Mortgage Rates Keep Movin' Up

10/13/2005

Aggressive selling sent Treasury prices down even further during a week that has seen yields, which move in the opposite direction of prices, soar. The increase in yields, which lenders use as a guide to set mortgage rates, has sent the rate on the 30-year fixed to its highest level since March. And rates on many adjustable rate mortgages are higher than they have been in more than a year.

At 4 p.m. EDT, AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage rose to 5.817 percent from 5.797 percent at Wednesday's close.

The 15-year Conventional Fixed-Rate Mortgage climbed to 5.417 percent from 5.404 percent at Wednesday's close.

Coming Up:

A slew of market movers is on tap for Friday, namely the Consumer Price Index (CPI) and Retail Sales for September, along with the University of Michigan's preliminary consumer sentiment report for October. The CPI, which looks for inflation at the retail level, is expected to jump to 1 percent after climbing 0.5 percent in August. The core index, which excludes volatile food and energy prices, is forecast to rise 0.2 percent, double the previous 0.1 percent increase. Such an outcome might set well with bond traders, but a big jump in retail sales would not. The forecast for a 0.6 percent increase in sales is sharply higher than the 2.1 percent decrease the previous month. Excluding auto sales, retail sales

are estimated to climb 1.1 percent. Consumer sentiment is forecast to rise to 81 from 76.9 posted two weeks ago. Business inventories for August are expected to rise 0.1 percent, as opposed to a 0.5 percent decline in July. This report, however, will not be a factor.

Any signs of growing inflation or a confident and spending consumer would likely have a negative impact on Treasuries. This would send prices down and yields even higher, which could allow mortgage rates to climb with them.

Mortgage Rates Climb

10/12/2005

Fed officials have voiced concerns about inflation, which erodes the value of fixed-rate assets such as bonds. And these hawkish comments, which unanimously reinforced the need for further rate hikes, sent the yield on the benchmark 10-year note to a multi-month high. The sharp rise in yields, which are used as guides to set mortgage rates, has forced lenders to edge rates up on many products.

At 4 p.m. EDT, AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage rose to 5.797 percent from 5.75 percent at Tuesday's close.

The 15-year Conventional Fixed-Rate Mortgage shot up to 5.404 percent from 5.339 percent at Tuesday's close.

Coming Up:

There are economic reports due on Thursday - the first ones of the week - but their importance will pale when compared to Friday's reports on the Consumer Price Index and Retail Sales for September. Tomorrow's reports lead off with first-time jobless claims for the week ended Oct. 7. Due to the hurricanes these numbers have been suspect and are ripe for big revisions. However, analysts are expecting claims to come in near 355,000, which would be down from the 390,000 posted the previous week. The U.S. trade deficit for August is expected to expand to $59.3 billion from the July gap of $57.9 billion. U.S. Import/Export price indexes also on the docket.

These reports generally do not carry much weight with regard to the financial markets, and they will do little to relieve concerns about inflation. This could lead to further selling of U.S. Treasuries, which would keep upward pressure on mortgage rates.

Mortgage Rates on Hold

The bond markets were closed on Monday in observance of Columbus Day, leaving U.S. Treasury yields at Friday's levels. The stability in yields, which move in the opposite direction of prices, allowed mortgage lenders to hold rates steady.

Inflation erodes the value of fixed-rate assets, such as bonds. If these concerns carry through into Tuesday, Treasuries prices could come under intense pressure.

At 4 p.m. EDT, AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage was at 5.727 percent from 5.747 percent at Friday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.349 percent from 5.343 percent at Friday's close.

Coming Up:

The only report of consequence slated for Tuesday is the minutes for the Sept. 20 meeting of the Federal Open Market Committee, which will be combed for further insight into the Fed's thoughts about inflation. Last week, however, it became crystal clear via a number of speeches by Fed officials, that the Committee has no intention of easing its rate-hike policy due to the threat of inflation. The only other economic news comes in the form of two weekly surveys on national retail sales. These data have little impact.

Treasury yields remained unchanged due to the holiday, and mortgage rates held, too. But if the inflationary fears that wracked Wall Street on Monday creep into the bond markets on Tuesday, Treasuries will sell and yields will move higher. This could cause an up tick in some mortgage rates.