and Wednesday, the rate and policy announcement from a two-day Fed meeting Wednesday, and Fed Chairman Ben Bernanke’s confirmation vote by the Senate Banking Committee on Thursday.

CONFORMING RATES ($200,000 – $417,000) – 1 POINT
30 Year: 4.875% (5.02% APR)
FHA 30 Year: 4.875% (5.08% APR)
5/1 ARM: 4.0% (4.13% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) – 1 POINT
30 Year: 5.125% (5.26% APR)
FHA 30 Year: 5.125% (5.25% APR)
5/1 ARM: 4.5% (4.63% APR)

JUMBO RATES ($625,500 – $3,500,000) – 1 POINT
30 Year: 5.625% to 5.875% (5.78% to 6.02% APR)
10/1 ARM: 6.25% (6.39% APR)
5/1 ARM: 5.25% (5.43% APR)