Bernanke Testimony

When Ben Speaks, Mortgage Rate Shoppers Need to Listen

On the 1-year anniversary of the Lehman Brothers collapse, Fed Chairman Ben Bernanke said Tuesday that the “recession is very likely over at this point”.  

His comments were supported by a Retail Sales report for August that was much better-than-expected.

Equities improved on the day, mortgage markets worsened, and home affordability suffered. 

The days of ultra-low mortgage rates may be coming to an end.

Since last September, mortgage bonds markets have been in Rally Mode.  As the Financial Crisis of 2008 worsened, investors fled the relatively risky world of stocks and moved dollars into safer investments like cash and bonds – including the mortgage-backed kind.

Risk aversion is common when market uncertainty exists but last year’s aversion was so strong that, by late-November, it had forced mortgage rates down to an all-time low. 

Since November, however, rates have been on the rise.  Stronger economic data and a general feeling of optimism have helped stock markets recover and some of those gains are coming at the expense of low mortgage rates.

Therefore, if you’re wondering what mortgage rates might do going forward, listen to the words of the Federal Reserve Chairman. If he sees economic recovery ahead, it’s probably going to happen.

It should spell higher mortgage rates into 2010.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Bernanke Testimony

Mortgage Rates Drop On Bernanke’s “Exit Strategy” From Markets

Mortgage markets rallied Tuesday while Fed Chairman Ben Bernanke gave his semi-annual testimony to Congress.

By the time the day was over, some conforming mortgage rates were down by as much as 0.250 percent.

One of the leading causes for the market rally was Chairman Bernanke revealing an “exit strategy” from its massive market stimulus. 

Until Tuesday, the Fed hadn’t gone into much depth about means and methods by which it would unwind its interventions.  In addition to penning a widely-read Op-Ed piece in the Wall Street Journal Tuesday, Bernanke testified to Congress that the Federal Reserve has a viable “exit strategy”.

Wall Street was pleased to hear it. 

The specter of long-term inflation has spooked the mortgage markets off-and-on since the start of the year.  It’s one of the reasons why mortgage rates have been so jumpy, and why they crossed 6 percent last month.  Inflation is terrible for mortgage markets.

So, with the fear of inflation subsiding — at least temporarily — mortgage rates sunk Tuesday. 

With any bit of luck, momentum will carry rates lower today and through the rest of the week.  But, don’t get greedy.  Mortgage markets are notoriously fickle and one “bad” statement from the Fed Chairman could cause rates to rise right back up.

Bernanke’s complete Tuesday testimony can read online at the Federal Reserve website.

Bernanke Testimony

Weekly Economic Releases for Feb. 22nd

This week brings us the release of six pieces of economic data for the bond market to digest along with some very important testimony from Fed Chairman Bernanke. Two of the reports are considered to be of low importance, but since we have data being posted every day of the week except for tomorrow, it is likely that we will see plenty of movement in mortgage rates the next few days.

Tuesday morning brings us the first of this week’s data with the release of February’s Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 37.7 in January to 36.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

Mr. Bernanke will deliver the Fed’s semi-annual testimony on the status of the economy late Tuesday morning. He will be speaking to the Senate Banking Committee and market participants will watch his words very closely. The Fed Chairman is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the banking and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate during this session, possibly affecting mortgage rates also.

January’s Existing Home Sales report will be posted late Wednesday morning. This is one of the least important reports of the week, along with Thursday’s New Home Sales report. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. The Existing Home Sales report is expected to show an increase in sales but new home sales are expected to fall slightly.

The only important data scheduled for release Thursday is January’s Durable Goods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A larger drop than the 2.3% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.

The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts’ forecasts currently call for a decline of 5.4%, indicating that the economy was weaker in the last quarter of the ye ar than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market.

The last piece of data scheduled for release this week is the University of Michigan’s revision to their Index of Consumer Sentiment for February. Current forecasts show this index revising slightly higher than previously thought. The preliminary reading was 56.2 and is now expected to stand at 56.5, indicating that consumer sentiment was slightly stronger than previously thought. This index is important because it helps us measure consumer confidence that translates into consumer willingness to spend.

Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Tuesday or Thursday, but Friday may be fairly active also. This would be a good week to maintain contact with your mortgage professional.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Bernanke Testimony

Weekly Economic Releases for Feb. 8th

There are only three pieces of economic data scheduled to be posted this week along with a couple of Treasury auctions and relevant speeches from highly important speakers. Only one of the three reports are considered to be of high importance while one is moderately important. The third is not considered to be of much importance unless it varies greatly from forecasts.

None of the economic reports will be posted tomorrow. However, tomorrow evening President Obama will address the nation on national television. He will likely speak about his economic recovery plan amongst other important topics. What he says may heavily influence trading the following morning. It is very difficult to predict whether the markets are likely to react favorably to his words or negatively. But I am expecting to see volatility Tuesday morning.

Fed Chairman Bernanke will be speaking before the House Financial Services Committee Tuesday at 1:00 PM ET. He is expected t o testify and update the panel on the Fed’s liquidity injections and future plans. His words could create movement in the markets and possibly mortgage pricing during afternoon trading.

There is no relevant data scheduled for release until Wednesday morning. This is when the week’s least important data, December’s Goods and Services Trade Balance, will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates.

The most important of the three reports this week is Thursday’s release of January’s Retail Sales data. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched quite closely. If Thursday’s report reveals weaker than expected sales, the bond market should thrive and m ortgage rates will fall. However, a stronger reading than the expected unchanged level of sales could lead to higher mortgage rates. Current forecasts are calling for a decline in sales of 0.3%.

February’s preliminary reading to the University of Michigan Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to rise slightly from January’s final reading of 61.2 to 61.5 for this month.

Overall, it is difficult to peg a particular day as the most important of the week. Tuesday will be quite interesting with the reaction to President Obama’s words from Monday evening and Fed Bernanke’s testimony on the Fed’s attempts to stabilize the financial system. The single most important piece of economic news comes Thursday, so that day needs to be given much weight also. Throw in the fact that there is an early close Friday due to the President’s Day holiday next Monday, and we have the makings of an interesting week ahead of us.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.