Mortgage Market Report for Thursday November 1st, 2007
Bonds are moving upward this morning, erasing yesterday's losses. The reason for the rally in Bonds is due to the Stock market being down significantly so far today. This set the stage for a poor Stock open, and money is for now being pushed into Bonds.
As we expected, the Fed cut rates by a quarter point, taking the Fed Funds Rate target down to 4.50%. As we have seen in the past, the immediate reaction by the Bond market wasn't very favorable.
The Fed stated "Readings on core inflation have improved modestly this year, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully". The Feds statement left the market with the impression that there will be no further rate cuts for the remainder of this year.
The Fed has to feel good about this morning's read on consumer inflation, as it remains in check for the time being. The year-over-year Core PCE unchanged at 1.8%, which remains within the Fed's target zone of 1 -2%. This is good news to the inflation fighting Fed, especially after they had already cut a half point in September.
The markets are expecting movement on tomorrow's Jobs Report. We think the number is going to come in above expectations and Mortgage Bonds will likely have a negative reaction to it. The weaker Dollar is helping US companies sell more products to Foreigners, where US goods appear inexpensive when purchased with higher valued foreign currency. And here in the US, shoppers see foreign goods costing more Dollars, so they may as well buy domestic. This is good for jobs here at home. Yes, the Housing and Mortgage sectors are struggling, but much of the job losses in these areas have already taken place.
It appears prudent to lock on today's rates and ahead of tomorrow's Jobs Report.
Thank you for listening and we will have another report for you tomorrow.
Roger Herrick
California Mortgage Broker
www.ContactHerrick.com
Comments(0)