Here is today’s market wrap for Friday, November 20,2009
A highly anticipated speech on Monday by Fed Chief Bernanke on the economic outlook revealed no change in the Fed’s stance on short-term monetary policy. There were also few surprises in the economic data released during the week. The monthly inflation readings continued to show that inflation is not a cause for concern in the short-term. As a result, mortgage rates edged just slightly lower during the week, remaining at historically low levels.
The decline in the value of the dollar has received a great deal of attention lately. While Fed officials rarely discuss the value of the dollar, Bernanke assured investors that the Fed is closely watching exchange rates. However, he then reminded investors that the Fed’s dual mandate is to promote full employment and to keep prices stable. According to Bernanke, the value of the dollar is just one of many factors affecting inflation, and the Fed is not concerned by the movement in the dollar so far. With a fragile economy and high unemployment rate, he suggested that the Fed intends to keep the fed funds rate at very low levels. Tightening monetary policy to strengthen the dollar would hurt the economic recovery and slow job creation. After the speech, the value of the dollar fell to the lowest level since August 2008.
If foreign investors expect the value of the dollar to continue to fall, it may pose a risk for mortgage rates in the future. Foreign investors historically have been major buyers of mortgage-backed securities (MBS). When the dollar falls, the value of US assets to foreign investors in their own currency declines, making US investments less rewarding. With the Fed scaling back its MBS purchases over the next few months, a drop in foreign demand would further pressure yields higher to fill the void left by the Fed.
Conforming Fixed Rates ended the day today at 4.375% with an APR of 4.573%. **
Conforming Jumbo Rates here in San Diego ended today at 4.625% with an APR of 4.747%. **
** Rates quoted are for 30 Day Locks
Also Notable for the Week
- October Core CPI inflation was a tame 1.7% higher than one year ago
- October Housing Starts dropped 11% from September
- The Treasury will auction a record $118 billion next week
- The Fed purchased $16 billion in agency MBS during the week ending 11/18
The Week Ahead
A wide range of economic data will be released during the holiday-shortened week ahead. Existing Home Sales will come out on Monday. GDP, Consumer Confidence, and the FOMC Minutes from the November 4th Fed meeting will be released on Tuesday. Durable Orders, Personal Income, Core PCE inflation, New Home Sales, and Consumer Sentiment will all be packed in on Wednesday. In addition, there will be Treasury auctions on Monday, Tuesday, and Wednesday. Mortgage markets will be closed on Thursday for Thanksgiving.
Advice for next week is to watch the market closely if you have any clients closing soon who have not locked.. Recommendation for your clients is to tread cautiously, and lock if possible.
Good luck, and have a great weekend. Best Wishes also for a Happy Thanksgiving Holiday.
Best Regards
