Interest Rates popped up last Friday and today. As to why they jumped and what's in store can always be answered with the movie title: "It's Complicated" :) My comments are in BOLD.
MBS Quoteline summarized it well here (italics):
Anticipation of the Fed's quantitative easing program pushed mortgage rates down to the lowest levels in decades, (until last Friday) but they have moved significantly higher since the announcement. (Friday and today.)
The size of the program was close to expectations. With yields so low, though, investors have been questioning what could push them lower in the future. There has been substantial opposition to the quantitative easing program from other countries and from many US politicians and economists, meaning that the Fed will face strong resistance to an expansion of the program.
Unless the economy falters, it may be difficult for mortgage rates to hold near recent lows, and investors have been selling MBS based on this outlook. Today's Retail Sales data was a little stronger than expected. (Mostly fueled by auto sales, remove them and it was a little worse.) Retail Sales ex-autos matched the consensus. The Empire State index came in below expectations. The Dow is up 20 points. No more economic data will be released today.
Many experts believe the movement in the bond market was not justified and that we can expect a correction back to lower mortgage rates. Last week, prior to Friday borrowers could lock in rates in the low 4's, Monday, those rates moved to mid to high 4's for a conforming refinance.
What's Happening This Week:
PPI- The Producer Price Index. A Key Inflation Report
Treasury International Capital or TIC Flows - Who is buying our bonds
Mortgage Applications Index- Purchase and refinance activity
CPI- The Consumer Price Index- Important indicator of inflation
Housing Starts - Important index of the housing market activity.
Initial Jobless Claims
Leading Economic Indicators
Copyright @ 2010 MBSQuoteline, XINNIX with additional commentary by Mary Anne Daly