Mortgage Rates Continue Rise 9-22

A dip in the price of oil and the downgrading of Rita to a Category 4 hurricane stalled buying in U.S Treasury securities on Thursday, after an active start. Additionally, some analysts believe the economic impact of this hurricane could soften from the "worst case scenario" that has been offered.

The Fed said in its statement Tuesday that Hurricane Katrina would be a setback in the near-term, but pundits speculate that a second such assault could be enough to interrupt the Fed's credit-tightening program. There is concern that high energy prices will drag on the economy with the onset of winter, which is bound to bring high fuel oil and natural gas prices, which will put a dent in the consumer's disposable income. The damage done by Rita over the upcoming weekend is sure to influence the markets next week. For now, however, mortgage rates continue to tick up slightly.

Coming Up:

There are no reports scheduled for release on Friday, which will leave the financial markets to dwell on Hurricane Rita and all the various repercussions. The price of oil and the economic damage that could be imposed over the weekend when the storm is expected to hit landfall will be in sharp focus. Overnight and into tomorrow, however, mortgage rates are likely to hold near present levels, as changes in yields today were negligible.

Mortgage Rates Fall 9-21

Treasury securities prices jumped on Wednesday, while mortgage rates dipped, as the market mulled the impact of more weather-induced hikes in energy prices and the kept Tuesday's Federal Reserve rate hike in its sights.

The market also continued to digest Tuesday's quarter-point hike in the Fed funds rate, which suggested to analysts that the Fed still sees room to raise rates in small increments to combat inflation.

Coming Up:

On Thursday, the market will dissect the weekly jobless claims report, expected to show a hurricane-bloated jump in claims to 450,000 from 398,000 the previous week. Also, August U.S. leading economic indicators are forecast dipping 0.3 percent after July's 0.1-percent decline.

Given the slight decline in mortgage rates posted by intraday Wednesday, lenders might see little reason to adjust rates further on key products until Thursday's data is released.

Mortgage Rates Not Affected by Fed Increase

The Federal Open Market Committee on Tuesday raised short-term interest rates for the 11th straight time, hiking the fed funds target rate to 3.75 percent - its highest level in more than four years. Although this is the rate that banks charge each other for overnight loans, it will also boost rates on credit cards, auto loans, home equity loans and adjustable-rate mortgages.

Although the Fed acknowledged that the impact from Hurricane Katrina would be a setback in the near term, it said it does "not pose a more persistent threat. Higher energy and other costs have the potential to add to inflation pressures." The Fed also opted to retain the word "measured" in its statement, reaffirming that rate hikes will continue.

Coming Up:

There are no reports scheduled for release on Wednesday, which will leave the financial markets to continue scouring the nuances of the Fed statement. If Wall Street determines that the Fed is being vigilant in fighting inflation, stocks could turn around. Treasuries appear to have already accepted that premise, and could hold steady due to the lack of economic input.

If Treasuries maintain a status quo, mortgage rates are likely to do the same.

Allstate Corporation profile

The Allstate Corporation operates as the holding company for Allstate Insurance Company. The company, through Allstate Insurance Company, and Allstate Life Insurance Company and affiliates, provides personal property and casualty insurance products and services primarily in the United States. It operates in two segments, Allstate Protection and Allstate Financial. Allstate Protection segment sells private passenger auto and homeowner's insurance. It also sells various personal property and casualty insurance products, including landlords, personal umbrella, renters, condominium, residential fire, manufactured housing, boat owners, and selected commercial property and casualty. Allstate Financial segment provides life insurance, retirement, and investment products to individual and institutional customers. Its products include traditional life, interest-sensitive life, variable life, and single premium life; fixed annuities, including traditional deferred annuities, market value adjusted annuities, equity-indexed annuities, and immediate annuities; variable annuities; other protection products, such as long-term care, accidental death, hospital indemnity, structured settlement annuities, and disability income insurance; and institutional products, such as funding agreements sold to investors. In addition, it offers various bank products, such as certificates of deposit, money market accounts, savings accounts, checking accounts, first mortgage loans, and home equity loans. The company distributes its products through independent agents, Allstate exclusive agencies, financial institutions, and broker dealers. The Allstate Corporation was incorporated in 1992 and is headquartered in Northbrook, Illinois.

Mortgage Rates Inching Up

The U.S. Treasury securities found buyers on Monday - the day prior to the Fed's expected eleventh straight rate hike. There has been a lot of talk about what the Fed would do about rate hikes in the wake of Katrina, including some sentiment for a pass at this meeting just after the hurricane struck. But signs of inflation - although not rampant - have made their presence felt in a number of different reports, and current thinking seems to support a 25-basis-point increase in the fed funds target rate as necessary to fight inflation. Inflation robs fixed-rate assets of their value.

Coming Up:

Tuesday the Federal Open Market Committee will meet for the sixth time this year, and it is largely expected that the Fed will raise target fed funds rates to 3.75 percent - the eleventh such increase since June 30, 2004. Concerns about inflation being stoked by high oil prices are the primary impetus for the rate hike. Of course, there will be major focus on the accompanying statement for clues of future intentions.

Also due are Housing Starts and Building Permits for August - the first look at the housing industry for that month. Analysts expect softer numbers, with starts at coming in at an annual rate of 2.03 million units - down from 2.04 million in July. Building permits, which often indicate future starts, are expected to fall to 2.12 million from the 2.17 million reported in July.

Overnight and into Tuesday mortgage rates could level off due to today's slight decline in Treasury yields. If the Fed goes ahead with the expected rate hike and offers no surprises in its statement, it is possible that rates could edge down slightly going into Wednesday.

Mortgage Rates up again 9-16

Another sell-off in U.S. Treasury securities on Friday led to the biggest one-week decline in prices in more than two months. Bond traders relegated several friendly economic reports to the back burner and dwelled on signs of inflation and concerns over the issuance of additional government debt, which led to aggressive selling. In addition, the steady decline in oil prices weighed on Treasuries, as lower energy prices are not as likely to slow the economy as high prices were. When the markets closed, the yield on the benchmark 10-year note was up 14 basis points from a week ago, settling at 4.26 percent, while the yield on the long bond, which is most affected by inflation, climbed 17 basis points during the week. The spike in yields, which move in the opposite direction of prices, forced mortgage lenders who base their rates on yields to raise them on most mortgage products.

Coming Up:

The week of September 19 has little to offer in the way of economic reports, but the Tuesday meeting of the Fed will more than make up for it. Although most insiders expect an eleventh straight 25-basis-point increase, there is no clear consensus about future moves. Will the Fed pause at the Nov. 1 meeting if October economic data point to slowing? Or, will they continue in their mission to ward off inflation? The financial markets are hoping for answers to these questions in the accompanying statement. Also due on Tuesday are Housing Starts and Building Permits for August.

Over the weekend and into Monday mortgage rates will likely continue their climb in order to keep pace with today's steep rise in Treasury yields.