Texas Mortgage Rate Update 8/5/2008
Uncle Sam will be in the credit market today looking to borrow $10 billion in the form of 30-year bonds. From a technical perspective I see reason to believe a modest rally in the credit markets (including mortgages) may develop as fixed-income investors breathe a sigh-of-relief that the heavy round of incoming supply from the government is finally out of the way. Let’s see what happens following the conclusion of the 30-year bond auction this afternoon at 1:00 p.m. ET
The Federal Open Market Committee members have begun their one day monetary policy meeting. Their deliberations will conclude at 2:15 p.m. ET with the public announcement of their decision with respect to short-term interest rate levels and the release of the post-meeting statement explaining why they choose a particular course of action. The Texas mortgage market will likely trade very quietly with little change in note rates or investor prices until the Fed’s monetary policy position for the next six weeks is known.
Most analysts firmly believe that persistent job losses, strained financial conditions and a weak housing market leave central bankers little choice other than to leave their benchmark fed funds rate and discount rate unchanged. The Fed will likely tweak the language of their post-meeting statement to reinforce the idea that their next move will be to push short-term interest rates higher to ward off developing inflation pressures. As former Fed Governor Lyle Gramley said, “The Fed wants to be sure they do not give the impression that somehow they have lost their concern over inflation.”
So far this year some members of the Federal Open Market Committee have dissented with the majority’s decision to either cut short-term interest rates or – as in June – to leave the benchmark interest rates unchanged. Many observes believe the number of members voting for a rate-hike may grow this time around with Philadelphia Fed President Plosser and/or Minneapolis Fed President Stern joining Dallas Fed President Fisher in calling for a rate hike. These three are not likely to prevail but the growing number of voices on the Committee calling for a rate hike will not do much for fixed-income investor confidence.
Investor appetite for tomorrow’s $17 billion 10-year note auction and Thursday’s $10 billion 30-year bond offering will likely be very limited. A condition (should it develop) that will not bode well for the prospects of lower Texas mortgage note rates through the end of the week.
The Institute of Supply Management said its index of activity in the service sector shrank slightly in July – but by less than most economists had expected. The index posted a reading of 49.5 in July, higher than June’s mark of 48.2, but still below the 50.0 level (considered the demarcation point between a sector that is expanding and one that is contracting). Investors gave this data little more than a passing glance – as they await the outcome of the much more important Federal Open Market Committee meeting this afternoon.
As always, If you have ever have a question on whether it is the best time for you to refinance your Dallas mortgage rate or what interest rate you can get when buying your next Texas home, feel free to give us a call or shoot us an email by filling in your information on the right hand side of this page.