Last week saw mortgage rates improve an average of .125 to .250 percent from the previous week. While each day continues to contain volatility, we enjoyed rate improvements 4 out of 5 days with the largest gains coming on Monday correcting what I thought was an over exaggeration to the June employment report. Wednesday was clearly the most interesting day of the week. The minutes from the last Federal Open Market Committee (FOMC) were released showing several of the FOMC members favored “tapering” the amount of monthly bond purchases in the near term. While it was about half of the members that favored this approached, in previous minutes it was only a few members that favored pulling back bond purchases. This shows a growing sentiment by Fed members that “tweaking” the amount of purchases will come at some stage. The timing of it is what traders keep guessing on. And this guessing is what has been moving the markets.
MBS sold off after the release of the FOMC minutes (worse rates for borrowers) but then rebounded after Bernanke made comments that appeared to back track on the immediacy of the “tapering”. MBS rallied again on Friday on a weaker than expected Consumer Sentiment Index but our gains were capped by our ceiling of resistance located at our 10 day moving average.
This Week there are a number of key economic releases but the major focus is Bernanke testifying to the House and Senate on the economy, employment, and inflation on Wed and Thur. Bernanke has made an about face recently trying to calm markets after his comments a few weeks ago sent the bond markets, and mortgage rates, into a frenzy. I expect his words this week to be well calculated but you never know. If he shows confidence in the economy and employment than rates will move higher again. If he shows renewed concerns in both than rates could settle a tad lower. I’ll be watching closely.
I’d like to dedicate this weeks Rate Update to my wife Tasha who on her first attempt completed the Tour of the California Alps Death Ride. I much admire her mental strength and determination and am reminded that sometimes we have to step out of our comfort zones and endure suffering to accomplish things we didn’t know we could do. Once you’ve done that, things seem less difficult.