Mortgage Headlines
Mortgage rates in post-Fed climb
Mortgage rates moved up on Wednesday in response to the major sell-off in U.S. Treasury securities on Tuesday. Treasury yields, which move in the opposite direction of prices, hit their highest levels in almost two years after traders learned yesterday that the Fed has more rate hikes up its sleeve. Not only were short-term interest rates boosted by another 25 basis points, but the accompanying statement noted that 'some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance.'
The fact that there was no economic news released today left traders to focus on their disappointment with the Fed statement and a so-so auction of five-year notes did nothing to improve their spirits. Indirect buyers, which are heavily relied on for buying support, snapped up only 21 percent of the offering. And futures contracts are already pointing to a 25-basis-point increase in the Fed funds target at the May 10 meeting.
Sky-high Treasury yields forced mortgage lenders who use yields as a guide to set rates to increase them on many mortgage products. The rate on the popular 30-year fixed mortgage is edging toward 6.25 percent, its highest level since May 2004.
Stocks go wild
Stocks apparently overdid it on selling Tuesday, so they made up for it today, posting big gains across the board, with the Nasdaq closing at a five-year high. Oil added only 3 cents a barrel to close at $66.40, with buyers slowing a bit thanks to a large stock of crude. Gasoline prices rose, however, as inventories were far lower than predicted.
Only a handful of the 30 Dow Jones industrials closed in negative territory, while gainers ruled. Disney headed the list with a 2.9 percent increase, followed by Boeing, up 2.2 percent, and Alcoa, which rose 1.9 percent. An upgrade of 3M pushed its shares up 1.7 percent, and Hewlett-Packard, which lost 3.14 percent yesterday, rebounded with a 2 percent increase. Also heavy on the plus side was Verizon, which gained 1.4 percent. Intel and Altria posted gains on the sunny side of 1 percent.
GM is back in negative territory after confirming that it will have to restate almost four years of GMAC results. This sent the stock down 2.6 percent. And Caterpillar slid on a downgrade, giving up 1.6 percent.
The Nasdaq posted its biggest one-day gain in three months, handily recouping yesterday's losses and then some. Gains were broad-based, due to upgrades, announcements and sector moves. Sun Microsystems, a widely held tech stock, rose 4.4 percent on an upgrade, while Apple climbed 6 percent after making free software upgrades for volume control available for iPods. Google continued its march back to $400 a share, adding 5.4 percent today, and chips made a good run, sending the Philadelphia semiconductor index up 12 points. JDS Uniphase rose 1.7 percent, and Intel and Oracle each gained in excess of 1 percent.
As of 4 p.m. EST:
The Dow Jones industrial index closed up 61.16 points (+0.55 percent) to 11,215.70; the Nasdaq composite gained 33.32 points (+1.45 percent) to 2, 337.78, and the Standard & Poor's 500 index rose 9.66 points (+0.75 percent) to 1,302.89.
The 30-year Treasury bond closed down 21/32 in price with the yield rising to 4.84 percent, from 4.79 percent on Tuesday.
The 10-year Treasury note closed down 5/32 in price with the yield rising to 4.80 percent, from 4.77 percent on Tuesday.
The five-year Treasury note closed down 2/32 in price with the yield rising to 4.80 percent, from 4.78 percent on Tuesday.
The two-year Treasury note closed down 1/32 in price with the yield rising to 4.81 percent, from 4.79 percent on Tuesday.
At 4 p.m. EST, average mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year conventional fixed-rate mortgage was at 6.182 percent, up from 6.114 percent on Tuesday.
The 15-year conventional fixed-rate mortgage was at 5.786 percent, up from 5.706 percent on Tuesday.
Coming up:
On Thursday the final revision of fourth-quarter gross domestic product, or GDP, will be released, but major changes are not expected. Analysts are predicting only a small increase in GDP -- up to 1.7 percent from the previous 1.6 percent level. The chain deflator is expected to hold at plus 3.3 percent.
First-time unemployment claims for the week ended March 25 are also due, with pundits forecasting a slight increase to 305,000 -- up from the 302,000 reported last week. Claims have risen every week but one in March, creating questions about the strength of the employment report for this month.
In response to the huge increase in Treasury yields, mortgage rates are likely to continue creeping upward overnight and into Thursday morning.
Carolyn Siegel
Carolyn@interest.com
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