from HSH Associates Financial News Blog by Tim Manni
According to the latest issue of HSH’s Market Trends Newsletter, “The Fed, and Record Rates (again),” the conclusion of the Fed’s two-day FOMC meeting sent conforming mortgage rates down once again to historically-low levels.
“Without usual policy tools at its disposal, the Fed again weighed heavily into mortgage and bond markets. At the close of its meeting Wednesday, The Fed announced an extension of its plan to buy up Fannie and Freddie-issued debt and mortgage-backed securities offered by the GSEs as well as Ginnie Mae (FHA-backed product) and detailed a long-rumored plan to start purchasing certain Treasury securities.”
“Conforming mortgage rates moved into record territory again this week. After falling to a new daily low average rate of 4.94% on Thursday, HSH’s weekly average for 30-year FRM conforming money also managed a 13-basis point dip to 5.07% + 0.28 points, while the overall average for fixed-rate mortgage money (expressed as HSH’s Fixed-Rate Mortgage Indicator) slipped back by seven basis points, landing at 5.62%. The FRMI’s 5/1 Hybrid counterpart moved backward by six basis points to 5.36%, while Federally-unsupported jumbo 30-year FRMs remained steady for the week.”
“The Fed originally announced a $600 billion mortgage support plan back in November 2008, with $100 billion available for GSE debt and $500 billion for MBS purchases. The plan kicked in in early January, and since then the Fed has been accumulating MBS at about $4 billion per day, with estimates that they have used up about $200 billion of the original $500 billion commitment. At such a pace, it’s easy to plot on a calendar just when that original commitment would come to a close — somewhere in May or June. At about $100 billion per month, and with an initial expiry in a month or two, we believe that the Fed’s new $750 billion represents an enduring commitment to this program at least until the end of the year and perhaps slightly beyond. The total of $1.25 trillion may very well mean that virtually all MBS originated this year will find a ready buyer, financial market stress or not.”
“While there was some anticipation that mortgage rates would fall sharply as a result of the program, we note that the Fed didn’t say that they were going to pick up the velocity of their purchases (although they well could). Rather, we think that they wished to signal to the bond market and consumers that rates would remain low and stable for the foreseeable future, and that there will be an entity that will support the good-credit quality mortgage markets.”
