Fed will be buying Agency coupons tomorrow
The Fed has announced they will be buying Agency coupon debt tomorrow as they continue to try and keep the rates down so that the spring/summer housing market has low rates to stimulate demand/refinancings. Yesterday Mortgage Applications fell by 11% for the first decline in 5 weeks. This was despite a lowering of the average 30 year mortgage rate to 4.70% from 4.73% the week prior. Note, there was some talk that the Easter/Passover may have been an influence. We will see what next week brings.
Clearly, the Fed/Treasury is doing all it can to keep the flicker of hope in the housing to continue to shine. The problem is employment losses and negative home equity are countering the lower rates, and may keep foreclosures high. This is the risk. Before this happens, it is the intention to lure the new buyers to the market. For those who have the equity/cash to refinance, the low rates will hopefully be a stimulus for spending.
All sit on a knifes edge with the result “too close to call”. Initial Claims data today is an indication of perhaps a slight improvement in the rate of decline in employment. The improvement in the NY Empire Manufacturing and Philly Fed Index are another step in the right direction. However, Building Permits and Housing Starts were not encouraging. Also, the improvement in the economy, if it does ignite, is likely to be very slowe, with unemployment still being an issue.
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