Mortgage Headlines
Mortgage Rates Edge Upward with Treasuries
U.S. Treasury securities prices lost ground for a third consecutive day Wednesday as yields, which move the opposite direction, gained ground, and rates on many mortgage products followed suit and edged higher as well.
Treasuries lost ground Wednesday on uncertainty about the near-term price outlook and after mixed economic data. Some stabilization in crude oil prices after recent pullbacks from record highs left traders on squishy footing, especially as they digested hawkish comments from Chicago Federal Reserve Bank President Michael Moskow and weighed signs that wage inflation might be heating up.
The second-quarter U.S. productivity estimate was revised downward to a slower-than-expected 1.8-percent annual rate. That's off from 2.2-percent rate previously reported and below the first-quarter's growth of 3.2 percent. But the market got jittery about the inflation implications of a 2.5-percent growth pace in unit labor costs. They originally rose at a 1.3 percent rate and outstripped forecasts for a 1.4-percent gain.
Inflation Hawk
Michael Moskow, a voting member of the Federal Open Market Committee, on Wednesday revisited hawkish comments he made Aug. 24 and made Treasury traders think twice about whether the Fed will be able to defer another rate hike later this month. Moskow told a Chicago futures industry audience on Wednesday that, "I'm concerned about core inflation running at the upper end of the range that I feel is consistent with price stability."
However, the Fed's so-called Beige Book of economic activity had muted impact on the markets, largely because the data it contained was gathered before Hurricane Katrina had hit. The Beige Book, prepared this time by the Minneapolis Fed, noted that business activity increased nationwide from mid-July through August even as energy prices rose. It used data collected on or before Aug. 29.
The Congressional Budget Office in a letter dated Sept. 6 said the CBO expected the effects of Hurricane Katrina to trim up to 1.0 percentage point from real Gross Domestic Product and cut up to 400,000 jobs through year end but that growth likely will rebound in early 2006 as Gulf Cost area rebuilding accelerates.
Stocks Firm Again
U.S. stock indexes gained ground again on Wednesday, unshaken by the inflation worries that hit Treasuries. McDonald's Corp., J.P. Morgan and Hewlett-Packard Co. all advanced, buoyed by brokerage firm upgrades.
McDonald's jumped $1.04 to $33.70; J.P. Morgan added $0.32 to $34.89, and Hewlett-Packard added $0.21 to $27.46.
Technical buying also underpinned some stock indexes after they held above key support levels during the recent erosion and re-approached multi-year peaks.
At closing:
The Dow 30 Industrial Index gained 44.26 points (+0.42 percent) to 10,633.50; the Nasdaq Composite index advanced 5.17 points (+0.24 percent) to 2,172.03, and the benchmark Standard & Poor's 500 Index added 2.97 points (+0.24 percent) to 1,236.36.
The 30-year Treasury bond fell 1-2/32 with the yield rising to 4.42 percent from 4.35 percent at Tuesday's close.
The 10-year Treasury note fell 13/32 in price with the yield rising to 4.13 percent from 4.08 percent at Tuesday's close.
The 5-year Treasury note gave up 5/32 in price with the yield edging up to 3.93 percent from 3.89 percent at Tuesday's close.
At 4 p.m. EDT, AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year Conventional Fixed-Rate Mortgage was at 5.534 percent from 5.504 percent at Tuesday's close.
The 15-year Conventional Fixed-Rate Mortgage was at 5.118 percent from 5.102 percent at Tuesday's close.
Coming Up:
On Thursday, weekly jobless claims are forecast at a 315,000 rate. July U.S. wholesale inventories are expected to gain 0.6 percent, while July consumer credit is seen at $10.0 billion.
Given the continued edge upward in Treasury yields on Wednesday and the upward tilt in mortgages, rates on some key mortgage products already may have adjusted and therefore could stay stable into Thursday.
Laura Jacobsljacobs@interest.com
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