The Federal Reserve released their statement on monetary policy and economic outlook yesterday.  Although there were some changes to the text of the statement, markets got what they were expecting. The FOMC held the Fed funds rate at its current level and gave a cautiously optimistic outlook on the economy.   After some early morning weakness. prices of mortgage backed securities improved after Fed statement and closed basically unchanged on the day.   Unfortunately, falling prices early in the session led some lenders to reprice for the worse. However, some, not all, lenders repriced for the better later in the day.

If you would like to read more on the Fed statement, check out AQ’s analysis.  READ MORE. I also recommend reading the MBS OPEN for an in-depth discussion on how the Fed's policy statement affected the rates market.\

In other news, the Senate voted unanimously yesterday to extend the First Time Home Buyer tax credit through April 30th of 2010.   The House of Representatives is expected to vote on the amendment by the end of the week.   To read more, check out the MND STORY.

This morning the U.S. Department of Labor released the weekly jobless claims.  This data totals the amount of people who filed for first time unemployment benefits in the prior week.  As part of this report we get continuing claims which totals the number of Americans that continue to file for benefits due to a lack of finding a new job. 

The report shows that fewer Americans than expected filed for unemployment benefits last week.  Initial claims dropped by 20,000 to 512,000, the fewest amount since January.  Continuing claims also fell more than expected to 5.75million from 5.82million last week,  but the decline is being attributed to the expiration of benefits.  READ MORE 

The only other economic release today shows us how productive our work force is in our country.   If workers are more productive, it keeps wage costs down and helps to fight inflation.   The data shows that our nation’s work force was much more productive than expected last month.  This is good news for corporate profits but not great news for Americans looking for work.  Companies are demanding more productivity from current work force instead of hiring.  

Reports from fellow mortgage professionals indicate that lender rate sheets are unchanged from yesterday.  The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for well qualified consumers.  To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. 

With the all important Employment Situation report due out tomorrow morning at 8:30am, floating remains risky. If the report is better than expected, we could see mortgage rates rise quickly.  Making this situation extra sensitive is the fact that while benchmark interest rates have continued to rise over the course of the week, MBS have held steady. If the data is better than expected and benchmark rates continue to rise, MBS coupon prices will have more room to fall then benchmark Treasuries. Another problem with floating into tomorrow’s report is that it is released prior to lenders issuing rate sheets. If the data is better than expected, there is no time to get your loan locked before lenders reprice for the worse.

Because mortgage rates have held steady in the middle of the range in which we base our lock/float recommendations upon, I would say locking today is still the best move. This range has been our friend, following the strategy of locking at the price highs and floating at the price lows has worked very well over the last few months.  

On a personal note, I would like to congratulate the New York Yankees and their fans (Brian and Ninja included) on their World Series victory last night.  As a Red Sox fan it pains me to see the Yankees win but they deserve it this year. The Red Sox will be back though!