12 August 2009 ? Today the bonds opened up 6bps better, which gave us a little hope our rally would be sustained. However, that quickly turned south and bonds are now down 34bps for the day. Stock traders and investors continue to pour money into the Dow and the traders feel that no change in the Federal Funds Rate and positive comments from the Fed this afternoon are causes to buy stocks. The Fed will comment today on the $300 billion Treasury purchase program?slated to end in September?as well as on inflation. The ten-year $23 billion auction was just graded a B and stocks continue to soar, which is pressuring the bonds. We will most likely continue the volatility today and hopefully we will stabilize. Continued rise in the stock market and good economic news will cause the interest rates to rise from their current levels. The first time buyer stimulus package also ends November 30th, 2009, the $8,000 credit that first time buyers (or if you haven?t owned in 3 years) can only be used if you have closed on your home by November 30th, 2009! Right now the 30 year rate is hovering at 5.25% and may increase by tomorrow, we will see after the dust settles this afternoon where we end up.

28 April 2009 – Mortgage interest rates are actually doing very well today! We recommend a cautiously float stance as it relates to mortgage interest rate locks. If we continue to see deterioration of the market indices we would recommend locking. But for now, let’s just watch the market and if stocks start to fly, consider locking. With the right conditions, we’ve actually seen a 4.5% (4.677% APR) interest rate for a 30 year fixed mortgage (15 day lock) available with no points or added fees. Mortgage interest rates are still trying to push through some resistance but are struggling to stay at these low interest rate levels.

There are a number of mixed signals in the market today that are pointing to a recovery, yet there continues to be a slew of bad news that question whether the recovery is truly imminent. Amongst some of the positive news, is the string or earnings reports from the banking sector, led by Wells Fargo and 5th3rd Bank; a rise in March existing single family home sales in California, up 64%; significantly better than expected consumer price index, 39.2 versus expectations of 29.7 and 26.0 last month; an announcement from IBM that they are raising their stock dividend by 10% and aggressively repurchasing stock (indicating strong belief that the stock is very devalued), and the list goes on and on. On the negative side, GM outlines a turnaround plan that would leave the U.S. government in the auto business as well; Federal Banking regulators have told Bank of America and Citigroup that they may need to raise additional capital based on the “so-called” results of earlier stress tests placed on financial institutions, this capital shortfall represents billions of dollars; an additional Ponzi scheme discovered possibly affecting billions of dollars and crossing across international borders; and near pandemic levels of a deadly new flu virus; are all counter balancing the positives. Stay tuned but for now, we would recommend a cautious floating position.

Federal Reserve Bought Mortgage-Backed Securities to Try to Reduce Mortgage Rate

Bloomberg.com is reporting that the Federal Reserve has bought $10.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities. According to the New York Fed’s Web site they bought $6.9 billion of Freddie Mac securities, $2.9 billion of Fannie Mae bonds and $450 million of Ginnie Mae debt.

Mortgage-backed securities are bundles of mortgages. The value of these securities comes from the flow of payments being made on the principal and the interest of the mortgages in the bundle. Many people, facing a combination of personal economic problems and rising payments on their adjustable-rate mortgages are not able to make their payments. This results in the securities being worth far less and the institutions that hold them unable to do anything.

The $10.2 billion purchase is one of the steps taken this week in a program attempting to lower mortgage rates. It appears that the program is working. It is being widely reported (WSJ, MSNBC, Reuters, NYT…) that mortgage rates are falling, and are currently at around 5%. Many experts are predicting that the rates will go as low as 4.5%