Daily Commentary by Larry Baer: Mortgage investors are broadly anticipating the
Federal Open Market Committee will maintain its $85 billion monthly bond and
agency eligible mortgage-backed securities purchase program despite improving
economic news here at home and a new flare-up in the continuing saga of the
euro-zone fiscal crisis.
The Committee
members have likely spent a considerable amount of time debating the potential
benefits of sustaining the current quantitative easing program versus the risk
the program will ultimately lead to asset bubbles and hyper-inflation pressures
down the road. In the end, the majority of the voting central bankers
have probably concluded the risks are worth taking - and the program will
continue uninterrupted for the foreseeable future.
The Fed will release
its policy statement, along with a new set of economic projections, at 2:00
p.m. ET. Fed Chairman Bernanke will hold a press conference thirty-minutes
later at 2:30 p.m.
In the highly
unlikely event there is a shift in the terminology contained in the Fed's
post-meeting statement that suggests the Fed is considering throttling back
their QE3 purchase program sooner rather than later - and/or if the Fed's
economic forecast is significantly more optimistic than expected -- look for
the stock market to take a nosedive - to the direct benefit of the prospects
for fractionally lower mortgage interest rates. Please note -- a more optimistic economic forecast from the
Fed this afternoon will undoubtedly push mortgage interest rates higher - but
the initial upward surge will almost certainly be delayed for a short period
(probably a day or two) by the "flight-to-quality" flow of capital
out of riskier asset classes like stocks into the perceived safe-haven of
Treasury debt obligations and agency eligible mortgage-backed securities.
As they do every
Wednesday, the Mortgage Bankers of America have released their Mortgage
Application Survey for the week ended March 15th. Overall loan
application activity declined by 7.1% -- with purchase demand 3.9% lower and
refinance requests down by 8.0% on a week-over-week basis. Refinance
applications accounted for 75% of all applications and 69% of the perspective
loan volume.
For the week, the
contract rate for 30-year fixed rate conforming mortgages increased by 1
basis-point to 3.82%. The interest rate is 4 basis-points higher from
four-weeks ago, but 37 basis-points lower than the year-ago mark.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
