Disappointing demand for Treasury auctions outweighed a cautious forecast by Fed Chief Ben Bernanke, ultimately driving mortgage rates higher during the week. Despite a surprising employment report on Friday, Bernanke addressed the Economic Club of Washington on Monday and said the US economy faces “formidable headwinds” to expansion, including a weak labor market and tight credit. He repeated the current Fed policy to keep the fed funds rate extremely low for an extended period of time as there is little concern for inflation for the next few years. An investor class including foreign central banks seemed to agree with the Fed’s short-term inflation outlook as demand was stronger than average for Tuesday’s $40 billion 3-year note auction. Demand was very weak later in the week, however, during the 10-year and 30-year auctions. Currently, the 30-Year Fixed sits at 4.625% (4.804% APR) and the 15-Year Fixed sits at 4.000% (4.307% APR). The Fed will meet this week, and everyone will undoubtedly be watching for hints regarding the future timing of any rate hikes. We will also see the monthly inflation reports with the Producer Price Index and Consumer Price Index.
Central Coast Lending, Inc.