Mortgage Market Report for Thursday April 24, 2008
The FOMC will announce its rate decision on April 30. Economists expect a 25bp cut to bring the Fed funds rate to 2.00%.
Greg Ip, the economist said. "The Fed is concerned that further easing could aggravate rising inflation expectations as food and oil prices soar to new records. Concerns about inflationary pressures "means the option of standing pat will likely also be on the table. Fed fund futures imply a 90% chance of a 25bp cut with a 10% chance of no change. Looking further out, futures show a 19.8% chance of a second cut at the June 25 FOMC meeting, unchanged from a day earlier."
These improvements take some time to factor into the long term fixed mortgage market. Initially, these reductions in short term rates create higher long term fixed securities. The markets have been continuously rocked by credit crunch and the housing bubble.
On the day mortgage bonds are down and rates are up. They are testing the new floor at the 200 day moving average.
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