Mortgages backed-bond prices are now at the lowest level we’ve seen all year which means mortgage rates are at the highest level.
Earlier in the morning it looked as if mortgage rates may benefit from a sell-off in the stock market following weaker than expected earnings outlooks from American Express, Apple, & Wachovia. In fact, Wachovia announced yesterday that they would discontinue their wholesale mortgage lending operations effective in August of this year.
However, stocks have reversed higher (pressuring bonds lower) following comments made by Philadelphia Fed President Charlie Plosser who said “inflation is too high” and that the Fed must “back up their words with action” by hiking short-term rates. The fact that the equity markets have risen on these comments is a clear signal that Wall Street is more concerned about inflation than economic growth.
We favor a floating stance at this point because we believe technical trading patterns will help mortgage rates move lower in the coming days. However, at some point inflation concerns may very well pressure rates higher in the long-term.
On a side note, I continue to update my blog with articles about the ongoing Fannie Mae and Freddie Mac story line. If you’re curious about these two companies and how important they are to our livelihood I would encourage you to read my first posting on the topic at this link.
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