Monday, August 4, 2008

Rate Watch: Cautiously Floating

Mortgage Bond Prices are lower this morning (when prices are lower, bond yield is higher and mortgage rates are higher), after the PCE Index showed a climb of .8% in June. This is the highest jump in 27 years and shows how the soaring energy and commodity prices this past month have negatively effected inflation. Because inflation is the archenemy of Mortgage Bonds and will usually push interest rates higher in the short term, I will be watching other economic indicators for you.

As the Fed announces it's decision about the Fed Funds Rate tomorrow afternoon, it is expected that the Fed will keep the Rate at 2.00%. For now I recommend cautiously floating because Mortgage Bonds appear to gaining back some of their earlier losses.

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