"YOUR TEXAS LENDER"
Mortgage Market Commentary
Mortgage backed securities (MBS) prices are
higher (rates lower) after yesterday's volatile
trading over the FOMC policy statement and
before today's Treasury auction of $27 billion
in 7yr notes that completes the record $104
billion in borrowing; FNMA 5.0% coupon
101.58bps, +28bps and the high of the session.
The Fed, encouraged by signs the recession is
easing, doused speculation they will pump more
money into the economy. Fed policy makers will
maintain the size and pace of their program to
buy Treasuries, agency debt and MBS. The
statement indicated more time is needed to
assess the prospects for a recovery before
deciding to exit from their unprecedented credit
programs and reinforced expectations that
interest rates will remain low for some time.
Also emphasized was continued monetary stimulus
is needed but the risk of inflation is low,
easing concern that higher prices will erode the
value of the fixed payments from debt. The
difference between 10yr note yields and Treasury
Inflation Protected Securities (TIPS), which
reflect the outlook among traders for consumer
prices, narrowed to 183bps from 202bps two weeks
ago. The final revision to 1st quarter Gross
Domestic Product (GDP), the sum of all goods and
services produced, came in at -5.5% reflecting
declines in inventories, housing and business
spending and capping the worst six month
performance in almost sixty years. Residential
construction dropped 39%, the most since 1980.
Business investment shrank 37%, the biggest
decline since 1947. Inventories fell $87
billion, the biggest drop ever. On a positive
note, the trade deficit narrowed contributing
2.4% to growth, while core PCE rose only 1.6%.
Personal Consumption Expenditure is the Fed's
preferred measure of inflation. Jobless claims
unexpectedly rose for a second straight week,
15K to 627K from a revised 4K higher 612K
indicating the labor market may take longer to
stabilize. The data included unexpected claims
from the educational services sector which often
shows variability at the end of the school year.
The 4 week moving average also increased to
617,250 from 616,750. The total number of people
collecting unemployment insurence jumped 29K to
6.74 million. Fed Chairman Bernanke is
testifying today before the House Committee on
Oversight and Government Reform regarding his
role in Bank of America's purchase of Merrill
Lynch.
| From: | RateAlert@ThinkBigWorkSmall.com |
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