December 19th, 2014 10:38 PM by Dale DiGennaro
Mortgage TimeMortgage Market News for the week ending December 19, 2014Compliments ofDaleDiGennaroOwner | NMLS: 298353Custom Lending Group, Inc.Co.NMLS: 845079CalBRE: 944064 & 966782Office: 707.252.2700 - Ext. 109•Cell: 707.739.0878Fax: 707.252.1319dale@clgroup.net•www.customlending.net/Home1700 Soscol AvenueSuite 22Napa,CA94559Stocks Rally After Fed MeetingFollowingWednesday'srelease of the FOMC statement and Fed Chair Yellen's press conference, there was a big rally in the stock market. The reaction in bond markets was fairly muted, however, and mortgage rates ended the week a little higher.The Fed statement included some change in language but Yellen emphasized that it did not "signify any change" in Fed policy as indicated in prior statements. The phrase "considerable period" remained in the statement, and the term "patient" was added to describe the Fed's approach in adjusting monetary policy. Theforecastsfrom Fed officials for the fed funds rate at the end of 2015 and 2016 were lowered a little from their forecasts at the September meeting. According to Yellen, the Fed is unlikely to start raising the fed funds rate for "at least the next couple of meetings". All of this suggests that most Fed officials expect to begin raising the fed funds rate next year, but that the pace of rate hikes likely will be a little slower than previously thought.Following the Fed meeting, stock prices posted strong gains, with the Dow adding roughly 550 points since that time. Equity investors were pleased that there is little risk of fed funds rate hikes any time soon. The reaction in mortgage rates was much smaller, however, and negative.So why did the mortgage market respond this way? Until recently, the reaction to Fed meetings was generally either favorable or unfavorable for both stocks and mortgage rates. The difference is that this meeting had nothing to do with the Fed'squantitative easing(QE) program, which essentially ended in October. QE involved actual purchases of mortgage-backed securities (MBS), so any indication of a change in the expected level of future MBS purchases had a very direct effect on MBS prices and mortgage rates. This meeting was focused on the outlook for changes in the fed funds rate, which has no such direct effect.Next week, Existing Home Sales will be releasedon Monday.Tuesdaywill be packed ahead of the holiday withDurable Orders, New Home Sales, Core PCE inflation, Personal Income, Consumer Sentiment, and revisions to third quarter GDP. In addition, there will be Treasury auctionson Monday,Tuesday, andWednesday. Mortgage markets will close earlyon Wednesdayand will be closedon Thursdayfor Christmas.
Mortgage Time
Mortgage Market News for the week ending December 19, 2014
Compliments of
DaleDiGennaro
Owner | NMLS: 298353
Custom Lending Group, Inc.
Co.NMLS: 845079CalBRE: 944064 & 966782
Office: 707.252.2700 - Ext. 109•Cell: 707.739.0878Fax: 707.252.1319
dale@clgroup.net•www.customlending.net/Home
1700 Soscol Avenue
Suite 22
Napa,CA94559
Stocks Rally After Fed Meeting
FollowingWednesday'srelease of the FOMC statement and Fed Chair Yellen's press conference, there was a big rally in the stock market. The reaction in bond markets was fairly muted, however, and mortgage rates ended the week a little higher.
The Fed statement included some change in language but Yellen emphasized that it did not "signify any change" in Fed policy as indicated in prior statements. The phrase "considerable period" remained in the statement, and the term "patient" was added to describe the Fed's approach in adjusting monetary policy. Theforecastsfrom Fed officials for the fed funds rate at the end of 2015 and 2016 were lowered a little from their forecasts at the September meeting. According to Yellen, the Fed is unlikely to start raising the fed funds rate for "at least the next couple of meetings". All of this suggests that most Fed officials expect to begin raising the fed funds rate next year, but that the pace of rate hikes likely will be a little slower than previously thought.
Following the Fed meeting, stock prices posted strong gains, with the Dow adding roughly 550 points since that time. Equity investors were pleased that there is little risk of fed funds rate hikes any time soon. The reaction in mortgage rates was much smaller, however, and negative.
So why did the mortgage market respond this way? Until recently, the reaction to Fed meetings was generally either favorable or unfavorable for both stocks and mortgage rates. The difference is that this meeting had nothing to do with the Fed'squantitative easing(QE) program, which essentially ended in October. QE involved actual purchases of mortgage-backed securities (MBS), so any indication of a change in the expected level of future MBS purchases had a very direct effect on MBS prices and mortgage rates. This meeting was focused on the outlook for changes in the fed funds rate, which has no such direct effect.
Next week, Existing Home Sales will be releasedon Monday.Tuesdaywill be packed ahead of the holiday withDurable Orders, New Home Sales, Core PCE inflation, Personal Income, Consumer Sentiment, and revisions to third quarter GDP. In addition, there will be Treasury auctionson Monday,Tuesday, andWednesday. Mortgage markets will close earlyon Wednesdayand will be closedon Thursdayfor Christmas.