VMG Weekly Rate Tracker – 01/28/2015
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WEDNESDAY AFTERNOON UPDATE:
The FOMC meeting of the year has adjourned with no change in key short-term interest rates. There were a couple of changes in the common verbiage used in recent statements regarding inflation projections and the timing of the Fed’s first rate hike. The biggest changes indicated the Fed believes the recent drop in gas prices will keep inflation below their target rate for a longer period than previously thought. Inflation hitting the Fed’s preferred rate was needed before they started raising key rates. That change in verbiage now has some analysts thinking the first rate hike may come later in the year than previous estimate of spring.
The effect on the markets has been mixed. Stocks set lows of the day after the announcement and are still near those levels with the Dow down 29 points and the Nasdaq unchanged from yesterday’s close. The bond market is rallying, now up 35/32 (1.71%), which should improve this afternoon’s mortgage rates by approximately .250 of a discount point from this morning’s pricing.
Tomorrow’s only economic data is last week’s unemployment numbers at 8:30 AM ET. They are expected to show that 300,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week’s 307,000 initial claims. The higher the number of new claims, the better the news it is for mortgage rates as rising claims is a sign of employment sector weakness. However, because this report tracks only a single week’s worth of new claims, it usually takes a surprise spike or drop for it to noticeably affect mortgage rates.
There are also two relatively important Treasury auctions tomorrow. The Fed will auction 5-year and 7-year Treasury Notes tomorrow (5-year sale was previously set for today). If the sales are met with a strong demand from investors, the broader bond market may improve during afternoon hours. If they draw a lackluster interest, they could lead to bond selling and higher mortgage rates. The 5-year auction results will be posted at 11:30 AM while the 7-year will come at 1:00 PM ET.
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