Rate Forecast

 

Last week mortgage backed securities (MBS) lost -69 basis points from last Friday's close which caused 30 year fixed rates to move upward.  We saw our best rates on Monday and our worst rates on Thursday.

The bond markets were once again held hostage by the government shutdown which occurred October 1st.  As a result, mortgage backed securities (MBS) traded in a narrow range with a well-defined ceiling of resistance that traders were unwilling to trade above due to the uncertainty of the length of the shutdown.

Several economic reports were not released.  And the few reports that were released such as Initial Weekly Jobless Claims and Consumer Sentiment Index were weaker than expected.

We did have three Treasury auctions with the 3 year and 10 year notes seeing a pull-back in demand but the 30 year bond saw an improvement in demand. 

The Federal Open Market Committee (FOMC) released the minutes from their last meeting.  In the minutes, it was revealed that only one committee member voted to taper at the last meeting.  However, there were several members that felt the economic conditions were improving and that they would be willing to taper by the end of the year.  Of course that is off the table now due to the government shutdown and the corresponding drag to our economic growth.

President Obama officially nominated Janet Yellen as the next Federal Reserve chair which was widely expected.


We have another big week for economic releases, unfortunately many of the reports listed above will not be released due to the continued government shutdown.

This week will once again hinge upon any movement on the debt ceiling talks.  According to the Treasury department, the U.S. will hit our debt ceiling on October 17th.  If we progress past that date then the U.S. will have to put off making some debt payments which may be considered a technical default and would rattle the global financial system.

- Michael Corboy
www.specialtyfinancialmtg.com