Friday, November 15, 2013

Dovish Statements from Yellen

Mortgage Time
Mortgage Market News for the week ending November 15, 2013

During a light week for economic data, the biggest influence on mortgage rates was testimony from Janet Yellen. Yellen, the nominee to be the next Fed Chief, revealed strong support for the Fed's bond buying program. This news helped mortgage rates end the week lower.
Janet Yellen testified this week at her confirmation hearing to replace Ben Bernanke as the Chair of the Fed. Essentially she stated that the Fed will continue the policies currently in place. She emphasized that the Fed's monetary stimulus is appropriate to help boost the economy. According to Yellen, Fed officials are looking for signs of sustainable economic growth which will "promote continued progress" before they begin to scale back the Fed's bond purchases. In short, her comments suggested that the Fed is in no rush to tighten monetary policy.
Investors viewed Yellen's dovish comments as good news for both stocks and bonds. At its current pace, the Fed is purchasing the majority of newly issued mortgage-backed securities (MBS) each month. Since mortgage rates are determined in large part by MBS prices, this enormous added demand from the Fed for MBS has helped keep mortgage rates low. Economic news which causes investors to shift their outlook for the bond buying program causes a significant reaction in mortgage markets, as seen following last Friday's stronger than expected Employment report.

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
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2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767     /