Interest Rate Update – May 22 May 26, 2009

CONVENTIONAL
30 Yr   4.625%
15 Yr   4.25

 

ARMS
3 Yr   3.5%
5 Yr   3.625
7 Yr   4.0

 

JUMBO
30 Yr   5.95%
15 Yr   5.75
5 Yr ARM  4.70%
7 Yr ARM  5.30

 

FHA/VA
30 Yr   4.875%
15 Yr   4.375
3 Yr ARM  3.5%
5 Yr ARM  3.5

 

My Comments -

 
Mortgage Bonds are near unchanged, but well of the highs seen earlier on the 
day.  This on the heels of yesterday’s steep selloff – so what happened?  The 
overall Bond market was hit with a double whammy, which pressured prices lower 
throughout the entire day.

 

First – the Treasury announced that it was going to sell $162B worth of Bonds 
next week.  That is an enormous amount of paper that has to be absorbed by the 
market and the additional supply may make it difficult for Bond prices to make 
any meaningful gains.  The Government has to issue all this debt and much more 
to pay for the massive stimulus programs.

 

Because of the additional indebtedness that the US now has to take on - 
literally mortgaging the future – there are concerns as to our government’s 
ability to service this debt without having to print additional money.  
Beating the drum on that specific issue was Pimco’s Bill Gross who more or 
less said, the US will eventually lose it’s AAA credit rating.  Although he 
did not see this happening anytime soon an already jittery Bond market sold 
off further.

 

The New York Federal Reserve purchased another $25B in Mortgage Backed 
Securities from May 14 through May 20, bringing the year-to-date total to 
$482B, out of the $1.25T that has been allotted.  The coupons ranged from the 
4% to 6% with no purchases of 3% or 3.5%.  Rates can’t improve much further 
unless the Fed goes in and buys significant amounts of the 3 to 3.5% Bonds.

 
Source:

Michael Delzer
First Class Financial Services
(720) 904-9048, www.fcfsdenver.com
Home Mortgages with Honesty, Integrity, Service & Trust