Market Comment
Mortgage bond prices finished the week higher which pushed rates lower. Rates were worse the beginning of the week ahead of the Fed results Thursday. Retail sales rose 0.2% versus the expected 0.3% increase. Industrial production fell 0.4% versus the expected 0.2% decrease. Capacity use was 77.6 versus the expected 77.8. These figures were rate friendly but we got no traction from them as selling pressure continued tied to stock gains. The NAHB Housing Market Index was @ 62 versus the expected 61. Rates improved Thursday afternoon in response to the Fed (see article below.) Mortgage interest rates finished the week better by about 3/8 of a discount point.
Fed Reinvests in Mortgage Bonds The Fed stated, “The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.” This is great news for lower rates in the short term. However, the Fed also noted that most members look for a rate hike by the end of the year. Now is a great time to take advantage of mortgage interest rates at these favorable levels.
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