Last week we saw Mortgage Backed Securities worsen by about 50 basis points, which caused mortgage rates to move higher by about .125%. This brought an end to the 2 previous weeks of rate improvements that I was expecting after the massive increase in rates caused by market over exaggeration to Bernanke’s comments that the Fed would begin backing out of its bond purchasing program sooner than later. The FOMC meets again this week to comment on the path of the economy and the future of the Fed bond purchasing program. According to a WSJ article last week, they are speculating that the FOMC will finally make the much needed comments to ease the panic that rates will be moving higher sooner. Let’s hope they actually do this, this time around, as I speculated they would/should have done the last time they met about 6 weeks ago.
There is a lot of economic data on the plate for this week, with the mother being the FOMC meeting which concludes on Wednesday. With all of the new data to absorb we could be in for some increased volatility this week. If the economic data is worse than what is generally expected, and the Fed provides the cooling verbiage needed, we could see rates settle in or possibly even improve a bit more. If the economy appears to be picking up steam, and the housing sector continues it’s positive growth even after the increase in rates, then we can expect rates to continue to inch higher. It’s a double edged sword. We all want the economy to improve and put this dang recession behind us, but nobody wants higher interest rates. It’s kind of funny how all of a sudden a 5% mortgage rate is unbearable.